Internationalization performance of Chinese multinational companies in the developed markets

This study investigates the relationship between prior cooperation experience with partners from the developed markets and internationalization performance of emerging multinational companies. Based on the knowledge-based view, this study sheds light on the crucial role of knowledge base, organizational learning in the home country, and acquisition possibility of knowledge in the host country. Employing a sample of Chinese international firms, this study demonstrates that international experience accumulated by learning through linkage with partners from the developed markets improves the performance of companies from the emerging market. Organizational learning in the home country and acquisition possibility of knowledge in the host country moderate the effect of international experience. The implications of these findings for theoretical development and future research are discussed.     

Manage the value and liability of offshoring innovation

The impact of offshoring innovation on firm innovativeness remains unclear. To bridge this gap, we draw upon the new eclectic paradigm and the strategy structure paradigm to examine offshoring innovation, a combination of geographical dispersion and functional interdependence of various innovation activities. We also explore the sole and joint effects of two managing mechanisms – a global offshoring strategy and captive operations – on the relationship between offshoring innovation and firm innovativeness. As offshoring innovation has positive impact on firm innovativeness, each mechanism helps firms appropriate the value of offshoring innovation. Despite that, the joint adoption of both mechanisms exerts a greater impact of offshoring innovation on firm innovativeness than does sole one.     

Exploring and investigating sustainable international business practices by MNEs in emerging markets

While there are a number of dimensions to sustainability, ranging from the environmental to the social, a common assumption in the literature is that firms from the mature markets are more likely to have the capacity and indeed, rationale to take sustainability more seriously. Emerging market counterparts, MNEs included, are seen to lag behind in sustainable practices. However, recent developments challenge this conventional wisdom. This article introduces the special issue on ‘Sustainable International Business Practices by MNEs in Emerging Markets, and highlights emerging themes which are promising future directions for theoretical and empirical enquiry.     

Environmental sustainability practices and exports: The interplay of strategy and institutions in Latin America

We integrate institutional economics with stakeholder theory to examine the antecedents and outcomes of Environmental Sustainability Practices (ESP) for small and medium enterprises in Latin America. We find that these firms primarily engage in ESP to succeed in export markets. We also find that this is especially true when firms demonstrate organizational agency by adopting complementary strategies such as obtaining international quality certifications to develop credibility among stakeholders. Lastly, their cause receives a further boost when they are based in institutional environments that are known for strong democratic voice and accountability mechanisms. In elucidating the interplay of strategy and institutions, we suggest the need to better integrate organizational agency into institutional theory and institutional environment into stakeholder theory.     

Corporate governance and MNE strategies in emerging economies

We explore factors of convergence and divergence in corporate governance of emerging and developed market economies, focussing on the role of firm internationalisation. In particular, foreign investments by emerging economy firms led to upgrade of their governance capabilities. These firms also became advocates for home-country policy reforms that mandated the development of similar capabilities for local firms. We present a broad overview of the literature and propose an approach that considers the evolution of corporate governance, both at the national level and the firm level, with MNEs from both emerging market economies and developed economies as active actors in this process.     

Institutional duality and political strategies of foreign-invested firms in an emerging economy

This study investigates how the complex institutional environment surrounding foreign-invested firms (FIEs) affects their corporate political strategies (CPS) in China. Analyses of data on 442 FIEs operating in China show that the relative potency of dual institutional pressure from FIEs’ home and host countries shapes their strategic choices. Institutional factors at the country, region, and firm levels not only affect firms’ adoption of multiple firm-based tactics but also shape their collective-oriented associational activities. Moreover, participation in both foreign and domestic business associations enhances an FIE's adoption of firm-based political tactics, but joining domestic business associations has a stronger effect.     

Country of origin and network effects on internationalization: A comparative study of SMEs from an emerging and developed economy

This study examines the internationalization of high technology small and medium enterprises (HTSMEs). It explores how they develop and use networks to penetrate their first foreign market relying on information collected via direct interviews with the CEOs or founders of 58 high technology small firms that operate internationally. It uses mixed methods to discuss the network building mechanisms identified — client–supplier relationships, existing personal contacts, contacts acquired by chance, and contacts acquired through specific strategies. The findings provide the basis for developing propositions for further comparative analyses of the internationalization of HTSMEs based in emerging and developed markets. The study contributes to the literature on networks, internationalization and international entrepreneurship.     

