Firms In Developing Countries Research Articles

The “Social Europe” Effect: Does Southern Foreign Direct Investment in Europe Improve Labor Rights in the Global South?

Trade and foreign direct investment (FDI) relations between developing and developed countries can lead to ratcheting-up of labor standards. Past research, however, has relegated developing countries to a passive role in the global economy while simultaneously largely ignoring variation between developed countries’ degree of protection of labor rights. In this study, we consider FDI by developing countries into Europe and how it can lead to labor upgrading. We argue that the obligations to upgrade implied by Europe’s regulatory environment will pressure developing country firms with strategic asset-seeking FDI to upgrade their practices which can subsequently diffuse in their home countries. We tease out this specific mechanism from others through a comparative research design juxtaposing FDI into high standard social Europe and the relatively low standard United States for a panel of 122 developing countries in the period 2001–2010. Our analysis compares how FDI into each location affects both collective and individual labor rights, finding that FDI into “Social Europe" leads to the improvement of labor standards, particularly trade union rights and substantive rights relating to working conditions, while there is no such upgrading effect for FDI into the United States. These findings are robust to multiple specifications, including an innovative application of the measurement strategy in studies on trading-/investing-up effects. This research helps us to understand two underappreciated facets of this latest phase of globalization: the rise of developing countries as agents of global integration and how regulatory disparities between potential economic partners can affect labor upgrading in those same developing countries. Any weakening of the European social model should consider its external consequences.

A Systematic Review of Agile-Adaptive Balanced Scorecard and Sustainable Performance: Bibliometric, and Future Direction

While sustainability initiatives have gained recognition and significance in modern organizations, they often encounter obstacles within firms, especially SMEs. Consequently, the adoption of integrated tools like AABSC has become crucial, replacing traditional BSC tools, to empower managers to make informed decisions amid sudden economic fluctuations. However, the adoption of AABSC remains limited in the literature review and is still in the process of dissemination and adoption by scholars and researchers. Therefore, this study aims to analyze the literature that has adopted AABSC in developing countries, particularly to focus on SMEs. The research methodology involved a systematic review of the ScienceDirect, IEEE, Scopus, and Web of Science databases from 2010 to 2021, resulting in the gathering of 1,841 papers. These articles were then filtered based on inclusion and exclusion criteria defined in the systematic review protocol. From the findings, a total of 39 articles were selected and divided into four distinct categories. The first category encompasses MAS, accounting for 20.50%, followed by AABSC at 10.26%. The third category pertains to sustainable performance, representing 30.77%, while the final category consists of Hybrid Studies, accounting for 38.46%. Nevertheless, the systematic review also highlights the necessity for more rigorous evaluations regarding the adoption of AABSC. This research has implications for both the body of knowledge and practice, as it sheds light on the outcomes and potential benefits of implementing AABSC in developing country firms, particularly SMEs.

Global value chains and product sophistication in developing countries; the case of Indian manufacturing

ABSTRACT This paper examines whether linking into Global Value Chains (GVCs) can facilitate product upgrading in developing country firms, enabling them to climb up the value-chain ladder. The analysis is conducted using an unbalanced panel of Indian manufacturing firms in the period 2001–2015. Extensive data at the product-firm level is used to construct a sales-weighted average product sophistication level of Indian firms. To account for econometric issues of endogeneity and self-selection, the study employs the System GMM estimator and Propensity Score Matching (PSM). Findings indicate that linking into GVCs boosts the average product sophistication level of Indian firms by roughly 2 percent. Younger, more innovative, and more embedded GVC firms capture higher product sophistication gains from GVCs, while no significant impact is found for foreign investment. Results are robust to the use of different measurement techniques, model and lag specifications and methodologies. Findings suggest that designing trade policies in developing countries to increase GVC integration can enable product upgrading but there is a need to boost internal innovative capabilities to maximise gains from linking into GVCs. Further, the study raises important concerns regarding the future of export sophistication in India, demonstrating a shift in India’s GVC trade towards the Global South and its tendency to export less sophisticated goods to Southern partners.

