Network complementaries in the international expansion of emerging market firms

Can domestic political capital be transferable to more or less similar institutional contexts abroad? Motivated by contradictory results in two streams of research, this study seeks to combine the insights from two theoretical arguments and conceptualize the role of domestic political ties in international expansion as a dual problem of securing key resources from home governments and looking for opportunities in foreign markets and matching resources to capture them. We adopt the notion of network complementarity to examine the complementarity effect of domestic political ties and foreign ties on international expansion. The implication is that EMNE research that concentrates on either looking for foreign opportunities or securing domestic resources, but not both, is likely to be incomplete when international expansion is being studied. Using a longitudinal panel dataset of Chinese international new ventures expanding to 105 foreign markets, we find a positive interactive effect of domestic political ties and foreign ties on Chinese MNEs’ internationalization. This positive interactive effect on internationalization is found to be stronger for expanding to developing host markets than to developed host markets. We discuss the implications of these findings for research on domestic political ties, the international expansion literature, the network complementarity literature, and the international entrepreneurship literature.     

Export performance of emerging market firms

I investigate the export performance of firms from emerging economies based on resource based view (RBV) of a firm. Based on review of extant literature, I identify firm size, research and development expenditure, advertising expenditure and business group affiliation to be important antecedents of level of exporting activities of a firm. I utilize a two-stage least square estimation (G2SLS) on a sample of 47,140 firm-year observations over a period of sixteen years from 1990–2005. The findings suggest that export sales and domestic sales are interdependent and affect each other. R&D expenditure and business group affiliation positively affect export sales, however advertising expenditure negatively affects export sales.     

Moderators on international diversification of advanced emerging market firms

Firms from advanced emerging markets are becoming notable players in the global marketplace. This study seeks to examine how these firms expand to international markets successfully. Drawing on R&D intensity and learning capability, this study finds that an s-shaped relationship exists between firm internationalization and performance. The results also show that R&D intensity and learning capability significantly strengthen the impact of internationalization on firm performance. These results imply that R&D intensity and learning capability are the main drivers of success for firms from advanced emerging markets in foreign markets.     

Contextualizing international strategy by emerging market firms: A composition-based approach

We present a composition-based logic toward international expansion by emerging market firms (EMFs) – firms that use compositional investment, compositional competition, and compositional collaboration to create a unique competitive advantage in global competition. This view explains how EMFs creatively adopt a composition-based international strategy, enabling them to compensate for their weaknesses while capitalizing on their strengths during global competition where they offer a competitive price-value ratio suited to mass global customers who are cost sensitive. We also explicated the working conditions (i.e., strategic resource-seeking motivation, subsidiary autonomy delegation, and cross-border sharing system) that fortify the outcome of composition. Using survey data from 201 EMFs, our analysis supports these key arguments. A composition-based lens provides a new understanding of why and how emerging market businesses can survive in international competition for some period of time without possessing traditionally defined monopolistic advantages.     

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.     

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.     

Industry globalization and the performance of emerging market firms: Evidence from China

In this study, we explore the extent to which industry globalization affects the performance of firms in China, an emerging market. We focus on the period between 1996 and 2001 and track the globalization levels for six different Chinese industries as well as the performance of 166 public listed firms in these industries. The results validate our major premise: high levels of industry globalization positively impact the performance of Chinese firms. We also find that when their industries globalize, firms with slack resources experience greater performance improvement than other firms without these resources.     

Exchange rate regimes and foreign exchange exposure: The case of emerging market firms

We investigate the influence of exchange rate regimes on the foreign exchange exposure of emerging market firms. Using a sample of 1523 firms from 20 countries for the period December 1999 to December 2010, we find that about half of the firms are significantly exposed to exchange rate fluctuations. We find that non-floating exchange rate arrangements are associated with more widespread exposure as well as a greater magnitude of firms' exposure. Cross-sectional analyses suggest that the exchange rate regime is an important determinant of firm-level exchange rate exposure for emerging market firms, and that pegged exchange rate regimes amplify exposure. This result holds after controlling for a wide range of potential determinants of firm-level and country-level foreign exchange exposure. Our findings suggest that exchange rate regime matters at the micro as well as the macro level; non-floating regimes fail to protect firms from exchange rate exposure.     

