Firm-level Capabilities Research Articles

Firm-level capabilities and response to a negative export shock: 2014 Russian embargo on the West

This paper investigates the resources and capabilities that determine firm-level adjustments after a sudden unexpected closure of a major export market. We focus on the effects of the 2014 Russian embargo on Western food exporters using the example of Estonian firms. The paper applies a novel multimethod approach consisting of Study I quantifying the embargo effect on the trade diversion of firms that had exported embargoed goods to Russia, and Study II conducting a multiple case study into three dairy exporters highly affected by the embargo. Study I employs a difference-in-difference model with matched exporters of embargoed goods as treatment. Study II builds on extensive document analysis that serves as input for interviews with the CEOs of the sample dairy firms. We find that pre-shock productivity is on average a good predictor of post-shock firm trade diversion (Study I), however, we specify that the key firm-level resources and capabilities necessary for successful post-shock adjustments might not be reflected in the standard quantitative productivity level measures (Study II). We conclude that key firm-level resources and capabilities for embargo-resilience are the quality of exporting experience, competitive product-market matching, absorptive capacity, and managerial vision and empowerment.

Impact of heterogenous capabilities on export performance amid the digital transformation

We investigate the effects of adopting digital technology on export performance of Korean manufacturing firms amidst the digital transformation. We recognize firm-level capabilities should be closely associated with adoption of rapidly progressing digital technology but also with export performance. And our data indicates that the most common purpose of digital technology adoption is to launch new products to the market. Hence, we consider that technology adoption is a strategic and purposeful decision to gain competitive edge mostly by producing new product, and treating technology adoption exogenous can be misleading. Due to the endogeneity and selection issues in technology adoption, the endogenous switching regression is applied to this study as Coad et al. (2020). On technology adoption decision, we find external innovative resources from strategic alliance in addition to internal innovative capabilities stand out. Given technology adoption decision, internal capabilities like patent rights and international affiliation are complementary factors to export growth. The treatment effect analysis has implications as follows: the result on contribution of technology adoption to export growth for actually adopting firms is rather small, and shows heterogenous innovation, organizational, and external capabilities are still critical factors as much as new products embedding high-end digital technology; the result on non-adopting firms indicates potential of advanced digital technology to improve export performance by helping to produce such new products if they were actually capable to do it. In sum, our findings provide another evidence that structurally positive interaction between innovative activities and export performance as Aw et al. (2011), since adoption of digital technology to products itself is innovative in the digital transformation. Furthermore, the result is consistent with the capability theory in that heterogenous innovative and complementary capabilities determine strategic technology adoption and export performance simultaneously. Finally, our findings indicate that the digital transformation might be still at the early stage. The fact that Korean firms have adopted advanced digital technology mainly for new products can be interpreted as an indicator of early development stage of transformation, since firms concentrate on product innovation than process innovation to gain competitive edge at the early stage (Utterback and Abernathy, 1975). Thus, we expect that further evolution of digital transformation can facilitate process innovation, then contribute to firm performance by improving cost efficiency that should be tackled in the upcoming study.

State Ownership and Green Innovation

Climate change and digital transformation have significant effects on all aspects of society. With the increasing importance of state-owned enterprises (SOEs) that represent governments' stand to respond to environmental challenges, this study investigates how state ownership affects green innovation and how digital transformation factors play a role at both the firm level and the provincial level. Based on the data analysis of Chinese listed firms between 2008 and 2021, we find that state ownership hinders green innovation. However, with a high degree of digital transformation at the firm level and digital innovation capability at the province level, the state ownership and green innovation relationship can be weakened. Overall, this study advances both green innovation and SOE innovation literature by bridging state ownership, green innovation, and digital-related factors. We advocate government and SOE managers to invest more in digital transformation and improve their digital capabilities for better green innovation output.

