Firms In Emerging Economies Research Articles

China's technological catch-up through foreign IP acquisitions: Disaggregating the effects of cross-national distance

While the effects of proximity on the technological catch-up of emerging economy firms are well documented, little is known about how the sub-dimensions of cross-national distance impact such firms' acquisition of foreign IP. Cross-national distance is a complex, multi-dimensional construct that has the potential to influence catch-up in different ways, especially for Chinese firms. We use the established Wharton indicators of cross-national distance (Berry et al., 2010) to understand foreign IP acquisition by Chinese firms over a 10-year period. Results show: (1) different sub-dimensions of distance have different direct effects on foreign IP acquisition, (2) a positive effect of knowledge distance on IP acquisition interacts with three other forms of distance, (3) the most aggressive foreign IP acquisition strategies are linked to only three forms of distance, and (4) the impact of disaggregated distance depends on IP asset type and whether the acquirer is in manufacturing or services. Results provide new insight into China's technological catch-up and the complex, multi-dimensional nature of international proximity influencing technological catch-up through acquisitions.

Acquirer ESG, Home Country Policy Enforcement, Country Distance, and Cross-Border Mergers and Acquisitions: Evidence from Chinese Firms

This paper examines the impact of ESG (Environmental, Social, and Governance) on cross-border M&A activities and outcomes from the perspective of emerging economy firms. Using cross-border M&A events of Chinese acquirers between 2009 and 2021 as a sample, we employ logistic regression and multiple linear regression for analysis and conduct robustness tests. The study finds that: (1) Acquirers with lower ESG ratings are more likely to choose other developing countries for M&A, and the home country’s policy enforcement significantly positively moderates this relationship; (2) Lower ESG ratings of acquirers have a significant negative impact on their M&A performance, while the country distance between China and the host country does not have a significant moderating effect on this relationship. These results suggest that under strong home country policy enforcement, emerging economy firms are pressured by their home country’s ESG ratings to choose host countries with lower ESG requirements for M&A. However, this approach is like “drinking poison to quench thirst”; while selecting an “ESG haven” can temporarily reduce ESG rating pressure, low ESG ratings ultimately result in lower M&A performance.

Limitations of Managerial Attention and Role of Advisors: CBAs by Emerging Economy Firms

Limitations of Managerial Attention and Role of Advisors: CBAs by Emerging Economy Firms

The Effect of Internationalization on Innovation in Emerging Economy Firms: Role of Board Diversity

The Effect of Internationalization on Innovation in Emerging Economy Firms: Role of Board Diversity

Contingent Value of Political Connections in Cross-Border Acquisitions of Emerging Economy Firms

Contingent Value of Political Connections in Cross-Border Acquisitions of Emerging Economy Firms

Unlocking the relationship between board of directors’ attributes and international diversification in Indian firms

PurposeThe study aims to investigate the relationship between certain key attributes of the board of directors as their international experience, tenure, age, independence and size and internationalization strategies of firms in an emerging economy.Design/methodology/approachThe study uses random effects panel Tobit regression on a data set of 418 Indian companies spanning over a time frame of nine years from fiscal year (F.Y.) 2009–2010 to F.Y. 2017–2018.FindingsBoard members substantially associate with internationalization choices of emerging economy firms. Specifically, board members with extensive international experience, shorter tenure, higher age, greater independence and larger board size are associated with high level of internationalization in these firms.Research limitations/implicationsThe study advocates that Indian companies should focus on recruiting board members with international experience, periodically refreshing their boards, valuing wisdom and experience, adhering to regulatory requirements of independent directors and increase the number of board members to expand internationally. By following this, Indian companies can successfully expand into international markets.Originality/valueThe study’s originality lies in its focus on the role of board members in the internationalization strategy of emerging economy firms, which remains an under-researched area.

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.

