For many years the industrialized nations were supposed to be models for the underdeveloped societies, and that these societies must come at par with the industrialized countries and this belief is still held today in many quarters (Escobar, 1995). However, post-1980’s witnessed the widespread liberalization and adoption of market-based policies by most developing countries resulting in emerging market economies (Hoskisson, Eden, Lau, & Wright, 2000). An emerging economy is defined as a country that satisfies two criteria: a rapid pace of economic development, and government policies favoring economic liberalization and the adoption of free-market system. The emerging economies are dynamic and that it is important to take account of changes in the institutional environment. The relevance of emerging markets are for two reasons: first, a significant part of economic growth is coming from emerging markets and second, innovations from emerging markets may be relevant for Western mature markets.

Some early research on emerging markets argued that Western multinational companies need to develop strategies for doing business in such markets and that it should be different from those they use at home country (Khanna & Peplau, 2005). As Khanna & Peplau (2005: 5) showed, “when firms understand the institutional differences between countries then they are likely to choose the best markets to enter, select optimal strategies, and make the most out of operating in emerging markets.”

Given the fact that emerging economies are not homogeneous, even within the same geographic region and countries have pursued different paths to transition and have achieved different degrees of progress (Hoskisson et al. 2000) pose the problem of comparison as institutions in emerging economies differ significantly from those in the developed economies (Peng, Wang, & Jiang, 2008).