Emerging Economy Research Articles

Cross-border mergers and acquisitions from emerging economy firms: a new channel for technology augmentation

PurposeExtending the springboard perspective with the resource dependence theory, the authors posit that cross-border mergers and acquisitions (M&As) are a new channel for emerging economy firms (EEFs) to enhance their technology capabilities. This study aims to examine the impact of cross-border M&As initiated by EEFs on their technology augmentation vis-à-vis matched domestic M&A cases and investigate the factors influencing the difference in post-merger innovation capability.Design/methodology/approachThis paper estimates the post-acquisition innovation capability of acquirers from emerging economies (EEs) that engage in cross-border M&As. To remove possible selection bias, the authors leverage a difference-in-difference-style approach in combination with a matched sample constructed by pairing each cross-border M&A case with a similar domestic deal. The data set contains 266 cross-border M&As and 266 matched domestic M&A deals between 2003 and 2011, whereby acquirers are based in 6 EEs and targets are in 36 countries consisting of both EEs and advanced economies (AEs).FindingsThe present empirical results show that cross-border M&As engaged by EEFs are an important engine for improving EEFs’ innovation capability through technology augmentation. The main empirical results are as follows. First, compared with matched domestic acquirers with similar characteristics, EE cross-border M&As have a positive effect on innovation capability. Second, the positive effect of the EEFs’ cross-border M&As relative to the matched domestic M&As on innovation capability is driven largely by cross-border M&As with targets in AEs. Third, the increase in post-M&A innovation capability of the EE cross-border acquirers comes mainly from deals where targets are based in countries with relatively superior human capital and innovation capability than those of the acquirers.Originality/valueTo the best of the authors’ knowledge, this study is the first systematic study of whether cross-border M&As serve as an effective channel of technology augmentation for EE acquirers compared to matched domestic acquirers with similar characteristics.

Emerging economy firm technological catch‐up through a dual innovation ecosystem framework

Research has identified two principal mechanisms for emerging economy (EE) firms to technologically catch up with advanced economy (AE) firms: absorbing knowledge spillovers from AE subsidiaries and internationalizing R&D into AEs. Prior technological catch‐up research has assumed EE firms are merely trailing their AE counterparts on the technological frontier when in fact the research on the bottom of the pyramid, as well as other research streams, have recognized that the different consumer demands in EEs and AEs drive different R&D activities in EEs and AEs. We submit that technological catch‐up requires both the upgrading of technological capabilities and the shifting of R&D activity from solving EE demand problems to solving AE demand problems. Utilizing patent data, we investigate the relative efficacy of AE knowledge spillovers and internationalizing R&D in AEs on technological catch‐up within a dual innovation ecosystem framework. We find that knowledge spillovers affect technological catch‐up through a process that initially decreases the technological capabilities of EE firms before increasing such capabilities as EE firms shift R&D activity towards the AE innovation ecosystem. However, we find that internationalizing R&D in AEs yields a significant positive effect on EE firms' technological capabilities and shifts their innovative activities towards solving AE demand problems.

Knowledge management through information and communication technology investments: the story of Indian family firms

PurposeInformation and communication technologies (ICT) are indispensable tools for Knowledge Management (KM) practices in today’s knowledge-intensive and globally interconnected marketplace. This paper seeks to investigate the impact of family ownership on ICT investments in an emerging economy (EE) context.Design/methodology/approachThis empirical paper uses data from 300 large Indian listed firms with 2,650 observations in the period 2008–2017, to test its hypothesis.FindingsThe results indicate that family firms are not favourably inclined towards ICT investments for formalizing their KM practices. However, under certain contexts, such as higher foreign institutional ownership or business group affiliation, they are more willing to invest in ICT resources.Practical implicationsThis study establishes a nuanced understanding of how family firms approach ICT investments and KM practices. This research can help family owners/managers to commit sufficient resources on ICT projects.Originality/valueLiterature on KM has largely emanated from developed countries. This is one of the first papers from an EE context that studies the impact of family ownership on ICT investments and subsequent KM practices. In this way, this paper offers specific insights into the context of Indian family firms and offers some interesting findings that can contribute to the literature, policy and practice.

