Emerging‐Market Firms Venturing into Advanced Economies: The Role of Context

Sociocultural, economic, political, and institutional differences between countries increase uncertainty and complexity in today's highly competitive international business environment. Moreover, the “West‐Leads‐East” to “West‐Meets‐East” shift in the global economy requires firms in both advanced economies and emerging markets to seek sustainable solutions by collaborating across geographic boundaries. Such novel collaborative partnerships may help build a stable, resilient, and sustainable world economy by leveraging the resources and capabilities of firms from both advanced and emerging economies. This article has three general objectives. First, we seek to show that context has been a long‐standing issue in management, organization, and international business research and provide an overview of the puzzles that informed and motivated this special issue. Second, we highlight the key insights and contributions of the articles included in this special issue by reviewing their theoretical underpinnings, methodological approaches, and empirical findings. Finally, we outline a future research agenda on emerging‐market firms venturing into advanced economies that can help advance international business and management studies. © 2017 Wiley Periodicals, Inc.     

Transforming under deep uncertainty: A strategic perspective on risk management

Companies increasingly face the need for transformation in today’s rapidly changing business environment, characterized by major shifts in technology, regulation, and customer behavior. A lack of strategic risk insight and foresight leaves many incumbents insufficiently prepared in the face of such deep uncertainty. We argue that traditional risk management falls short because it predominantly focuses on strategy execution while leaving strategy formulation largely untouched. Moreover, an administrative-heavy risk management process can create strategic inertia and a misleading sense of control. In today’s dynamic business context, companies must not only increase the speed and impact of their strategy execution but also continuously explore the development of new strategies in response to disruptive events or emerging opportunities. Our research shows how leading companies develop a strategic risk management (SRM) capability to increase their resilience and agility in response to deep uncertainty. SRM takes a strategic, forward-looking perspective and focuses on strengthening processes, people, and practices for purposefully integrating risk into the strategy formulation process. This article offers a framework with three proven configurations of content and timing integration, risk management roles, and leading practices that enable effective SRM.     

Critical assumption planning: A practical tool for managing business development risk

Although much has been written about the practice of new business development, the authors continue to find corporate managers and entrepreneurs repeating the same mistakes and often reaching the conclusion that venturing in the corporate environment won't work. The problem stems from a mental model about how business should be managed and managers' performance assessed. Corporate managers of existing businesses are judged against meeting plan. In growing new businesses, however, strict adherence to “the plan” can lead to business failure. To manage business development risk, venture managers must learn to deal with uncertainty. Whereas managers of mature businesses practice the ethic of predictability, venture managers must follow a learning ethic.Working with Fortune 100 corporations, the authors have evolved a practical, disciplined process for business development risk management that focuses on learning. Titled critical assumption planning (CAP), the process maximizes learning about new markets at lowest cost. Major uncertainties in the business proposition are isolated as critical planning assumptions. Critical assumptions in the plan are then tested. The test sequence is determined by the potential reduction of uncertainty per dollar of test cost. Assessment of the assumption test results marks a milestone. At each milestone the business plan is revised to reflect what has been learned, and the venture is redirected or terminated. This process avoids the wasted effort and expense of pursuing the original plan until commercial failure becomes obvious.The key steps in this learning process are identification of critical assumptions and cost-effective testing of assumptions. Because these steps are unfamiliar to most corporate managers, effective use requires a new perspective and new planning tools. The study explains this perspective and introduces new tools for employing the process. Following are some planning innovations that have been effective in changing perspective and that also are of practical use:

1. 1. Differentiation between primary and derivative assumptions with focus on extracting and understanding the primary assumptions.

2. 2. Early construction of a model of the business plan that allows calculation of the impact of primary assumptions such as price or sales productivity factors on derivative assumptions such as revenues and income.

3. 3. Assignment of uncertainty ranges to the primary assumption values, not just the most likely values.

4. 4. Identification of the critical planning assumptions by determining the impact of their uncertainty ranges on venture net present value.

5. 5. Selection of the next venture milestone based on the test program that results in maximum reduction of uncertainty at least cost in least time for the most critical assumption(s).

Using CAP, managers can control risk despite the many uncertainties surrounding a new business proposition. Above all, decisions to stop or redirect ventures can be taken earlier, saving the corporation money and venture managers their career credibility.     