Firm-Level Capabilities and Response to a Negative Export Shock: 2014 Russian Embargo on the West

Firm-Level Capabilities and Response to a Negative Export Shock: 2014 Russian Embargo on the West

The role of sustainable business networks in promoting a Circular Economy in Africa—A systematic literature review

AbstractIn order to achieve transition toward a Circular Economy (CE), multiple stakeholder partnerships are required. Although the CE shows proven potential and impact, the implementation is still very low in developing and transition countries. The role of networks in promoting the CE is assessed, including the impact which network participation has on the implementation of a CE at company level. Although firm level capabilities can be enhanced by network participation, a lot of knowledge gaps exist regarding the orientation and structure of networks; governance models for networks and the high impact activities that can be implemented. A systematic literature review was undertaken to characterize the role of sustainable business networks in green industrial transformation. The approach to literature review included keyword search, title analysis, search title analysis, abstract analysis and systematic review of contents for full review of 50 research articles from Web of Science, Scopus and literature. Barriers, cognitions and challenges in the operation of sustainable business networks were clearly analyzed, including knowledge gaps existing in literature. Database search and document review was undertaken to determine the role and impact of sustainable business networks in promoting a CE in comparison to idiosyncratic organizations without any affiliation. The review enabled determination of the policies which promote sustainable business networks, network structure, governance, and success factors. We conclude that sustainable business networks have an impact on the CE transformation in selected African countries. Implementation success could be explained by contextual factors within sustainable business network boundaries.This article is categorized under: Climate and Environment > Pollution Prevention Climate and Environment > Circular Economy Policy and Economics > Green Economics and Financing

Industry diversification in industrial districts: is it about embedded regional or firm-level capabilities?

ABSTRACT We analyse whether regionally embedded or firm-level capabilities drive regional diversification in industrial districts, examining the relationship between relatedness and Marshallian agglomerations. We argue that regional diversification lacks an explicit mechanism to explain branching into new products, positing that the origin of regional product branching is based on firm-level heterogeneity of capabilities and diversification, which is overlooked. Using mixed methods and patent analysis (1895–2019; 3592 patents and utility models), product diversification in the Toy Valley district in Alicante (Spain) is analysed, showing that firm-level related diversification with extensive local search explains the mechanism of the regional relatedness diversification.

Service innovation capability: a systematic literature review and research agenda

ABSTRACT Though singular or discrete service innovations are accepted as essential to the performance and survival of organizations, practitioners and researchers are increasingly directing their attention towards the firm-level capability that underlies their repeated and continuous introduction, commonly referred to as service innovation capability (SIC). However, compared to the rich body of literature on the innovation capability of manufacturers and industrial organizations, SIC is poorly understood by managers and service researchers and there is no consensus on its definition, antecedents, outcomes, or dimensions. This study remedies this protracted gap through a comprehensive review of 45 academic journals reporting on firm-level studies of SIC using the SPAR-4-SLR protocol. These were found in the Web of Science and Scopus databases and analyzed according to the TCCM framework. Our research provides new theoretical and managerial insights, advancing a consolidated original definition of SIC, reconciles and organizes factors in SIC’s nomological network advanced by disparate studies and synthesizes links between them in an integrating framework, and makes 13 propositions for advancing this topic based on the research gaps identified.

It is a balancing act: understanding the key audit matters disclosure in the context of a developing country

PurposeThis study aims to examine the strategies that auditors in Bangladesh follow in identifying and reporting key audit matters (KAMs). The study also examines the factors affecting auditors’ strategies in the identification and disclosures of KAMs.Design/methodology/approachThe authors have conducted interviews with audit partners, chief financial officers (CFOs) and regulators involved in KAMs reporting and monitoring. The authors have used the lens of institutional theory of coercive, mimetic and normative isomorphism and the concept of decoupling.FindingsAuditors have used a decoupling strategy by identifying and reporting greater number of industry-generic KAMs than that of other countries in an effort to minimize risks and avoid regulatory scrutiny, although they disclose remote risks as KAMs and mask severe problem areas of the client. Because of the principle-based approach of International Standards on Auditing (ISA) 701 and because of the pressure and misunderstanding from the audit committee, auditors report industry-generic items and generic descriptions of KAMs.Practical implicationsThe findings have important implications for the standard setters and local and global audit firms for the diffusion of new auditing standards in different jurisdictions. Without the development of audit firm-level capability and the corporate governance environment, changes in standards may not be effective in achieving the objectives of the standards.Social implicationsAlthough auditors consider that the KAMs reporting requirements provide with opportunities to enhance audit profession’s legitimacy and public trusts, the actual KAMs reporting practices are driven by the market logic, an urge to maintain the status quo with clients and eventual rationalization of the impairment of professional independence.Originality/valueGiven the dearth of prior research on the implementation and diffusion patterns of ISA 701 KAMs reporting, this study fills the gap in the literature. To the best of the authors’ knowledge, this is the first known study to examine auditors’ strategic responses to balance among conflicting priorities in reporting KAMs.

