The international market selection of Chinese SMEs: How institutional influence overrides psychic distance

The purpose of this research is to contribute to the ongoing debate about whether psychic distance still plays a vital role in the internationalisation of SMEs from emerging markets. Drawing on the prior research which suggests the salient impact of institutional factors on internationalisation, we investigate the role of home country institutions in international market selection. Adopting a multi-case methodology, we collected semi-structured interview data from six small and medium-sized manufacturing firms in China. Our findings suggest that while psychic distance is still important in some circumstances, both formal institutions, such as government support, and informal institutions, such as business and political guanxi, enable Chinese SMEs to choose psychically distant markets. Our findings also indicate that informal institutions interact with formal institutions to further influence SMEs’ international market selection. This research contributes to SME internationalisation studies by revealing how formal and informal institutional factors override psychic distance in influencing international market selection.     

Lessons learned from Brazilian multinationals’ internationalization strategies

Internationalization of emerging market multinationals is a recent phenomenon gaining importance in the global economy. This foreign expansion of a new breed of companies has challenged established theories and practices in the field of international business (Cuervo-Cazurra, 2007). This article addresses the issue of whether or not there is something to learn from these emerging market companies and their foreign expansion. Focusing on the international trajectories of four Brazilian multinationals (i.e., Odebrecht, Embraer, Stefanini, and Marcopolo), this study analyzes their strategies and managerial processes during and after the recent economic crisis with regards to internationalization. Our qualitative fieldwork suggests that the trajectories of these Brazilian multinationals are quite unstructured and evolve as a reaction to the opportunities they face in international markets. It seems all four companies in our sample shared a strong entrepreneurial spirit and a high motivation to expand their international operations despite the crisis and the obstacles they faced. Our findings and suggestions in terms of lessons learned should provide valuable implications for multinational managers from other emerging markets by providing a better understanding of how Brazilian multinationals expand internationally, deal with economic crisis, and manage relationships with local and foreign institutions.     

China goes global: public policies' influence on small- and medium-sized enterprises' international expansion

Despite small- and medium-sized enterprises' (SMEs) significant contribution to China's social and economic development, very little has been written about the influence that public policies (i.e. public funding priorities and regulatory measures) may have on the first stage of international expansion of Chinese SMEs. To help fill this gap, the article analyses five main factors related to public policies and services affecting Chinese SMEs' internationalization: access to public financial resources; participation of the government in ownership; access to public procurement contracts; adverse regulatory and inconsistent legal frameworks; and public assistance on information and knowledge about markets. The main conclusion is that SMEs appear to base their international expansion on private capabilities, rather than on support from the government; in addition, the perceived barriers for the international expansion of these firms may be mainly internal, rather than institutional.     

Internationally leading SMEs vs. internationalized SMEs: Evidence of success factors from South Korea

Previous studies on the internationalization of small and medium-sized enterprises (SMEs) have typically compared the performance of internationalized SMEs (I-SMEs) with that of non-internationalized SMEs. However, not all I-SMEs can successfully lead the international market either unless they should consistently strive to attain and maintain competitive advantages. Thus, this study aims at identifying success factors which influence efforts of I-SMEs to lead international markets as internationally leading SMEs (IL-SMEs). To examine the success factors of the IL-SMEs, in this paper, IL-SMEs are specifically defined as I-SMEs which occupy dominant positions in the international market, i.e., ranking among the top three worldwide. The results based on a sample of 88 South Korean SMEs including 18 IL-SMEs and 70 I-SMEs indicate that 18 factors (out of 47 factors) show significant differences between IL-SEMs and I-SMEs in terms of customer relations/service, technological innovation, and corporate strategies. Also, by factor analysis and logistic regression analysis, three factors influencing the success of IL-SMEs are identified in the perspectives of technological innovation (R&D) and international marketing (customer satisfaction and demand quality/scope). Surprisingly, internationalization strategies and external markets have no relationship with performance of IL-SMEs. These results provide important implications to policy-makers interested in the sustainably international competitiveness of SMEs.     

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.     

The Growth and International Expansion of an Emerging Market Retailer in Latin America

ABSTRACT

This study contributes to the literature on international retailing by addressing a gap in the literature regarding how retailers from emerging markets expand internationally. This historical case study analyzes the growth and internationalization process of Chilean retailer Falabella, which is one of the largest retailers in Latin America and has been able to compete with multinationals from developed countries. The research is based on primary and secondary data sources including 33 oral interviews with company managers and family executives, as well as industry data, corporate reports, and trade journals. Drawing on institutional theory, the findings show that belonging to a family conglomerate, engaging in networks, partnerships, and organizational learning, and having an experienced management team helped Falabella gain legitimacy in all international markets.     

