The effect of local institutions on the competitive strategies of exporters. The case of emerging economies in Latin America

Abstract

This paper analyzes the effect of local institutions and market orientation on the export performance of Latin American firms when they implement generic competitive strategies. A specific questionnaire sent to 201 executives of exporting manufacturing and service companies in Brazil, Chile, Mexico, and Peru generates the data for this research. Then, confirmatory factor analysis is used to develop the underlying multi-item constructs, and a structural equation model tests the hypotheses. The results state that local institutions, directly and indirectly, affect export performance through the marketing orientation of firms, and marketing orientation mediates the implementation of the differentiation strategy but not the cost-based leadership strategy. The findings suggest that firms with differentiation strategies benefit more from strong local institutions.