The timing of market entry and firm performance: A perspective of institutional theory

Integrating literature from institutional theory with that from market entry research, we study the effects of a firm's early marketing entry on other firms' behaviors and performances. In addition, we also consider the moderating effect of other institutional factors, such as the firms' home-country culture and institutional environments in an emerging economy. Based on a review of all the relevant research, we develop a theoretical model with testable hypotheses. With empirical data from multi-national enterprises (MNEs) competing in China's insurance-service market, we test the hypotheses. Our data analyses show evidence that, other things being equal, early market entry can cause institutional imitation, in terms of market diversification, among imitators. At the same time, the imitation can be moderated by the home-country culture of the MNEs. In addition, the imitation of early market entry firms has some significant effects on the performance of imitators, including less deviation from the industry norm and better financial performance.     

红色战略还是灰色战略——针对我国制度转型中企业战略迷失的实证研究

我国制造业公司目前陷入了战略迷失:在重视市场的红色战略和利用正式制度漏洞来寻租的灰色战略两者之间应该选择哪一个?基于我国的制度转型情境,我们采用战略均衡三角理论,通过我国制造业所有上市公司2000—2010年15620个公司年的数据,研究了近十年制度转型过程中企业战略迷失问题的形成以及作用机制。研究表明,政府不正确的、过度的干预,不仅会影响企业行为的获利回报,而且会导致企业战略行为选择的错位。同时指出,在战略均衡的三角中,制度观视角比产业观、资源观视角更能够解释我国企业的战略行为,且与后两者属于不同维度。本研究加深了人们对我国企业关系型战略、战略与商务模式匹配、政府角色等问题的理解。     

An empirical study of SOEs' market orientation in transitional China

Using institutional theory, this paper investigates the antecedents and outcomes of market orientation in state-owned enterprises (SOEs) in transitional China. A survey of 274 SOEs demonstrates a strong positive relationship between market orientation and various measures of organizational performance. Additionally, market competitive pressure, formalized corporate governance, and less government control are found to promote market orientation of SOEs in the transitional period. These results support the views that market orientation leads to better performance and that institutional factors should be considered in studies of strategy in Chinese firms. This paper was supported by NSFC (70472039, 70272023).     

Supporting new product commercialization through managerial social ties and market knowledge development in an emerging economy

While it has been advocated that the generation and application of market knowledge shape marketing capabilities to commercialize new products, the weak institutional environment makes access to critical market knowledge challenging in emerging economies. Critically, managerial social ties with business and political institutions may complement the firm’s market orientation (MO) to obtain market knowledge that is not available in the open market in emerging economies. This study draws attention to the differential roles of business and political ties in complementing or inhibiting the effects of market orientation on exploratory and exploitative marketing capabilities in one of the “Next Eleven” emerging economies, Iran. The results help firms operating in emerging economies to identify the conditions under which business and political ties help to overcome institutional limitations, complement market-oriented efforts, and successfully commercialize new products.     

The strategic dilemmas of innovative enterprises: proposals for high‐technology sectors

High levels of research and development (R&D) expenditure, pressure for innovation and the creation of new knowledge are features that distinguish high‐technology (high‐tech) enterprises from other, less technologically advanced, firms. Confronted with multiple contemporary approaches to strategy and turbulence in their environment, these enterprises make strategic choices continuously and dynamically. This paper proposes a model and matrix for the classification of high‐tech enterprises’ development strategies (with regard to their specific features), which are then verified. Qualitative research was conducted in 61 medium and large high‐tech companies based in Poland that operate either in Poland or in the global marketplace. The results show that high‐tech firms have the fundamental goal of developing R&D activity as a resource (and its redundancy) rather than product/market goals. The studied firms strive above all for leadership in innovation, creating new technologies based on their own R&D resources, while also using outside sources and mostly applying the personalisation approach in knowledge management. However, they choose different paths for product and market development, depending on the opportunities presented by the environment, and the firm's ability to identify and take advantage of these.     