Extended Implementation of IFRS 15 Integrated Model in Countries with an Emerging Economy

The mandatory implementation of the International Financial Reporting Standard 15 (IFRS 15) Revenue from Contracts with Customers starting with the 2018 financial year for all those companies using the IFRS has led to a significant change in approaching the accounting policies on profits, especially those related to their evaluation and identification within the financial statement. It is a fact that this significant change has had visible effects on the information disclosed by stakeholders especially given the stressful financial statement when both the costs themselves and the lack of cash flow have amplified these results. Consequently, the aim of the present study is both to evaluate the real impact of the use of the IFRS 15 in different fields of activity and to identify those solutions in terms of solving the issues for each and every significant sector given the stressful financial conditions, especially in those countries with an emergent economy. Thus, the main objectives of the study itself refer to the identification of the framework of applicability of the IFRS 15 and its matrix transposition in the form of a scoreboard based on certain cross-panel correlation keys and the design of an extended modelling methodology for applying the IFRS 15 based on dynamic indicators and indexes. The final results refer to the design of a replicable model of extended usage of the IFRS 15 which will serve all the analysed fields of activity. This up-to-date topic is the result of the implementation of the right model in itself as well as an accurate and objective evaluation of the value of those profits originating from the contracts signed with clients for all those categories of entities using the IFRS irrespective of the type of activity or the business model.

Green supply chain management and SMEs environmental performance: green HRM practices as antecedent from service sector of emerging economy

PurposeThe research aimed to study the influence of green human resources management practices (GHRMPs) on green supply chain management (GSCM) and environmental performance while examining how those green practices affect environmental performance.Design/methodology/approachThe study investigated 314 cases (responses) from the small and medium-sized enterprises belonging to the service sector from an emergent economy (i.e. Oman). The study model was developed based on the theory of resource-based view and the theory of ability, motivation and opportunity. The structural equation modeling was used for hypotheses testing using SmartPLS 3 software.FindingsBased on the findings, green hiring and green training and innovation have a positive and significant effect on GSCM, while both of them have no effect on environmental performance. Further, green performance management and compensation positively influenced the environmental performance but not GSCM. Furthermore, GSCM significantly and positively influenced environmental performance.Originality/valueGHRMPs and GSCM can enhance environmental performance. Organizations should consider this interesting finding if they aim to reduce their negative environmental effect, conserve energy, prevent pollution and recycle garbage. Despite the fact that the present environment-friendly culture is still in its infancy, it adds uniqueness to this research by investigating the phenomenon's importance.

Overcoming the liability of origin: cross-listing in developed economies as a signal

PurposeThe purpose of this paper is to investigate the role of cross-listing in overcoming liability of origin (LOO) facing emerging economy corporations (EECs).Design/methodology/approachThis paper takes Chinese firms' cross-listing in Hong Kong and the firms' establishment of international joint ventures (IJVs) with foreign partners as the research setting. This is an empirical study using Heckman's self-selection model as the primary econometric technique and two-stage least square (2SLS) regressions as the supplementary estimation procedure.FindingsCross-listing in developed economies can serve as a signal for EECs to overcome the LOO. In addition, the regional institutional voids of emerging economies (EEs) and state ownership are prominent boundary conditions shaping this effect.Research limitations/implicationsOnly Chinese firms and the firms' cross-listing in Hong Kong are considered for the empirical context as a result of data availability.Practical implicationsThis paper provides a practical solution for EECs whose internationalisation tends to be hindered by the LOO.Originality/valueThis study is of high importance in that it centres on a distinctive and challenging problem faced with EECs—the LOO. Besides, it ascribes this liability to a matter of information asymmetries and explores how cross-listing can serve as a signal to cope with this challenge.

Financial inclusion and digital banking on an emergent economy

PurposeTo analyze financial inclusion through digital banking in order to identify how digital banking is including or excluding different types of populations in an emergent economy.Design/methodology/approachChi-square statistical tests were conducted to test the relationship between demographic variables (i.e. gender, region, locality and age) with having a digital banking account, types of services and reasons for not using them. As an example of an emergent economy, the Mexican Financial Inclusion Survey database was used, which includes stratified and clustered sampling.FindingsHaving a bank account with digital banking is related to gender. Women are more excluded than men, demonstrating a gender gap in access to digital banking accounts. Moreover, having a bank account with digital banking depends on the region. In regions where digital banking is more developed, the population uses a wide variety of digital banking services, in contrast to less developed regions. About the size of the locality, the lack of financial inclusion via digital banking is more common in rural contexts or small cities, demonstrating the exclusion of this type of population.Research limitations/implicationsThis study is conducted with data from the latest Mexican Financial Inclusion Survey. Since the National Institute of Statistics and Geography (NISG) in Mexico previously conducted the study for exploratory purposes, it was not possible for the researchers to modify the variables.Practical implicationsThe results might be considered on similar emergent economies to promote financial inclusion of vulnerable groups such as women, people living in underdeveloped regions, rural areas, small cities and elders. These findings may provide criteria for both government agencies and banking institutions to make efforts focused on including these population groups that have not been financially included through digital banking.Originality/valueIdentifying the barriers that affect financial inclusion, such as gender, region, size of the city and age can help to guide efforts to achieve greater economic freedom and quality of life for diverse types of populations. Although the study is carried out in an emerging economy, the results can also shed light on how to address these forms of exclusion that occur in different types of economies. It is understood that the lack of financial inclusion is a limitation to the economic freedom and quality of life to which everyone should have access, hence the relevance of the article.

