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.     

The export performance of emerging economy firms: The influence of firm capabilities and institutional environments

We advance a two-stage theoretical model which contends that the export performance of emerging economy firms (EEFs) will depend both upon their firm-specific capabilities and their home institutional environments. Specifically, we argue that EEFs will be more likely to export when facing more uncertainty at home from greater political instability, substantial informal competition, and high corruption. Furthermore, we hypothesize that firms’ export intensities will be contingent upon specialized internal capabilities such as a skilled workforce, top managerial experience, and access to external technologies. We test these hypotheses using a dataset of more than 16,000 firms from the four BRIC economies (i.e., Brazil, Russia, China and India). Our results confirm that political instability and informal competition have robust effects on the export propensity of EEFs, whilst export intensity is contingent upon the availability of skilled workers and access to external technologies via licensing.     

How foreign firms achieve competitive advantage in the Chinese emerging economy: Managerial ties and market orientation

As China experience unprecedented changes in its social, legal, and economic institutions, on what should foreign firms focus more to overcome this challenge, managerial ties or market orientation? This study investigates how managerial ties and market orientation affect competitive advantage and, consequently, firm performance in China. On the basis of a survey of 179 foreign firms in China, we find that both managerial ties and market orientation can lead to firm success—but in different ways. Market orientation enhances firm performance by providing differentiation and cost advantages, whereas managerial ties improve performance through an institutional advantage (i.e., superiority in securing scarce resources and institutional support). Institutional advantage, in turn, leads to differentiation and cost advantages and consequently superior performance.     

The moderating effect of technology and marketing know-how in the regional-global diversification link: Evidence from emerging market multinationals

In this study, we link regional diversification to global diversification of emerging market multinationals (EMNCs) and explore the importance of firm-specific technology and marketing know-how in that process. We develop our hypotheses and test them using a sample of 625 Chinese manufacturing multinationals across multiple industries. The results reveal that regional diversification predicts global diversification, and that firm-specific technology and marketing know-how both increase the likelihood of a firm’s moving from regional to global operations. Technology know-how was found to be more influential than marketing know-how.     

Sources of knowledge and process innovation: The moderating role of perceived competitive intensity

Global competition means that firms are under pressure to systematically develop the efficiency of their manufacturing processes. However, little has been said in the international business literature about how firms, especially those subject to severe barriers, can search for knowledge within and across national boundaries to help in the development of process innovation. We build on key aspects of the innovation and search strategy literature to develop our conceptual model and hypotheses, which we test in the context of a less-developed, isolated, and closed economy, using data from 171 automotive component suppliers in Iran. We find that foreign knowledge search is positively related to process innovation, even in an economy that operates under severe economic sanctions. This contributes to the international business field by providing evidence that, while economic sanctions are increasingly used in modern geopolitics by the world’s most powerful countries, these actions may fail to achieve their goals with respect to individual businesses.     

Competitive advantage: A longitudinal analysis of the roles of data-driven innovation capabilities,marketing agility,and market turbulence

While data-driven innovation capabilities have received considerable attention from academics and practitioners, there is insufficient longitudinal evidence on how they might contribute to improved marketing agility and competitive advantage. In this study, we make a preliminary effort to address this gap by developing a model based on the dynamic capabilities view. We also explore the moderating effects of market turbulence on the link among marketing agility and competitive advantage. We used two-waves data (T = 677 and T+1 = 569) and the cross-lagged panel approach was utilised to analyse the longitudinal data. Our findings provide robust empirical evidence on the causal and predictive temporal impact of data driven innovation capabilities on marketing agility and competitive advantage. It also indicated that marketing agility mediates this relationship over time. Moreover, the analysis suggested that market turbulence reinforce the influence of marketing agility on competitive advantage. We provided significant implications for theory and practice.     

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.     

