one crucial decision for international marketing managers is

COMPARATIVE MARKETING: AN INTERDISCIPLINARY FRAMEWORK FOR INSTITUTIONAL ANALYSIS

Gopalkrishnan R. Iyer* Baruch College, The City University of New York

Abstract. Institutional analysis is proposed as an alternative theoretical methodology for the study of comparative marketing systems. This paper argues that institutional analysis offers considerable potential for understanding dynamic marketing systems and for the explicit study of change. Disciplinary insights of institutional analysis are reviewed and the richness of the conceptual apparatus of comparative institutional analysis, as applied to the study of comparative marketing systems, is explicated.

INTRODUCTION

One crucial decision for international marketing managers is the extent to which marketing strategy and programs should be standardized across international markets or adapted to particular characteristics of such markets [Douglas and Wind 1987; Jain 1989]. Levitt's [1983] thesis on the "globalization of markets" due to global developments in technology and communication systems favors standardization across international markets; however, the major limitation to such standardization is the extent to which local tastes, preferences and consumption habits differ across national boundaries [Boddewyn, Soehl and Picard 1986; Douglas and Wind 1987]. While the globalization debate focusses more closely on the process of standardization versus adaptation of international marketing strategy, the tools for analyzing whether substantial similarities and differences exist across national boundaries is provided by comparative marketing.

Comparative marketing approaches focus on the systematic study of similarities and differences between national marketing systems across time, space and sectors for the purposes of theory-building and theory-application [Bartels 1963; Boddewyn 1969, 1981; Cox 1965; Kaynak and Savitt 1984; Shapiro 1965]. A marketing system is viewed to be a composite of structures,

*Gopalkrishnan R. Iyer (Ph.D., Virginia Tech) is Assistant Professor of Marketing and International Business at Baruch College, The City University of New York. His current research interests include comparative marketing, business-to-business relationships, business ethics, and the sociology of religion. The author is grateful for the insights and comments of Jean Boddewyn, George Fisk and three anonymous reviewers on earlier versions of this paper. The author also acknowledges the comments of participants at the Twentieth Annual Macromarketing Conference, Richmond, Virginia, 1995, where a version emphasizing the study of institutional change in macromarketing systems was presented.

Received: July 1995; Revised: November 1996 & April 1997; Accepted: April 1997.

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532 JOURNAL OF INTERNATIONAL BUSINESS STUDIES, THIRD QUARTER 1997

functions, processes and actors involved in exchanges within an economy [Boddewyn 1969]. Comparative marketing studies provide the possibility of international generalizations of marketing concepts and theory as well as enable any firm to understand and adapt its marketing programs and processes to environments other than its own [Boddewyn 1981; Farmer and Richman 1964].

The ever-changing and increasingly complex relations between marketing systems and the environments in which they operate underscore the need for a thorough analysis of environments and the ways in which these shape and/or are shaped by marketing processes. In the world environment today, four new types of forces are at work: (1) an increasing shift towards market liberaliza- tion in historically planned economies as well as in economies that had, until recently, pursued nationalistic and self-reliant economic development strategies; (2) an increasing regionalization of trade into a variety of economic groupings; (3) an increasing emphasis on the internationalization of activities hitherto confined to domestic economic spheres; and, (4) the impact of social and political influences on business that render the environment of business and exchange relationships more complex and interdependent than they were even a decade ago. The goal of comparing and contrasting marketing systems can only be more important in a dynamic world characterized by rapid changes and breakdowns of established economic systems, the emergence of new marketing systems, and the regionalization of older ones.

Traditional approaches to the analysis of marketing systems viewed the marketing system as an autonomous entity separate from its environment. Various components of the environment were themselves segregated into unique dimensions such as the physical, economic, social, cultural and the political. Marketing strategy was then conceived to be the best set of actions to achieve the firm's objectives, given the specifics of the inter-relations between parts of the environment and its influence on components of the marketing system. Thus, for example, the study of economic development in and of itself provided crucial insights to issues as wide-ranging as channel structure, buyer behavior, diffusion of innovations, and multinational organization structures. It is not the contention here that such analyses were wrong in their direction; it is simply that newer constellations of forces in the world environment have challenged our long-held conceptions on exchange, market relations and competition and, thus, call for a different form of analysis than those used so far.

Drawing concepts and ideas from new institutional economics and from institutional analysis within organization theory, this paper introduces and elaborates on an alternative institutional framework for the analysis of marketing systems around the world. Contrary to the ready image of institutions as organizations, the notion of institutions used throughout this paper, in line with recent theory in different disciplines, is the pattern of rules,

INSTITUTIONAL ANALYSIS OF MARKETING SYSTEMS 533

norms and habitual thought that constrain or prescribe behaviors [North 1990]. The major contribution of this paper is the argument that variations in national marketing systems can be established on the basis of their institutional environments as much as from strategic responses of organizations comprising the system. We demonstrate that such an institutional approach to the study of comparative marketing systems yields a richer conceptual apparatus that explains both stable and changing patterns of firm behavior and the firm-environment linkages within marketing systems.

The organization of this paper is as follows. First, approaches to institutional analysis from various disciplines are reviewed with the aim of accumulating theoretical and methodological tools useful for the study of comparative marketing systems (CMS). This paper then advances a view of marketing systems as sets of institutional arrangements and places this view in the context of prior conceptualizations of marketing systems. Further, using some formal principles of institutional analysis, some core arguments are developed regarding marketing systems and their interlinkages with the environment. Finally, this paper offers some avenues for future theorizing and elaborates on several implications of the proposed analytical framework.

INSTITUTIONAL ANALYSIS: DISCIPLINARY INSIGHTS

In the past two decades, the notion of "institutions" has been invoked to address a number of questions concerning formal organizational structure, social reality, historical path-dependence of technology, cultural change and persistence, and practical, habit-based action [DiMaggio and Powell 1991]. However, insitutionalism itself is not a new field. Veblen [1919] was prescient in his explicit call for the analysis of institutions in understanding economic realities and in his criticism of orthodox economic theory with its attendant simplistic and often unreal accounts of rationality. For Veblen, institutions were the "habits of thought which prevail in a given period" [Mitchell 1949]. Further, "an institution is of the nature of a usage which has become axiomatic and indispensable by habituation and general acceptance" [Veblen 1919: 225]. According to Veblen - as Hutchison elaborated - "the task of economists" was to study "customs, usages, habits of thought or "institutions," and their evolution, in order to explain how economic decisions and actions had been undertaken at different times and places, rather than to assume a particular, highly simplified pattern as universal" [Hutchison 1984: 20].

However, the conception as well as importance of institutions have been subject to debate among various disciplines, such as economics, economic history, sociology, organization science, and political science, in which institutional analysis has recently found some acceptance. The perspective on institutions in this paper incorporates the disciplines shown in Table 1. The discussion below clarifies key ideas on institutions, institutional environment and the processes of institutional change.