Supplier concentration, market power and R&D investment

ABSTRACT This paper examines the relationship between supplier concentration and R&D investment of Chinese firms using the sample of all A-share listed companies on the Shanghai Stock Exchange and Shenzhen Stock Exchange from 2008 to 2015. Empirical results present the significant negative relationship between supplier concentration and firms’ R&D expenditure. Further analysis indicates that the weaker the firm’s market power, the stronger the negative impact of supplier concentration on the firm’s R&D investment. This paper enriches corporate R&D investments, supply chains, and market power literature. As developing countries deepen their participation in global supply chain networks and transform through technological upgrading, the findings of this paper have important practical implications for developing country firms to overcome R&D resistance and for policymakers to lead industrial development.

Big data analytics capability as a major antecedent of firm innovation performance

Purpose: This study aimed to investigate the big data analytics capabilities (BDAC) model using resource-based theory (RBT) and dimensions of big data analytics (management, technological, and talent) that influenced the firm innovation performance. Design/methodology/approach: The research uses quantitative research design where 548 respondents were selected for the survey from Pakistan electronic media regulatory authority (PEMRA), national database and registration authority (NADRA), and cellular companies. Only 394 useable responses were received from the respondents. Findings: The findings revealed that BDAC has a statistically positive impact on firm innovation performance. All of the proposed hypotheses were approved in this study. Research limitations/implications: The study gives future direction to the researchers and practitioners to implement this model in other industries. Practical implications: The research makes important theoretical and methodological contributions to the business and society's nexus in developing country firms that are under economic pressure. Originality/value: The paper is new in the context of the developing firm's innovation.

Entrepreneurship and economic growth: does gender matter?

PurposeEntrepreneurial firms contribute to economic growth, but the potential gendered nature of this contribution must be investigated as outcomes of male-owned and female-owned firms differ. The study investigates the female underperformance hypothesis in a cross-country analysis of Schumpeterian entrepreneurs. Next, it investigates if there is a gendered dimension of Schumpeterian firm contribution to economic growth.Design/methodology/approachThe study utilizes both nonparametric and parametric methodologies. Through nonparametric methods, the success of female-owned and male-owned firms is compared. Next, a parametric ordinary least squares regression model tests if there is a gendered nature of an entrepreneurial firm's economic contribution.FindingsIn nonparametric analyses, female-owned entrepreneurial firms in developed countries perform similarly to male-owned firms, while in developing countries male-owned firms significantly outperform female-owned firms. The author also finds strong evidence that the gender of the Schumpeterian entrepreneur does not matter in the contribution in economic growth.Research limitations/implicationsIn all countries, the number of female-owned entrepreneurial firms was significantly lower than that of male-owned firms. The findings point to consistent cultural barriers for women in innovation-related fields and persistent gendered norms in entrepreneurship. Thus, removal of cultural barriers and continued support for Schumpeterian entrepreneurship will benefit women and contribute to a country's economic growth.Originality/valueThe data for this study is a unique utilization of the Enterprise World Survey to identify Schumpeterian entrepreneurial firms. Additionally, the study challenges the female underperformance hypothesis and contributes to the literature on the role of entrepreneurship in economic growth.

Dual embeddedness? Innovation capabilities, multinational subsidiaries, and solar power development in South Africa

One longstanding strand of research in the development studies literature has concerned itself with the development of innovation capabilities in developing-country firms. As most of this literature focuses on domestic firms, foreign-owned firms, such as subsidiaries of multinational companies (MNC), have received much less attention. In this paper, we address this knowledge gap by conducting an in-depth study exploring the learning and capability-building trajectory of a single MNC subsidiary operating in the market for solar power in South Africa. We employ a conceptual framework enabling us to explore capability building arising from the dual embeddedness of the subsidiary respectively in the corporate network of the parent company and the host economy in South Africa. We find that the subsidiary managed to achieve an advanced level of innovation capabilities in a short period. Initially, learning through interaction with the parent company and firm-internal learning in the subsidiary were found to have been essential in the early stage of the capability building process. Learning through collaboration with local research institutes became important only after a certain level of capabilities had already been acquired. Learning by hiring was important throughout, but it became gradually more important in parallel with the increasing specialisation of the local workforce in solar power projects. Our findings are particularly relevant for a new type of 'born global' MNCs that is becoming dominant in the global market for renewable energy. Finally, we point to the importance of regulatory conditions in shaping the degree of knowledge transfer and capability building of MNC subsidiaries.