Risk,uncertainty, and heuristics

Nearly a century ago, Frank Knight famously distinguished between risk and uncertainty with respect to the nature of decisions made in a business enterprise. He associated generating economic profit with making entrepreneurial decisions in the face of fundamental uncertainties. This uncertainty is complex because it cannot be reliably hedged unless it is reducible to risk. In making sense of uncertainty, the mathematics of probability that is used for risk calculations may lose relevance. Fast-and-frugal heuristics, on the other hand, provide robust strategies that can perform well under uncertainty. The present paper describes the structure and nature of such heuristics and provides conditions under which each class of heuristics performs successfully. Dealing with uncertainty requires knowledge but not necessarily an exhaustive use of information. In many business situations, effective heuristic decision-making deliberately ignores information and hence uses fewer resources. In an uncertain world, less often proves to be more.     

Reevaluating hedging performance

Mixed results have been documented for the performance of hedging strategies with the use of futures. This article reinvestigates this issue with the use of an extensive set of performance‐evaluation metrics across seven international markets. The hedging performances of short and long hedgers are compared with the use of traditional variance‐based approaches together with modern risk‐management techniques, including value at risk, conditional value at risk, and approaches based on downside risk. The findings indicate that use of these metrics to evaluate hedging performance yields differences in terms of best hedging strategy as compared with the traditional variance measure. Also, significant differences in performance between short and long hedgers are found. These results are observed both in sample and out of sample. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:677–702, 2006     

Planning and the Entrepreneur: A Longitudinal Examination of Nascent Entrepreneurs in Sweden

We studied 623 nascent entrepreneurs during a six‐year period, examining how their planning decisions impact venture‐level performance. Our study is unique in that we tracked nascent ventures, examining their planning behavior, including changes to plans. Relying on the theory of legitimacy, this paper adds to the scholarly debate over the merits of business planning by examining, longitudinally, the impact of planning during a six‐year period, accounting for both pre‐emergent nascent activity and post‐emergent success factors. We found that neither formal planning nor changes in the business plan increased venture‐level performance over the six‐year study period.     

To challenge the world view or to flow with it? Teaching sustainable development in business schools

This paper explores the fundamental question of what ‘responsibility’ means to different sets of world views adopted implicitly by business students. The exploration adopts the stakeholder theory and three subsets of the Friedman mentality to explain how individuals may value sustainability initiatives. Subsequently, it explores whether it is better to flow with the dominant economic‐driven world view as prescribed by the business school or to challenge it in order to cultivate business students with sustainability‐driven values. The conclusion highlights implications for business and management education, as well as the role of entrepreneurship to promote sustainability values.     

Questioning the impact of the ‘graduatization’ of the managerial labour force upon the management of human resources in the Scottish hotel industry

This paper outlines the findings of a questionnaire survey returned by 125 Scottish hotels from a sample of 500 small and middle‐sized enterprises. We asked questions on the level of impact that hospitality graduates have had upon human resource management practices within individual units. The research reports that, although the cumulative graduatization of the managerial workforce appears to be under way, the main route to a permanent management post still remains one of practical work experience, rather than the attainment of a hospitality‐related degree. Although manpower planning is widely used by line managers for managing the conditions of local/external labour markets and operatives’ jobs, there is less evidence of a systematic approach to the management of graduate careers/skills or of the management of internal job structures and labour market processes in order to improve the quality of customer service. Our work suggests a need for smaller hotels to strike a fresh balance between traditional operationally driven approaches to people management and strategic human resource management frameworks.     

Changing Paradigms of International Entrepreneurship Strategy

This article identifies sweeping transformations taking place in the contemporary international business environment, and discusses their impact on international entrepreneurship. We focus on two overarching trends: (1) the demise of the nation-state as the relevant unit around which international business activity is organised and conducted; and (2) the demise of the stand-alone firm, with a hierarchic distribution of power and control, as the principal unit of business competition. We then discuss an alternate approach to internationalisation: one that involves a multi-polar distribution of power and control. Traditional approaches to internationalisation focus on the hierarchic centralised firm, with a uni-polar distribution of power and control. We suggest that the world is moving towards multi-polar networks of firms, involved in what we term symbiotic management: each entity benefits from working together within a multi-polar network. This includes large corporations as well as small and medium-sized enterprises (SMEs). As corporations out-source to specialised firms–increasingly SMEs–power and control are dispersed among independently owned firms that are cooperating voluntarily for increased efficiency and profit. The new paradigm moves from a focus on the firm, towards a focus on relationships within multi-polar networks. We conclude by illustrating how this emerging competitive paradigm may impact on the strategic management of small firms, with examples from a real-world company.     

