¹Collaboratory for Research on Global Projects, Stanford University, Stanford, USA

Correspondence: RJ Orr, Collaboratory for Research on Global Projects, Y2E2 Building, Room 239, Stanford University, MC 4020, 473 Via Ortega, Stanford, CA 94305, USA. Tel: +1 650 387 6415; Fax: +1 650 723 4806; E-mail: rjorr@stanford.edu

Received 7 February 2006; Revised 16 August 2007; Accepted 4 September 2007; Published online 21 February 2008.

Abstract

This inductive study offers an examination of 23 cases in which informants from firms engaged in large-scale global projects reported unforeseen costs after failing to comprehend cognitive-cultural, normative, and/or regulative institutions in an unfamiliar host societal context. The study builds on the conceptual framework of institutional theory. The findings, which include propositions and a generic narrative model, contribute to theoretical knowledge of how institutional exceptions arise, how they are resolved, and how they typically involve three general phases: ignorance, sensemaking, and response. The findings also articulate the kinds of institutional transaction costs that an entrant incurs in each of the three phases, and the conditions that lead to the growth of these costs.