Labor upgrading and export market opportunities: Evidence from Vietnam

AbstractWe explore and provide an empirical assessment of an important mechanism by which global markets can motivate labor‐related upgrading among developing country firms. New market opportunities, which result from exogenous shocks, can some producers to improve their treatment of workers. These improvements come because they are consistent with taking advantage of new opportunities. We focus specifically on how shifts in U.S. trade policy toward China in 2018 affect the willingness of foreign firms operating in Vietnam to engage in upgrading. Our analyses, based on surveys of firms in 2016, 2017, and 2018, suggest that firms respond significantly to changes in market opportunities, especially when they are primed to consider specific supply chain relationships. This market opportunity mechanism for upgrading contrasts with another widely used tool, in which developed country governments condition access to their markets upon improved human and labor rights outcomes. The former operates, in the short to medium term, at the firm level, while the latter seeks to effect change at the country level.

Global sales, international currencies and the currency denomination of debt

We document that the currency denomination of the debt of developed country firms is strongly related to the geographical distribution of their sales. On average, a unit increase in the percentage of sales in a country is associated with an equivalent increase in the proportion of debt denominated in the corresponding currency. Consistent with the existence of fixed costs of debt issuance, we find that the relationship between the currency denomination of debt and the geography of sales vanishes below the 5% threshold for sales. Finally, we document significant home currency bias and international currency bias in debt issuance. In particular, we show that, controlling for the geography of sales, firms issue more debt denominated in their home currency and the two most traded currencies, the US dollar and the euro.

Chief marketing officer and internationalization—a resource-based view

PurposeThis study aims to examine whether the selection of a new outsider chief marketing officer from a developed-country incumbent firm with an established brand can serve as an alternative strategy to the acquisition of developed-country firms in benefiting the internationalization of a postselection emerging-market brand marketer that suffers from late-mover disadvantages.Design/methodology/approachA pretest (survey) and two main studies (experiments) were conducted to examine the proposed mediation model of “Chief Marketing Officer background—enhancement of capabilities—brand competitiveness”.FindingsAn emerging-market brand marketer gains enhanced resources and capabilities when a new chief marketing officer is recruited from a developed-country incumbent with a superior reputation, leading to improved brand competitiveness. This positive effect accrues from the new chief marketing officer's background (i.e. prior work organization) spilling over to his/her new emerging-market employer.Originality/valueThis research integrates the research streams of emerging-market firm internationalization, chief marketing officer and executive succession to provide an alternative strategy for emerging-market firms to overcome late-mover disadvantages in global markets.

Determinants of capital structure for firms in an Islamic equity index: comparing developed and developing countries

PurposeThe paper aims to identify the differences between developed and developing country firms with respect to firm-specific and country-level determinants of their capital structure. For this purpose, all constituent firms in one of the oldest Islamic equity indices, Dow Jones Islamic Market World Index (DJIM), are considered and the Muslim-majority status of each firm's domicile country is recognized.Design/methodology/approachThe study employs Hausman–Taylor random effects regression with endogenous covariates to explain the debt ratios of firms in DJIM by separating them into developed and developing country subsamples in an unbalanced panel data setting. Developing country subsample is further split into two based on the Muslim-majority status of each firm's domicile country.FindingsConsistent with the previous literature, this study finds that firm-specific characteristics are the main determinants of their capital structure. Additionally, the paper shows that country-level characteristics have an impact on the debt ratio, however, the types of factors vary across developed and developing countries. Debt ratios in developing country firms are lower than those in developed country firms, largely due to the significantly smaller leverage ratios of firms in Muslim-majority countries. Although the debt ratios of DJIM firms are higher in “non-Muslim” countries, the set of firm-level capital structure determinants are not statistically explained by operating in a “Muslim” country. The study also documents that, before the global financial crisis of 2008, companies in developing countries have gradually become less leveraged worldwide.Originality/valueThis paper provides a new perspective into the differences between developed and developing country firms' capital structures by focusing on a relatively homogeneous data set restricted by leverage screening rules of an Islamic equity index and recognizing the Muslim-majority status of each firm's domicile country.