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Institutions

A recent definition of institution is inclusive of many diverse approaches and serves our purpose well. Scott [1995: 33] defined "institutions" as follows:

Institutions consist of cognitive, normative, and regulative structures and activities that provide stability and meaning to social behavior. Institutions are transported by various carriers - cultures, subcultures, and routines - and they operate at multiple levels of jurisdiction.

The above definition includes various fundamentals, embodiments and levels of analysis. Institutions thus shape meanings (cognitive), prescribe behaviors (normative) and constrain behaviors (regulative). Moreover, they are em- bodied in cultural and subcultural processes, social structures, and routines [Scott 1995]. Various levels of institutional analysis include organizational subsystem, organization, organization population, organizational field, societal and world system [Scott 1995].1

In ordinary parlance, institutions appear to be merely structures of collective action. However, analytic usage of the term often extends beyond conceptions of organizations to include government agencies, educational bodies, political committees, labor unions, and rural cooperatives, to name but a few. The common element in this view of "institutions" is the existence of structured patterns of action and interaction. Current conceptions of institutions retain this element and extend it in a variety of ways. First, attention is given to the underlying pattern of rules, norms and routines of action and interaction that contribute to structural properties [March and Olsen 1989; Meyer and Rowan 1977; Williamson 1991]. Second, various patterns of rules, norms and routines may exist outside the structure and may, in fact, determine the structure, thus paving the way for the study of the interaction of the institutional environment with the resulting structure [Meyer and Rowan 1977; Scott 1987]. Third, the institutional environment provides an array of rules, norms and routines, and institutional changes are marked by changes in such rules, norms and routines. Fourth, institutional change may occur due to intentional transformations or random shocks [March and Olsen 1989]. Fifth, institutional patterns in the environment may evolve through complex processes of social and political change [North 1990; Zucker 1987, 1988]. Sixth, institutional choice may be a result of discriminatory matching of the environment with relevant institutional alternatives [Williamson 1985, 1991]. Seventh, organizational behavior may be purposive, but not necessarily rational, and may be guided, but not necessarily due to active agency [DiMaggio and Powell 1991; Oliver 1991]. Eighth, institutionalization within a structure occurs through diffusion of standard rules and routines, shared mental schemas, legitimating accounts, imitation, or through demands for compliance [DiMaggio and Powell 1983; North 1994; Oliver 1991; Zucker


1987]. Lastly, economic, social and political forces may not only serve to legitimate institutions, but also provide pressures for de-institutionalization [DiMaggio and Powell 1983, 1991; Oliver 1992].

Institutional Environment

Similar to the notion of institutions, elements of the relevant institutional environment also vary across disciplines. It is here that crucial assumptions made by various disciplines are readily apparent. Micro-analytical approaches, such as transactions cost economics, view the relevant institutional environment to be the exchange atmosphere in which economic transactions are conducted [Williamson 1975]. This environment is characterized by boundedly- rational humans, who due to language and neurophysiological limitations, are unable to completely predict the future and develop complete contracts [Williamson 1975]. Moreover, transactors may behave opportunistically whenever such behavior is feasible and profitable [Williamson 1985]. Thus, transactions which are especially vulnerable to the risks of opportunism unmitigated by market contracting increase uncertainty in the environment and may raise the costs of transacting [Williamson 1975, 1985].

On the other hand, economic history approaches view the institutional environment broadly as the "set of fundamental political, social and legal ground rules that establishes the basis for production, exchange and distribution" [Davis and North 1971: 6]. Examples of such ground rules include rules governing elections, state agencies, government regulations, property rights, and technology [Davis and North 1971; North 1990]. Moreover, certain shared values and ideology prevalent in a society could also be considered part of the institutional environment since these determine a variety of exchange norms and options [Denzau and North 1994; North 1990].

Sociology, organization science and political science approaches to the study of institutions view the institutional environment as characterized by a variety of norms, conventions and bodies that serve to legitimate organizational and individual actions [Scott 1987; Zucker 1987]. State, societal and cultural pressures, more than market or competitive pressures, are viewed to be especially important in providing criteria for organizational and individual conformity [DiMaggio and Powell 1983]. In the organization theory variant, institutional environments include regulatory structures, government agencies, laws, courts, and professions [Scott 1987]. Moreover, the relevant environment is decomposed into institutional and technical sectors, i.e., environments are rich not only with symbols and rituals but also with various goals and means of accomplishing individual and institutional goals. As Scott and Meyer [1983: 140] elaborated, "institutional sectors are characterized by the elaboration of rules and requirements to which individual organizations must conform if they are to receive support and legitimacy from the environment" and, "technical sectors are those within which a product or service is exchanged in a market


such that organizations are rewarded for effective and efficient control of the work process."

Institutional Change

Institutional change depicts changes in the institutional environment. The crucial analytical domain for institutionalists is dimensionalizing such change and studying its effects on organizational structure and processes. On the one hand, there is an active agency responding to environmental changes; on the other, organizations and individuals undergo passive transformations (towards conformity) due to environmental pressures. The notion of active agency is the crucial difference between new institutionalists in economics and those in sociology, organization science and political science.

In transactions cost economics, changes in the institutional environment are characterized by a higher degree of uncertainty due to exposure of assets specific to the exchange relation (i.e., those that do not have a salvageable value outside the current exchange relation) and the concurrent risks of opportunism by the other partner in the exchange relation [Williamson 1975]. These risks increase costs of transacting in that processes of negotiation and governance become costly and unmanageable. In such cases, the economizing task is to increase efficiency by moving such risky transactions under the protection of appropriate governance umbrellas, such as hierarchies and "hybrids" [Williamson 1975, 1991]. Thus, institutional change finds an economizing response through managerial agency. In transactions cost economics, the path of institutional change is actively led from market- governance to increasing levels of internal organization.

In economic history approaches, there is a combination of passivity and strategic choice. Since many institutional changes arising from redefinitions of property rights, right to contract, and government actions are uncontrollable, there is a change in the institutional environment or the "rules of the game" [North 1990]. However, values and ideologies permit perception of institutional changes as changes in the opportunity set [North 1990]. Ideological mental models as well as acquisition of learning and skills permit entrepreneurs to exploit new opportunities by altering the institutional framework [Denzau and North 1994; North 1990]. Thus, the institutional environment is akin to an incentive structure, and those who invest in knowledge and skills that exploit the incentive structure earn the highest payoff [North 1991]. Institutional change towards superior economic performance is influenced by regularities in history, that is, they are path dependent. There is a strong bias at any point of time to rationalize existing institutions by organizations that have invested in learning and playing by the prevalent rules [North 1991].

In political science as well, the role of agency is mixed with those of passive reaction. Intentional transformations do happen, but norm-based behaviors,


or actions based upon the logic of appropriateness, rather than consequentialism, guide choices.

In organization theory and sociology, however, behavior is primarily un- intentional, passive and habitual. Routine action is understood to be cognitive and flowing from regularities in thought and dispositions, rather than from affect and experience. In this view, institutionalization is understood to be the process of infusing something with value. It occurs by diffusion of standard rules and structures through imitation, shared scripts and schemas, legitimating accounts, and routines [DiMaggio and Powell 1991; Jepperson 1991]. Organizations tend to be isomorphic (similar in elements) with their institutional environment and, thus, acquire legitimacy for their structure from it.

