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.     

International SMEs from emerging markets—Insights from the Colombian textile and apparel industry

The internationalization of firms from emerging markets has been studied mainly from the perspective of large firms. Smaller and younger international firms based in emerging markets suffer from underrepresentation in the literature. This study sheds light on the internationalization of emerging market SMEs, focusing on Colombian textile and apparel exporters. Using mixed research methods, it illustrates the role of firm age in influencing internationalization strategy. It examines 1165 export contracts by 50 SMEs, discussing export intensity, speed, and geographic scope using recurrence analysis and cluster analysis. It contributes to international entrepreneurship by exploring new empirical evidence and examining it using a novel methodological approach.     

Bring institutions into FDI spillover research: Exploring the impact of ownership restructuring and institutional development in emerging economies

Extant studies exploring the influences of foreign direct investment (FDI) spillovers on the productivity of local firms have provided conflicting evidence. In particular, they have largely overlooked the important role of institutional mechanisms in the host market in understanding the sources of the variation in FDI spillover effects on the productivity of local firms, especially in the context of emerging markets. Using a comprehensive panel data set of manufacturing firms in China during 1998–2007, our paper presents an integrative framework of how FDI spillovers affect the productivity of local firms in emerging markets. We identify an inverted U-shaped relationship between FDI spillovers and the productivity of local firms in China. This result suggests the coexistence of and the interplay between the opposing mechanisms of FDI spillover learning opportunity and adverse competition. Drawing on the institution-based view, this study also develops contingency frameworks and arguments to explore the question of if FDI spillover effects are contingent on, or independent of, a local institutional context especially in emerging markets. We find that institutional mechanisms, such as the institutionally determined ownership restructuring and the different levels of subnational institutional development within the host emerging market, significantly shape the variation of FDI spillover effects on the productivity of local firms. This research highlights the importance of incorporating institutional effects in understanding the FDI spillover effects in emerging markets.     

Innovation and survival of exporters: A contingency perspective

We challenge the traditional view that innovations always help exporters prosper in competitive international market, by developing and testing the premise that the relationship between innovation and export performance is contingent on some important firm-specific idiosyncrasies. With a large dataset of Chinese firms, the empirical results demonstrate that innovation could be detrimental to exporter survival. Such negative effect is more pronounced for firms that have weak profitability and high outstanding receivables, and also for those without foreign ownership. Nonetheless, we also observe a positive relationship between innovation and survival in highly profitable exporters. By identifying the negative rather than conventionally assumed positive effect of innovation, and the conditions under which innovation facilitates or impedes exporter survival, this paper contributes to the literature on the relationship between innovation and export in the context of emerging markets. Our findings have important implications for how managers develop innovation strategy to compete in the export market.     

Communicating CSR practices – Role of internationalization of emerging market firms

Emerging markets suffer from institutional voids, and in such resource deficient economies, corporate social responsibility is given scant attention. However, when firms from emerging markets globalize, international stakeholders become suspicious about firms’ products, services, and business practices. Grounded in the liability of emergingness and legitimacy theory and using a sample of 134 manufacturing firms from one emerging market, India, this study explores how firms’ international diversification intent and market-seeking motives influence emerging markets’ firms communication of socially responsible activities as an attempt to eliminate illegitimacy. Furthermore, the study reveals that business group affiliation enhances the influence of internationalization on firms’ communication of socially responsible activities.     

FDI expansion speed of state-owned enterprises and the moderating role of market capitalism: Evidence from China

Drawing on an institutional logics perspective and isomorphism viewpoint, we posit that the negative impact of state ownership on the speed of foreign direct investment (FDI) expansion is attributed to the state socialism logic, which is inconsistent with market-oriented mechanisms that underpin rapid international expansion. We further argue that firms associated with the market capitalism logic shape an institutional context in which state-owned enterprises (SOEs) may adjust their behaviors by adopting market-oriented practices to expand quickly in the global market. Using outward FDI project information from Chinese listed firms over a fourteen-year period, we find evidence that confirms our theoretical predictions. Our analysis shows that, despite the negative relationship between state ownership and the speed of an SOE’s FDI expansion, both the non-state economy in the firm’s subnational region and privately owned enterprises in its industry sector positively moderate this relationship. This study enriches our understanding of institutional complexity in emerging markets and internationalization of emerging-market firms.     

Ownership structure and earnings management in emerging markets—An institutionalized agency perspective

Previous earnings management research has largely focused on firm-level governance mechanisms in single countries or on macro-level variables in multiple countries. Building on this research, we incorporate firm ownership predictors along with national institutional dimensions to explore why firm decision makers in emerging markets vary in their earnings management behavior. Our theoretical framework integrates agency and institutional theories proposing that firm-level ownership mechanisms do not function in isolation, but are reinforced or attenuated by elements of the institutional governance environment. The multilevel empirical analysis of 1200 firms in 24 emerging markets indicates that controlling ownership is positively related to earnings management. We find that the level of minority shareholder protection in a country weakens this positive relationship. We also find that regulatory quality strengthens the negative relationship between institutional ownership and earnings management activity. It is hoped that awareness of how firm ownership structures interact with national-level institutions in affecting firm-level behavior will help managers and investors develop skills and practices to better cope with business norms in emerging economies.     