Entrepreneurial firms’ network competence,technological capability,and new product development performance

Successfully developing new products is critical to an entrepreneurial firm’s continued success. Based on the resource management model, this study aims to answer the key research question: how entrepreneurial firms leverage network competence and technological capability to enhance their new product development (NPD) performance in a turbulent environment. Using data collected from 134 entrepreneurial firms in China, we investigate the performance effects of network competence and technological capability, and the moderating effects of technological turbulence and market turbulence. Our findings show that network competence has a positive impact on NPD performance and technological capability plays a mediating role between network competence and NPD performance. Technological turbulence enhances the performance effects of network competence and technological capability; market turbulence advances the performance effect of network competence, but fails to exert significant negative impact on that of technological capability. We discuss managerial implications of our findings and offer directions for future research.     

Slack and the performance of state-owned enterprises

Organizational slack has been recognized as critical to firm performance, although its impact is not always positive. Slack may be used to fuel innovation or alternatively excess resources may be squandered on pet projects. However, most research on slack is rooted in studying private firms in developed economies, especially the United States. Whether prior research on organizational slack can readily inform our understanding of state-owned enterprises’ (SOEs) behavior is questionable since SOEs prioritize goals such as social welfare and full employment differently than do the privately owned enterprises (POEs). The differences between SOEs and POEs influence their sources and use of slack due to the nature of their ownership, budget constraints, and agency relations. To bring insight to this issue we develop an institutional change lifecycle model to study the relationship between slack and the economic and social aspects of SOE performance.     

Inter-firm collaboration in new product development in Chinese pharmaceutical companies

High-tech firms increasingly rely on inter-firm collaboration (IFC) in new product development (NPD). While there is a growing research interest in exploring the economic rationale of IFC through the transaction cost economics (TCE) and the resource synergy of IFC through the resource-based view of the firm (RBV), little attention has been given to the institution-based view (IBV) that also has important implications for firms’ choice of IFC. In particular, how national institutional environment affects IFC in the NPD process remains under-researched. This study aims to contribute to the literature by extending our understanding of the role of IFC in firms’ NPD process, taking into account transactional, resource, and institutional factors. Based on a case study of two firms: a state-owned and a private pharmaceutical firm in China, our research identifies three key forms of IFC, which are dynamic at different stages of NPD and contingent upon an array of institutional, resource, and transactional rationales underpinning firms’ choice of different forms of IFC. Our study is the first one that investigates the role of IFC in the NPD process bringing together the IBV, RBV, and TCE perspectives.     

The use of favors by emerging market managers: Facilitator or inhibitor of international expansion?

This article explores the use of favors by emerging market managers, the impact of using favors on their firms’ growth, legitimacy, and reputation in a variety of business environments, and how the use of favors affects firms’ paths to international expansion. We discuss the concept of favors, and to illustrate the process of favors, we look at culturally rooted examples of their use by managers from the BRIC countries of Brazil, Russia, India, and China. Utilizing neo-institutional theory, we create a typology of four types of environments in which managers and firms from emerging markets conduct business with various relational entities (e.g., governments, customers, suppliers, competitors, alliance partners). We posit that the use of favors by managers compensates for the relatively weak legitimacy of formal institutions in emerging market environments, with favors illustrating the resulting reliance upon informal cultural-cognitive institutions. We develop propositions regarding the impact of the use of favors on the organizational outcomes of growth, legitimacy, and reputation of emerging market firms doing business in each of the four environments. This leads to further propositions regarding how the use of favors can influence their firms’ internationalization growth paths. We conclude that the impact of favors on international growth paths results from the fit or non-fit of their use with the level of legitimacy of the formal institutional environment of the focal relational entity in various business transactions.     