However, as demonstrated by Oliver [1991], institutional theory in organizational analysis does not preclude strategic actions by organizations. Each strategy noted by Oliver [1991] is linked to a tactic that may be pursued by international marketers facing institutional pressures in host country environments. First, organizations may accede to institutional pressures (e.g., marketers may choose to accept prevailing norms to gain social support or enhance environmental predictability). Second, organizations may arrive at a compromise (e.g., marketers may attempt to balance host government expect- ations with consumer needs in international markets). Third, organizations may consciously avoid institutional pressures (e.g., transfer pricing may be used as "window dressing" to convey conformity with taxation and tariffs in the host country). Fourth, organizations may defy institutional pressures (e.g., marketers may challenge host governments' unwillingness to open up markets through public criticism). Lastly, organizations may attempt to manipulate institutional pressures and evaluations (e.g., in host countries with less developed credit and financing systems, marketers may control the processes of evaluating and assessing credit terms).

Thus, the study of any system, be it an organization or even world system, is enriched by institutional analysis that gives particular attention to the varieties of institutions in the systems' environment, relevant changes in the institutional environment and responses to such changes. Moreover, the system- environment inter-relations can be strategic as well as passive. These elements of institutional analysis are applied to the study of marketing systems later. The incremental insights obtained from this analysis can be evaluated against the backdrop of prior conceptual approaches to the study of marketing systems, reviewed in the following section.

COMPARATIVE MARKETING SYSTEMS - PRIOR CONCEPTUAL APPROACHES

The loci of comparison in the study of CMS are the historical, spatial and/or sectoral similarities and differences in marketing systems [Boddewyn 1969].


Historical studies involve comparisons of events/phenomena that are removed in time while spatial studies compare events/phenomena/characteristics located in spatially removed units. Sectoral studies involve the comparison of economic and social sectors or subcultures located within a specific time and space [Boddewyn 1969].

Some major differences lie in the specific conceptual approaches followed to identify similarities and differences in marketing systems. Some features of important conceptual approaches are detailed below and summarized in Table 2.

Cox [1965] called attention to the study of flows of authority, communication and finance and the understanding of how these were similar or different in various countries. Since many of the theories, models and concepts on marketing may be more universal, i.e., applicable to a number of countries, Cox's agenda was one of searching for universals. However, in the absence of true universals, Cox suggested the second-best strategy of seeking "limited generalizations" [Cox 1965]. The problems of accurately understanding various flows, agencies and structures notwithstanding, Cox's approach suffers from the premise that an underlying and static theory of marketing exists and that each system can be readily compared to this theory.

Bartels [1963, 1968], on the other hand, conceptualized the marketing system as diffuse and open - one that could be in a state of flux. Marketing was understood to be a social system and as well as a social process that operates under higher level forces of the market, economy, society and nation [Bartels 1963]. For Bartels, study of the relationships between marketing and its environment in different social contexts was the aim of comparative marketing research.

Performance aspects of marketing systems were the sources of concern for Farmer and Richman [1964] and Fisk [1967]. Farmer and Richman [1964] identified a conceptual apparatus that uncovered external constraints imposed by the environment (referred to as the macromanagerial structure) on internal management of the firm, particularly in terms of its efficiency. Drawing from the systems perspective, Fisk [1967] called attention to the analysis of marketing systems in terms of their purposes, organizations, inputs, outputs, constraints and efficiency. Both the Farmer and Richman and the Fisk approaches are more attuned towards an indepth understanding of the impact of the environment on the firm rather than to the study of the dynamic interaction between the firm and the environment.

Boddewyn [1969] argued that comparative marketing involves the analysis of functions, structures, processes, actors, and environments that facilitate marketing exchanges within different contexts. Boddewyn's approach collapses both Cox's and Bartels' conceptualizations. Thus, like Cox, he provides a more


TABLE 2 Major Approaches to the Study of Comparative Marketing Systems

Seminal Contributor(s) Unit of Analysis Focus of Study

Cox [1965] Marketing Flows How are the flows of authority, communication and finance similar in different countries?

Bartels [1963, 1968] Marketing-Environment How does the marketing- Relationship environment relationship differ

within various societal contexts?

Farmer & Richman [1964]; External Constraints on How does the immediate Fisk [1967] Firm Performance environment of the firm (system)

affect its performance?

Boddewyn [1969, 1981] Exchange What are the relevant actor characteristics, structures, processes, and functions in exchange systems, and how do these interact with the environment?

Arndt [1981] Institutions What are the relevant institutional alternatives for social control of the system?

IMP GROUP Business Network What are the interplays between Relationships activity, resource and actor layers

in business relationships, and how do network firms interact and adapt to changes?

formal framework for marketing systems in terms of conceptualizing them as providing for exchange, formal relationships, activities and interactions between buyers and sellers [Boddewyn 1969]. On the other hand, the fact that this system operates within a particular environment does not preclude the study of 'interchanges between the marketing system and the environment. Boddewyn's admitted focus, however, was on the study of changing, interrelated, and interacting elements of exchange systems. Moreover, the crucial difference between Boddewyn's approach to the study of CMS as compared to Bartels' is that while the former gave explicit focus to comparisons of national marketing systems as well their environments, the latter argued that the relevant comparisons were made to the relationships of marketing systems to their environments [Bartels 1968; Boddewyn 1981].

Arndt [1981] was the first to argue for an institutional approach to the comparative study of marketing systems. While the study of comparative aspects of institutions, such as wholesaling [Bartels 1963], retailing [Arndt 1972; Cundiff 1965] and distribution system [Cox 1965; Hall, Knapp and Winston 1961] has been one clear area of research within comparative marketing, Arndt suggested broadening the concept of "institutions" to include many other non-


visible and non-formal modes of organization and governance. Arndt [1981: 37] viewed institutions as "sets of conditions and rules for transacting and other interactions." This view of institutions as social control mechanisms for facilitating economic and political interactions within a political economy framework differed from the view of institutions-as-governance structures only in its explicit focus on politics as an institutional alternative [Arndt 1981].

Scandinavian and Western European approaches (developed formally under the aegis of the International Marketing and Purchasing Project group) apply the network concept to the study of marketing systems [Hakansson and Snehota 1995; Johansson and Hallen 1989; Johansson and Mattson 1987; Sharma 1993]. Here, the network of firms in technology or product or national sectors forms the focus of analysis and detailed attention is given to the relationships between firms as well as the interaction (exchange) processes within the network. The marketing system itself could be viewed as a network of relationships, and attention given to its dynamic and structural elements [Andersson 1992]. The network approach is particularly useful for understanding business marketing relationships and for the study of industrial goods sectors where such relationships are more common.

