Examining how firm and institutional factors affect lean capability development of emerging market firms

Abstract

Drawing on the dynamic capabilities view (DCV) and institutional theory, we examine the impact of firm-level and country-level factors on emerging market firms' (EMFs) lean capability development. Based on a sample of 1,702 firms from Brazil, China, and India, we found that EMFs' human resource management (HRM) and process management practices have a positive effect on their lean capability development. Further, EMFs' internationalisation enhances the positive relationship of the firms' HRM practices and lean capability development. At the institutional level, our results suggest that regulatory institutions reinforce the positive effect of process management on EMFs' lean capability development; however, normative institutions (power distance) negatively influence the effect of firms' HRM practices on lean capability development. Our cross-country analysis suggests that, unlike India and Brazil, China's regulatory and normative environments (which have a higher level of power distance) hamper the positive effect of firm-level factors on their firms' lean capability development.