The Influence of Domestic Interfirm Networks on the Internationalization Process of Taiwanese SMEs

This study investigated how domestic interfirm networks contribute to a better understanding of the internationalization process of Taiwanese small and medium enterprises (SMEs) in the automobile and textiles sectors. The rapid growth of business networks in Taiwan's newly internationalizing firms provides an appropriate context in which to study the emergence and evolution of such networks. Findings from the in-depth case studies indicate that domestic interfirm networks are a major factor in the decision to internationalize. Furthermore, the benefits of assured orders in an unknown international market coupled with the availability of market information from other network partners can be a potential source of competitive advantage for the internationalized SME.     

The Effects of Learning on Relationship Value in a Business Network Context

ABSTRACT

In today's intense global competition, a firm's ability to learn from its networks of business relationships is an important source of sustainable competitive advantage. Learning in a network of relationships involves a constellation of resource linkages among business partners tied together by interconnected resources. This has the potential of increasing the relationship value of a firm in terms of knowledge created through interactions among firms in the business network. Prior research has not yet examined the effects of learning in and through relationships in a business network context. Interdependence of firms in business networks gives rise to learning effects of adaptation and coordination that can have implications for relationship value. An empirical study of 215 business relationships from a network of nine high-technology companies in the United Kingdom shows that learning in and through relationships as a result of interactions and resource interdependencies in networks of relationships has a positive effect on a firm's relationship value. Furthermore, an understanding of the network context through interactions among firms facilitates learning and development of the firm's learning capabilities that enhance relationship value.     

Dismantling institutional complexity behind international competitiveness of emerging market firms

The paper examines the perceived role of emerging market institutions in the creation of firm‐specific advantages of local small‐ and medium‐sized enterprises (SMEs) supporting international expansion and competitiveness. Our objective is to deepen conceptual understanding of the complex link between emerging market institutional factors and an ability of emerging market SMEs to compete internationally. Our empirical evidence from Russian software SMEs operating in global niche markets reveals that managers perceive institutional influence on their firms' ability to compete internationally in a number of direct and indirect means. We find that, in addition to the well acknowledged negative impact of institutions, there are supportive and triggering forces that incentivize SMEs' international expansion and development of competitive advantages. We contribute to the literature by elaborating about the complexity of institutional influence on international competitiveness of emerging market SMEs. This research offers insights for managers about the prospects of international expansion of SMEs from emerging markets.     

Market knowledge: Evidence from importers

Previous firm‐level literature established that there are substantial costs of entry into new export markets. Chaney (The American Economic Review, 104, 2014, 3600) opens the black‐box of entry costs by building a dynamic network model of international trade where firms acquire customers in new destinations through their existing customers in other destinations. Following his conjecture, this paper examines whether firms use their existing suppliers in a destination to find their first clients in those markets. I use a disaggregated data set on Turkish firms' exports and imports for the 2003–08 period, and investigate the effect of import experience on export entry. By identifying import experience using instrumental variables, and shutting down productivity channels with firm‐year fixed effects, I find that having a supplier in the destination country raises the probability of starting to export to that country by 5.5 percentage points on average, revealing a “market knowledge” phenomenon. The paper's main contribution to the literature is finding that firms' country‐specific import experience increases the likelihood of export‐market entry. Digging further to explore heterogeneous effects, I find that this effect does not exist when trading with low‐income countries, but it increases with the destination country's size, proximity, language similarity and the size of its Turkish immigrant community. Moreover, the strength of the firm's relationship with its supplier as proxied by several variables such as the share of imported products that are differentiated increases the probability of export‐market entry.     

Entry deterrence/accommodation with imperfect strategic thinking capability

Both through empirical research and laboratory experiments it has been shown that managers are heterogeneous in strategic thinking-i.e., not all the managers can accurately conjecture their competitors’ behavior and actions. In this paper, we examine the entry deterrence/accommodation strategy of an incumbent firm facing a potential entrant that may behave less strategically than the incumbent in the way of conjecturing competitors’ actions and beliefs. We adapt the Cognitive Hierarchy model to capture this heterogeneity among the managers of the entrant firm and the incumbent firm. Surprisingly, we show that the incumbent can deter entry by investing in expanding the market size and the competition may increase the incumbent’s incentive to invest in market expansion. If entry does occur, the market expansion in our model also benefits entrant comparing to the case without market expansion. This feature of our result sets it apart from the standard result in the entry deterrence literature, which tends to suggest that incumbent has to either over-invest in actions harmful to entrant if entry occurs. In our model investing in expanding the market size makes the entrant to update its belief about the incumbent’s strategic thinking capability downward and thus, decreases the entrant’s expected profitability, which in turn deters entry. Our research has important implications especially for emerging markets given that the lack of management talent is a particularly severe problem among local firms in emerging markets and multinational companies pioneer in the emerging markets with great market expansion opportunities have to face the potential entry of local companies.     