INSTITUTIONAL ANALYSIS AND THE STUDY OF CMS

The conception of marketing systems used here follows Boddewyn's [1969] approach to the study of CMS in terms of constituent actors, structures, functions, and processes involved in marketing exchanges with some modi- fications. These elements of marketing systems are viewed separately only for analytical purposes. In so far as elementary aspects of marketing systems yield a better understanding of the constituent dimensions of marketing systems, the question remains one of identifying the specific elements. Abstraction of marketing systems into actors, structures, functions, and processes yields elements that are non-empty categories across a variety of marketing systems.2 On the other hand, there is still the danger of making reductionistic comparisons along only one dimension, e.g., the extent to which marketing structures differ across different national environments. In the discussion below, this form of reductionism is avoided in the following ways. One, the focus is on explaining the institutional aspects within the domain of each element of the marketing system, rather than on identifying unique properties of each element. Two, no attempt is made to understand marketing systems merely in terms of their individual elements. For example, if a specific marketing system exhibits persistent stagnation, little attempt is made to explain this solely in terms of individual motivations or organizational performance. Three, the relevant properties studied under each element are given a wider context of analysis, as in the network approaches reviewed above. A more holistic perspective emerges from the argument that context matters. For example, similar degrees of calculativeness in individual behavior across


various marketing systems may not translate into similar performance implications for each system.

The major argument advanced here is that significant variations in marketing systems could be attributed to historical factors, specific environmental contexts, and to discriminatory matches between structures, processes, and functions to specific environmental needs. Thus, the focus is not only on establishing whether differences or similarities exist, but also on explaining such differences and similarities. While the field of comparative marketing systems may not have advanced to a level that such explanations are possible [Boddewyn 1981], we submit that institutional analysis permits such research goals to be viable, thereby contributing to meaningful theory development.

Actors

Institutional analysis calls attention to the fact that actors (including buyers, sellers, intermediaries, and others) in a marketing system are often not guided by rational, economic goals or even ones that reflect calculativeness in exchange contexts. Rather, in many situations, actions may be guided by rule- bound and habitual behavior unless the institutional context in which the exchange is embedded exhibits considerable ambiguity or change. Thus, an attempt to reduce the study of actors to understanding their motives, interests, needs, etc., may be less realistic than the study of institutions that facilitate exchange or otherwise constrain it. However, the specifics of institutional rules and routines that shape preferences can contribute to a richer understanding of decision-making in a variety of consumption contexts. In demonstrating the applicability of institutional analysis for uncovering variations in marketing systems, actors are first examined as buyers (treatment of individuals and organizations as buyers are collapsed for reasons of parsimony) and then as marketers or sellers (here, firms are the focus of analysis).

Actors as Consumers. Variations in marketing systems due to buyer behavior can be analyzed in terms of: (1) contributions to preference formation, (2) impact of preferences and principles on buyer decisionmaking, (3) customs and consumer behavior, and (4) contexts and levels of innovative and habitual behaviors. These are not exhaustible categories for analysis; they are provided to illustrate the potency of institutional explanations over more traditional ones.

Even rudimentary and middle-range theories of consumer behavior note the impact of a variety of individual, group and cultural factors on the formation of preferences for particular commodities and services. Such differences go beyond the narrow conception of the impact of economic wealth on consumption of particular goods, such as food and consumer durables, and evaluation of products solely in terms of quality and price. While, at one level, consumer lifestyles are seemingly correlated with wealth (e.g., the rich around


the world have greater transport and entertainment options, evident in their ownership of cars, TV sets and stereos), preferences for many consumer goods are formed and diffused through cultural institutions. The manifestation of preferences in erstwhile socialist-bloc countries provides interesting insights on the formation of preferences. While many may be due to the increased impact of the social context on consumption, others are simply the manifestation of shortages. For example, Levi's jeans may emerge as a highly desirable product in Eastern bloc countries, not so much due to their price but more due to the shortage in supply compared to demand (see Kornai [1986] on the economics of shortages). However, another cogent explanation is the fact that groups in society would tend to differentiate themselves through their patterns of consumption and ways in which certain patterns of tastes and preferences are institutionalized [Bourdieu 1984].3

On the other hand, not all consumption arises from preferences alone. In many instances, matters of principle may be invoked in the choice, not only for particular commodities and services, but also for the selection of particular forms of such commodities and services. Such principles may also explain why particular choices may not emerge despite provision for their fulfillment. The issues of abortion services and family planning in the Western and developing countries are examples of principles governing choice and restraining consumption, respectively. Indeed, in consumption contexts as well as the political ones explored by March and Olsen [1989], decisionmaking may be guided by norms of appropriateness (e.g., valuing certain non-economic criteria, such as environmental impacts) rather than norms of consequentialism. Matters of principle may govern choices in contexts wherein a personal or social image/identity is desirable and/or ethical and moral rules are given precedence over economic ones [Prelec 19911. The relative degree and contexts in which principles rather than preferences may govern choice is a source of variation in actors contributing to variations in marketing systems.4

Moreover, the varying role of customs in different markets are another source of creation of preferences that shape economic behaviors of actors. Simply defined, customs are a "set of behavioral dispositions inherited from the past" [Schlicht 1993: 178]. One clear institutional feature of custom is its ability to reduce transactions costs by obviating the need to rely on complex and costly safeguards [Schlicht 1993]. For example, customers may willingly forgo comparison shopping to become regular customers of particular vendors and firms [Plattner 1983]. However, in other cases, customs may detract from economic efficiency [Schlicht 1993]. For example, economically advantageous pay-offs may be downplayed or not recognized if they contradict customs [Denzau and North 1994; North 1990]. Thus, transactions costs and efficiency considerations may favor identification with particular sellers and firms and hence, customer loyalty to them. The prevalence of client ties and repeated trading relations (or retail patronage behavior) are evidence of how


economic customs bind buyers and sellers in a competitive marketplace [Plattner 1983].

Comparative studies of consumption often invoke cultural factors such as individualism/collectivism [Hofstede 1984] or high/low cultural contexts [Hall 1976] in their attempts to explain cross-national consumer behaviors, such as attitudes towards foreign products or innovation/adoption behaviors. While the effects of cultural influences on consumer innovativeness seem intuitive, a recent empirical study by Parker and Sarvery [1996: 18] demonstrated that "dispositions to innovate are invariant across cultures." Institutional explanations may be superior in exploring the extent to which "breaks from habit" as denoted by innovative behavior are due to lower transactions costs, either from changes in personal values or from changes in the institutional environment resulting in higher pay-offs for innovative actions [North 1990]. Similarly, other behaviors, such as the intensive price bargaining characteristic of "bazaar economies" may be due more to the institutional characteristic of availability of relevant information. For example, as Geertz [1978: 30] argued, the primary problem facing the participants of a bazaar is "not balancing options but of finding what they are."

Actors as Marketers. Variations in marketing systems due to characteristics of marketers may be analyzed in terms of: (1) the importance attached to the profit motive versus community considerations, (2) preferences for repeated exchanges, (3) the degree of integration of firms within sectors, and (4) the prevalence and dominance of specific trading groups or networks.

