Isomorphic pressure for MNCs: Institutional misalignment and practice adoption

Institutional theory has argued that multinational corporations (MNCs) are under the host country's institutional pressure to become isomorphic to local practices. However, some institutional researchers (Kostova, Roth, and Dacin 2008) have argued that MNCs present a challenge for institutional theory and suggest that MNCs have limited institutional pressure for isomorphism. Drawing upon the debate on the applicability of institutional theory to MNC settings, this study strives to answer this research question by examining the difference in practice adoption rate and the diffusion patterns between foreign MNCs and domestic firms in a host country. The main contention of this study is that foreign MNCs not only have institutional freedom to choose, but they also have the economic and institutional drive to avoid becoming isomorphic to the local practices. Specifically, the study suggests that institutional misalignment created by incongruence among institutional spheres is one such drive. This study also examines how functional pressure, competitive pressure, and institutional pressure interact with these drives and influence the practice adoption behavior of MNCs. This dissertation thus contributes to institutional theory, practice adoption and diffusion literature, and strategic human resource management.