Exploring the influence of resource environments on absorptive capacity development: The case of emerging market firms

Research recognizes that emerging market firms (EMFs) have relatively underdeveloped absorptive capacity. Yet, scarce attention has been paid to the conditions that constrain or facilitate EMFs’ absorptive capacity development. In this article, we explore how differences in home country resource environments influence EMFs’ absorptive capacity. We suggest that home country institutions and factor markets influence EMFs’ choice among three learning strategies: duplicative imitation, creative imitation, and innovation. Building on the organizational learning perspective, we then explore how learning strategies of EMFs’ from different emerging economies influence their preferences with respect to sources of new knowledge, and consequently the implications of these strategic choices for their absorptive capacity.     

Unleashing the dynamics of product-market ambidexterity in the pursuit of international opportunities: Insights from emerging market firms

Extending the current debate surrounding ambidexterity, this study examines how emerging market firms pursue international opportunities by leveraging the dynamics of strategic ambidexterity in product and market domains. The investigation draws on longitudinal and multiple sources of data from four Chinese multinational firms. Two follow traditional or incremental internationalization pathways, whilst the other two pursue rapid or accelerated internationalization. The study offers a more dynamic perspective to help understand the evolving nature of ambidexterity with respect to the routes of strategic product and market development options. In particularly, the findings reveal that incremental internationalization is characterized by structural ambidexterity combining product exploitation with market exploration at the initial stages, whereas accelerated internationalization is best explained by market exploration and exploitation (or market ambidexterity) when first entering foreign markets. Moreover, firms were found to maintain strategic priorities through structural and punctuated ambidexterity across product and market domains at later stages of internationalization. This study contributes to the dynamic perspective of strategic ambidexterity for seizing international opportunities among emerging market firms.     

Imitation and rapid internationalization of emerging market firms

By drawing upon imitation research, this study addresses the role peers play in rapid internationalization by emerging market firms (EMFs). We argue that imitation of industry peers’ international expansion accelerates EMFs’ internationalization speed through two mutually reinforcing mechanisms: information-based imitation, which legitimizes similar operations and conveys valuable information; and rivalry-based imitation, which exerts considerable competitive pressure. We find that industry peers’ international expansion is positively related to EMFs’ internationalization speed. Such positive effect is stronger when EMFs lack prior international experience and when industry competitive intensity is strong.     

Post-M&A technological capability-building of emerging market firms in China: the case of Lenovo

Technological acquisitions have become a strong motivation for cross-border merger and acquisition (M&A) activities by firms in emerging countries. However, whether these companies achieve their objectives remains an open question. This article presents a case study of Lenovo’s acquisition of IBM’s PC division with a focus on inventor productivity after acquisition. Our case study suggests that while a ‘light-touch’ integration approach helped avoid the all-too-common post-M&A productivity drop, intra-firm knowledge transfers to veteran inventors of the acquirers remained difficult due to the knowledge gap. However, M&A events create other opportunities to improve the technological capability of the acquiring company by sourcing new talent globally, offering unignorable merit that justifies outbound M&A activities by emerging market firms.     

Imitation,performance feedback,and outward foreign direct investments by emerging market firms

Extending the rational-based perspective of imitation, this study investigates how emerging market firms (EMFs) selectively imitate the frequency of outward foreign direct investment from two theoretically connected role models, i.e., large firms in an industry and board-interlocked firms. We posit that large and board-interlocked firms have differential values in endowing legitimacy and providing information because of their differences in terms of visibility to outsiders and value of acquired information. Using performance feedback as a moderator, we also indicate that EMFs performing above aspiration level decrease their imitation of large firms and board-interlocked firms. We also find that EMFs performing below aspiration level are more likely to imitate interlocked firms but less likely to imitate large firms.     

Synergies and tensions between and within domestic and international market activities of firms

The distinction between domestic and international market activities has an idiosyncratic meaning for international business research. This study examines the significant yet unclear role of domestic market activities for the internationalizing firm through the theoretical lens of exploitation and exploration. By means of five qualitative case studies, we show that both the dynamics between domestic–international market activities and the interplay between exploitation–exploration are intrinsically concerned with synergies and tensions. Our findings uncover how firms leverage these synergies and manage these tensions that manifest between and within their domestic and international markets. Synergies and tensions are found to revolve around ambidexterity, networks and organizational market information processes.     