One remarkable feature of comparative studies of the firm has been the realization that individuals and firms differ in the importance attached to the profit motive as a guide for business strategy [Dore 1983]. While some clearly pursue profit-maximizing goals, charging prices to the fullest extent that markets can bear, artificially restricting supply (monopoly), and free-riding on quality (opportunism), others pursue a mixture of profit and seemingly contra- profit goals. For example, Japanese firms are more focussed on long-term goals than short-term profit maximization, and firms in Indonesia appear to be "relief" organizations rather than profit-oriented enterprises [Geertz 1963; Granovetter 1992]. The prevalence of profit-maximization may be attributed to the institutional diffusion of this norm, through experience, education or imitation.5 However, the realization that self-interested behavior is also self- defeating is crucial for not pursuing the profit-maximization motive [Sen 1983], as is the realization that "fairness" considerations may be prevalent despite clear disadvantages and higher costs [Kahneman, Knetsch and Thaler 1986]. Plattner [1983] provided an interesting scenario of a trader in an underdeveloped country refusing an offer from a foreigner of double the expected market price of her produce. Here, the crucial realization was that obligations to ongoing partners (hence, long-term income and survival) was more important than a "one time killing" [Plattner 1983: 848-849].


Recent research has shown that long-term buyer-seller relationships are characterized by a concern for mutuality, lower transaction costs due to repeated dealings that develop trust and minimize opportunism (and hence, increase economic efficiency), and greater degrees of interfirm adaptation that favor adjustments in quantity, quality and price without resorting to complex, legalistic contracts [Anderson and Weitz 1989; H'akansson and Snehota 1995; Johansson and Mattson 1987]. In a comparative study of buyer-seller relationships in Japan and Germany, Campbell [1985] found that Japanese relationships were more closely knit, personalized, informal, trusting, and long-term oriented.

The degree of integration and size distribution of firms is an important characteristic of marketing systems across nations or across sectors. A high degree of integration contributes to small channel lengths, while low integration often results in longer channel lengths [Sharma and Dominguez 1992]. It is logical that firms integrating production would also, for similar transaction costs reasons, attempt integration into distribution as well. One crucial institutional determinant of such integration and firm sizes is the willingness to decentralize control over economic activities [Whitley 1994]. For example, some economies, such as Taiwan, are dominated by small, family- controlled businesses, while in others such as, Norway, the economy is characterized by loosely interrelated small firms as well as tightly interrelated large ones [Berrefjord and Heum 1993]. In Japan, a large number of tightly interrelated small firms form the distribution channel, making it almost impenetrable by foreign firms [Shimaguchi and Rosenberg 1979].

Specific trading groups may also dominate marketing systems. Often, such trading groups are homogeneous with respect to kinship, clan or ethnicity [La Croix 1989]. Examples include East Indians in East Africa, Jews in the New York diamond trade and Hokkien Chinese middlemen in the rubber trade in Singapore and West Malaysia [Ben-Porath 1980; Carr and Landa 1983; La Croix 1989]. Such homogeneous middlemen groups provide low cost information screening devices and mobilize exchanges at lower transaction costs [Ben- Porath 1980; Landa 1981]. Trusting relations are formed more on the basis of common kinship, identity, ethnicity, and religion, since family and friends can be trusted more than strangers, contributing to reductions in contractual uncertainties [Carr and Landa 1983]. Suitable institutional norms that constrain behavior are better developed within such homogenized groups [Carr and Landa 1983].

Processes

In terms of processes, the institutional enforcement of property rights, promises, obligations, reciprocal actions, and restitution (as in obligatory exchanges, personal ties, relational networks) may be better explicated by understanding the institutions that facilitate exchange. Also, institutional


constraints on the emergence of market behavior can contribute to a deeper understanding of the structure of the market mechanism, competition, efficiency, persistence of inefficient exchanges and functional processes, the nature of market formation, as well as the reasons why markets may not emerge (apart from the standard externalities and transactions costs explanations of market failure).

It is pertinent to note that market relations could vary considerably since markets themselves are institutions, while at the same time requiring a host of other institutional support mechanisms. Some of the common variance principles of market relations include formality/informality, personal/ impersonal, cooperative/conflicting, short-term/long-term, periodic/per- manent, and reciprocal/non-reciprocal. Such variations may also be sector- specific within or across national marketing systems. For example, until recently within the United States, the publishing industry was characterized by informal, cooperative, long-term and reciprocal networks [Coser, Powell and Kadushin 1982], while the automobile industry was characterized by a series of "arm's-length" transactions [Helper 1991].

At another level, marketing systems vary not just in the extent of competition but also in the specific types of competitive patterns. In fact, markets themselves can viewed as institutionalized systems for the mediation of competition [Abolafia and Biggart 1991]. Indeed, markets have "normative underpinnings and institutionalized means for sustaining norms of competition" [Abolafia and Biggart 1991: 212]. Norms of competition may promote competitive individualism, as in the social regulation of trade within the Chicago Board of Trade, or may promote "family" type norms as in the selling behavior of some direct selling organizations such as Mary Kay cosmetics [Abolafia and Biggart 1991]. Thus, competitive norms may develop through "fictive kinship" norms mimicking kinship structures [Carr and Landa 1983] or through the development of "brotherhood" between firms, as in the Swedish case [Collin 1993]. Moreover, competitive norms may emphasize mutuality over self- seeking autonomy, thereby resulting in a form of group communitarianism as in the case of Japanese business groups [Abolafia and Biggart 1991].

Structure

Institutional analysis suggests an evaluation of the structure not in terms of its formal dimensions, but in terms of the social constructions, stability of interaction patterns, persistence of institutions, and the extent of legitimation of organizational processes by the broader institutional context. Here, given the broadest definition of structure as stability of patterns and routines, a better grasp is facilitated of the possible institutional options and organizational responses.

Variations in marketing systems can arise out of such structural features.


Beyond loose and tight coupling of firms within the system, the emergence of stable patterns of interactions and relationships within the marketing system can contribute to better system performance [Sharma 1993]. Analysis of network structures is not a new avenue for the exploration of inter-firm ties and coordination (see Andersson [1992]; Johansson and Hallen [1989]). Network approaches emphasize the understanding of roles, evolution and performance of companies from their ability to develop networks of relationships and develop resources within such networks. Networks enable better exploitation of internal efficiencies [Ha'kansson and Snehota 1995].

Andersson [1992] has argued that distribution channels can be viewed as networks that differ, among other respects, in terms of stability, flexibility, adaptation, and loose and tight coupling. Analysis of networks enables uncovering a variety of patterns of interdependencies and the institutionalization of processes of adaptation, cooperation, social interaction and routinization between firms [Hakansson and Snehota 1995]. Networks of long-term relationships provide stability to industrial buyer-seller relationships and may provide structure to a variety of national and international sectors of economic activity. The extent to which marketing systems are characterized by such vertical, long-term relationships or "networks of firms" clearly contributes to preferences for non-market governance over market or hierarchical forms of governance. For example, the Japanese economy is characterized not only by a high-level of horizontal networking into groups of keiretsu firms but also by vertical or distribution networks [Cutts 1992].

