Emerging Market Firms Research Articles

Relationship multiplexity, multiple resource acquisition, and export performance of emerging-market firms

Relationship multiplexity, multiple resource acquisition, and export performance of emerging-market firms

The Estimation and Power of Alternative Discretionary Accruals Models

Discretionary accruals remain decade’s long measures to detect earnings management in empirical accounting research. The correctness of the specifications and test power of the information content for the models remains unexplored based on samples of most emerging market firms. Yet, country’s-based researchers have increasingly used different Jones-based discretionary accruals to proxy earnings management. The paper aims to evaluate four discretionary accruals models and to decide the most appropriate one for the detection of earnings management. For the aim, we apply regression methods to estimate and evaluate four Jones-type discretionary accruals models – simple Jones, modified Jones, extended Jones cash flow model and working capital accruals – based on evidence of a final sample of 1,852 firm-year of 102 firms in Nigeria during 2001–2020. The results disclose that all models are well-specified such that the likelihood of Type I errors is minimum and below the significance level of 5%. In order to demonstrate the power of the test, the simulations completed identify that the modified Jones model exhibits the highest power capability. The implication of this finding is that the modified Jones model is the most appropriate model to detect earnings management based on the Nigerian sample.

Board generational diversity in emerging markets

To identify the determinants of the generational diversity of board membership in emerging market firms, we conducted an empirical analysis using state-level social inequality indices and data on 14,598 listed/unlisted firms from 20 Eastern European countries and China. We found that, in these emerging markets, social inequality strongly inhibits the generational diversity of board membership, regardless of the gender of board members. The results also reveal that four firm attributes—board size, CEO duality, state ownership, and the presence of foreign investors from non-advanced economies as firm owners—significantly affect the age composition of board directors in line with our expectations. Two other firm attributes—ownership concentration and firm ownership by foreign investors from advanced economies—are also found to have a significant impact on board generational diversity; however, the direction of their impact contradicts our predictions. Supplementary estimations carried out by introducing various sample restrictions produce similar results, thus confirming the statistical robustness of our findings.

International expansion and home-country resource acquisition: A signaling perspective of emerging-market firms’ internationalization

International expansion and home-country resource acquisition: A signaling perspective of emerging-market firms’ internationalization

Geographic Cluster or Global Linkages? What Accelerates Emerging Market Firms Foreign Entry Speed

This study examines whether emerging market firms use global linkages as a substitute to the location in geographical clusters to promote the speed of foreign market entry. Drawing from economic geography, we find a slower speed of foreign market entry by firms located outside geographical clusters in the home country as compared to firms inside clusters. This relationship is further moderated by the firm’s cognitive proximity in the foreign markets (measured as a firm’s extent of informal global linkages). Cognitive proximity increases the transfer of tacit knowledge and weakens the negative impact of firm cluster absence on the speed of foreign entry. We test the proposed hypotheses using the cox proportional hazard model based on a longitudinal sample of 602 Indian firms in the information technology industry (IT) from 2000 to 2019.

Promote or inhibit? The influence of partner repeatedness in university-industry alliance portfolios on firm innovation performance

ABSTRACT Constructing a portfolio of university-industry (UI) alliances with multiple academic institutions simultaneously has been pervasive for emerging market firms. However, whether repeated partnerships in focal firms’ UI alliance portfolios influence firm innovation performance remains unknown. Using the unbalanced panel data from Chinese manufacturing firms, we theorise and find that UI alliance portfolio partner repeatedness has a negative effect on focal firms’ innovation performance. Besides, we examine the boundary conditions under which UI alliance portfolio partner repeatedness influences firm innovation performance. We find that both institutional development and market competition weaken the negative effect of UI alliance portfolio partner repeatedness on firm innovation performance. This study contributes to previous studies and provides practical implications for both firm managers and policymakers.