Entrepreneurial orientation, management commitment, and human capital: The internationalization of SMEs in India

Small- and medium-sized enterprises (SMEs) make sizeable contributions to the economic success of nations. Research concerning the internationalization of SMEs is available in the context of developed economies but less is can be found dealing specifically with the entrepreneurial behavior and international expansion of SMEs in emerging markets such as India. This research extends the literature addressing the relationships surrounding the internationalization of SMEs in India as related to entrepreneurial behavior, firm resources, and commitment to internationalization. Entrepreneurial orientation, a commitment to internationalization, and the ability to leverage human capital influence the international success of Indian SMEs, based on the analysis of data collected from 150 Indian SMEs.     

The effect of sub-national institutions and international entrepreneurial capability on international performance of export-focused SMEs: Evidence from China and South Korea

A number of recent studies have taken notice of the differences among sub-national institutions within the convoluted structures of Asian economies. The influence that the institutional environment exerts upon the performance of larger multi-national enterprises (MNEs) in Asian markets is well-documented; however, the relationship between sub-national institutions, international entrepreneurial capability (IEC), and international performance (IP) is a realm that has been less closely explored. This paper seeks to address that gap by assessing the effect of relevant sub-national institutions, namely, local government support, legal rules, government transparency, and government efficiency on the IEC of export-focused small and medium-sized enterprises (SMEs) in two leading Asian economies. The researchers have devised and assessed a model that links sub-national institutions, their IEC and IP. To this end, data was collected from export-focused SMEs in two important emerging markets, China and South Korea. Three rounds of data collection resulted in 217 complete surveys. This paper discusses the analyzed data as well as the theoretical and managerial contributions of those findings.     

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.     

Delineating Foreign Market Potential: A Tool for International Market Selection

International expansion is becoming more imperative in today's marketplace. However, determining which markets best suit a specific company is not a straightforward task. This study tackles the question of how managers should go about identifying, evaluating, and selecting foreign markets. For this purpose, we propose a practical, flexible, and forward‐looking three‐stage template for assessing foreign market opportunities and identifying the most promising international markets. The three stages include determining country responsiveness for a specific industry, estimating future industry growth, and incorporating an industry‐relevant aggregate measure. The study illustrates the tool for three companies from various industries and discusses the implications. The proposed tool offers insights on crucial dimensions for the industry‐specific market potential, and assists managers in identifying favorable foreign markets. This study also addresses the gap in the international market selection literature by developing a new empirical tool for foreign market analysis and selection using longitudinal secondary data. © 2015 Wiley Periodicals, Inc.     

Financial Globalisation and Emerging Markets Volatility

The volatility of capital flows to emerging market (EM) countries and frequency of financial crises have imposed high welfare costs on the countries involved. The empirical literature provides, at best, a mixed picture on the relationship between long‐run EM country growth and financial integration. Meanwhile, the prevailing policy discourse regarding reform of the international financial system remains incomplete: the focus has largely been on either institutional and policy measures required of EM countries or international crisis‐resolution procedures. The role played by private financial markets and institutions in the developed world has not received adequate attention. This paper describes some of the structural features inherent in today's financial markets that directly contribute to the instability in EM capital flows.     

High ownership concentration and exporting of emerging market firms: evidence from Peru

Despite the extraordinarily high ownership concentration widely observed in emerging market firms as a result of institutional voids, there is little research on how this high ownership concentration affects the exporting behavior of emerging market firms. From principal–agent and institutional perspectives, we hypothesize that high ownership concentration has a negative relationship with export intensity, because, in emerging markets, highly concentrated ownership bridges the interests of owners (principals) and managers (agents) so that principals must be prudent in exploring risky international markets. Moreover, we hypothesize that export country diversification strengthens the relationship between ownership concentration and export intensity, because broad geographic dispersion increases risk exposure and principal-agent problems. Empirical analysis based on a panel dataset for publicly listed firms in Peru from 2005 to 2014 supports the hypotheses. The study highlights the risk aversion attitude activated by ownership concentration, an attitude that protects emerging market firms from overconfidently exploring international business opportunities. The study extends the conventional literature on the interface between ownership concentration and international business in an emerging market context. We also discuss the generalizability of the findings to other emerging markets, e.g. China.     

Understanding cross‐border mergers and acquisitions of African firms: The role of dynamic capabilities in enabling competitiveness amidst contextual constraints

This article builds on existing international business literature that examines the drivers of cross‐border mergers and acquisitions (M&As) within emerging and developing economy contexts, theoretically exploring how dynamic capabilities (DCs) are connected to these drivers, and how African emerging multinational enterprises (EMNEs) can pursue them to achieve competitiveness. The article's contribution is the development of a DC framework and testable propositions for African EMNEs' cross‐border M&As. The theoretical framework shows the division of DC dimensions—sensing, seizing, and transforming—and establishes explanations for their linkage with institutional and resource drivers for African EMNEs' cross‐border M&A competitiveness. In addition, the article outlines managerial implications to this effect. Overall, the article contributes to the emerging literature on the international expansion of African EMNEs through cross‐border M&As by underscoring the role of DCs.     