WITHDRAWN - GLOBAL BANK RISK AND MONETARY POLICY IN AN EMERGING ECONOMY

The global financial crisis was characterized by heightened financial risk in the USA, which spread to the rest of the world, including emerging economies. This paper constructs a core–periphery model with a global banking network and financial frictions. Due to a common-lender effect, when global banks lend to an emerging economy, heightened financial risk in the center depresses cross-border lending to the emerging economy, reducing real activities and exacerbating monetary policy trade-offs. As financial markets become more integrated, exchange rate flexibility becomes less welfare enhancing and active capital account policy becomes more welfare enhancing.

What drives cross-border acquisitions of hotel companies based in an emerging economy? A study on Chinese hotel corporations

This study takes Chinese hotels as example, explores the driving forces and objectives underlying the cross-border acquisitions (CBAs) of hotel corporations based in emerging economies (EEs) from three perspectives: the institutional conditions of EEs; the characteristics of the hotel industry; and the types of the acquiring corporations. To this end, 20 senior corporate executives who served as decision makers in seven Chinese hotel corporations’ CBAs were interviewed. The findings identify four emerging objectives of Chinese hotel corporations: 1) create network; 2) export the brand; 3) obtain land resources; and 4) transfer assets. The findings also demonstrate that the institutional conditions of EEs, the characteristics of the hotel industry and the types of the acquiring corporations are important influential factors in the CBAs decisions of Chinese hotel corporations.

Patent citation‐based knowledge inflow measures: The case of emerging economy multinational corporations

AbstractEmpirical analyses of multinationals from emerging economies (EMNCs) have been a challenge because of the absence of systematic and consistent data. This study focuses on the impacts of patent examiner added citations on citation‐based measures of EMNC subsidiary knowledge inflows. The US patents of leading innovation‐oriented EMNCs from China and India between 2002 and 2014 are analyzed, with their major competitors from mature industrialized countries as a benchmark group. We find that, subsidiary knowledge inflow variables in the current study are not significantly distorted by examiner added citations. This study offers the validity evidence of employing the US patent and citation data in studying EMNCs. The results also contribute to patent economics literature in general by testing the impacts of examiner added citations on citation‐based measures of knowledge flows.

Organizational and social innovation in Non-Profit Organizations performance in the context of an emergent economy

Purpose: This study provides empirical evidence on the innovations that Nonprofit Organizations (NPOs) in Colombia have implemented within their own management to address social problems which are the object of their institutional mission.Design/methodology/approach: This research is based on information obtained from a survey applied to executives of Colombian NPOs. Multiple linear regression models were developed to check the partial effect of the set of independent variables (Organizational and Social Innovation) over the dependent variable (Organizational Performance). Main Components Analysis was applied to grouping the considered variables.Findings: Empirical evidence indicates that Colombian NPOs are innovative organizations that advisedly follow management strategies for this purpose. Colombian NPOs have been innovating for their disposition to tackle the social problems implicated in their institutional mission. Evidence indicates that the main components derived from NPOs’ organizational and social innovations are grouped into four: NPO innovation actions to adapt to the environment; internal innovation actions to improve NPO’s performance; variables related with NPO innovation actions to improve their relations with external agents; innovation actions aimed at improving the management of social interventions associated with the mission of the NPOs and the management of institutional projects.Research limitations/implications: The field work only used the survey technique to obtain the information and only assessed the perception of one of the directors of each of the NPOs participating in the study in terms of both the actions of organizational innovation such as social innovation and organizational performance. Therefore, the study undoubtedly presents bias in that perception.The technique used for the selection of the sample of the participants was a non-probabilistic sampling, which implies bias in the information and therefore, limitation for the generalization of the results to other contexts. The geographical location of the administration of the NPOs was restricted to Bogota and surrounding municipalities.Originality/value: An analysis of the relationship between social and organizational innovations with organizational performance in NPOs was carried out in the context of an emerging economy, where the subject has been very little studied and much less with principal component analysis. This in order to contribute to a better understanding of the subject.