Environmental performance and financial constraints in emerging markets

ABSTRACT We examine how corporate environmental performance relates to financial constraints in an environment likely to face high global pressure to address climate change. Using multivariate regressions and a large dataset of over 8,500 firm-years from 24 emerging market countries during 2003 to 2020, we find superior environmental performance (especially relating to carbon emissions) to be associated with significantly lower levels of financial constraints. This finding is robust to an alternative measure of financial constraint, different sample compositions, and to endogeneity concerns. Further analyses reveal that the reductions in financial constraints are significantly higher for firms: (i) in high carbon-emitting countries; (ii) in countries that adopted the 2015 Paris Climate Agreement early; and (iii) that cross-list onto foreign stock exchanges. Finally, we provide evidence to suggest that the environmental aspects of a firm’s CSR efforts mitigate its financial constraints more than can be attained by the other major CSR dimensions. Overall, the findings imply that stakeholders (capital providers) of emerging market firms prioritise environmental concerns and, therefore, reward environmentally responsible firms with cheaper and easier access to financing, especially when global environmental concerns are high.

Ways to neutralize the country-of-origin effect in the emerging market firms international branding1

Abstract Paper’s objectives The purpose of this paper is to examine the ways in which to neutralize the country-of-origin (COO) effect (COE) in the emerging market of firms’ international branding. Design/methods applied/approach used A multiple-case study of five companies from European and Asian emerging markets – owners of household appliances brands, with data sourced from in-depth interviews and secondary sources. Findings Companies from emerging markets neutralize the genuine COO in their international branding in various ways, for example, by applying brand or sub-brand names that do not refer to the genuine country-of-brand-origin, using slogans in foreign languages or establishing brand alliances with partners from developed countries. Originality/value This study offers original insights fostering a better understanding of international branding strategies applied by emerging market companies by identifying the ways they neutralize the COE both at the brand concept level and brand marketing communication tools.

Firm size and Chinese firms' internationalization speed in advanced and developing countries: The moderating effects of marketization and inward FDI

How can firm size influence outward FDI (OFDI) expansion speed of emerging market firms (EMFs)? Because firm size may have two opposing effects, this study explored this question in the advanced and developing country environments respectively. Applying theUppsala model (UM) and institution-based view (IBV), this research developed several hypotheses and examined them on a Chinese sample. This research found the different influences of firm size on EMFs’ OFDI expansion speed in advanced and developing countries. Marketization and inward FDI (IFDI) can moderate these influences. This research contributes to the UM and the internationalization speed research, updates our understanding of the IFDI-OFDI relationship, and solves the conflict associated with firm size.

Grand challenges and emerging market small and medium enterprises: The role of strategic agility and gender diversity

AbstractThis paper examines the role played by strategic agility and gender diversity in enabling the creation of value for grand challenges (VCGCs) by small and medium‐sized enterprises originating from emerging markets (ESMEs). ESMEs face significant challenges due to the dynamic environments in which they operate and the limited support they receive from formal institutions. In such contexts, strategic agility enables ESMEs to drive VCGCs through responsible collaborative innovation. We further argue that gender diversity is an important boundary condition that influences the effect of strategic agility on VCGCs via responsible collaborative innovation. Utilizing 228 survey responses from ESMEs originating from the United Arab Emirates (UAE), our findings shed light on the vital role played by strategic agility in enhancing ESMEs' VCGCs. Specifically, our findings indicate that responsible collaborative innovation acts as an important mediating mechanism between strategic agility and VCGCs. In addition, gender diversity emerges as an important moderating factor in that, in the presence of more heterogeneous senior management teams, the effect of strategic agility on VCGCs through the mediating mechanism of responsible collaborative innovation is higher. These findings contribute to the literature on dynamic capabilities, upper echelons, and grand challenges by providing important insights into the mechanisms and boundary conditions of VCGCs in the context of emerging market firms.