Determinants of early movers in cross-border merger and acquisition wave in an emerging market: A study of Indian firms

A series of changes in India’s financial institutional regime led to waves of cross-border mergers and acquisitions (M&A) deals spanning various industries. In this article, we explore firm-level determinants that distinguish between early movers and followers in these waves. We tested our hypotheses using data for the 2001–2011 period. Analysis found support for our hypotheses that prior experience (with alliances), firm size, and international embeddedness of business group influence timing of firms’ cross-border M&A. Findings support the springboarding perspective that emerging market (EM) firms engage in preemptive acquisitions to gain first-mover advantage.     

Institutions,resources, and entry strategies in emerging economies

We investigate the impact of market‐supporting institutions on business strategies by analyzing the entry strategies of foreign investors entering emerging economies. We apply and advance the institution‐based view of strategy by integrating it with resource‐based considerations. In particular, we show how resource‐seeking strategies are pursued using different entry modes in different institutional contexts. Alternative modes of entry—greenfield, acquisition, and joint venture (JV)—allow firms to overcome different kinds of market inefficiencies related to both characteristics of the resources and to the institutional context. In a weaker institutional framework, JVs are used to access many resources, but in a stronger institutional framework, JVs become less important while acquisitions can play a more important role in accessing resources that are intangible and organizationally embedded. Combining survey and archival data from four emerging economies, India, Vietnam, South Africa, and Egypt, we provide empirical support for our hypotheses. Copyright © 2008 John Wiley & Sons, Ltd.     

Technological change and multinational growth in international telecommunications services

Revolutionary technological and institutional changes, introduced since mid-seventies, are drastically altering the quiet functioning of international telecommunications markets, traditionally characterized by a strong multilateral oligopoly. In such multilateral oligopoly firms had little scope and opportunity for any form of international growth. Since the early eighties the scope for international growth of telecommunications carriers is emerging as a critical issue in international telecommunications. The economics of multinational firms and international trade make it possible to assess the role of technology gaps in the modernization process, international telecommunications tariff asymmetries and global outsourcing as the determinants of multinational growth of telecommunications carriers and their international strategies.     

Technological catch-up by east Asian firms: Trends,issues, and future research agenda

This paper reviews extant research on technological catch-up of East Asian firms, which has recently emerged as an important issue. We review 76 articles on technological catch-up in the East Asian context published in 17 journals over 23 years (1995–2017), covering the academic disciplines of strategic management, international business, entrepreneurship, technology and innovation management, and economics. Based on a systematic analysis of this literature, we develop an overarching framework to this topic. We then identify the major gaps in the literature and suggest areas for future research on technological catch-up of Asian firms.     

Collective action for market chain innovation in the Andes

The Papa Andina network employs collective action in two novel approaches for fostering market chain innovation. The participatory market chain approach (PMCA) and stakeholder platforms engage small potato producers together with market agents and agricultural service providers in group activities to identify common interests, share market knowledge and develop new business opportunities. These forms of collective action have generated commercial, technological and institutional innovations, and created new market niches for Andean native potatoes grown by poor farmers in remote highland areas. These innovations have benefited small farmers as well as other market chain actors. This paper describes Papa Andina’s experiences with collective action for market chain innovation. It then discusses the implications of these experiences for the understanding of collective action and the policy implications for research and development organizations.     

CUSTOMER POWER,STRATEGIC INVESTMENT,AND THE FAILURE OF LEADING FIRMS

Why might firms be regarded as astutely managed at one point, yet subsequently lose their positions of industry leadership when faced with technological change? We present a model, grounded in a study of the world disk drive industry, that charts the process through which the demands of a firm's customers shape the allocation of resources in technological innovation—a model that links theories of resource dependence and resource allocation. We show that established firms led the industry in developing technologies of every sort—even radical ones—whenever the technologies addressed existing customers' needs. The same firms failed to develop simpler technologies that initially were only useful in emerging markets, because impetus coalesces behind, and resources are allocated to, programs targeting powerful customers. Projects targeted at technologies for which no customers yet exist languish for lack of impetus and resources. Because the rate of technical progress can exceed the performance demanded in a market, technologies which initially can only be used in emerging markets later can invade mainstream ones, carrying entrant firms to victory over established companies.     