Do as the large enterprises do?: Expatriate selection and overseas performance in emerging markets: The case of Taiwan SMEs

This study investigated the less explored expatriation practices of small- and medium-sized enterprises (SMEs) in emerging markets. Data for 133 Taiwan SMEs operating in Malaysia and Vietnam revealed that four personality traits of expatriates, i.e., control ability, independence, openness and social ability exert significant influences on overseas performance given that different types of performance require different of expatriate competency. Analytical results also indicated that the widely perceived influence of the favorable evaluation of the expatriate by top managers does not impact the overseas performance of expatriates. Further, the expatriate practices of Taiwan SMEs vary depending on cultural differences between the home country and host countries. Taken together, the findings of this study have valuable implications for both academicians and practitioners in international management.     

Is the cure worse than the disease? The effect of emerging market MNEs on host country corruption

In recent years, there has been an exponential increase in the amount of foreign investment by emerging market multinational enterprises (EMNEs). While it has been debated whether EMNEs strengthen or weaken the institutions in host countries they invest in, the literature has paid limited attention to how EMNE investment impacts corruption in other emerging markets, one of the most significant destinations of EMNEs. Following Hoskisson et al. (2013), we categorize two types of emerging markets as targets of EMNE investment, a) low-income emerging markets and b) middle-income emerging markets, based on their institutional and market development. Building on the theory of firm-specific advantages (FSAs) and the institutional advantage (IA) of EMNEs, we reason that EMNEs enter foreign markets in accordance to where their skills and competencies can be effectively utilized, and this impacts corruption in the host country. We make two key arguments: (1) EMNEs predominantly use their IA in low-income emerging markets, which in the long term increases corruption in the host market, and (2) EMNEs predominantly use their FSAs to gain competitive advantage in middle-income emerging markets, which decreases corruption in the host market. Empirical analysis of Chinese outward FDI from the 2008-2018 period supports our hypotheses. Our research contributes to both the literature on EMNEs and corruption.     

中小企业国际化经营转型的制度困境及发展路径

中小企业“浅度”的国际化经营是以出口和加工贸易为主体、以低价竞争为手段、以廉价劳动力资源为核心、以低附加值产品为载体,不利于中小企业在拓展国际市场的同时迅速成长并形成核心竞争力。中国中小企业要实现从“浅度”向“深度”国际化经营的转型,必须以战略规划促进成长,突破企业制度的约束;以特色经营拓展市场,突破贸易制度的约束;以企业集群强化优势,突破产业制度的约束;以品牌塑造提高影响力,突破市场体制的约束;以技术创新形成核心竞争力,突破企业间合作制度的约束。     

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.     

Managerial characteristics and entrepreneurial internationalization: A study of Tunisian SMEs

Growing internationalization has sparked increasing interest in any factor which could strengthen a firm’s ability to develop a long-term competitive edge. One of the main factors which determine a firm’s international behavior is the characteristics of its management team. The aim of this paper is to shed light on the relationship between the management team’s characteristics and factors which favor a company’s development by examining the causal effects of managerial characteristics on innovative behavior of small- and medium-sized enterprises (SMEs) seeking international market expansion. The conceptual model and its hypotheses are tested through an empirical study of a multi-industry sample of Tunisian SMEs. To our knowledge, this present study is the first to include Islamic ethics as a determining factor on managers’ behaviors as their companies enter the international market. Obtained by structural equation modeling technique, the key findings of this research show that personality traits, mental ability, and social networks of managers have a direct impact on a firm’s behavior as it enters the international context. Results also show that Islamic ethics seem to favor a creative context for innovative ideas in both local and foreign markets. Given the importance of the results analyzed, it could be suggested that Islamic ethics in organizations be implemented as a part of the education system in all Islamic societies.     

International strategy: From local to global and beyond

To survive and thrive, multinational enterprises (MNEs) have had to adapt to dramatic changes and increasing complexity in the global competitive landscape over the past 50 years. MNEs’ international strategies and the academic research on the various attributes and outcomes of these strategies have evolved accordingly. This work reviews the evolution of international strategy research over the past five decades. In particular, the research on international diversification and the timing and speed of entering international markets is closely examined. In recent years, the influence of formal and informal institutions on international strategy has become a central research topic. Furthermore, MNEs’ strategies often seek to explore and exploit critical capabilities to build advantages in international markets. Finally, emerging research themes, such as institutional complexity, business sustainability, emerging economy firms and international new ventures are highlighted.     

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.