Resource curse impacts on the co-evolution of emerging economy institutions and firm internationalization

We investigate natural resource “curse” impacts on co-evolutionary relationships between emerging economy institutions and firm internationalization. We discuss how these relationships challenge and extend IB institutional research using three predominant resource curse characteristics (boom and bust cycles with related public discourse and “Dutch Disease” with associated manufacturing sector investment crowd-out). These characteristics alter regulative, normative and cognitive institutional impacts on state- and privately-owned firm internationalization during an emerging economy’s resource curse. We develop propositions describing these processes using oil and gas, manufacturing and service sector examples in several emerging economies. We discuss our theoretical contributions to the resource curse and international business literatures and outline future research directions.     

The role of stock markets on environmental degradation: A comparative study of developed and emerging market economies across the globe

It is well established in the literature that stock markets increase both economic activities and energy consumption across countries. Therefore, it is commonly believed that stock markets are expected to have a significant effect on CO₂ emissions. However, it is not known whether these stock markets can contribute to more or less CO₂ emissions. Hence, the goal of this study is to examine the impact of stock market indicators on CO₂ emissions across a global panel of both developed and emerging market economies. The results establish that stock market indicators have a significant negative and positive impact on carbon emissions in developed and emerging market economies, respectively. Furthermore, the findings illustrate the presence of the Environmental Kuznets Curve (EKC) hypothesis, implying that stronger stock markets lead to a further decline in carbon emissions. Given these findings, the study argues that the role of stock markets in the abatement of CO₂ emissions significantly varies across both developed and emerging market economies. Significant implications have to do with the fact that developed markets might have initiated effective policies on listed firms to minimize carbon emissions, while emerging markets are yet to achieve this.     

The moderating role of local embeddedness on the performance of foreign and domestic firms in emerging markets

This paper examines the impact of the firm’s degree of local embeddedness on its performance in emerging markets using the World Bank’s Enterprise Survey Manufacturing Sector Module data on 15,715 firms covering 78 emerging markets. We use the degree of localization of sourcing and sales to measure the degree of embeddedness in the host country market. We argue that since embeddedness brings the firm into closer interaction with local firms and institutions, the costs of embeddedness should be lower for local firms than for MNE subsidiaries, since local firms can be assumed to be better able to decipher local institutions. We find that both dimensions are subject to a reversed U-shaped function. That is, by extending the degree of local sales and local sourcing up to a certain percentage, a firm can realize positive performance growth by becoming more embedded into the emerging market, but beyond this point, the performance impact is negative. We also find that foreign firms involved in local sales seem to lose part of their ability to exploit their ownership advantages as compared to foreign firms that export their production.     

Performance of professional service firms from emerging markets: Role of innovative services and firm capabilities

Professional service firms (PSF) from emerging markets face a financial dilemma: PSFs tend to utilize high-wage labor, yet their emerging market status makes foreign clients cautious regarding quality and less willing to pay high prices. To allay these concerns, PSFs may be able to develop attractive, highly innovative services, but as the resource-based view (RBV) notes, this requires emerging market firms to possess critical capabilities to support such a competitive advantage. Relying on services theory, we propose that entrepreneurial orientation (EO) of management and expert human capital (HC) are critical capabilities, enabling a PSF to develop and market innovative services profitably. In testing our model on 201 Indian PSFs, we find a mediating role for innovativeness whereby EO and HC drive service innovation which, in turn, accounts for financial performance. Further, we find EO positively moderates the innovative service–performance relationship as proactive, risk-tolerant managers improve foreign marketing. Insights for theory and practice are provided that enable PSFs to overcome the constraints and challenges of their emerging market origin.     

Brand prominence and social status in luxury consumption: A comparison of emerging and mature markets

This research investigated how the use of a prominent versus subtle branding strategy and status consumption affect consumers’ intention to buy luxury products across emerging and mature markets. To this end, an experimental study with consumers in India (emerging market) and the United States (mature market) was conducted. The results suggest that Indian (but not U.S.) consumers with a higher status consumption tendency are more willing to purchase prominently branded luxury products than subtly branded ones. On the other hand, U.S. (but not Indian) consumers with a lower status consumption tendency are more willing to purchase subtly branded luxury products than prominently branded ones. The paper discusses these findings, highlights their contribution to luxury research, and illustrates their practical value for luxury companies interested in targeting mature and emerging markets.     

Cross-border acquisition in services: Comparing ownership choice of developed and emerging economy MNEs in India

Despite rapid increase in cross-border acquisitions (CBAs), prior research has not examined ownership choice of foreign MNEs investing in the services sector in emerging economies. Drawing on multiple strands of literature, we posit acquirer's ownership choice (partial versus full acquisition) to be influenced by type of service offering (soft versus hard), institutional distance between acquirer and target nation, and acquirer's country-of-origin (emerging versus developed economy). Empirical analysis of 385 CBAs undertaken in India over an 11-year period provides evidence that services, in particular soft services, and high institutional distance increases the likelihood of full acquisition by emerging economy acquirers. However, acquirers from developed economies show preference for partial acquisition under similar circumstances.     