Impact of domestic and foreign knowledge mechanisms on the innovation performance of Indian firms

Research on emerging market firms (EMFs) has acknowledged the role of innovation in catching-up with advanced economies. Although we know that EMFs’ innovation increasingly depends on collaborations and cross-border knowledge flows, less has been said about the effectiveness of foreign and domestic knowledge mechanisms adopted to improve EMFs’ innovation performance. We hypothesize that foreign mechanisms rely on diverse knowledge and foster explorative innovation (i.e. innovation that extends the existing local competencies), while domestic mechanisms are more likely to be associated with the exploitation of the local existing competencies. Additionally, we claim that the breadth of EMFs’ absorptive capacity strengthens the impact of foreign knowledge mechanisms on explorative innovation, while depth increases the impact of domestic knowledge mechanisms on EMFs’ exploitative innovation, thus highlighting that the interplay of knowledge resources internal and external to the firm involve different levels of recombination. Our empirical analyses conducted on a sample of 161 Indian bio-pharmaceutical firms observed from 1997 to 2018 confirm our hypotheses, thus contributing to the literature on EMFs’ catching up via internationalization and innovation.

Inheriting the DNA of emergingness: Strategies of advanced market firms under emerging market ownership

AbstractDespite growing concerns about emerging market firms (EMFs)' acquisitions in advanced markets, the influences of emerging market ownership on advanced market firms (AMFs) as targets remain largely underexplored. This study aims to conceptually advance our understanding of the environmental adaptation strategies of AMFs under emerging market ownership, focusing on the strategic implications of the “emergingness” encapsulated in the resource transfer from EMF acquirers to AMF targets. Drawing on the institution‐based view and resource‐based view, this conceptual piece develops an Institution‐Resource‐Strategy framework and proposes two types of strategies for AMFs under emerging market ownership, namely arbitrage and avoidance, each comprising three varying tactics. We illustrate our propositions using three cases of Japanese firms under Chinese ownership. This study adds to the literature on internationalizing EMFs, the institution‐based view of global strategies, and cross‐border mergers and acquisitions and offers managerial implications for emerging and advanced market stakeholders.

Performance feedback and location choice of foreign direct investment

Integrating the behavioral theory of the firm and the OLI paradigm, this paper studies how performance feedback affects the location choice of emerging market firms between developed countries (DCs) and less developed countries (LDCs) during the process of internationalization. Using the sample of 1,306 Chinese public listed firms which established new foreign subsidiaries between 2008 and 2019, we find that the further a firm’s performance is below aspiration, the more likely it will invest in LDCs than DCs, whereas the further a firm’s performance is above aspiration, the more likely it will invest in DCs than LDCs. In addition, technology-based capability and labor intensive production capability have moderating effects on the relationship between performance feedback and location choice between DCs and LDCs. This paper complements and extends the OLI paradigm by injecting dynamic and non-economic factors to explain OFDI location choice.

Subnational social trust and the internationalization of emerging market firms

This study examines how informal institutions at the home country subnational level drive the foreign direct investment (FDI) of firms from emerging markets, where informal institutions play a salient role because of the underdevelopment of formal institutions. Integrating the institutional escape view and institutional support view, we argue that social trust, as a critical dimension of informal institutions, affects firms’ FDI decisions. Using a sample of publicly listed firms in China, our empirical analysis finds an inverted U-shaped relationship between subnational social trust and the likelihood of firms’ international expansions. Furthermore, this relationship is contingent on firms’ affiliations with business groups.

Imbalanced trade dependence and Chinese firms’ entry mode choices: the moderating effects of state ownership and marketization

PurposeApplying resource dependence theory (RDT), this research paper aims to examine the effect of imbalanced trade dependence (ITD) on entry mode choices and how state ownership and marketization each can moderate this effect.Design/methodology/approachUsing data on 1,404 foreign projects made by 493 Chinese listed firms during the 2009–2015 period of time, this study applies logit regression to do the statistical analysis.FindingsIt finds that ITD positively affects the choice of wholly-owned subsidiaries. State ownership and marketization each can moderate this influence.Originality/valueIt develops the concept of ITD, applies it to examine entry mode choices and lets us better understand the substitutive or complementary relationship between governments and foreign firms as two sources of resources. It helps us better understand some competitive advantages of emerging market firms (EMFs) and the impacts of the state on EMFs’ outward FDI. It contributes to entry mode research by applying RDT to explain how ITD influences entry mode choices and how state ownership and marketization each can moderate this relationship.