Avoid, acquiesce … or engage? New insights from sub‐Saharan Africa on MNE strategies for managing corruption

AbstractResearch summaryMany questions remain about how MNEs manage corruption. Moreover, what is known derives largely from the perspective and experiences of developed country MNEs. To address this limitation, we compare developed country and developing country MNEs' approaches for managing corruption in sub‐Saharan Africa. Through an inductive, qualitative research design, we discover how and why firms engage in “avoidance” and “acquiescence” strategies. We also uncover a novel “engagement” strategy pioneered by developing country firms that involves such tactics as finding innovative substitutes for corrupt activities, leveraging partnerships with governments and other firms, and forming deeper, long‐term relationships in the host country. These findings suggest that MNEs have more room for active agency and more proactive strategies for managing corruption than has typically been assumed in the literature.Managerial summaryMultinational firms face challenges in host countries where corruption is common, due to concerns that they will need to engage in corrupt acts in order to survive. Some respond by simply not operating in these countries, while others fall into the trap of engaging in illicit activities. We consider an alternative perspective: that firms may use deeper positive engagement with the host country to reduce pressures to engage in corruption, by building their popular acceptance and strengthening their bargaining power. Although we find that this “engagement” approach was first used by developing country firms, developed country firms have also begun using this strategy. The logic underlying this approach can help managers succeed abroad while reducing the need to get their hands dirty in the process.

The Direction of Cultural Distance and the Performance of Foreign Subsidiaries in Latin America

Despite being an important construct, there is an ever-growing concern related to the conceptual and methodological aspects of the Cultural Distance (CD) construct. Critiques suggest that several important properties of CD might have been neglected. While most studies focus on the magnitude (size) of CD, we argue that the construct is incomplete as it does not account for the direction and the specific characteristics of each cultural dimension. Furthermore, although cultures may not be compared in terms of better or worse, when it comes to the implication to foreign subsidiary firms, some cultural characteristics in the host country can be more or less favorable to doing business. We use panel data including foreign subsidiaries from developed countries, emerging markets and Latin America operating in 10 host countries in Latin America totaling 4226 firm-year observations and a combination of 168 home and countries. The asymmetric effects for the direction of CD are highlighted as some cultural characteristics in the host country seem to affect firms in similar ways regardless of cultural similarities between home and host countries. While firms from the region do not seem to be in advantage in dealing with CD, the positive and significant effects for the Power Distance dimension reveals the legitimate use of power attributed to developed country firms operating in Latin America. The asymmetric effects are highlighted as some cultural characteristics in the host countries can be more or less favorable for foreign subsidiary firms to do business. The study highlights important characteristics of CD and points venues for future research.

Home country institutional impediments and international expansion of developing country SMEs

Though institutional contexts are critical drivers of firms’ international expansion, very limited research efforts have focused on how and when these factors facilitate developing country firms’ outward market activities. This study derives insights from the institution-based view and activity theory to test how perceived environmental uncertainty mediates the link between institutional impediments and international expansion. Using data from small and medium-sized firms from Ghana (N = 222) and Ethiopia (N = 203), the findings suggest that high levels of perceived regulatory and cognitive impediments amplify the mediation effect of perceived environmental uncertainty on the degree of SME’s international expansion. Additionally, the findings suggest that, when political connections are well-developed and deployed, the potency of perceived environmental uncertainty as a driver of international expansion is attenuated. Moreover, the study finds that varying levels of home-country industry competition moderate the relationship between perceived environmental uncertainty and the degree of international expansion. Implications relating to theory and practice are discussed.

Between a rock and a hard place: A critique of economic upgrading in global value chains

AbstractResearch SummaryResearchers have tried to understand how insertion into global value chains (GVCs) can lead to economic upgrading for the developing country firms (DCFs) involved. Many of these studies operationalize upgrading as a DCF's movement into higher value‐added activities, where the creation and appropriation of value‐added are assumed to be symbiotic. In doing so, they divorce economic upgrading from its effect on interfirm bargaining power. We address this core assumption by introducing insights from theories on power‐dependence relations. We argue that pursuing an economic upgrading trajectory can be positioned a necessary but insufficient condition for DCF value‐added appropriation. In so doing, we theoretically explicate the conditions under which an economic upgrading trajectory is likely to result in DCF value‐added capture.Managerial SummaryThe fragmentation and dispersion of the multinational enterprises' (MNE) value‐adding activities allows DCFs to insert themselves in the MNEs' value chain. Within both academic and policy spheres, DCFs are encouraged to participate in GVCs as it allows for knowledge and resource transfers from the MNE (upgrading opportunities). In this paper, we offer a critique on this notion of economic upgrading. We argue that researchers have focused on the benefits that new or improved value chain activities can bring, but have largely ignored how these benefits are shared between the chain participants OR members. We address this assumption by introducing power‐dependence and bargaining power to explicate the conditions under which an economic upgrading trajectory can positively influence the DCF's value‐added appropriation.

