‘Second Best’ Institutions and Global Sustainability

In an ideal textbook world, the noble concept of sustainable development sounds less complex and more feasible to actualize. Nevertheless, the fierce scramble to appear socially responsible also involves sophisticated corporate ingenuity characterized by deviance (Cohen, 1966), which is aimed mostly at rent seeking without regard to social and environmental issues, especially in weaker institutions. Institutional theory has thus far proved very valuable in providing insights into the reasons why the rules of the international business game, with multinational companies (MNCs) as major players, are applied differently in different institutional environments, resulting in different outcomes. It is easier to identify the functions of institutions than the structure they should take in specific contexts. The available literature and conventional knowledge about institutions have mostly been developed in the West, where the judicial, socioeconomic and political systems are generally formalized, stable, advanced and diverse. From theory to practice, this has led to the general assumption that the first best practices of the West should also be easily enforceable elsewhere in the developing world (Rodrik, 2008). From the start of the millennium, however, economic crises and emerging opportunities have highlighted the importance of the developing economies (DEs). First, they are potential markets notwithstanding the fundamentally different challenges they pose. Secondly, the institutional structures underpinning the rules of the game for their sustainable development are susceptible to analysis using the ‘second best perspective’ (Rodrik, 2008).