Financial Crises and Capital Structure Decisions: Empirical Evidence from Emerging Markets

ABSTRACT This study analyzes emerging market firms’ capital structure decisions. We select the reference as 2007–2008 financial crisis and study the temporal behavior. We investigate if EM firms differ in decisions of issuing debt and equity and if their responses to the global financial crisis are explicable with the existing theories. Our findings suggest that the crisis behavior of EM firms is not fully conformable with the extant theories. Their debt and equity reversals are antithetical, that is in the reverse direction from the last extreme point, driving a pattern to stagger between substantial debt issues followed by equity expansions.

Internationalization Motives of Emerging Market Firms: A View from Chinese State-Owned Enterprises

Internationalization Motives of Emerging Market Firms: A View from Chinese State-Owned Enterprises

The study is an attempt to reveal and describe the main directions of digital transformation of business models of professional sports organizations through the example of the US National Football League. Based on the Johnson, Christensen and Kagermann’s approach to describe four main components of a successful business model, the authors analyzed the National Football League business model and studied

This study examines the relationship between state ownership and internationalization in Russian companies. International expansion of state firms from emerging markets is the topic frequently addressed in the research community of international business and strategic management, whereby the studies on emerging markets state-owned enterprises internationalization provide contradictory results. One of the reasons is the difference between the contexts of countries where state-owned enterprises operate which affects the way how state ownership is related to internationalization. Russian state-owned enterprises are the least studied companies in terms of their international expansion, and the examination of the relationship between state ownership and internationalization of firms can fill in the gap in the emerging market state-owned enterprises internationalization puzzle. The paper shows the study of the internationalization of the Russian state-owned enterprises spanning a five-year period 2013–2017. The results show that the more the degree of state ownership in a Russian company is, the less its internationalization is. The study contributes to the discussion of the role of state ownership for the internationalization of emerging market firms by emphasizing the importantce of the contextual country specifics. The study also discusses the role of a state in the internationalization of companies.

Dynamic trade and technology linkages: a perspective from global value chain upgradation of Asian countries

PurposeThe focus is on determining the long-term relationship in explaining how technological capabilities interact with trade and global value chain (GVC) participation to aid in the upgradation process using a panel auto-regressive distributed lag (ARDL) model. The results suggest that export of both low-skill and medium-skill technology-intensive manufactures and patents by residents positively and significantly impact GVC participation.Design/methodology/approachThis paper examines the dynamic linkages between GVC participation and technological capability of major Asian countries in a comparative (1995–2018) perspective.FindingsThis implies that certain sectors enable greater integration into GVCs in the long-run, supported by critical learning variables. Further, with the help of the panel causality test, a bi-directional flow between GVC participation and export of high-technology manufactures and import of labour-intensive technology manufactures is witnessed. Even a one-way flow from research and development (R&D) intensity to GVC participation is seen.Originality/valueThe technological capabilities are found to be characterising the initial structure of local enterprises in trade and GVCs, as well as the extent to which emerging-market firms may harness knowledge flows and migrate into high-tech industries.

How does frugal innovation help young firms in the US? The moderating roles of venture capital investment and debt financing

This study examines the effects of frugal innovation on firm performance among young firms located in the U.S. Though frugal innovation is a concept that originated from innovation practices among emerging market firms, firms in the developed economies have absorbed a frugal mindset and are regularly exercising frugal innovation. We develop a framework for frugal innovation by building on entrepreneurial bricolage theory. One of our research findings shows that young firms in the U.S. find frugal innovation useful in gaining firm performance. In addition, interaction effects on firm performance are tested; those between frugal innovation and venture capital (VC) equity financing and frugal innovation and debt financing are found to be significant. Both moderators are found to weaken the positive effects on firm performance. These findings are interesting because we had initially hypothesized that the interaction effect on firm performance of frugal innovation and VC equity financing would be positive while the moderator that includes debt financing would be negative. This paper contributes to the innovation and entrepreneurship literature by empirically testing frugal innovation, a concept which has not been quantitatively studied thus far. In addition, the study establishes a link between frugal innovation and entrepreneurial bricolage.