Financing behaviour of R&D investment in the emerging markets: the role of alliance and financial system

This paper examines the financing behaviour of research and development (R&D) investments in emerging markets. Drawing on institutional theory and using panel data of generalized methods of moment estimation for a sample of 302 firms from 20 countries during the period 2003–2015, we find that emerging market firms tend to use internal funds for financing R&D investments. Interesting results emerged when the sample was divided as alliance and non‐alliance firms, and bank‐based and market‐based financial systems. The results show that R&D financing behaves differently for alliance and non‐alliance firms. Alliance firms use both internal and external funds for R&D investments, while non‐alliance firms do not use external funds. We also document that a country's financial system influences the choice of available sources of finance. Firms from countries that follow a bank‐based financial system tend to rely on external funds while firms from countries that follow a market‐based financial system depend more on internal funds for financing R&D investments. This study is important as it provides new evidence on financing R&D investments in emerging countries taking into account the institutional arguments of financing choices, and so should guide stakeholders about appropriate sources of R&D financing.     

Exploring the incremental merger value from multimarket and technology arguments

We address the question through which channels mergers create incremental value to merging firms and consider various product market and technological arguments. Based on the pairwise stable allocation concept, we estimate firms’ pair-specific (incremental) merger value functions. Our results show that technological arguments contribute to the majority of added merger value. We also find that market power arguments across multiple markets contribute to explaining incremental post-merger value. In contrast, multimarket strategic effects do not add merger value. Our estimated match values are aligned with the merging firms’ post-merger stock market performance.     

Collaborating to shape markets: Emergent collective market work

Research into ‘market-shaping’ – the deliberate shaping by firms and other actors of market behavior, structures, expectations and practices – has primarily taken either system-level or micro-level practice perspectives. Instead, this research focuses on ‘collective market work’ – the orchestrated purposeful actions of a collaboration to shape a market. In synthesizing the social emergence paradigm and the institutional work framework, this study examines the different types of market work undertaken as a meso-level collective evolves. Drawing on primary and secondary data, this paper explores the historic case of a collaboration by small New Zealand wineries to gain acceptance of the screwcap closure on premium wine in the early 2000s. We find collective market work travels through three stages: ‘coalescing,’ ‘legitimizing,’ and ‘using market clout.’ Each stage functions as an intermediate frame within the market system, progressively enabling and emboldening the collaborators to take action and impact increasing numbers of larger actors and market gatekeepers.     

A contingent view of institutional environment,firm capability,and innovation performance of emerging multinational enterprises

Drawing on the institution theory and the resource-based view of the firm, we propose a contingent view on the relationship between host market's institutional environment, emerging multinational enterprises (EMNEs)’ capability, and their innovation performance in the internationalization process. Specifically, we examine three key aspects of host market's institutional environment: market maturity, intellectual property right protection, and cultural distance, to investigate their distinct impact on innovation performance. We further explore how the effects of institutional environment is contingent upon firm-specific absorptive capability. The analyses of a panel data of 735 Chinese EMNEs provide support for this contingent view, and the findings of this study thus can help advance our understanding of the internationalization process of EMNEs.     

Uncertainty and the market valuation of R&D within a real options logic

The aim of this study is to provide new theoretical insights and empirical evidence on the effect of market and technological uncertainty on the market valuation of a firm's R&D capital. A set of hypotheses is developed adopting a real options logic and tested on a panel dataset of 290 manufacturing firms traded in the UK. Consistently with our theoretical model, we show that market and technological uncertainty have distinct effects on the valuation of R&D investments. The results have several important implications for resource allocation to R&D under uncertainty, which we discuss in the concluding section. Copyright © 2008 John Wiley & Sons, Ltd.