Abstract
This paper discusses the theories that explain the manner in which businesses execute their strategies and outlines the process of adopting measures that increase performances in international business. The paper outlines the application of the resource-based view and the industry based view. Then, it relates the application of the institution based theory as proposed by Peng, Jiang, and Wang (2008). The institution-based view forms the third leg of the tripod evaluation in examining international trade. The combination of the resource-based perspective, the industry-based perspective, and the institution-based perspective forms an essential tripod strategy to determine the performance and strategy of an organization
The Third Leg In the Strategy “Tripod”’ Evaluation
Excellence in international business is always associated with a myriad of challenges. This can be attributed to international regulations, political differences, cultural issues, allocation of resources, and trade barriers among other issues. Regardless of these challenges, some multinational corporations from developing nations have managed to achieve excellence in international business despite lacking experience and limited resource (Becker, and Huselid, 2006). This aspect has raised some mysteries concerning the factors that make such businesses to succeed in international business. Traditionally, the industry-based view and the resource-based view were the key strategies used to describe the factors that determine the success or failure of business in international business. The industry-based view argues that the internal conditions within a business are largely responsible for determining the performance and strategy of a firm. On the other hand, the resource-based view argues that specific differences within a firm are responsible to drive performance and strategy (Warnier, Weppe, & Lecocq, 2013).
Peng, Jiang, and Wang (2008) argued for the need of including a third theory (the institution-based theory) to analyze the strategy and performance of a firm. This will form the tripod comprising of the resource-based theory, the industry-based theory, and the institution-based theory. The authors argue that institutional components are essential for enabling an organization to cope with the challenges associated with hyperactive competition and effects of globalization. The institution-based view calls the need for firms to address the informal and formal issues relating to the business. Expansion of business activities to international markets forces businesses to research on the factors affecting business activities in these operating regions (Caliskan, 2010). Such strategies are aimed at eliminating competition by disrupting the status quo that define competitive advantage within the industry. As such, businesses should be willing to change the rules of the industry rather than devising strategies to enable it fit to an industry. To achieve this objective, firms should innovate and develop creative strategies that are critical for growth and expansion.
The industry-based view
The industry based view concentrates on competition as forming the crucial aspect in formulating strategies for organizations. This can be attributed to the idea that competition covers aspects relating to the economy and the behavior of firms, suppliers, and consumers within the economy. As such, the industry-based view can be used with the resource based theory and the institution based theory to assimilate a tripod strategy (Peng, Sunny Li, Pinkham, & Hao, 2009).
The resource-based view
Finally, the resource-based view is focused on strengthening the nature of prolonged competitive advantage over a given period (Wernerfelt, 2013). For this reasons, organizations often use intangible and tangible resources to strengthen the level of their competitive advantage (Patton, 2001). Such organizations use equal resource distribution strategies to coordinate the assets and capabilities of an organization.
Conclusion
The combination of the resource-based perspective, the industry-based perspective, and the institution-based perspective forms an essential tripod strategy to determine the performance and strategy of an organization (Gao, Murray, Kotabe, & Lu, 2010). The effects of hyper-competition and globalization forces firms to strive for longevity and adoption of strategies to enable them succeed in the increasingly competitive market. This enables the firm to target higher possibilities and explore any boundaries that can make it expand its performance and productivity.
Reference List
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Caliskan, E. N. 2010. The impact of strategic human resource management on organizational performance. Journal of Naval Science and Engineering 6(2): 100-116
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Patton, M. 2001. Utilization-focused evaluation: the new century text. Thousand Oaks: Sage Publication.
Peng, M, Sunny Li, S, Pinkham, B, & Hao, C 2009, 'The Institution-Based View as a Third Leg for a Strategy Tripod', Academy Of Management Perspectives, 23, 3, pp. 63-81
Peng, M.W., Wang, D.Y.L. & Jiang, Y. (2008) ‘An institution-based view of international business strategy: A focus on emerging economies’, Journal of International Business Studies, 39 (5), July/August, pp. 920–936.
Warnier, V, Weppe, X, & Lecocq, X 2013, 'Extending resource-based theory: considering strategic, ordinary, and junk resources', Management Decision, 51, 7, pp. 1359-1379,
Wernerfelt, B 2013, 'Small forces and large firms: Foundations of the RBV Small forces and large firms: Foundations of the RBV', Strategic Management Journal, 34, 6, pp. 635-643,