Exploring the experience of developing COVID-19 vaccines in Iran.

Widespread public vaccination is one of the effective mechanisms to ensure the health and prevent deaths in societies. The coronavirus disease 2019 (COVID-19) vaccine is a stark instance in this regard. Vaccine development is a complex process requiring firm-level capabilities, various infrastructures, long-term planning, and stable and efficient policies. Due to the global demand for vaccines during the pandemic, the national capability to produce vaccines is critical. To this end, the current paper investigates influential factors, at the firm- and policy-level, in the COVID-19 vaccine development process in Iran. By adopting a qualitative research method and conducting 17 semi-structured interviews and analyzing policy documents, news, and reports, we extracted internal and external factors affecting the success and failure of a vaccine development project. We also discuss the characteristics of the vaccine ecosystem and the gradual maturity of policies. This paper draws lessons for vaccine development in developing countries at both firm and policy levels.

Strategic agility of SMEs in emerging economies: Antecedents, consequences and boundary conditions

This study investigates the effects of firm-level capabilities, and their relationships with strategic agility and the international performance of small and medium-sized enterprises (SMEs). Using time-lagged data from 233 internationalizing SMEs from Ghana, we test the direct relationships between SMEs’ capabilities and strategic agility. Additionally, we examine the indirect relationships between technological and networking capabilities and superior performance in international markets through the mediating mechanism of strategic agility. We also investigate the moderating effects of environmental dynamism and internationalization knowledge on the relationship between strategic agility and international performance. Our findings provide a nuanced view of the relationship between the firm-level capabilities, strategic agility and SMEs’ international performance.

A Systematic Review and Agenda for Learning-By-Exporting Research

Over the past four decades, flourishing empirical research has attempted to establish the mechanisms and conditions underpinning improvements in exporters’ innovation and productivity via the learning-by-exporting (LBE) effect, and the domain has gained legitimacy and empirical credibility. However, the literature’s findings are largely fragmented and require systematic review and analysis to draw definitive conclusions on the factors that influence the subsequent realization of learning from exporting. To fill this void, we critically examine the extant LBE research for the period 1984–2021. We systematically review 167 articles to develop a system-based taxonomy and conceptual model of LBE, which comprises five major components: system outputs (productivity and innovation), inputs (e.g., institutional factors and resources), firm-level capabilities (e.g., absorptive capacity and innovation persistence), managerial competencies (e.g., entrepreneurship skills), and strategic internationalization decisions. In doing so, we uncover paradoxical tensions within the system brought about by the conflicting roles of some components of the LBE system, such as firm-, industry-, and country-level technological capabilities. Our review also reveals research gaps that open relevant opportunities for further research and conclusions that hold novel implications for managers and policymakers.

Firm innovation in Africa and Latin America: Heterogeneity and country context

Abstract In this paper, we analyze the drivers of firm innovation in 35 African and Latin American countries. We investigate how firm-level capabilities and national country characteristics affect firm innovation activities and innovation outputs. Using data from the World Bank Enterprise Surveys, we analyze the factors driving firm-level innovation distinguishing two stages in the innovation process: firm engagement with innovation inputs and the translation of innovation inputs into innovation outputs. The paper provides empirical support for the importance of country-level macro and institutional characteristics, in addition to firm-level capabilities, across a large number of countries in determining firm-level innovation. We demonstrate that capital investment and training are just as important innovation activities as research and development spending in developing economies. We highlight the heterogeneity in firm innovation across firm size, country- and firm-level characteristics, and economic sectors.