Performance feedback and export intensity of Chinese private firms: Moderating roles of institution-related factors

Building on the behavioral theory of the firm and institutional view, we examine how performance feedback (i.e., a focal firm’s performance relative to its industry peers) affects export intensity and how institution-related factors moderate this relationship. Using a sample of Chinese private manufacturing firms, we find that positive performance feedback lowers export intensity while the relationship between negative performance feedback and export intensity is insignificant. Moreover, outperforming firms are likely to decrease their export intensity even more when they are located in regions of better institutional development or have political connections. Underperforming firms with political connections tend to increase their export intensity. These findings enrich our understanding of the export behavior of emerging market firms.     

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.     

How does the geographic export diversification–performance relationship vary at different levels of export intensity?

We argue that the relationship between geographic export diversification and firm performance follows an S-curve relationship if export intensity is low and an inverted U-shape if export intensity is high. The S-shape curve occurs because firms have weaker incentives to deploy the resources needed for succeeding in foreign markets if they generate relatively low revenues in export markets compared to their domestic market. Firms highly committed to export markets, in contrast, face stronger incentives to accelerate their learning curve, which results in an inverted U-shape relationship. We examine our hypotheses using a panel of longitudinal archival data with over 2000 firm-year observations, which cover all of the possible export destination countries served by large Brazil-based exporters from 2001 to 2010. Our results imply that the degree of export intensity changes the cost-benefit relationship of geographic export diversification.     

Export strategy,export intensity and learning: Integrating the resource perspective and institutional perspective

Export intensity (EI) has been widely examined as a performance outcome of exporting firms. To date, studies on the determinants of EI have generated mixed and even contradictory results. To reconcile such inconsistencies, this study dichotomizes export strategy in emerging economies into two distinctive types, expansion-oriented vs. escape-oriented, with the former inspired by exploiting firm-specific competencies as portrayed by the RBV and the latter motivated by avoiding the domestic institutional deficiencies as informed by the institutional perspective. Different from prior findings in the International Business literature, this research finds that a firm’s extremely high EI might not result from their superior competencies. Instead, high EI firms might focus on export mainly for the purpose of escaping from their home country’s deficient institutional environment that places extra burdens in terms of costs of doing business. Such escape-oriented exporters are more sensitive and responsive to changes in the environment while they do not enhance their learning as much as those expansion-oriented exporters. Furthermore, institutional environment has heterogeneous impacts on firms with different ownership types. Our study helps integrate the insights from both the RBV and the institutional perspective, and our dichotomization of export strategy adds precision and sophistication to the understanding of EI and export performance. Our hypotheses are supported by an empirical study based on a sample of exporting firms in China between 1998 and 2007.     

A corporate entrepreneurship perspective of pre‐entry strategies for internationalization: A case study of a Chinese business conglomerate

The international expansion of Chinese firms is a remarkable phenomenon of contemporary international business. However, international expansion is particularly challenging for firms expanding from emerging market economies such as China because they have relatively few ownership advantages and suffer disadvantages. We apply a corporate entrepreneurship perspective to explore this under‐researched topic via a longitudinal case study of a large Chinese business conglomerate. Thirty‐one semistructured interviews and seven focus‐group discussions were conducted with 55 informants; company documents were also analyzed. We found sophisticated pre‐entry entrepreneurial initiatives are critical for successful internationalization, as they enable emerging market firms to overcome some constraints, leverage their assets, and build competences for international venturing.     

企业边界人员的私人关系与企业绩效——基于中国市场数据的元分析检验

企业边界人员与外部利益相关者发展私人关系是新兴市场中的普遍现象,但是"私人关系"是否真的会提升企业绩效?当前文献对此问题并未给出一致结论。文章基于105篇使用中国市场数据的中英文文献,运用元分析技术(Meta-Analysis)考察了私人关系对企业绩效的影响,并分析了企业所处的制度环境和市场环境,企业的生命周期、规模、所有制形式等内部特征对上述影响的调节作用。通过对392个效应值的集成分析,文章发现,尽管私人关系确实能提升企业绩效■,但是不同层面的私人关系(政治联系和商业联系)对不同类型的企业绩效(财务绩效、运营绩效和战略绩效)所产生的影响存在差异。同时制度环境、市场环境、企业特征均会显著地调节私人关系对企业绩效的影响。上述结论为新兴市场中的企业如何将私人关系转化为企业绩效提供了指导。     

Unpacking Institutional Distance: Addressing Human Capital Development and Emerging‐Market Firms’ Ownership Strategy in an Advanced Economy

As latecomers to global business competition, emerging‐market multinational companies (EMNCs) utilize cross‐border mergers and acquisitions (M&As) to quickly acquire strategic assets, resulting in an improved competitive position. Advanced markets with well‐established firms and well‐developed market‐supporting institutions become particularly important destinations for EMNCs’ foreign operations. Institutional distance, which represents conflicting legitimacy requirements between the host and home institutional environments, is expected to be negatively associated with the foreign acquirer's ownership position. The current study examines a sample of EMNCs’ cross‐border M&As in the United States between 2005 and 2011 and reveals the unique nature of EMNCs’ ownership strategies. Taking both formal and informal institutions into consideration, our findings suggest that EMNCs originating in countries with lower levels of human capital development may have more urgency in seeking ownership control in advanced markets and are less influenced by the negative association of institutional distance in their ownership strategy. © 2016 Wiley Periodicals, Inc.     

