The effects of the institutional context on a foreign company´s entry strategy when entering an emerging market : A case study: Väderstad-Verken AB

Abstract: Background: More foreign companies expand into emerging markets and such markets differ from developed ones. Emerging markets present opportunities and challenges for foreign companies. Challenges include many environmental factors, cultural differences, economic uncertainties and weak institutions. Emerging markets are often characterized by underdeveloped formal institutions which result in the so called institutional voids. Informal institutions act as formal institutions and fill in these institutional voids. Foreign companies need to pay much attention to emerging economies institutions when selecting entry mode since the institutions affect their strategy and profitability. Aim: The purpose of my thesis is to investigate and analyze how aforeign company is affected by a host country’s institutional context when entering an emerging market. The thesis focuses on the emerging market of Russia and a case company. Conclusions: Institutions affect the steps taken in accordance with the Uppsalamodel. It is important to learn more about the institutions of a host country in choosing an entry mode. The weakness in property rights, risk of corruption, political and economic factors combined with networking were the dominant factors in choosing an entrymode. Väderstad suffers from institutional shocks in the Russian market and they affect the willingness to invest further.