An Attempt to Understand Stock Market Investors’ Behaviour: The Case of Environmental, Social, and Governance (ESG) Forces in the Pakistani Stock Market

The present study investigates the decision-making process of investors on the Pakistan Stock Exchange with regard to portfolio construction, explicitly focusing on the incorporation of ESG concerns. A quantitative research approach has been implemented for this paper. The hypotheses have been developed and tested through the adapted questionnaires. The data were collected from individual Pakistani investors. The present study employed SmartPLS-SEM to quantitatively assess data received from a sample of 421 out of 500 respondents. Based on the available data, investors participating in the Pakistan Stock Exchange are notably impacted by ESG aspects. The findings of this study hold significance for emerging economy firms, regulators, and investors, in terms of both theoretical and practical ramifications. The study’s findings demonstrate a clear indication of investors’ significant emphasis on ESG matters. This research made a significant contribution to the field of behavioural finance with a focus on ESG-related issues. This work contributes to the literature on ESG elements by using the Theory of Planned Behaviour (TPB) to adapt the ESG components from the United Nations Global Compact (UNGC) and Thomson Reuters Corporate Responsibility Index (TRCRI). Furthermore, it provides valuable insights for stakeholders who are involved in the ever-evolving realm of sustainable finance within developing countries.

Political connections and firms’ trade credit in emerging economies

PurposeTrade credit is an important business-to-business marketing tool for building firms’ competitive advantage. Many studies explore the determinants of trade credits from a trust-based view, but the role of political connections is largely overlooked, despite their potential influence in assessing firms’ trustworthiness in the context of emerging economies. This study aims to fill this gap by examining how political connections affect the capacity of emerging economy firms (EEFs) to grant and receive trade credit.Design/methodology/approachThis study tests a conceptual model using secondary data collected from 1,149 Chinese privately owned listed manufacturing firms between 2008 and 2016.FindingsThis study finds that political connections reduce EEFs’ accounts receivable and payable; their philanthropic activities alleviate this negative effect for accounts payable, while patent applications reduce it for accounts receivable. These findings suggest the effect of political connections can spillover to EEFs’ relationship with their up- and down-stream partners.Practical implicationsThis study has implications EEF managers, particularly in pointing to the detrimental effect of political connections on relationships with buyers and suppliers, and highlights the need to adopt suitable approaches to offset this effect.Originality/valueThis study sheds new light on the negative effect of political connections on EEFs’ capacity to grant and receive trade credit in their exchanges with up-stream and down-stream partners. It enriches the trust-based view of trade credit by revealing the significant influence of EEFs’ political connections, while also advancing a contingency view by testing the moderating role of corporate philanthropic activities and patent applications.

Exploring the indirect effects of innovation policy and innovation culture on business model innovation: a moderated mediation analysis

Purpose While previous studies have investigated the factors influencing the internet adoption, the findings may not be transferable to explain blockchain technology adoption, despite its similarities to the internet. This study aims to address this gap by exploring the mediating effect of innovation culture and the moderating effect of innovation policies on business model innovation (BMI) outcomes in emerging economy firms. It investigates how these factors synergistically facilitate BMI, offering practical guidance for public authorities and managers to develop relevant policies and govern businesses effectively. Design/methodology/approach This study collected data from 287 valid responses among 948 listed companies on the Taiwan Stock Exchange using a structured questionnaire. This study used structural equation modeling and Process Model 5 to analyze direct and indirect effects, focusing on corporate key capabilities for BMI while exploring the combined impact of innovation culture and policies. Findings The study revealed that innovation culture and innovation policies synergistically facilitate BMI, accelerating firms’ progress toward BMI in the emerging economy context. These outcomes offer valuable guidance for public authorities and company managers in formulating relevant policies and managing businesses effectively. Originality/value This study contributes to the literature by uniquely exploring the combined influence of innovation culture and policies on BMI in emerging economy firms, shedding light on their compounding effect and offering practical implications for policy-making and business management.

Performance of cross-border acquirers from India and China: its sustainability in the long-run?

