Institutions, Transaction Costs, and Entry Mode Choice in Eastern Europe

That multinational enterprises entering a new market must adapt their strategies to the host country environment has been a hallmark finding in the international business literature. In recent years, increasing attention has been paid to the adaptation of these strategies to the demands of the institutions in the host economies (Oxley, 1999; Peng, 2000). Institutions are important for the functioning of any economy, as they constrain or facilitate business. For countries in development or transition, the evolution of institutions appropriate to a market economy is a critical hurdle (e.g. Clague, 1997). One way to understand business strategies in emerging markets is to analyze the role and effects of institutions in reducing transaction costs (Hoskisson et al., 2000). This requires an investigation of different institutional contexts across countries and their effects on entry strat-