Theorising Data-Driven Innovation Capabilities to Survive and Thrive in the Digital Economy

ABSTRACT While data-driven innovation (DDI) is receiving substantial attention from academics and industry specialists, there is limited research on its dimensions and effects in marketing. We address this theoretical gap by examining the following research questions: ‘What are the necessary firm-level capabilities of DDI and its effects in a marketing environment?’ Drawing from the resource-based view (RBV), dynamic capabilities (DC), and market orientation theories, this study presents a data-driven innovation capabilities (DDIC) framework and proposes a new conceptualisation with new data product performance through new data product creativity. Based on a systematic literature review and thematic analysis, the findings offer seven propositions to enrich the emerging DDI theory in marketing and guide managerial decision making.

Innovation Outcomes of Digitally Enabled Collaborative Problemistic Search Capability

A firm’s use of boundary-spanning information systems (BSIS) can be beneficial for innovation by providing access to market-facing information. At the same time, BSIS use can give rise to information overload, making it difficult for firms to leverage the most pertinent information for innovation. Although there has been progress in developing the understanding of the role of IS in innovation, it is unclear what capabilities firms need to develop to facilitate innovation in the presence of information overload from BSIS (IO-BSIS). We maintain that firms are increasingly experiencing IO-BSIS and therefore a thorough investigation of firm-level capabilities to facilitate innovation while coping with IO-BSIS is needed. To address this important gap, we broaden the theory of problemistic search for innovation by proposing a digitally enabled collaborative problemistic search (CPS) capability. We propose that a cross-stream CPS effect—the interaction of CPS with customers (CPS-C) and CPS with suppliers (CPS-S)—can enable firms to reinvigorate their internal knowledge for innovation by engaging customers and suppliers in filtering and interpreting market-facing information. Further, we theorize that the presence or absence of IO-BSIS is a contingency factor that affects whether the cross-stream CPS effect is likely to be beneficial or detrimental to innovation. Based on the analysis of data collected from 227 firms, we find that the cross-stream CPS effect is beneficial for innovation when firms face IO-BSIS and detrimental to innovation when firms do not experience IO-BSIS. We thus open the black box of the digitally enabled innovation activity by shedding light on specific collaborative activities that advance innovation while enabling firms to cope with information overload.

Learning from global suppliers: the diffusion of small wind in low- and middle-income countries

An increasing number of low and middle-income countries seek to boost electrification with renewable energy. Yet, most renewable energy equipment and services are imported from global technologies suppliers located in high-income countries. This article aims to learn from global suppliers of small wind turbines: what can we learn about capabilities, opportunities and barriers for diffusion of small wind? What insights can we derive about organisational learning and policy learning to enhance diffusion? Our survey of global producers shows that at firm-level capabilities such as preparation of feasibility reports and selection of project sites are major weakness in developing countries. Limited knowledge of technologies and skilled manpower are also key constraints. While there are opportunities for learning from global suppliers during project planning and installation, low absorptive capacity constrains the further diffusion of knowledge locally.

The impact of deunionization on the growth and dispersion of productivity and pay

Abstract This article presents an Agent-Based Model (ABM) that seeks to explain the concordance of sluggish growth of productivity and of real wages found in macroeconomic statistics, and the increased dispersion of firm productivity and worker earnings found in micro level statistics in advanced economies at the turn of the 21st century. It shows that a single market process unleashed by the decline of unionization can account for both the macro- and micro-economic phenomena, and that deunionization can be modeled as an endogenous outcome of competition between high wage firms seeking to raise productive capacity and low productivity firms seeking to cut wages. The model highlights the antipodal competitive dynamics between a “winner-takes-all economy” in which corporate strategies focused on cost reductions lead to divergence in productivity and wages and a “social market economy” in which competition rewards the accumulation of firm-level capabilities and worker skills with a more egalitarian wage structure.

