Exit, voice and loyalty as firm strategic responses to institutional pressures A comparative case study of Google and Baidu in mainland China

Purpose - The purpose of this study of Google and Baidu in mainland China is to identify the key contingencies to firm strategic responses to technical and institutional pressures. From an institutional logic perspective and Hirschman's model of exit, voice, and loyalty, this research proposes a few propositions which are intended to explain why foreign and local companies adopt different responses to similar institutional requirements or under similar institutional pressures. Design/methodology/approach - This study applies a historical chronological method by the recognition of certain types of events and key strategic activities conducted by two sample organizations from their foundations in mainland China till March 2010 when Google exited from China's internet search market. These activities were identified as the measurement of firm strategic responses to institutional pressures. Data were gathered from various sources, including documents published by sample organizations, online and media reports, etc. Findings - It is found that firms adopted similar responses to technical pressures which were determined by characteristics of the internet industry. However, their responses to institutional pressures, which were driven by the state logic for control of the internet, were dramatically different. As a multinational corporation, Google was faced with inherent tensions between home and host institutional requirements. When the state control pressures increased, Google eventually selected a voice and exit strategy. Baidu, as a local leading player in China's internet market, adopted a loyalty strategy through closer collaboration with local institutional constituents, including government agencies and clients, in addition to its investment in creating corporate images and reputation among local internet users. Originality/value - This research explores the dynamic and diverse responses of foreign and local companies to institutional pressures and advances our understanding of political properties in firm strategies and the importance of firm nationality in strategy making.