How Firms Compete Across Borders: Institutions, Location and Corporate Strategy

Going global is rarely as simple as taking a product that works at home and selling it somewhere else. A firm crossing borders has to read the rules of an unfamiliar environment, decide where it should physically operate, and choose how far to standardise its approach versus adapt to local taste. International business strategy is, at heart, the discipline of answering those questions well.

This article works through three of the most useful lenses for doing so. The first is the institution-based view, an idea that reshaped how scholars think about competing in emerging economies. The second is the OLI framework, which helps a firm decide where to locate. The third is the integration–responsiveness framework, which helps it decide how to compete once it is there. Throughout the second half, PepsiCo serves as a concrete example of these ideas in action.

Section 01Part one: the institution-based view of strategy

For a long time, two perspectives dominated thinking about why some firms outperform others. The industry-based view, associated with competitive-forces analysis, locates advantage in the structure of the industry a firm competes in. The resource-based view locates it inside the firm, in capabilities rivals cannot easily copy. In an influential 2008 paper in the Journal of International Business Studies, Peng, Wang and Jiang argued that these two are incomplete on their own. They proposed a third leg - an institution-based view - and described the combination as a "strategy tripod."

Institutions, in this sense, are the formal and informal rules of the game: laws, regulations, enforcement regimes, but also norms, relationships and cultural expectations. The argument is that these rules are not neutral background; they actively shape what strategies are possible and profitable, and they matter most precisely where they are least settled - in emerging economies. The paper develops this through four areas of research.

Antidumping as an entry barrier. Entry barriers shape how competitive an industry is, and one form of barrier is institutional. Foreign firms already carry a "liability of foreignness," and antidumping law adds to it. Dumping describes two situations: selling abroad below cost, and raising prices once local rivals have been driven out. The paper notes that China sat at the centre of global antidumping activity, accounting for a large share of cases, and introduced its own antidumping laws at the end of the 1990s. The strategic point is that antidumping is not merely a legal technicality but a deliberate competitive instrument - one international strategy increasingly has to plan around.

Governing the corporation in emerging economies. Most corporate-governance research grew out of the developed Anglo-American context, where the central tension is the principal–agent conflict between dispersed shareholders and the managers who run the firm on their behalf. But most companies worldwide are not like that. They have concentrated ownership, often by a family or the state, which changes the nature of the problem. The key conflict becomes principal–principal: between controlling shareholders and minority shareholders. Governance reforms designed for the Anglo-American model are therefore poorly suited to emerging economies, where the institutional roots of ownership are different.

Competing inside and outside India. India's IT and business-process-outsourcing industry is a vivid illustration of institutions shaping strategy. A deep pool of skilled, lower-cost talent gave Indian firms a global edge, and Western multinationals invested heavily, drawn by quality and value - and, in the process, raised the productivity of local firms. But the same firms were also exposed to political shifts abroad, including moves in some US states to restrict public contracts going to Indian providers in order to protect domestic jobs. Success, in other words, depended on the institutional environment at home and abroad as much as on industry conditions or firm resources.

The growth of the firm in China. China presents an apparent paradox: rapid economic growth alongside formal institutions that remained, by conventional measures, underdeveloped. The paper's resolution is that growth was driven less by formal rules than by relationships. Micro-level interpersonal bonds between managers scaled up into macro-level inter-organisational networks and alliances. Where formal institutions were weak, strong informal ones - rooted in culture and mutual trust - did much of the work, supporting both domestic firms and the expansion of business networks.

Strengths and limitations. The paper is careful not to claim that the institution-based view replaces the industry- and resource-based views; it adds a third leg to the tripod. Its strength is the detailed account of how institutions shape firm performance, and its call for more attention to informal forces, including the role of non-governmental organisations. Its honest limitation is the difficulty of predicting how firms co-evolve with uncertain, shifting institutional environments - particularly in regulatory settings that are opaque or politically volatile, where developed economies themselves change course to suit their interests.

Why it matters going forward. The institution-based view opens a clear research agenda. A simple "global strategy" built around the profitable top of the global economic pyramid cannot just be lightly adapted for emerging markets; doing so tends to serve a handful of customers while ignoring the much larger base that made those markets attractive in the first place. New business models, built around price–value trade-offs and a genuine grasp of local formal and informal institutions, are needed instead. The same lens also helps explain how emerging-market firms are themselves internationalising and becoming a new kind of multinational.

Section 02Part two: PepsiCo in practice

PepsiCo is an American multinational operating in food, snacks and beverages, handling the manufacture, distribution and marketing of its products. Its roots trace back to Pepsi-Cola, established in 1898; the modern company was formed in 1965 when Pepsi-Cola merged with Frito-Lay. Headquartered in Harrison, New York, it operates in more than 200 countries, and by early 2021 it counted more than twenty brands each generating over a billion dollars in sales. Two strategic questions illustrate how a firm of this scale thinks: where to operate, and how to compete.

Deciding where to operate: the OLI framework

Location of operation refers to where a business produces and from where it supplies its customers, and the choice influences far more than logistics. A good location keeps a firm close to its market, so it can reach customers quickly and cheaply; it secures reliable access to raw materials; and it offers adequate transport and a supply of quality labour at workable wages. In manufacturing especially, clustering production in the right place lowers production, transport and logistics costs at once - one reason firms in the same industry often grow up alongside each other, as the Japanese car industry famously did.