Global Location Strategy

The essence of global strategy is the worldwide mobilization of the firm's resources behind global objectives. Global companies see national markets as part of a single world market. This perception fundamentally effects their strategy, including questions of geographic location, i.e., where to locate the firm's plants and other facilities. In general, methods for evaluating geographic location have not received a great deal of attention in the literature. Those that have been forwarded focus on an individualistic country-by-country evaluation of potential sites which is at odds with the more integrative view of world markets currently adopted by global companies. This article applies and adapts portfolio screening as developed in the corporate strategy literature to the special problem of international site location. It provides a simple yet effective method for viewing the global geographic positioning of the firm relative to world markets. Secondly, geographic analysis is further developed as a tool for identifying and interpreting global competitive strategy.     

Developing strategies for global markets: An evolutionary perspective

As the global landscape becomes populated by an increasingly diverse array of companies of different sizes, from different industries and of varied national origins, developing a strategy to compete effectively in global markets becomes ever more complex. How can companies of all kinds compete effectively in an increasingly diverse global landscape? The authors suggest that the appropriate response depends on a firm's level of involvement in international markets: whether a firm is just entering international markets, is aggressively expanding its international presence or is attempting to rationalize far-flung global operations. Focusing on three different industries, processed foods, automobiles and motor scooters, the authors identify appropriate strategies for leveraging competitive advantage at each phase of international involvement. They show how three paramount tasks, learning, building and leading, must evolve through each phase.     

International network extension processes to institutionally different markets: Entry nodes and processes of exporting SMEs

This article is about how SMEs reduce their liability of network outsidership in the process of establishing a network insider position in foreign business networks. By examining how SMEs establish insidership positions in institutionally different business networks, the authors contributes to the network approach to firm internationalization. From a detailed longitudinal and retrospective case study of four SMEs from mature market entering emerging country markets and four SMEs from such immature markets entering mature markets, the authors develop propositions based on intra-group and inter-group analysis. The propositions concern the parties to which the exporter initiates and develops relationships when plugging into the foreign network (the entry node), and how the firm reaches an insider position in this network (the entry process). Three distinct network types are identified along this entry process: the exposure network, the formation network and the sustenance network.     

Assessing the needs of international markets against an emerging market company's capabilities: A tool for internationalization

Senior managers in emerging markets often strive to ensure that their companies develop sufficient capabilities to confront the needs they encounter in international markets. However, extant research and practice remain unclear as to how senior managers in emerging market companies can approach assessing the needs of their international markets against their own company's capabilities, to aim for a balance between both. This article offers an innovative approach for assessing the needs of international markets against an emerging market company's capabilities. Based on the assessments of 100 senior managers leading emerging market companies, we explain how this approach can provide two key insights. First, evidence of a balance between the needs of international markets and an emerging market company's capabilities, that indicates the company's competitive position is focused; or evidence of an imbalance between the needs of international markets and an emerging market company's capabilities, that indicates the company's competitive position is either vulnerable or overqualified. Second, an understanding of where the gaps between the needs of international markets and an emerging market company's capabilities are, that enables improving the company's competitive position by closing these gaps. Drawing on this approach, we offer an open access tool that allows senior managers in emerging markets to identify and improve their own company's competitive position for internationalization. Using this tool, senior managers can lead their emerging market companies toward a focused competitive position in international markets, providing better chances of successfully capturing potential benefits.     