The Micro-Foundation of Ambidextrous Foreign Direct Investment

ABSTRACTPursuing ambidextrous foreign direct investment (FDI) has been suggested as a desirable strategic choice of emerging economy (EE) firms in their internationalization. Yet, reconciling explorative and exploitative activities overseas is complicated due to their conflicting and tensional nature. This study explores why some EE firms can achieve high levels of ambidextrous FDI while others cannot. Drawing on upper echelons theory, we propose a micro-foundation perspective of ambidextrous FDI by studying top management teams’ (TMTs) attributes. Applying a configurational approach to a sample of 294 EE firms’ FDI observations (of which 43 are ambidextrous FDI in nature) from 2011 to 2015, we not only confirm the equal importance of both TMT incentive and cognitive factors as causal conditions to achieve a high degree of ambidextrous FDI, but also provide original evidence on the interactive configurations of those factors that lead to ambidextrous FDI.

Do Chinese firms benefit from government ownership following cross-border acquisitions?

Chinese firms’ increasing cross-border acquisitions (CBAs) in recent years seem to challenge the explanatory power of received theories of multinational enterprise (MNE) due to their relatively unique characteristics and the active role of the Chinese government. In this study, we seek to revisit and contextualize the OLI paradigm in conjunction with the institution-based view and examine how Chinese firms’ post-CBA long term performance is associated with government ownership. Our study shows that Chinese firms with more government ownership demonstrate better post-CBA long term performance. However, the above relationship is differentially moderated by such firm-level boundary conditions as political connections and financial slack, and the country-level institutional boundary conditions (i.e., the host country formal institutions and the home-host country cultural distance). We discuss our findings in detail and explore theoretical and practical implications for both Chinese firms and other emerging economy (EE) firms.

Does Knowledge from Home Markets Boost Outward Foreign Direct Investments of Emerging Economy Multinationals? Evidence from Indian Family EMNEs

Despite increasing research on multinationals from emerging economies (EMNEs), our understanding of the antecedents of their international expansion is still limited. In this study, we seek to examine whether knowledge gained from operating in their complex and diverse domestic markets deter or aid the outward foreign direct investments of EMNEs. As family firms are dominant in emerging economies, we further explore how heterogeneity within family firms moderate this relationship. We conduct our investigations using a proprietary longitudinal dataset comprising 213 EMNEs from India featuring in the S&P Bombay Stock Exchange (BSE) 500 index covering a six-year period from 2007-08 to 2012-13, of which 175 were family EMNEs and find supporting evidence for our theoretical predictions.

Portfolio characteristics of outward foreign direct investment and dynamic performance of emerging economy firms: An option portfolio perspective

In recent decades, emerging economy (EE) firms have taken an aggressive approach to international expansion. Drawing upon option portfolio theory, this study develops the characteristics of the OFDI portfolio based on two attributes of a portfolio and two dimensions of host environments. We examine how the characteristics of the OFDI portfolio dynamically influence the OFDI‒performance linkage. Using a sample of 545 Chinese listed multinational firms during the period 2009–2018, we find EE firms’ OFDI contributes more to short-term performance when the OFDI portfolio features a higher overall quality of host institutions or a higher diversity of strategic factor market developments in the host countries. However, over a relatively long period, EE firms’ OFDI contributes more to long-term performance when the portfolio features a higher overall diversity of strategic factor markets and institutional environments. These findings offer further knowledge on the OFDI‒performance link in emerging economies.

How Chinese companies deal with a legitimacy imbalance when acquiring firms from developed economies

Chinese companies are increasingly pursuing acquisitions from developed economies (DE) with varying degrees of success. Because of their late-comer and emerging-economy (EE) status, Chinese firms are often perceived as having less legitimacy than the firms they are acquiring. In this study, we examine how Chinese companies’ deal with this legitimacy imbalance by investigating five cases where Chinese firms acquired firms from more developed economies. We find that there is a difference in internal and external legitimacy vis a vis internal and external stakeholders, and that their relative importance changes over the course of the merger process. External legitimacy is more important in the pre- and during- merger stages, while internal legitimacy plays a more important role in the post- merger stage. In addition, we find that during the three stages of the merger process, Chinese MNEs utilize various strategies in an attempt to address the legitimacy imbalance when entering a developed economy, such as relationship building, cooperation with co-investors, allowing the acquired company to operate independently in the first few years, and operational commitment. We discuss the implications of these findings for researchers and practitioners and suggest future research directions.