Impact of institutional reforms and industry structural factors on market returns of emerging market rivals during acquisitions by foreign firms

This paper seeks to understand the joint impact of institutional reforms and industry structural factors on market returns earned by rivals in an emerging market during foreign acquisitions. We use a sample of 238 foreign acquisitions in India during the period 2004–2013 and find empirical evidence to support the notion that institutional reforms, foreign competition and business group competition positively impact the market returns of the rivals of acquired firms. Additionally, we find that the effects of foreign competition and business group competition on rivals’ market returns are shaped by the degree of institutional reforms in the industry, indicating that firms’ market returns in emerging markets during foreign acquisitions can be better understood through the incorporation of the joint role of industry structural factors and institutional reforms.     

Are Group-Affiliated Firms Really More Profitable than Nonaffiliated?

The role of corporate center in influencing the economic performance of business units has been a central research topic in the industrial organization and strategic management literature. A common finding is the limited corporate and business group effects. Recently, an emerging line of studies argues that the market inefficiencies and institutional voids in emerging markets can be overcome more efficiently by large diversified business groups than by non-group small firms. Some empirical evidence also shows that non-group small firms are significantly less profitable than group-affiliated firms. This paper raises this issue by empirically investigating the influence of group affiliation on the return on assets and Tobin's q of 340 group-affiliated firms versus 423 non-group firms in Taiwan, during the period of 1997–1999. The statistical results show that group affiliation can not always create value for member firms. The size of the business group matters. When affiliated with the largest business groups, member firms indeed show improved stock market performance, but when firms are affiliated with small- and medium-sized groups, their accounting performance suffers. Findings of this paper suggest a threshold effect and a U-shape relationship between group affiliation and profitability in emerging economies.     

Institutional determinants of ownership stake in cross-border acquisitions in Africa: The moderating role of geographic distance

We look at how emerging markets' institutional features affect ownership stake in cross-border acquisitions (CBAs) within Africa. Particularly, we show that the presence of shared colonial history between the home and host country and the extent of fractionalization distance and formal institutional distance influence the acquiring firm's decision regarding its ownership stake in the target. Moreover, we show that geographic distance between the home and host country, by augmenting uncertainty faced by acquiring firms, moderates the relationship between these institutional features and ownership stake. We test our hypotheses in a sample of 341 intra-Africa CBAs from 2001 to 2016. Generally, we find that greater ex ante uncertainty and ex post costs increase ownership stake. Specifically, greater geographic distance strengthens the positive relationship between shared colonial history and ownership stake and reverses the negative relationship between formal institutional distance and ownership stake. As for fractionalization distance, the relationship is more nuanced and needs to be further studied. We contribute to advance research on south–south CBAs in general, particularly within Africa, as well as to extend hostage theory in foreign market entry strategies in and from emerging markets.     

Determinants of ownership preference of international joint ventures: new evidence from Chinese manufacturing industries

Given the large size and rapid growth of foreign direct investment in China, the subject of ownership preference is of great interest to academics as well as to firms intending to invest in China. This study focuses on two sets of variables: industry-specific factors and venture-specific factors. Statistical tests based on information of 818 international joint ventures (IJVs) in China show that duration and scale of IJVs are positively associated with the level of foreign ownership. Industry-specific factors such as skill intensity, market concentration, market potentials, and foreign business agglomerations also positively influence the ownership preference of foreign firms, while local industry R and D intensity and productivity are found to be significant but negatively associated with the ownership preference.     

The Determinants of Nicaraguan Nonagricultural Exporters: A Firm-Level Perspective

Nicaragua, as a small emerging market with a challenging history of economic and political turmoil, is understudied within the international business context. Utilizing the World Bank's 2010 Nicaragua Enterprise Survey, this article explores which nonagricultural Nicaraguan firms are best suited to export. Important findings include firm location, firm size, ownership composition, performance, firm industry, firm quality programs, and firm origin in the informal sector. These findings are discussed within the Nicaraguan context.     

The Signaling Effect of Corporate Social Responsibility in Emerging Economies

What signals do firms in emerging economies send to stakeholders when they adopt corporate social responsibility (CSR) practices? We argue that in emerging economies, firms that adopt CSR practices positively signal investors that their firms have superior capabilities for filling institutional voids. From an institution-based view, we hypothesize that the institutional environment moderates the signaling effect of CSR on a firm’s financial performance. Based on a sample of firms from ten Asian emerging economies, we find a positive relationship between CSR practices and financial performance. This positive relationship is stronger in the less developed capital market than in the more developed one. The financial benefits of CSR practices are also more salient in the low information diffusion market than in the high one. We emphasize that signaling theory and the institution-based view can jointly contribute to the CSR literature.