Pro-market institutions and global strategy: The pendulum of pro-market reforms and reversals

We review the literature analyzing the impact of pro-market institutions on firms' global strategy. We propose that the ideological tension between whether the government or the market should drive economic development results in a pendulum of pro-market reforms and reversals that drive changes in firm strategy and performance. Much progress has been made in the analyses of pro-market reforms and their impact on firms' international strategies and performance. However, there is a need to further learn about four areas: (1) the concept of pro-market institutions, in particular the variety of institutional dimensions, the measures, and the influence of informal institutions on firm strategies; (2) the drivers of changes in pro-market institutions, especially firms' influences and the co-evolution of firm strategies and institutional changes; (3) the implications of changes in pro-market reforms for the interactions among integration, diversification, and internationalization strategies, the causality chains connecting institutions and strategies, and the reconfiguration of activities globally; and (4) the non-traditional moderators that alter the impact of pro-market institutional dynamics on firms' strategies, such as country-level political systems, industry-level competitor reactions, and individual-level managerial capabilities and perceptions.