The motives and performance of cross-border acquirers from emerging economies: Comparison between Chinese and Indian firms

During the recent decade, the world has witnessed the rapid growth of MNEs from emerging economies. Their increasing participation in cross-border mergers and acquisitions has raised great attention in the extant literature. This study evaluates the value creation from these cross-border transactions from two representative emerging countries, namely China and India, and determines factors that result in the different performance of these international acquisition activities. Cross-border acquisitions conducted by these countries’ companies indeed lead to significant shareholder wealth creation. Furthermore, Indian shareholders are more likely to benefit from deals in small cultural distance countries, while Chinese investors gain from the cross-border expansion of manufacturing companies. Location also affects the performance of cross-border acquisitions, with acquisitions into developed countries generating higher returns to shareholders. Our sample consists of 203 Indian and 63 Chinese cross-border deals over the period 2000–2010 and our results hold after controlling for various deal-level and firm-level characteristics.     

Inheriting the DNA of emergingness: Strategies of advanced market firms under emerging market ownership

Despite growing concerns about emerging market firms (EMFs)' acquisitions in advanced markets, the influences of emerging market ownership on advanced market firms (AMFs) as targets remain largely underexplored. This study aims to conceptually advance our understanding of the environmental adaptation strategies of AMFs under emerging market ownership, focusing on the strategic implications of the “emergingness” encapsulated in the resource transfer from EMF acquirers to AMF targets. Drawing on the institution-based view and resource-based view, this conceptual piece develops an Institution-Resource-Strategy framework and proposes two types of strategies for AMFs under emerging market ownership, namely arbitrage and avoidance, each comprising three varying tactics. We illustrate our propositions using three cases of Japanese firms under Chinese ownership. This study adds to the literature on internationalizing EMFs, the institution-based view of global strategies, and cross-border mergers and acquisitions and offers managerial implications for emerging and advanced market stakeholders.     

Factors influencing perceptions of performance: The case of western FDI in an emerging market

This paper adopts an integrative approach to incorporate institutional, host country and firm variables as determinants of the factors influencing perceptions of foreign affiliate performance. Based on primary data from 145 affiliates of Western MNEs in Turkey, the findings show that the factors of input quality, comparative cost advantages and government regulations demonstrate a statistically significant impact on the perception of performance of affiliates. In contrast, political risk, financial incentives and cultural distance do not have any significant impact on the perception of performance of affiliates. The findings indicate that firm specific factors are less important than either institutional or perceived environment-specific factors within the host country in influencing perceptions of foreign affiliate performance.     

The efficacy of marketing skills and market responsiveness in marketing performance of emerging market exporting firms in advanced markets: The moderating role of competitive intensity

Emerging market exporting firms in advanced economies must manage a highly dynamic landscape owing to factors such as changing market needs and fierce competition. Hence, these firms need to develop unique marketing skills for superior performance. Accordingly, this study draws on the resource-based and dynamic capability theory to empirically examine the role of marketing skills in developing a dynamic capability—market responsiveness—for improved marketing performance, and the changes in this relationship under highly competitive intensity. Using a sample (n = 98) of firms originating from an emerging market (Pakistan) mainly exporting to advanced markets (the United Kingdom, the United States or both), the findings show that marketing skills, positively mediated by market responsiveness, influence the marketing performance of such firms in advanced markets. The indirect relationship is positively moderated by a higher level of competitive intensity. This study extends the dynamic capability and export marketing streams of literature, particularly for emerging market exporting firms in advanced markets, and provides useful performance implications to export marketing managers.     

Linking market orientation to international market selection and international performance

One key strategic decision in a firm's internationalization process is the international market selection (IMS). IMS must match the firm's own-specific resources and capabilities for optimal performance. This research, drawing on the resource-based view, investigates how a firm's market orientation (MO) resources and capabilities influence the firm's IMS between culturally close and distant markets and how the matching of MO and IMS impacts on its international performance. We hypothesize that market-oriented firms tend to choose culturally distant markets that help them exploit their MO. Firms with a fit between MO and IMS tend to perform better internationally than those without such a fit. Both hypotheses are supported by our database of Chinese manufacturing firms expanding internationally.