“What determines the scope of the firm? ” is one of the most fundamental questions in strategic management. We argue that, in addition to product relatedness, a focus on institutional relatedness—defined as an organization’s informal linkages with dominant institutions that confer resources and legitimacy—helps answer this question. We address this question both longitudinally (firms in developed and emerging economies over time) and cross-sectionally (developed versus emerging economies), thus contributing to an institution-based theory of corporate diversification. As part of the broader intellectual movement centered on new institutionalism throughout the social sciences in recent decades (North, 1990; Powell & DiMaggio, 1991; Scott, 1995; Williamson, 2000), strategic approaches to organization are considering institutional forces much more explicitly than before (Henisz, 2003; Oliver, 1997; Peng, 2003, 2006). Researchers increasingly realize that institutions are more than background conditions and that “institutions directly determine what arrows a firm has in its quiver as it struggles to formulate and implement strategy” (Ingram & Silverman, 2002: 20; emphasis added). Positioned to deepen our understanding of how an institutional perspective adds to strategy re-

0238820). All views expressed are ours and do not necessarily represent those of the funding organizations. INTERNATIONAL JOINT VENTURES AND THE VALUE OF GROWTH OPTIONS Real options theory predicts that international joint ventures (IJVs) confer valuable growth options to firms, yet there has been no direct evidence on whether firms actually capture growth option value from such investments or under what conditions. We bridge the gap between theory and evidence by empirically testing this prediction, and we also develop the theoretical arguments that an IJV’s ownership structure, product market focus, and geographic location are important contingencies affecting the value of embedded growth options. The empirical evidence confirms that IJVs do enhance firms ’ growth option values, but only under certain circumstances. Specifically, minority IJVs and diversifying IJVs contribute to growth option value, but other types of IJVs do not. The findings also challenge recent claims on the growth option value of investments in emerging economies. Key words: International joint ventures; real options theory; growth option value; international

abstract Acquisition of capabilities is both imperative and difficult in emerging economies. This study adopts a duel network perspective to examine how the source networks and recipient networks in which international joint venture (IJV) partners operate influence inter-organizational transfer and diffusion of capabilities. We study multiple cases in the Chinese automotive industry to investigate how various factors of MNE source networks and the local recipient networks (business groups in China or qiye jituan) affect knowledge transfer from the MNE source networks into IJVs and knowledge diffusion from IJVs to their local recipient networks. The study suggests ways that the dual networks influence both types of knowledge transfer. We found both positive and negative effects of recipient and source networks on knowledge inflow to the IJVs and knowledge outflow from IJVs. The dual networks perspective is particularly relevant for emerging economies where the asymmetry between the knowledge, power and motivations of the recipient and source networks may significantly affect the knowledge transfer outcome.

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Organizational legitimacy can be viewed as conformity to broadly-accepted standards, or institutions. The main question we are looking to answer with the present study is what happens if these standards change? Which legitimacy strategy will organizations adopt? This paper analyzes how institutional changes affect organizational strategies. A framework was designed to take into consideration the types of changes based on the different levels of the institutional environment of a company. A typology of organizational legitimacy strategies was developed based on a qualitative study carried out on the Bulgarian wine sector. The later represents the perfect setting for the present study since both the country as well as the industry encountered major transformations over the last several years. The results show that the type of strategy adopted depends on the type of change as well as the specific organizational characteristics such as organizational size, and also the management style initiated by the CEO. First, regarding their regulatory environment, organizations respond to change either by conforming to the new law, or by creating their own standards in order to conform also to standards established on a global basis. Furthermore, we found that institutional change influences the type of varietals grown. As for the normative aspect, organizations adopt an ‘inside-out strategy’, hence creating the basis for local reputation before expanding and looking for a global presence. Finally, in the context of institutional change, organizations are looking for the most ‘embedded ’ anchor-point, represented by the cognitive dimension of legitimacy. Gaining legitimacy is an important issue for new organizations

and resource accumulation for firms from emerging economies