Firm-level export duration: The importance of market-specific ownership linkages

This paper explores the impact of a firm's market-specific ownership linkages and trade complementarities on different dimensions of its exporting longevity. Unlike previous studies that were mostly based on country-product-level data, this paper uses transaction-level trade data on the population of firms in Slovenia in the 2002–11 period, matched with detailed origin/direction of inward/outward FDI information to determine a firm's integration in international production networks. Our results indicate that firm's bilateral inward and outward FDI flows with an export-destination country have a strong positive effect on a firm's export survival in that market. Importance of market-specific ownership linkages for export duration is exclusively driven by intermediate goods which suggests prolonged export duration through production network involvement. However, the perseverance effect of bilateral FDI ties on export spells has been weakened during the crisis period. We find pronounced market- and product-related trade complementarities as either exporting or importing experience with the relevant market/product substantially improves the chances of a product–market export spell continuing. Finally, the risk of exports termination is lower for a firm's core export products.     

Leveraging local knowledge or global advantage: Cross border bank mergers and acquisitions in Africa

This paper examines global financial markets perception of value creation for banks from across the world initiating or expanding their operations on the African continent through mergers and acquisitions (M&As) over the period 2000–2018. Especially before and during the financial crisis, we document a strong advantage of Pan-African Banks (PABs) over domestic and emerging market banks and a slight advantage over advanced market banks. These results are in line with the hypothesis that PABs benefitted from both a global expertise and local knowledge advantage in the market for corporate control. We also document how retrenchment of global banks during and in the aftermath of the global financial crisis have created opportunities for PABs.     

Contextualizing international learning: The moderating effects of mode of entry & subsidiary networks on the relationship between reforms & profitability

This empirical paper studies how MNEs from developing and emerging markets may learn through their choice of entry mode and subsidiary network configuration, and use this knowledge to increase their responsiveness to pro-market reforms in their home market. The paper proposes that entry modes and network configurations that facilitate knowledge acquisition provide firms from developing countries an advantage when responding to such institutional changes. The analyses use data for the largest Latin American companies from 1989 to 2008. The findings provide evidence for a positive moderating effect of equity international joint ventures, international acquisitions, and subsidiary network centrality closeness on the relationship between reforms and profitability.     

Contractual Completeness: A Comparison of Two Heterogeneous Emerging Markets

ABSTRACT

Interfirm contractual relations form an essential part of firms' survival. Such relations will likely differ across markets due to country-specific factors. Despite this understanding, there are few studies that examine interfirm contractual relations across markets. This article examines determinants of contractual completeness in two heterogeneous emerging markets (Tanzania and Poland). The terms “advanced” (Poland) and “less advanced” (Tanzania) are used to distinguish these two emerging markets and in the development of the hypotheses. The findings indicate that the dimensions involving weaker relational ties among firms have a stronger positive effect on contractual completeness in the relatively advanced emerging market than in the less advanced one, while stronger relational dimensions had a stronger positive effect in the less advanced emerging market.     

Age,order of entry,strategic orientation,and organizational performance

This paper proposes an empirical test of several hypotheses linking age, order of entry, and strategic orientations to a firm's performance. Three strategies are defined: cost-leadership strategy, innovative differentiation, and marketing differentiation. The aim is to show that the impact on performance of both age and each of the three strategic orientations may differ according to a firm's order of entry into an industry.Following Lieberman and Montgomery's (1998) evaluation of their major contribution on first mover advantage, we emphasize three points. First, we develop and test hypotheses related to early and late followers' strategic orientations, broadening the scope of traditional studies on pioneers. Second, the model combines the dimensions of a firm's age, order of entry, and strategic orientations, as well as industry conditions (stage of the industry, environmental unpredictability, and technology diffusion), to establish a contingent model of performance analysis. Finally, the empirical study deals chiefly with organizational performance and not market share, which is considered a typical advantage accruing to pioneers.In addition, the scope of the study (582 French manufacturing firms) provides the means to fill a void in empirical studies because it is a broad cross-sectional test on non-U.S. data. The firms are mainly private, small to medium-sized, and single or dominant business firms. Therefore, our assumptions must be understood as particularly applicable to this type of firm.The results reveal important lessons for practitioners. First, we did not find a first-mover advantage in terms of organizational performance. In addition, pioneers' organizational performance is enhanced by the cost leader strategy—contrary to our assumption emphasizing innovative differentiation for these firms. Second, early followers' performance benefits from innovative differentiation and marketing differentiation. Finally, late entrants developing a cost leader strategy have a significantly higher performance. All groups considered, late followers are the firms most sensitive to environmental uncertainty and age effects.Our study clarifies the impact of a firm's age and strategic orientations on its performance depending on the firm's order of entry. The implications of these results are particularly relevant for practitioners and entrepreneurs. First, a cost leadership strategy seems to be a guarantee for a pioneer to increase its organizational performance. New ventures should therefore take into consideration the fact that newness and innovative differentiation might not be the best strategic orientations for high performance in the long run. Second, as a second mover, however, developing a superior product and being able to market it efficiently appear to be the enhancing factors of firm performance. Third, for both pioneers and early followers, age does not significantly reduce their performance. However, the longer a firm waits before entering, the greater is the negative effect of age on its performance. This is due to the difficulty of resisting competitive erosion, because pioneers and early followers drive the changes in the industry. The identification of these effects should help managers and stakeholders to make more effective entry decisions to sustain a firm's advantage, leading to better performance and higher probability of survival.     

