Strategic responses to institutional changes: ‘Indigenous growth’ model of the Indian pharmaceutical industry Raveendra Chittoor a , Sougata Ray a , Preet S. Aulakh b, ⁎ , M.B. Sarkar c a Indian Institute of Management Calcutta, Joka, Diamond Harbor Road, Kolkata 700104, India b Schulich School of Business, York University, Toronto, Canada ON M3J 1P3 c Fox School of Business, Temple University, Philadelphia, PA 19122, USA Received 8 January 2007; received in revised form 29 August 2007; accepted 10 May 2008 Available online 5 August 2008 Abstract This paper examines the strategic response of the Indian pharmaceutical industry to the dual institutional changes arising from economic liberalization of the Indian economy and the WTO mandated intellectual property regime. An analysis of the relative position and growth of Indian firms vis-à-vis foreign multinationals, changes in the resources and capabilities of these firms, and scope in terms of product market internationalization and overseas acquisitions during the 1995–2005 period, suggests an ‘indigenous growth’ model in the Indian pharmaceutical industry which is in contrast to the FDI initiated growth witnessed through full or partial privatization of state-owned firms in other geographical contexts. Second, internationalization of both inputs and product markets has been the dominant mode to overcome the pressures arising from institutional changes. We discuss the drivers of this model and provide implications for future research on strategic responses to institutional changes within other industries in India as well as for comparative research across different political and institutional settings. © 2008 Elsevier Inc. All rights reserved. Keywords: Organizational transformation; Institutional changes; Emerging economy firms; Growth models; India 1. Introduction During the past two and a half decades, a number of developing countries around the world have undertaken economic reforms of varying magnitude (Hoskisson et al., 2000; Wright et al., 2005) with the objectives that include: (i) a move away from inward-oriented import substitution policies towards outward-oriented export-led growth (Kotler et al., 1997), (ii) access foreign technology and capital in order to make domestic firms competitive in the global economy, and (iii) enhance capabilities in value-added industries rather than relying on traditional commodity goods (Aulakh et al., 2000; Thomas et al., 2000). While much of the earlier studies on economic liberalization focused on understanding the motivations behind macro-policy changes in individual countries as well as the specific market and investment opportunities afforded by liberalizing economies to foreign multinationals (e.g., Gillespie and Alden, 1989), there is a growing interest in Journal of International Management 14 (2008) 252 – 269 ⁎ Corresponding author. E-mail addresses: raveendra@iimcal.ac.in (R. Chittoor), sougata@iimcal.ac.in (S. Ray), paulakh@schulich.yorku.ca (P.S. Aulakh), msarkar@temple.edu (M.B. Sarkar). 1075-4253/$ - see front matter © 2008 Elsevier Inc. All rights reserved. doi:10.1016/j.intman.2008.05.001