Economic liberalization in emerging emerging economies has presented many investment opportunities to private investors. Despite greater extent of capital inflow, investments in emerging economies still retain many features conflicting with management of a market system. Drawing from transaction cost economics and institution-based view; we investigate private investors’ choice of various governance structures under institutional uncertainty. We find evidence that different investments vary systematically in their governance structure to respond in a coordinative manner to uncertainty in the institutional environments and to asset specific investments. Our findings suggest that success of private investments is affected by the choice of governance structures.
Keywords: Transaction cost economics, governance structures