Transition and polarisation: advanced producer services in the emerging regional (market) economies

This article is focused on role of advanced producer services in regional development in emerging market economies. The starting point of the analysis is Porter's concept on competitive advantage of regions that rests on the performance of local firms. The APS sector is discussed as a significant element of the value chain, supporting the adaptation of local agents to the emerging system market regulations and the rapid structural changes of the national, regional and local markets in Hungary. Although, empirical studies as well as statistical calculations suggested that, flexible strategies employed by service providers contributed to economic growth in regions embedded in global production systems, the national economy was basically dichotomised by the spatial centralisation of APSs.     

International new ventures as “small multinationals”: The importance of marketing capabilities

This paper explores how marketing capabilities contribute to the international expansion of international new ventures, and influence their choice of entry mode. The study examines how marketing capabilities help international new ventures to use entry modes involving higher resource commitment in international markets. The proposed model was tested on country-level data from Spain. The results show that marketing capabilities contribute to a firm's decision to choose entry modes involving higher resource commitment in foreign markets. The paper also includes insights on antecedents of international new ventures’ choice of entry modes in foreign markets.     

Home country institutional environments and foreign expansion of emerging market firms

We propose that home country institutional environment shapes emerging market firms’ foreign expansion. We argue that better-developed home country institutional environment promotes emerging market firms’ expansion to foreign markets more advanced than the home country, while institutional instability in the home country reduces this propensity. We further hypothesize that the effects of home country institutional environment are contingent on firm-specific government ownership. Data on the foreign expansion of 921 Chinese firms in the period of 1996–2000 provide strong support for the effects of home country's institutional development and institutional instability. We also find that a high degree of government ownership weakens the positive effect of home country's institutional development on emerging market firms’ propensity to expansion to more advanced markets.     

What determines performance of cross‐border M&As by Chinese companies? An absorptive capacity perspective

Chinese companies are increasingly using cross‐border merger and acquisitions (M&As) as a vehicle to source knowledge or strategic assets, so as to enhance their competitive advantage. However, a critical question is: Can strategic assets be effectively acquired by Chinese firms, thereby leading to superior firm performance? This article addresses this fundamental question from an absorptive capacity perspective. This approach concentrates on how an acquiring firm's absorptive capacity influences its ability to identify, assimilate, integrate, and apply external new knowledge into commercial use. By comparatively examining two high‐profile international M&A deals completed by leading Chinese firms Lenovo and TCL, we argue that the performance of Chinese companies' overseas acquisitions is substantially affected by the acquiring firm's absorptive capacity at multiple dimensions, thus drawing strategic implications for multinationals in other emerging markets. © 2010 Wiley Periodicals, Inc.     

A Study of Marketing Standardization and Performance of Australian,Japanese, and U.S. Firms

Given the continued importance of the globalization era, there is an ever-increasing interest in the correlation between marketing mix standardization and the firm's market performance. This issue focuses on the firm's pursuit of global markets in an environment conditional to internal and external market factors. The research examines factors on multinational firm's marketing mix (program and process marketing) from Australia, Japan, and the United States and the impact on market performance. The results are mixed providing some support for marketing standardization and profit performance.     

Social capital and new product development outcomes: The mediating role of sensing capability in Chinese high-tech firms

This study investigates the effects of social capital (trust and power) on a high-tech firm's new product development outcomes through the leveraging of its sensing capability in an emerging market, China. A sample of high-tech firms in China is used to test the proposed relationships. Findings confirm that both trust and power in a high-tech firm's social network are significantly associated with its two new product development outcomes through sensing capability which fully mediates the relationships.