Functions

In the institutionalist domain, functions follow from ideologies rather than clear-cut objectives. The availability, classification, and specification of each function are "prefabricated formulas available for use by any given organization" [Meyer and Rowan 1977]. Thus, the institutional environment pre- determines the availability of various functions and these are appropriated by business according to some ideology. For example, the position of fund-raiser may be more appropriate to firms following a nonprofit ideology while the position of instructor in history may be expected within an university. Similarly, in marketing, particular functions may emerge following the ideological exigencies of organizing a Suq [Geertz, Geertz and Rosen 1979], while direct marketing organizations may consider a different set of functions as appropriate [Abolafia and Biggart 1991]. It is possible that a pre-specified function, such as "wholesaler," may enable the identification of how wholesaling differs in different countries. However, a richer understanding of why observed differences exist is only possible by removing the link between function and structure and by explicitly considering the institutional and ideological domains of such functions. In economies and sectors where environmental uncertainty is increased by paucity and lack of credibility of information, and the absence of


trusting relationships as in personalized relationships, brokers may arise to provide information screening and exchange mobilization and thus reduce environmental uncertainty However, higher transaction costs may prevail without contributing to changes in the system, as in the case of the Suq in North Africa and the Middle East [North 1991].

THE INSTITUTIONAL ENVIRONMENTS OF MARKETING SYSTEMS

Environmental factors in the evolution and characteristics of specific marketing systems are often difficult to study for a variety of reasons. First, there are too many factors to be included in any single model such that it is difficult to study the impact of each factor on the resulting marketing system. For example, a systematic of study of even one environmental dimension, such as culture, could lead to the development of a complex array of indicators, most of which may themselves vary in form and degree. Thus, it may be feasible only to study the impact of a particular religion, such as Buddhism, on say, marketing practices. However, without similar studies of other religions, other practices and other cultural phenomena, it may not be possible to arrive at a clear conception of how culture affects marketing systems. Second, splitting the environment into a variety of dimensions, such as the economic, cultural, social and political, underscores the ways in which these dimensions are related. For example, complex economic exchanges are often embedded in social processes, and complex political phenomena, such as nationalism, may have cultural origins. Third, various primary and secondary effects of the environment must be taken into account [Thorelli 1990]. Impacts of national micro-environmental factors, such as market structure and marketing infra- structure, may be more readily apparent, but the impact of macro-environmental forces, such as inflation and fiscal and monetary policies, on marketing may be less readily understood. Moreover, the international environment may consist of a variety of forces contributing to building, diffusing and dissolving national or sector-specific institutions [Goldsmith 1992; Thorelli 1990].

Elaboration of the environment into its institutional and technical sectors provides a richer understanding of the microcosm of marketing systems. Changes in technical and institutional environments, the role of profes- sionalism, entrepreneurial activity, innovations and technical changes, customs and routines, and the broad impact of cultural and political institutions in granting legitimacy or coercing change can all be better described. For example, economic reforms may involve changes in the regulation of economic activity as well as the creation of institutions to facilitate market-based exchanges and technological change. A focus on the institutional and technical sectors of the environment provides a delineation of the appropriate behaviors expected, sanctions on certain types of behavior, changes in reward structures for output and efficiency and the appropriate role and scope of new institutions and their ability to self-sustain, reproduce and replicate within


organizations. The enduring properties of and patterns of change in marketing systems can now be identified, and predictive statements can be made from an understanding of historical responses of organizations to changing environments (i.e., whether the organization responds to particular rewards and sanctions as identified by reforms or attempts to counter them). This last point is particularly noteworthy in the analysis of the impacts of economic reform in some developing countries. Some actors and classes made better cognitive assessments of the rewards within the environment and were able to sustain appropriate and matching behaviors, while the majority of the public opposed the reforms since these entailed drastically different economic and political rewards and costs than before.

Variations in the institutional environment can be used to explain variations in marketing systems across specific time-periods, sectors and nations. One clear implication of the study of institutional environments is that focus is shifted away from a national environment. Instead, nations may be similar on specific institutional environment dimensions while being different on others. For example, consumption of particular products, distribution of products, firm behavior and credit availability may be very similar among nations where Islam is the dominant religion, even though there may be significant differences along a variety of macro-environmental dimensions among such nations [Rice 1996]. Analysis is also facilitated on sector-specific similarities and differences across nations. For example, patterns of retail evolution in a number of countries may be very similar despite different time-periods of such evolution, while in others (such as Italy), the evolutionary pattern may be disrupted by laws limiting store sizes. Thus, both macro- and micro- dimensions of environments are included.

The above conception has tremendous implications for understanding the forces favoring and resisting globalization. For example, increasing globalization may result in the creation of sector-specific similarities across nations, while factors resisting globalization may yield unique national responses within specific sectors of any nation. The emergence of a young, urban and educated segment with similar tastes and preferences for a host of products, such as jeans, music and fast food, may be one indication of globalization of specific marketing sectors, though the nation-state as a whole may struggle for self-identity and promote traditional values.

The predominance of certain types of ground rules and behaviors can be used to infer a variety of institutional effects, such as economic efficiency, social performance and patterns of stability and change in institutional and technical sectors. Diversity in institutions permits analysis of institutional choices and the legitimation processes that contribute to the emergent structuring of exchanges and the degree to which the institutional environment favors changes from established norms.


Some impacts of the institutional environment on marketing systems may be coercive, normative or mimetic [DiMaggio and Powell 1983]. Coercive isomorphism (homogenization of an organization with its institutional environment) results from the pressures exerted by regulatory agencies, such as the government, and other social bodies specially created to accord legitimacy to organizational practices. For example, changes in the political environment, such as redefinition of property rights, would lead to a different constellation of markets and firms within the marketing system, as is currently the case in transition economies. Normative isomorphism results from the impact of professionalization and the growth of professional networks that contribute to new normative rules on professional and organization behavior. Educational institutions and professional associations play an important role and contribute to changes in the marketing system by exposing internal rules to greater external evaluation. A growing professional class in developing countries and the contribution of Western marketing theory would contribute to similar patterns of marketing systems despite variations in national environments. Finally, mimetic isomorphism results from standard responses to uncertainty [DiMaggio and Powell 1983]. Successful patterns of structure, functions and processes will be replicated within the marketing system and innovation-imitating activities may contribute to wider patterns of organization and interactions within the marketing system.

INSTITUTIONAL EFFECTS ON PERFORMANCE OF MARKETING SYSTEMS

The performance of marketing systems can be evaluated, apart from the standard yardstick of economic efficiency, by focussing on distributive justice, successful adoption of technologies, rates of technical changes and inventive activity, and satisfaction of customer needs. In contrast to conventional transactions cost analysis of marketing systems, institutional theories identify several sources of economic efficiency. While most result in lowering the costs of exchange, such reductions in costs are not necessarily to due to higher levels of integration of marketing systems. In fact, networks, patterns of reciprocal bilateral trading and informal personal ties can contribute to reductions in costs of exchange and governance, thereby contributing to long-run economic efficiency.