Subnational institutions,political capital,and the internationalization of entrepreneurial firms in emerging economies

This study advances the institution-based view of strategy by integrating it with firm-specific capability considerations. In particular, we investigate the integrative influence of subnational-level home country institutional environments and firm-level political capital, as an important way to seek resources, on emerging economy entrepreneurial firms’ internationalization. With data from Chinese entrepreneurial firms, we find that the development of subnational institutional environments in the home country is related to firms’ degree of internationalization. Furthermore, while political capital with low-level governments enhances the effect of subnational institutions on internationalization, political capital with high levels of government has no such moderation effect. Theoretical and empirical contributions and implications are discussed.     

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.     

Intra and inter-country comparative effects of symbolic motivations on luxury purchase intentions in emerging markets

Emerging markets, and especially lower-tier cities within these markets, are seen as the future growth engines for luxury brands. However, extant literature on the drivers of luxury consumption has predominantly focused on Tier-1 cities. Grounded in the theory of network effects, this study offers first such intra and inter-country comparison of the symbolic motivations (i.e. snob, bandwagon and Veblen motivations) underpinning luxury purchases between and within Tier-1 and lower-tier cities in two prominent emerging markets, China and India. The findings offer first account of similarities and differences in consumer motivations that drive luxury consumption within and between these markets. While most luxury brands have ubiquitous strategies for emerging markets, the results will assist managers in developing distinctive brand strategies catering to the intra and inter-country differences.     

Fostering integration through HRM practices: An empirical examination of absorptive capacity and knowledge transfer in cross-border M&As

Transfer of knowledge-based resources from acquirers to the acquired units has been ubiquitously emphasized as an important driver of post-acquisition integration. Equally emphasized is the importance of recipient unit’s absorptive capacity for the success of knowledge transfer and the facilitating role of HRM practices in developing absorptive capacity. In this paper, we integrate different streams of research on post-acquisition integration, knowledge transfer, absorptive capacity and HRM practices. Different from most past research, we pay attention theoretically and empirically to the multi-dimensional nature of both knowledge transfer and absorptive capacity. We test our hypotheses on a sample of acquired Chinese subsidiaries of 181 multinational corporations from seven countries. We find that successful inflow and implementation of knowledge require the acquired unit to have distinct types of capabilities each of which can be developed by a specific HRM practice. These results contribute literature by recognizing absorptive capacity as a manageable capability and identifying how different components of this capability could be developed by specific HRM practices. Furthermore, our results shed light on human side of M&As by examining how companies can foster post-acquisition integration by fine-tuning the absorptive capacity of acquired units.     

Competing to be innovative: Foreign competition and imitative innovation of emerging economy firms

We examine the effect of increased competitive pressures within and outside the home market on the innovation of local firms. We argue that the relationship between exposure to foreign competition in domestic and international markets and firm innovation is better captured by imitative innovation than by radical innovation. We hypothesize that exposure to foreign competition inside and outside the home country is positively associated with local firms’ imitative innovation. Further, we argue that this relationship is contingent on institutional factors, including the role of the government, the legal system, and natural resource endowment. Using a dataset of 949 firm-year observations in the Middle East and North Africa (MENA) region, we find empirical support for the positive impact of competitive pressure on imitative innovation.     

Internationalization strategies of emerging market banks: Challenges and opportunities

The greatly improved economic fundamentals of the major emerging economies over the last decade have propelled several emerging banks into the ranks of the world’s largest. Despite their importance in the global economy, the internationalization of emerging market banks remains an understudied phenomenon. This article examines factors that may influence the internationalization strategies of emerging market banks in the private banking sector, both when going abroad (take-off) and upon arrival in a host country (landing). The private banking sector is of significant interest given its importance in many leading financial centers around the world while undergoing major transformation due to the worldwide financial crisis, several recent scandals, and a fast-changing regulatory environment. We highlight the internationalization strategies of two banks from emerging countries, China and Brazil, and their experience in Switzerland’s traditional private banking sector. These two cases highlight factors that may influence successful internationalization such as prior industry experience, existing client base, entry strategy, ownership type, and the liability of foreignness. Our findings offer valuable implications for managers from other emerging economies by providing a better understanding of how emerging market banks expand internationally.