Exploratory and exploitative OFDI from emerging markets: Impacts on firm performance

This study identifies exploratory and exploitative OFDI as two distinct approaches for emerging market (EM) firms to overcome their liability of foreignness in overseas markets. It assesses the performance impacts of both types of OFDI through investigating three sets of questions. (1) What are the differential impacts of exploratory and exploitative OFDI, and how long do they persist? (2) How do industry factors in the home country, including technological turbulence and competitive intensity, moderate these effects? And (3) how can firms balance these two types of OFDI across time? Based on multi-sourced data of 766 Chinese firms during 2008–2015, the results show that both types of OFDI promote performance, yet the positive effect of exploratory OFDI lasts longer than that of exploitative OFDI. Moreover, technological turbulence strengthens the effect of exploratory OFDI and weakens that of exploitative OFDI, but competitive intensity strengthens the effect of exploitative OFDI only. Finally, sequential ambidexterity improves firm performance through exploratory‒exploitative OFDI process.     

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.     

Pro-market institutions and outward FDI of emerging market firms: An institutional arbitrage logic

We offer new theory and evidence regarding the effects of pro-market institutions on outward foreign direct investment (FDI) of emerging market firms (EMFs). Drawing on the logic of institutional arbitrage, we integrate the escapism and exploitation mechanisms of EMF internationalization into a unified theoretical context. We propose an inverted U-shaped relationship between host market-supporting institutions (MSI) and the investment scale of an EMF’s FDI project in the country, showing an escape-driven upward slope for low-to-medium MSI levels and an exploitation-driven downward slope for medium-to-high MSI levels. We supplement this main argument with two boundary conditions: the alleviating effect of home market liberalization (HML) and the strengthening effect of home government subsidies (HGS), demonstrating the coexistence and variation of pro- and anti- market institutions in an emerging market. Using information on 1,450 FDI projects conducted by 288 Chinese listed firms in 116 host countries, we obtain supportive evidence for the predicted relationships between the three institutional forces. This study enriches the literatures on institutional arbitrage and pro-market institutions with evidence from EMFs.     

The effects of entrepreneurial orientation, market orientation, and marketing subunit influence on firm performance

The study investigates how an organization’s entrepreneurial orientation moderates the interplay between market orientation and marketing subunit influence on firm performance. The hypothesized model predicts that the positive interaction between market orientation and marketing subunit influence has a weaker effect on firm performance under conditions of high entrepreneurial orientation. The regression and supplementary analyses provide support for most predictions and, most importantly, for a negative three-way interaction effect: At higher levels of entrepreneurial orientation, the positive moderating effect of marketing subunit influence on the market orientation–business performance relationship is reduced. The authors discuss the managerial and theoretical implications of their findings and provide a number of directions for further research.

Reputation and new venture performance in online markets: The moderating role of market crowding

Reputation represents an important driver of new venture performance. This article shows that the performance benefits of reputation are substantially contingent on ventures' market conditions. My study of 797,087 sales transactions by 5760 new ventures in 119 platform-mediated online markets provides strong evidence that market crowding attenuates the reputation–performance relationship. Ventures benefit 38% to 42% more from a favorable reputation when they compete in an uncrowded (versus crowded) market. By disentangling the underlying mechanisms of reputation, my study allows for more accurate predictions about why, when, and how ventures benefit from reputation.     

The Chinese outward foreign direct investment motives in ASEAN countries through export performance: The role of competitive intensity among Chinese smartphone manufacturers

This study aims to examine the impact of outward foreign direct investment (OFDI) objectives on the achievement of export performance under competitive intensity. We apply the diverse theoretical perspectives of the eclectic paradigm and institutional theory. Primary data were collected from 162 Chinese manufacturer–exporter companies. Specifically, this research shows that Chinese OFDI motives increase its export performance in ASEAN markets. Furthermore, we discover that competitive intensity moderates the relationship between strategic assets-seeking foreign direct investment (FDI) motive and export performance, but not the relationship between market-seeking FDI motive and export performance. Hence, this study presents a holistic assessment of Chinese smartphone manufacturers' export performance by accounting for the overlooked effect of firms seeking FDI motive through the moderating of competitive intensity.     