Distributive justice considerations, on the other hand, may favor departures from the pursuit of economic efficiency. Governments often impose costly terms of exchange in order to align organizational activities to the distributive goals of the economy as a whole [Arrow 1985; North 1990]. For example, marketing systems may be characterized by increased public control (e.g., food distribution in developing countries), administered prices and subsidies in agriculture (in most countries), or increased regulation of various marketing activities (ultimately financed through taxation). Moreover, the alteration of


property rights through ownership specification (the "Africanization" of commerce in Kenya in the 1970s-[Himbara 1994]) and mechanisms for obtaining credit and financing (bank nationalization in India in 1960s) ultimately impact marketing systems by moving institutional norms from the profit motive to a forced focus on distributive justice.

Stable institutional patterns within marketing systems also affect the adoption of new technologies. While technology itself may have its tacit dimension limiting transferability and diffusion [Teece, Pisano and Shuen 1994], appropriability of profits from new technology requires institutional support from other firms and customers [Teece 1986]. In fact, the diffusion of retailing concepts and technological know-how has been limited by what have so far been perceived as social and cultural factors [Cundiff 1965; Kacker 1988]. Resistance to such changes may be more due to the relative pay-offs of change vis-a-vis the costs of change itself [North 1990]. Absent coercive and normative influences on changes in technology, failure may provide examples in the collective memory and raise the future costs of such changes.

Assessments can be made of the appropriability (the ability to profit) of technological innovations. Appropriability is affected by the extent to which patents on products and processes are honored by transactors, as well as the extent to which co-specialized assets in marketing can be created [Teece 1986]. Also, since innovations affect prevalent institutionalized behaviors in interesting ways, the extent to which technological innovations fit with the institutional context of marketing behavior can predict the diffusion of innovations. These, in turn, provide guideposts to investments in inventive activity within governments, research institutions and firms.

A focus on the satisfaction of customer needs and, consequently, the marketing orientation of firms, may differ widely across marketing systems. Here, as elsewhere, when norms of customer evaluation of goods are clearly present and widely circulated, the pressures of conformity to such norms may be communicated upstream in the marketing system. However, one critical variable is the extent and form of market relations. Market relations favoring repeated transactions in competitive markets are more likely to favor clear attention to customer needs while the relative absence of alternative supply sources (hence, competition) will downplay customer needs.

Personalized exchanges provide for greater satisfaction and repeat dealings, but personalized markets are limited in size within an economy. On the other hand, market-based exchanges, unless supported by elaborate institutional structures, entail tremendous costs due to problems of measuring value or performance and enforcement of terms of exchange. However, well-specified and well-enforced property rights mitigate these costs through the ability to devise and enforce formal contracts and mechanisms for ensuring performance and exchange [North 1987]. As a result, impersonal exchanges with third party


enforcement are possible to a greater degree, thereby enabling expansion of the market and the economy beyond smaller spheres of personal exchange.

In the context of changes in marketing systems in the Pacific Rim countries, Thorelli [1996] noted that modern marketing is "first and foremost a motivational force" that enables exchanges due to its impacts on choice, competition and cooperation among economic actors. Thus, the fundamental priority in realizing economic development is to liberate the motivational aspects of modern marketing in an environment that assures a variety of support institutions, albeit initially through government intervention [Thorelli 1996].

When institutions are made the focus for studying changes in marketing systems, due attention is given to changes in incentive structures that contribute to different choices made by individuals and entrepreneurs within the system [North 1994]. Similarly, changes within the system occur, given a perception that gains could be better realized when political and/or economic exchanges are restructured differently. Thus, apart from changes in prices and technology, changes in motivations and learning by individuals and entrepreneurs are also necessary for changes in marketing systems [Bromley 1989; North 1994; Thorelli 1996]. In fact, changes in such ideological factors are crucial for the formation and sustenance of efficient markets that contribute to enhanced economic performance [Ensminger 1992]. However, performance implications are also influenced by institutional norms, the polity and the flexibility of institutional structures [North 1994].

INSTITUTIONAL ANALYSIS AND INTERNATIONAL MARKETING THEORY

A framework for the comparative analysis of marketing systems should provide guidelines for suitable theory and action. Some implications are drawn for organization of exchange in international markets, the environments of transnationals, strategic responses to local environments by MNEs, and success of mode-of-entry strategies.

Exchange in International Markets. From a political-economy perspective, Toyne [1989: 7] argued that the international exchange process "should be treated as dynamic, multilevel and, influenced by historical events and national (societal) assumptions concerning the role played by business activity." In the specific study of comparative marketing systems, this implies, apart from a two-sided, dynamic exchange process, the fact that the firm-environment interrelationship is neither static nor unidimensional. Instead, firm behavior may be the result of discretionary decisionmaking and a result of direct and indirect impacts of the environment and changes therein. The study of comparative marketing systems may involve sifting through both complex, intricate and historical patterns of exchanges that shape the environment of business and specific business actions.


Theories of international marketing have historically failed to deal adequately with exchange processes, structures and governance, and the fundamental nature of market relations and competition. That exchange systems differ across various contexts is not a new realization [Smelser 1959]; however, less attention has been given to the comparative analysis of exchange systems than to individual components of the environment in the determination of a variety of strategies including mode of entry, standardization of marketing programs, and adoption/diffusion processes. Institutional analysis of CMS highlights the variety of stable patterns of exchange and interaction between firms and customers. Successful penetration into international markets requires suitable isomorphism or strategic responses to the national institutional environment. For example, after years of unsuccessful forays into the Japanese distribution system, the crucial realization now within the U.S. is that it is better to defy the existing Japanese institutional environment and work towards installing new distribution structures, such as large-store retailing, direct marketing, piggy- backing on successful entrants, and gray market importing [Kaikati 1993]. Moreover, the role of the state in contributing to existing patterns of exchange structure cannot be underscored, as evident in some East Asian countries [Orriu, Biggart and Hamilton 1991] and in the business-government relations in Norway, Japan and Germany [Berrefjord and Heum 1993; Orriu 1993].

Comparative analysis of exchange motivations and preferences calls for a more detailed study of the choice contexts and decision-making rules adopted by consumers. The study of differences in the institutional environment that contribute to choice options and rule formation may yield superior middle- range theories of buyer behavior under generalized choice contexts.

The Environments of MNEs. One important result of the dialogue between institutional analysis of organizational environments and MNE theory is the extent to which changes in organizational fields as a result of institutional changes lead to changes in MNE structure and strategy [Westney 1993]. Indeed, global organizational fields may encompass multiple boundaries and the essential challenge is to determine whether global competitors behave similarly or reflect clear national differences. While the specificity of institutional environments from which they originate may contribute to differences between say, British and Japanese multinationals, the increasing level of professionalization due to business education and multinational management experience may contribute to similarities within the same industry in various national contexts. Moreover, globalization may be defined in purely production or technological sense, thereby yielding a greater salience to the technical sector. Hence, similarities among technical sectors, such as in telecommunications and automobiles, may be more common, yielding a more global environment.