Turning water into wine? Exploring the role of dynamic capabilities in early-stage capitalization processes

Technology-based ventures face considerable challenges when attempting to raise early-stage capital during the early-stages of development. To create an operational business they need access to financial capital, but external investors prefer to see an operational business before investing capital. This study extends arguments grounded in dynamic managerial capabilities theory to examine the extent to which various trade-offs among the quality of a venture's management team, radicalness of the firm's technological resources, and demand uncertainty in focal markets impact the ability of ventures to resolve these capitalization challenges. We find that higher levels of demand uncertainty and more radical innovations do not appear to enhance the impact of strong management teams on the raising of early-stage capital. However, lower levels of uncertainty do appear to strengthen the effects of strong management teams. Implications of these findings for dynamic capabilities theory and early-stage capitalization processes are discussed.     

The Evolution of Resilience in Supply Chain Management: A Retrospective on Ensuring Supply Chain Resilience

We opened our 2010 paper in the Journal of Business Logistics with a 6th century quote by Heraclitus – “The only constant is change.” This immutable law certainly holds in today's volatile business world, especially for supply chain management, and has been the driving factor behind the interest in resilience. Since the seminal works of the mid‐to‐late 1990s and early 2000s, the supply chain discipline has progressed toward a common understanding of resilience. But we're not there yet. This paper reflects on the impact of our 2010 paper, and envisions future opportunities for advances in resilience that will improve both day‐to‐day business continuity and long‐term sustainability. We are honored to be selected for this 40th Anniversary Issue of the Journal of Business Logistics, and proud that our paper has been recognized as the most cited of the decade.     

Are Business Students Prepared for the World of Business? Self‐interest,Conformity and Conflict Styles

While conflict management is a central capability in the business world, it gets relatively little attention in most business schools. In a study of undergraduate and graduate students at a Canadian university, we investigate the roles personal values play in the relationship between majoring in business and students' conflict management propensities. We find that business students hold more narrowly self‐interested, as well as more conformist and traditionalist, values than students in other disciplines, with the implication that business students may be more prone to conflict avoidance and less likely than other students to engage with conflict collaboratively. We discuss both self‐selection and socialization as possible explanations, and the implication this has for business education and curriculum development.     

Planning Behavior Variables in Small Firms

Much of the empirical data that identifies the incidence of planning in small firms and the variables associated with that planning is based on small samples subject to geographic and industry constraints. The intent of this article is to partially overcome those limitations by testing relationships using results from a large Australian-wide, multiple-period sample. For each of three years, the frequency with which firms maintained documented business plans was determined and tested for associations with a range of traditional "business structure" demographic variables and a group of "management structure" variables. Results support expectations that size, volume, training, intention to change operations, and the major decision-maker's education are positively associated with business planning. Results also indicate that a significant number of firms change planning behavior states over time.     

Business model risk and uncertainty factors: Toward building and maintaining profitable and sustainable business models

Business models and business model innovation—and particularly their opportunities—have been a popular topic recently, but we find the extant literature on the subject lacking. The risk and uncertainty aspect typical of business models has not been sufficiently addressed. We draw upon the existing literature and triangulate results with an extensive expert group interview to identify 28 risk and uncertainty factor groups, creating a checklist that can be used as the first step in an integrative business model risk management process for existing and new iterations. With an established process for managing and identifying risk in business models, managers can make more conscious and well-informed decisions.     

Cross‐Functional Influence and the Supplier Selection Decision in Competitive Environments: Who Makes the Call?

This paper presents the results of a multiple‐case study that examines how procurement and engineering personnel share priorities, have a common vision, and influence the supplier selection decision in competitive environments of varying risk and uncertainty. We interviewed 113 procurement and engineering respondents from 26 different companies/business units across up‐, mid‐, and downstream segments of the oil and gas industry. Following a middle‐range theorizing approach, we develop a series of working propositions and theoretical frameworks, utilizing goal congruence theory to sharpen proposition development and create suggested extensions for theory. In general, we find that engineering personnel tend to dominate cross‐functional decision making in higher risk environments and that more equal arrangements exist when both risk and uncertainty are low. When competitive environment risk is low but uncertainty is high, considerable disagreement arises over which function “leads” this decision. Higher risk environments drive higher goal congruence through shared vision and consensus on who makes supplier selection decisions.     