The influence of firm-specific and country-specific advantages in the internationalization of emerging market firms: Evidence from Turkey

This paper examines the role of institutional factors that enable firm- and country-specific drivers of emerging market (EM) firms’ internationalization based on case-based research conducted in one EM, Turkey. Findings indicate that 10 major factors comprised of firm-specific and country-specific advantages drove the focal case study firms abroad: the firm-specific factors ranged from financial and operations supremacy; excellence in value chain activities; inexpensive human resources; rapid learning capabilities in production and technology development; and adaptability to foreign markets; while the country-specific factors included home-government policies supporting internationalization; logistical advantages arising from geographical position; adaptability capabilities resulting from former survival through institutional voids; strong social ties formed through networks; and availability of low cost resources. These findings are discussed and future research questions are offered.     

The stock market performance of exploration-oriented and exploitation-oriented cross-border mergers and acquisitions: Evidence from emerging market enterprises

This study builds on insights from mergers and acquisitions (M&A) studies and the perspective that stock market performance is affected by the M&A strategies of firms. Past studies show that acquisitions are an effective way to exploit existing knowledge and explore new possibilities. We argue that stock market performance can be a response to exploration/exploitation strategies in the context of cross-border M&As by emerging market multinationals. Based on cross-border M&A data of Chinese multinationals, we find that exploration-oriented acquisitions have worse stock market performance than exploitation-oriented acquisitions. Furthermore, we find support for our premise that acquiring firms can reduce the risk of exploration-oriented acquisitions by having more high-discretion slack resources or by maintaining a high level of equity share of the target firm. In addition, acquiring firms perform better if they conduct exploration-oriented acquisitions in related industries. Our results contribute to a better understanding of exploration and exploitation in the context of M&As.     

Market orientation,organizational performance,and the mediating role of crowdsourcing in knowledge‐based firms

This paper establishes the relationships between market orientation and crowdsourcing in knowledge‐based firms for improving their organizational performance. By understanding the relationships among these variables, firms are in a better position to tackle complex business and innovation problems faster and at a lower cost. Results from the Spanish biotechnology and telecommunications sectors show the relevance of social networks for a better adaptation to rapidly changing markets and increasing competitiveness.     

The institutional context as a source of heterogeneity in family firm internationalization strategies: A comparison between U.S. and emerging market family firms

Existing research has underexplored the role of context as a source of heterogeneity in family firms’ (FFs) internationalization strategies. Drawing upon institutional theory, we develop and test a mid-range theory positing that differences in the quality of the institutional context can moderate the strength of the relationship between individual- and board-level attributes and FF internationalization. Our comparison of U.S. FFs with FFs from Brazil and Mexico reveals that in emerging market FFs, individual-level attributes such as CEO international experience, CEO educational attainment, and CEO international education exhibit a stronger relationship with internationalization. Similarly, we find that board-level attributes such as board size and board independence are also more strongly related to internationalization in emerging market contexts. We contribute to the literature by identifying a source of variation in FF internationalization strategies based on context and by examining the relationship between a wide range of FF attributes and internationalization.     

Impact of responsive and proactive market orientation on SME performance: The moderating role of economic crisis perception

This study examines the relationship between market orientation (MO) and the performance of small and medium‐sized enterprises (SMEs) within the context of economic crisis. It distinguishes between two levels of MO: responsive market orientation (RMO) and proactive market orientation (PMO). Data were collected on a sample of 300 SME. Findings indicate that SMEs, confronted with an economic downturn, use a MO approach that is both proactive and responsive, and reveal the moderator effect of the SME manager's perception of an economic crisis on PMO/RMO–performance. Research and practical implications are discussed. © 2018 ASAC. Published by John Wiley & Sons, Ltd.     

Antecedents of firm performance in emerging economies: Business groups,strategy, industry structure,and state support

A rich literature has investigated the antecedents of firm performance in developed economies, resulting in a consensus view that firm resources and strategy are the key determinants. Several arguments, however, suggest that in emerging economies other factors are more important for firm performance. This study analyzes the impact of firm strategy and industry structure as well as business group membership and state support on firm performance in an advanced emerging economy, Turkey. Using a data set compiled from a selection of the 1000 largest manufacturing firms in this country, the study employs several regression models to identify the main determinants of firm performance as measured by productivity and net profit margin. In contrast to studies of developed economies, the investigation finds that firm-related factors (competitive strategies) do not significantly influence performance; instead factors related to industry structure and business group membership are the strongest determinants of firm performance; further, state support interacts with business group membership and is positively related to productivity.