Adaptations to Local Environments. Strategic adaptation to local institutional environments is also a challenging case. MNEs themselves are packages of


institutional arrangements that may be quite incompatible with specific national environments. A number of different scenarios are possible. On one hand, the MNE would adapt to the local institutional environment and, over time, such adaptations may contribute to changes in the MNE operation in other countries as well as its own home country [Westney 1993]. The twin pressures of conformity to conditions in the local environment and the need for consistency within the MNE may determine to a large extent the tensions between global integration of strategy and' national responsiveness [Rosenzweig and Singh 1991]. Thus, national boundaries may clearly define organizational environments and yield responses that are global or local [Hu 1995; Rosenzweig and Singh 1991]. On the other hand, the new institutional arrangement brought in by the MNE may contribute to changes in domestic institutional environments [Westney 1993]. Indeed, such processes are crucial for the international transfers of technology, management skills and labor practices into the host country. Moreover, lessons learnt from adaptations to local environments may be transmitted through the MNE organization [Rosenzweig and Singh 1991].

Mode of Entry. In a seminal contribution, Anderson and Gatignon [1986] called attention to the analysis of a variety of transactions costs considerations in choosing an efficient mode of entry into international markets. An efficient mode of entry can be selected by a discriminating match between the exchange environment and the specific institutional alternative which provides a certain degree of control. This analysis can be expanded by considering the exchange environment in greater detail and the extent to which certain modes of entry, i.e., franchising or licensing, are feasible in specific national environments. Franchising requires a well-developed entrepreneurial base and suitable profit motives (which contribute to an alignment of incentives between the franchisor and the franchisee). However, absent these, it is unlikely that franchising would have the intended results, though the degree of control may be as intended. Moreover, licensing strategies require adequate degree of patent protection and other enforcement of property rights, which vary across national contexts. Thus, managerial options may be limited due to the institutional environments, while at the same time, national government strategies may, through proactive regulations and education, increase the opportunity set for smoother flows and varied uses of FDI.

CONCLUSION

Comparative institutional analysis attempts to trace similarities and differences in institutions comprising marketing systems across time, sectors and regions. However, the diversity of institutions, industries and national contexts makes the study of institutions a daunting task. Still, as demonstrated by Hamilton and Biggart [1988] in their comparative study of organizational structures in Japan, South Korea and Taiwan, and by Eisenstadt [1980] in his


analysis of the impact of cultural orientations on the patterns of change in three historic regimes within "traditional" societies, the task is neither unmanageable nor unrewarding. For example, general theorizing has contributed not only to a richer understanding but also to a mid-range theory on the functions, ties and motivations of ethnically homogenous middlemen groups (see Carr and Landa [1983]; Landa [1981]; and La Croix [1989]).

The premise guiding this paper is that the study of dynamic systems and their properties require more than a simplistic analysis of their structures and functions. Understanding change requires not only a thorough understanding of the object under scrutiny but also historical insights into the processes of transformation and the mutative processes within the object. Thus, if one were to understand changes in international marketing systems, historical analysis provides insights into the nature, causes and consequences of such changes. However, while this presupposes an understanding of what constitutes marketing systems in different environments, such knowledge may be restricted to the awareness merely of known formal structures and readily observed processes. The study of underlying institutions, i.e., of the rules that structure human interaction and constrain human behavior, is proposed as the alternative for a deeper understanding of change in international environments.

Traditional analysis within marketing and international business disciplines is skewed towards the understanding and prescription of strategic behavior of firms and the extent to which these are affected by national and international environments. The long-term impact of strategic behavior on the environment and the impact of historical institutional forces in shaping individual and firm behaviors are largely ignored. Institutional analysis restores this imbalance by providing a common frame of analysis for assessing the environment as well as the discretionary behavior of firms. Institutional analysis - by focusing on relevant actors, conventions, and patterns of behavior - enables a better grasp of the structure of the environment as well as of the historical conditioning of current and future choices. Research on institutional similarities and diversities among marketing systems has the potential for contributing to more stable general principles for individual and collective behavior within marketing and for insights into public policy.

NOTES 1. This conception of institutions is broader than the treatments of institutions limited to the cultural domain. The distinction lies in the boundaries drawn for the study of actions and interactions within society. Cross-cultural analysis permits this study, but a broader conception, beyond cultural bounds, enables the inclusion of diverse elements such as technology [Arthur 1989; David 1985], regulation [North and Thomas 1973], ideology [Ensminger 1992], and various beliefs and individual self-conceptions [Scott 1995].

2. Contrast this with study of specific subunit (individual or organizational) behavior across different systems. For example, if bribery in business dealings is the focus of study, analytical


aspects of the study will be affected by the specific definition of bribery. If bribes are understood to be covert monetary payments that are extraneous to the exchange but made with the sole intention of influencing exchange results, then the relative prevalence of bribery will be quite varied across marketing systems. However, when other non-monetary and more subtle forms of voluntary influences - such as, gift-giving, lavish meals, and entertainment - are also considered as bribes, less variations are to be found across national marketing systems (see Wood [1995]).

3. Foster [1965] argued that in "peasant societies," the peasants' cognitive orientation was to view certain desirable goods as limited in supply, and given their own unexpandable resources, an attempt was made to impose sanctions on those attempting to gain greater than their fair share (i.e., an attempt was made to avert a win-lose situation). However, a critique by Kennedy [1966] called attention to the economic and social differentiation in peasant societies just as in other societies. The impact of a variety of reference groups of successful individuals yields a cognitive orientation that conceives the society as "open" and the idea of the good as "expandable," thereby justifying the pursuit of economic and social betterment. The emergence of certain unlikely candidates (from the Western point-of-view) as status goods in a number of societies and the "rugged individualism" of some in transition economies supports this view.

4. In the context of organizational theory, Shenkar and von Glinow [1994] favor the study of relative roles of culture and institutions in understanding the universality of theories developed in North America. The fact that such theories may themselves reflect cultural biases is explored by Boyacigiller and Adler [1991] and Hofstede [1996].

5. However, more importantly, to paraphrase Simon's [1990] arguments on altruism, profit motives (self-interested behavior) would be sustained and actively pursued in markets where such motives are advantageous to the economy as a whole and impose no additional costs to the fitness of individual firms. If profit motives are associated with major costs to fitness, they are less likely to be the prevailing norm. Also, profit motives detract from the possibility of providing for public goods, and one alternative, as suggested by Hirsch, is to change behavioral norms away from the pursuit of the profit motive [Sen 1983]. Thus, economies emphasizing fairness and distributive justice may downplay the profit motive and favor taxing to finance redistribution [Arrow 1985]. "Mixed economy" policies pursued by Scandinavian countries and some developing countries, such as India, are some examples.

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one crucial decision for international marketing managers is

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