Supply Chain Risk Management Approaches Under Different Conditions of Risk

A recent Deloitte study of 600 Supply Chain and C‐Level executives revealed that 45% felt that their supply chain risk management programs were only somewhat effective or not effective at all, while a mere 33% used risk management approaches to proactively and strategically manage supply chain risk based on conditions in their operating environment. Using a two‐method approach, the research summarized in this paper investigates the effectiveness of different supply chain risk management approaches by examining how performance varies when these approaches are applied under different risk conditions. The results counter prevailing knowledge regarding the appropriate use of such widely acknowledged risk management approaches as postponement and speculation, and highlight the dangers of functionally isolated decision making. The results lend credence to increasing calls for interdisciplinary research to address broad‐based supply and demand chain problems, and support the need to utilize performance metrics such as net profit to accurately assess supply chain decisions.     

Export Market Development: Planning and Relationship Processes of Entrepreneurs in Different Countries

This article makes an initial exploration of whether and to what extent different national values may affect the development of export markets through business to business relationships between entrepreneurs in different countries. It does this by specifically examining the trust between people and the nature and role of business planning in the export market development process. To do this, different modes of both planning and relationship development are first distinguished, based on two separate research traditions. Notions of national values developed in previous research are outlined and used to develop formal tabulated propositions regarding how national values might influence business planning and trust formation. The relevance and applicability in understanding different approaches to business development in different countries is then explored. The discussions of three matched case entrepreneurs from different countries are examined in terms of the propositions detailed by means of verbal protocol analysis. This exploratory study helps concrete propositions to be suggested why and how national values influence export market development processes through the development of theoretical typologies. Planning and relationship processes were both important but the relationships came first, in all three entrepreneurs. Different types of trusting relationships were sought and required by the individuals examined, however, that largely concurred with national values stereotypes. These, in turn, led to different approaches to the timing, role, and nature of export planning. It is hoped that the article contributes an understanding of how different national values might lead to different roles for planning and relationships in export market development.     

Home country uncertainty and the internationalization-performance relationship: Building an uncertainty management capability

We analyze the impact of home country uncertainty on the internationalization-performance relationship of emerging market firms. Building on organizational learning theory and the institutional approach, we argue that internationalization has a positive impact on the performance of emerging market firms, and that this relationship is strengthened for firms based in emerging countries with higher corruption and political risk. The reason is that by being exposed to high levels of home country uncertainty in the form of political risk and corruption, firms develop an uncertainty management capability at home that helps them face the challenges of internationalization better. We also propose that this uncertainty management capability helps emerging market firms perform better outside of their home region. We test our arguments on a sample of 536 firms from Argentina, Brazil, Chile, and Peru.     

Team‐based learning and training transfer: a case study of training for the implementation of enterprise resources planning software

While traditional models of training such as behavioral modeling (BMT) have been found to enhance training transfer, research suggests that more active learning strategies such as error management (EMT) and team‐based learning (TBL) may be more effective. This paper analyzes BMT, EMT and TBL strategies to train employees on new enterprise resources planning (ERP) software and discusses which training leads to successful procedural and declarative knowledge transfer, knowledge retention and application, and tangible business outcomes. TBL was predicted to be the most effective training type, as it models several components needed to use ERP software in the actual job setting. Overall and procedural knowledge as well as knowledge application scores improved most for TBL participants, while declarative knowledge improved the most in the EMT condition. During training, all conditions showed significant improvement in knowledge application; however, the TBL condition showed the highest knowledge application gains. This paper discusses the elements of TBL that support its use as an effective strategy to increase knowledge transfer in an organizational context.     

Labor,Risk, and Uncertainty in Global Supply Networks—Exploratory Insights

Arising from widespread outsourcing and, in particular, offshoring, goods and services are increasingly provided by supply networks that rely on global logistic systems. While the risks and uncertainties involved in this strategy have been widely acknowledged in the literature on interorganizational networks and supply chain management, labor conditions and labor relations—and related human resource management issues—have thus far been neglected. Starting from a perspective that takes into consideration that global supply networks are not only confronted with calculable risks but also genuine uncertainties, we explore the conditions under which labor may constitute a source as well as a means for dealing with risk and uncertainty. The study is based on a review of the relevant interorganizational network and supply chain management literature and is informed by an investigation of International Framework Agreements (IFAs) in 10 European corporations and their supply networks. IFAs—in addition to unilateral codes of conduct—could be used to detect and cope with labor‐related risk and uncertainties. However, our findings reveal that this is not the case. This leads to some tentative theoretical conclusions and implications for dealing with risk and uncertainty in global supply networks.