The most established way to analyse this is the eclectic, or OLI, framework, developed by the British economist John Dunning out of internalisation theory. It is a tool for judging whether a foreign direct investment is worth making, on the assumption that a firm will not invest abroad if it can obtain the same product or service internally at lower cost. The framework has three tiers:

PepsiCo's behaviour fits this logic, but with a modern twist. It has never tied itself rigidly to one location, and it has recently leaned into a "location-free" approach to talent - hiring people anywhere in the world rather than requiring relocation. The aim is to retain the best people and let them take on global roles without leaving their home countries, while taking advantage of available technology and respecting employees' career ambitions. Not every role suits this model, but it shows how the location question now applies to talent as much as to factories.

Deciding how to compete: corporate strategy and the I-R framework

Corporate strategy is the set of company-wide actions a firm takes to reach its goals over time - winning and keeping investors, surveying its current portfolio of businesses and working out how the pieces fit together and affect one another. It is broader than business strategy, and it carries a context: capitalism itself, a system built on private ownership of firms, property and the means of production, in which profit is the driving force and a structural distinction runs between owners and workers.

Studying corporate strategy is worthwhile because it reveals how an organisation approaches its international business, allocates resources to the best opportunities, motivates its people, sharpens its competitiveness and, ultimately, raises shareholder value.

The most influential lens here is the integration–responsiveness (I-R) framework, proposed by Bartlett and Ghoshal in 1993. Global integration measures how far a firm can use the same products and strategies across countries; local responsiveness measures how far it customises them to local demand. Crossing the two produces four strategies:

Among the strategies it has used, the integration–responsiveness approach has served PepsiCo particularly well abroad. The company treats the balance between global integration and local responsiveness as an ongoing negotiation rather than a fixed setting, which has supported its cost leadership and competitiveness. There is still room to improve: it would benefit from reducing its dependence on a small number of large retail partners to drive sales volume, from revisiting its strategies regularly to protect margins, and from continuing to build brand awareness against its rivals.

Section 03Conclusion

Location of operation and corporate strategy are two sides of the same coin, and both sit on the institutional foundation described in the first half of this article. The institution-based view reminds us that the rules of the game - formal and informal - shape what is possible in any market, especially an emerging one. The OLI framework turns the "where" question into a disciplined comparison of ownership, location and internalisation advantages. The integration–responsiveness framework turns the "how" question into a deliberate choice about standardising versus adapting. For a company like PepsiCo, getting all three right is what allows continued growth - achieved, ultimately, through steady innovation and investment.

Section 04References

1. Akter, S., Hossain, M. A., Lu, Q. S., & Shams, S. R. (2021). Big data-driven strategic orientation in international marketing. International Marketing Review.
2. Alaydi, S., Buck, T., & Tang, Y. K. (2021). Strategic responses to extreme institutional challenges: An MNE case study in the Palestinian mobile phone sector. International Business Review, 30(3), 101806.
3. Bartlett, C. A., & Ghoshal, S. (1993). Managing Across Borders: The Transnational Solution. Harvard Business School Press.
4. Brewster, C. (2017). The integration of human resource management and corporate strategy. In Policy and Practice in European Human Resource Management, 22–35.
5. Buccieri, D., Javalgi, R. G., & Cavusgil, E. (2020). International new venture performance: Role of international entrepreneurial culture, ambidextrous innovation, and dynamic marketing capabilities. International Business Review, 29(2), 101639.
6. Dunning, J. H. (1980). Toward an eclectic theory of international production: Some empirical tests. Journal of International Business Studies, 11(1), 9–31.
7. Forbes, N. (2018). Spain, political risk and corporate strategy before and after the Second World War. In Multinational Enterprise, Political Risk and Organisational Change.
8. Nithisathian, K., Wall, W. P., Thanitnan, C., & Ponwiritthon, R. (2018). Maintaining indispensable competitive advantage: Corporate strategy for the 21st century. RMUTL Journal of Business Administration and Liberal Arts, 6(1), 11–24.
9. Peng, M. W., Wang, D. Y. L., & Jiang, Y. (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39(5), 920–936.
10. Pícha, J., Kovář, P., Kessler, F., & Tomek, A. (2017). Key aspects of corporate strategy in international construction. Procedia Engineering, 196, 506–511.
11. Rugman, A. M., & Verbeke, A. (2017). Global Corporate Strategy and Trade Policy (Vol. 12). Routledge.
12. Singh, D. (2019). Foreign Direct Investment Location Determinants in India: National, Subnational and Regional Level Approach (Doctoral dissertation, Kaposvár University).
13. Tanriverdi, H., & Du, K. (2020). Corporate strategy changes and information technology control effectiveness in multibusiness firms. MIS Quarterly, 44(4).
14. Todorov, K., & Akbar, Y. H. (2018). Strategic Management in Emerging Markets: Aligning Business and Corporate Strategy. Emerald.
15. Velikorossov, V. V., et al. (2020). Integration as a corporate strategy. DEStech Transactions on Social Science, Education and Human Science.
16. Yamazaki, K. (2019). Golden rules in global corporate strategy. In Japanese Global Strategy (pp. 157–169). Palgrave Macmillan.