Rating standards around the world: A puzzle?

Using panel data on S&P's credit ratings for firms from 63 countries over the 2000–2016 period, we uncover divergent patterns in the rating standards over time. Standards strengthen by 1.5 notches for U.S. firms and by 2.2 notches for other developed country firms, but weaken by 1.2 notches for emerging country firms. Default and credit spread tests show that standards tightening for U.S. and other developed country firms is likely unwarranted, whereas standards loosening for firms in emerging economies appears to be justified. This novel and puzzling evidence suggests that S&P does not adopt consistent global standards over time.

CSP and governance in emerging and developing country firms: Of mirrors and substitutes

AbstractA recent debate in the international CSR literature has focused on the question whether CSR serves as a mirror or a substitute of country-level governance. Advocates of the mirror view highlight the role of country level institutions to drive corporate social performance (CSP) levels, whereas proponents of the substitute view find companies to become more active in light of governance gaps. We contribute to this debate by moving the focus to a sample of 264 emerging economy and developing country companies and by comparing the relationship between country-level governance and CSP based on three different CSP dimensions, namely, emissions, human rights, and community performance. Whilst we find corporate emissions performance and human rights performance to align more closely with the mirror view, there is some indication that corporate community performance—possibly traced back to the longstanding tradition of corporate philanthropy in non-Western contexts—instead acts as a substitute to fill institutional voids. We discuss implications of our findings for research and policymakers.

Rating Standards around the World: A Puzzle?

Using panel data on S&P’s credit ratings for firms from 63 countries over the 2000–2016 period, we uncover divergent patterns in the rating standards over time. Standards strengthen by 1.5 notches for U.S. firms and by 2.2 notches for other developed country firms, but weaken by 1.2 notches for emerging country firms. Default and credit spread tests show that standards tightening for U.S. and other developed country firms is likely unwarranted, whereas standards loosening for firms in emerging economies appears to be justified. This novel and puzzling evidence suggests that S&P does not adopt consistent global standards over time.

Developing Country Firms and the Challenge of Corruption

Corruption is an important topic for management scholars and practitioners. Given the rise to economic prominence of firms from developing countries, this paper investigates how developing country firms engage with this challenge. Based on a content analysis of 191 codes of conduct, issued by firms from 18 developing countries, we first investigate what anti-corruption commitments developing country firms make in their codes of conduct; we then determine contextual factors at national business system level that drive differences in firm engagement. We provide evidence for a ‘mirror view’ of corporate social responsibility, according to which companies match the quality of national-level institutions in their own anti-corruption commitments. This result stands in contrast to the basic expectation underlying the concept of corporate social responsibility that companies step in to close governance gaps and address wider societal-level challenges. Our findings thus highlight limitations to purely private governance mechanisms aimed at combatting corruption.

The Good and Bad of Innovation in Emerging Markets

This proposed symposium offers important implications related to the theme of the 2018 Academy of Management meeting, Improving Lives. Innovation in emerging markets has been the topic of many discussions. Innovation can contribute to the economic development of underdeveloped, developing and emerging economies, and even developed countries. For example, innovation can bring more cost effective process of production to reduce the cost of products and services, which can provide a better life for the bottom of the pyramid or any marginalized group of people. Innovation in underdeveloped or developing countries can also allow firms engage in business with other countries that can ultimately bring economic development for the country and potentially move it up the global value chain and to the stage of emerging economy with much larger prospect of development. On the other hand, many have criticized innovation in emerging and developing countries as their inventions are viewed as copying developed country firms’ processes and products, causes of path-dependency and lack of true development and indigenous innovation, cheaper production of such products and services due to factor endowment such as cheaper labor force, and contributor to social and environmental pollution due to lack of integrated institutions. Frugal Innovation from Emerging Market MNCs Presenter: Masud Chand; Wichita State U. Global Innovation Capabilities from Emerging Market: Beyond Reverse Innovation Presenter: Yi Wang; Tsinghua U. Innovation, Rural Economic Development and the Bottom of Pyramid Presenter: Majid Ghorbani; Renmin U. of China Presenter: Liyan Xuan; Renmin U. of China From Value Co-creation to Value Co-destruction? The Case of Dockless Bike Sharing in China Presenter: Juelin Yin; Xi'an Jiaotong-Liverpool U. Presenter: Lixian Qian; Xi'an Jiaotong-Liverpool U.