Emerging Economy MNEs: How does home country munificence matter?

Multinational Enterprises (MNEs) from emerging economies (EEs) are establishing operations in advanced economies (AEs), apparently departing from traditional models of internationalization. We explore an under-explored difference between EE MNE and their AE counterparts concerning their country of origin: EEs have less munificent business environments. This leads EE MNEs to make different location choices than AE MNEs when entering AEs, specifically because they are more deterred by barriers to entry. We therefore predict EE MNEs to be relatively more deterred by distance and weak intellectual property protection and relatively more attracted by diaspora of migrants and by markets. Our empirical results are consistent with these predictions.

Catch-Up and Leapfrogging: Emerging Economy Multinational Enterprises on the Global Stage

Over the past decade, emerging economy (EE) multinational enterprises (MNEs), especially from China, have been aggressively catching up with global leaders, often by acquiring companies in advanced economies. This raises the question if and how theories of the MNE should be adjusted. I argue that the nature of their firm-specific advantages differs and, as a consequence, their motives, strategies, and operations. Also the institutional and policy environment is more complex. Yet, the phenomenon of EE MNEs can largely be explained through appropriate application of existing theories. However, important research questions remain with respect to the implementation of catch-up strategies, the role of the policy environment, and the performance implications.

Institutional pluralism, two publics theory and performance reporting practices in Zambia’s health sector

PurposeThe purpose of this paper is to investigate accounting and performance reporting practices embraced in the midst of a pluralistic institutional environment of an emerging economy (EE), Zambia. The research is necessitated due to the increased presence and influence of donor institutions whose information needs may not conform to the needs of local citizens in many EEs.Design/methodology/approachThe study draws on institutional pluralism and Ekeh’s post-colonial theory of “two publics” to depict pluralistic environments that are typical of EEs. Primary data were collected through semi-structured interviews with 33 respondents drawn from the main stakeholder groups involved in health service delivery including legislators, policy makers, regulators, healthcare professionals and health service managers. Data analysis took the form of thematic analysis which involved identifying, analysing and constructing patterns and themes implicit within the data that were deemed to address the study’s research questions.FindingsFindings indicate that Zambia’s institutional environment within the health sector is highly fragmented and pluralistic as reflected by the multiplicity of both internal and external stakeholders. These stakeholder groups equally require different reporting mechanisms to fulfil their information expectations.Social implicationsThe multiple reporting practices evident within the health sector entail that the effectiveness of health programmes may be compromised due to the fragmentation in goals between government and international donor institutions. Rather than pooling resources and skills for maximum impact, these practices have the effect of dispersing performance efforts with the consequence of compromising their impact. Fragmented reporting equally complicates the work of policy makers in terms of monitoring the progress and impact of such programmes.Originality/valueBeyond Goddard et al. (2016), the study depicts the usefulness of Ekeh’s theory in understanding how organisations and institutions operating in pluralistic institutional environments may be better managed. In view of contradictory expectations of accounting and performance reporting requirements between the civic and primordial publics, the study indicates that different practices, mechanisms and structures have to be embraced in order to maintain institutional harmony and relevance to different communities within the health sector.

Investment Portfolios in an Emerging Economy: What Drives Portfolio’s Diversification?

This study sheds light on the investment portfolio’s decisions through behavioral insights. The study intends to identify personal characteristics that drive the level of diversification and lead investors to allocate resources in risky assets in an emergent economy, deepening the discussion about investment decisions and bringing some behavioral insights to the debate. The study has a unique and heterogeneous database of individual financial allocations from Brazil, one of the largest emergent economies. The characteristics of Brazilian investors play an important role in investment decisions, high educated and married investors tend to display diversified portfolios. To invest in risky assets, male investors have a 43% greater likelihood of investing in risky assets than females, highlighting the discussion on gender and investment decisions. Moreover, married investors tend to exhibit conservative portfolios. We observed that traditional investors are under-diversified, allocating primarily in traditional and safety assets. The results suggest that the investment decisions can be subject to psychological biases defined in behavioral finance theory.