PurposeEmerging market multinational companies have been vigorous in pursuing inorganic growth through cross-border acquisitions (CBAs). The fundamental studies till now have portrayed that rapid internationalization through CBAs tends to create value for these emerging market firms (EMFs) in the short term. However, there is an ambiguity about whether these firms endure better performance in the long term. The purpose of this study is to assess the long-term (ex-post) financial and operating performance of EMFs involved in overseas acquisitions before the COVID-19 pandemic hit the world economy.Design/methodology/approachCBAs completed by Indian and Chinese companies constitute the sample of the study. The performance has been analysed during the pre-COVID period spanning 17 years from 2001 to 2017. A comprehensive set of 14 financial ratios has been used to represent change (improvement/decline) in enterprises’ post-acquisition operating performance; these ratios have been divided into four broad groups: profitability, efficiency, solvency and liquidity ratios.FindingsThe performance of Indian companies has deteriorated significantly after the acquisition. However, there has been no change (deterioration/improvement), subsequent to CBAs, in the profitability of Chinese firms.Practical implicationsThe findings of the study support that firms from emerging economies exploit CBAs as a “springboard” to obtain strategic assets including intangible resources and brands rather than to achieve synergies through economies of scale and scope. Apparently, outbound acquisitions by emerging economy firms are not driven by cost-reduction or revenue-generation activities.Originality/valueNone of the studies, to the best knowledge of the authors, has carried out performance analysis using a comprehensive set of financial ratios. The comparative study of two emerging economies is another valuable addition to the existing literature. The study holds the potential to serve as the benchmark to assess the performance of CBAs executed after COVID-19.

Find your match! How emerging economy firms combine different forms of openness to innovate

This study investigates how combining different forms of formal collaboration (i.e., developed vs. emerging economy collaborations) and informal search (i.e., search breadth vs. depth) affects the innovation performance of emerging economy firms. The open innovation literature has primarily focused on the effect of individual open innovation practices, generating conflicting results. We argue that outcomes depend on specific combinations of open innovation practices. Drawing on the notion of external absorptive capacity routines, we argue that combining forms of openness that rely on the same absorptive capacity routine positively affects innovation performance. We specifically ask whether broad or deep search, which rely on different routines, is more appropriate for emerging economy firms who are collaborating with developed or other emerging economy partners. We test our hypotheses using responses from 659 manufacturing and service firms to two waves of the Turkish Innovation Survey. Using Tobit regression analysis, we generate findings consistent with our expectations. We find that deep search is appropriate when collaborating with developed economy partners, whereas broad search is appropriate when collaborating with other emerging economy partners. These confirm the importance of combining forms of openness with matching routines. Overall, we illustrate the importance of finding the right combination of different forms of openness.

The cost of foreign ownership: Voluntary sustainability reporting and financial performance in an emerging economy

PurposeMany emerging economy firms are under foreign owners' pressure to embrace the challenges of addressing corporate social responsibility (CSR) and consider adopting sustainability initiatives. However, it is not clear how foreign ownership plays a role to enable or inhibit these emerging economy firms from translating sustainability initiatives into improved financial performance. Utilizing neo-institutional theory, the authors argue that emerging economy firms that voluntarily report sustainability gain legitimacy in the eyes of shareholders and improve stock market performance. However, emerging economy firms may not have the resources to reconcile the internal stakeholders' various legitimacy requirements to promote sustainability practices, resulting in a negative association with accounting performance. Foreign ownership attenuates the relationship between sustainability reporting and firm performance due to the different legitimacy requirements in foreign markets.Design/methodology/approachTo test the study’s hypotheses, the authors collected and analyzed a large sample of publicly listed firms between 2010 and 2016 in Taiwan where the types of foreign ownership include foreign trust funds, foreign financial institutions and other foreign legal entities. Regression analyses were conducted to investigate whether the firms that report their sustainable practices have better financial performance, including stock market performance and accounting performance. Additionally, a three-step procedure was employed to address the endogeneity issue with a binary explanatory variable.FindingsThe positive stock market reaction to the emerging economy firms' voluntary sustainability reporting supports legitimacy gained among investors. By contrast, sustainability reporting has a negative association with accounting performance due to the difficulty of reconciling different legitimacy requirements among various stakeholders in emerging economies. Further, foreign ownership, particularly the trust fund, exhibits a negative moderating effect on the relationship between sustainability reporting in aligning corporate practices with sustainable development goals (SDGs) and the company's stock market performance.Originality/valueBy examining the less tested contingent role played by foreign ownership in the emerging economy firms' sustainability reporting, the authors provide insights into the influence exerted by different types of foreign ownership on firms' financial performances beyond previous studies that focus on family ownership, state ownership, or managerial ownership in emerging economies. The findings shed light on corporate sustainability strategy and foreign direct investment policies for an emerging economy.