Entry Mode Strategy, Firm-Level Capability, Environmental Turbulence, and Organisational Performance: A Moderated Analysis

This study examined the effect of entry mode strategy and firm-level capability on organisational performance of selected Fast-Moving Consumer Goods (FMCG) manufacturer in Lagos State, Nigeria; more so, it investigated the moderating effect of environmental turbulence on the interaction between entry mode strategy and firm-level capability, and organisational performance. The cross-sectional survey research design was adopted with a sample of 452 employees of twelve selected FMCGs manufacturers in Lagos State, Nigeria. A hierarchical regression analysis was conducted to substantiate the moderation-effect hypotheses formulated. Findings showed that entry mode strategy and firm-level capability have a positive and significant effect on organisational performance. Further analysis showed that the interaction term of environmental turbulence, firm-level capability, and entry mode strategy explained the increase in organisational performance with the introduction of environmental turbulence as a moderator. Beyond the performance-effect of entry mode strategy and firm-level capability, management needs to keep abreast of issues happening in the external environment and proactively position their organisation to take advantage of the environment's opportunities while reducing exposure to negative consequences.

Assessing Collaborative Capabilities for Sustainability in Interorganizational Networks

Sustainability in interorganizational networks depends on developing collaborative capabilities for this purpose. However, to improve their collaborative capabilities for sustainability (CCS), companies in interorganizational networks need methods to assess them. The existing CCS assessment approaches in the literature do not indicate what capabilities should be improved in an individual company to support collaborative strategies. Addressing this gap, the main contribution of this paper is providing a framework to assess CCS in interorganizational networks, providing support for improving firm-level capabilities. To attain this aim, the framework was based on the graph-theoretic approach (GTA), a multi-attribute technique that captures the interrelationships between elements of a system, providing multi-level and overall assessment. We tested the framework in three hotels from a tourism cluster in Brazil, where sustainability has been an unsettling issue. By applying the assessment framework, it was possible to generate a CCS index for each company and, thereby, to compare the results. Findings from the field confirmed the benefits of using the framework and its utility in assessing CCS and setting priorities for improvement.

The role of supply chain analytics capability and adaptation in unlocking value from supply chain relationships

The performance and survival of many supplier firms depend on key buyer–supplier relationships (BSRs). A difficult task in managing such relationships is creating value when there is a lack of justice. This study examines whether supply chain analytics capability (SCAC) and adaptation can prove useful for suppliers in extracting greater value from supply chain relationships. The role of SCAC in driving value has not been evaluated in contexts where independent decision making is constrained, such as the case for a power disadvantaged supplier. We use resource orchestration theory and social exchange theory to develop a model that explains how SCAC and adaptation can work in BSRs and test it using data from North American suppliers. The results show that in relationships marked by low levels of procedural justice, SCAC becomes critical in extracting value from the relationship, while in relationships marked by high levels of procedural justice, adaptation is more important. The findings lead to actionable insights on how suppliers can leverage SCAC and adaptation to maximize value from supply chain relationships. A key insight is that benefits from firm-level capabilities, like SCAC, depend on relational attributes in the supply chain context.

Studying the Incubation of a New Product Market Through Realized and Alternative Histories

In this paper, we contribute to the literature on new market emergence by implementing a “history-friendly” simulation of the incubation period encompassing the decision processes that took place within General Motors (GM), Chrysler, and Ford during the design and development of the first U.S. minivan. Our work offers a “middle ground” alternative methodology for unpacking the “black box” of market incubation processes. Our middle ground approach is useful for exploring the complex interdependencies among four general mechanisms that shape market incubation: environmental shocks that open up new technological possibilities, firm-level capabilities that allow firms to differentially take advantage of these possibilities, various incentives (e.g., product cannibalization, rivalry) that influence a firm’s willingness to exploit new possibilities, and managerial beliefs about the viability of these possibilities. Complex nonlinear interdependencies exist among these mechanisms, and historical contingencies affect the way in which they interact. We identify important historical contingencies within and across GM, Ford, and Chrysler in their precommercialization managerial decisions prior to Chrysler’s introduction of the Voyager and Caravan in 1983. We use the historical details of actual market incubation to calibrate the simulation and develop plausible alternative (both near and hypothetical) histories of that incubation. Understanding why Chrysler, Ford, and General Motors made their respective product commercialization choices not only pertains to automotive history, but can also illuminate the complexities inherent in market incubation processes.