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This study analyzes how formal institutions shape the firm’s decisions while exploring two polar cases of Brazilian textile-apparel firms that expanded their operations to Paraguay under the “Maquila regime.” It is guided by the institution-based view of international business. Different aspects of the institutional environment were analyzed to explain how the uncertainty can hamper firms from making quick operations decisions. Mechanisms of control and compliance imposed by institutions can negatively impact product-related decisions and innovation. Our research unveils the role of formal institutions in shaping operations decisions, helping to bridge the research gap about interactions between institutions and firm-level strategies.

Operations Decisions and the Influence of Host-Country Institutions: A Study under the Paraguayan “Maquila Regime”