Corruption, crime and investments by firms in emerging economies

PurposeThe study aims to investigate the effect of corruption and crime on the investments by firms in emerging economies (EEs).Design/methodology/approachThe study adopts the generalised methods of moments (GMM) estimator and data across 57 EEs.FindingsThe study shows that crime management, corruption and external quality assurance drive-up investments. Additionally, investments decline with firm age and crime incidence. Corruption and crime managements increase investments by exporting firms more than non-exporting firms investments. Also, external auditor services benefit investments by large firms more than small-medium firms.Originality/valueThere is a need for EEs to implement policies that will curtail corruption and create a level playing field and sustainable firm growth. EEs firms must be innovative to expand their productive investments and grow over time. Also, EEs firms should seek external quality certification, invest in internal security and monitor goods in transit.

Firm environmental, social, governance and financial performance relationship contradictions: Insights from institutional environment mediation

Empirical studies examining firm environmental, social, governance [ESG] and financial performance have provided contradictory results. The institutional difference hypothesis (Julian and Ofori-Dankwa, 2013) has portrayed that embedded legal, cultural, social, and economic institutional environment could be behind such results. Therefore, our motivation in this study is to examine whether country-specific legal origin (civil vs. common law), investors protection rights (strong vs. weak), national culture (ESG-averse vs. ESG-seeking), and corruption level (low vs. high) play a mediating role in nourishing firm ESG performance to strengthen or weaken its financial performance around the world. Our findings show that common law countries firms, firms from ESG-seeking national culture, and firms operating in high corruption environment undertake more ESG performance to improve their financial performance. Furthermore, strong investors protection rights negatively mediate firm ESG and financial performance relationship. Economic status of a country takes an important role only in case of emerging economies firms.

Configurational framework of learning conduits used by emerging economy firms to improve their innovation performance

The past decade has seen a dramatic increase in innovation coming from emerging economy firms. In response to this popular phenomenon, scholars are examining many learning conduits used by these firms to improve their innovation performance. The various learning conduits used by these firms include technology licensing, government R&D support, university-firm linkages, business groups, government affiliation, outward FDI, international collaborations, inward FDI, outsourcing, exporting, and importing. Building on a systematic review of 115 papers on this topic, we find this literature to be unstructured, with no organizing framework. To help researchers take stock and make advancements, we use configurational theorizing to develop a framework that helps understand when and why these emerging economy firms tend to use the different learning conduits. Specifically, we propose that the choice of learning conduits is often driven by two key factors: the relative level of institutional formality of the emerging economy and the relative level of traditional ownership advantages of these firms. Building on these two dimensions, we classify emerging economy firms into four configurations: social network focused firms, laggard firms, leader firms, and cutting-edge firms. We generate new insights based on our framework and overview of the existing studies, identify gaps in the literature, and make recommendations about how to extend this growing stream of research.

Dynamics of Catching Up: Exploring National, Sectoral, and Ownership Influences in Two Emerging Economy Firms

Dynamics of Catching Up: Exploring National, Sectoral, and Ownership Influences in Two Emerging Economy Firms

The influence of informal and foreign competition on innovation: does size matter

This study examines whether micro or large firms in emerging economies produce innovation as a response to threats from informal and foreign competitors. This research focuses on firm size because it captures micro and large firms' resource similarity and market commonality with informal and foreign competitors. Specifically, this study theorises how threats from informal and foreign competitors influence emerging economy firms' engagement in innovation activities depending on firm size, such as micro and large firms. Results from the empirical analyses, with survey data of a large sample of firms located across Eastern Europe and Central Asia, provide support to hypotheses.

Dışsal Ortaklık Ve Yenilik Hedefleri: Sektörün Aracılık Etkisi

This study examines the effect of external partnering on innovation performance of emerging economy firms by considering different conditional factors. Firstly, the effect of innovative intent is examined to understand how the link between external partnering and innovation performance evolves. Secondly, the interaction effect between external partnering and innovative intention is further examined depending on the industry affiliation. This research argues that firms with less innovative intention leverage more from external partnering than firms with more innovative intention. Moreover, this research argues that the link between external partnering and innovative intent becomes positive for manufacturing firms and negative for service firms. Based on a dataset of 2370 firms from different industries in Turkey, this research finds support for the hypotheses.