Internationalization of Emerging Market Firms: A Dynamic Managerial Capability Perspective

Abstract

This study adopts a dynamic managerial capabilities (DMC) approach to investigate the role of board level managerial human capital (MHC) in international expansion of emerging market firms (EMFs). We propose that aggregate MHC has an inverted U-shape influence on international expansion of EMFs. Our argument is that at low to moderate levels, aggregate MHC addresses labor market institutional voids and eventually supports internationalization strategy of EMFs by monitoring and guiding top management team to manage ambidextrous strategy and integrate into the global innovation ecosystem. But beyond a certain level, aggregate MHC is detrimental to international expansion due to opposing cognitive and behavioral forces. We also hypothesize that MHC diversity plays a contingent role by influencing the role of aggregate MHC in international expansion. We test the hypotheses using a unique hand created dataset drawn from 201 Indian firms over a five-year period (2008-2012). Contrary to hypothesized model, we find that, in the emerging market scenario, aggregate MHC is beneficial only beyond a certain threshold limit and the shape of the relationship is dependent on levels of MHC diversity. We identify managerial insight that EMFs need to balance different dimensions of board members’ characteristics to leverage such DMC into international expansion.