Firms In Emerging Economies Research Articles

Effects of Emerging-Economy Firms’ Knowledge Acquisition from an Advanced International Joint Venture Partner on Their Financial Performance Based on the Open Innovation Perspective

Although emerging-economy firms (E-E firms) must have a keen interest in improving their performance by utilizing knowledge transferred from their advanced international joint venture (IJV) partner, there has been little research on the performance implications of E-E firms’ knowledge transferred from their advanced IJV partner. So, drawing on open innovation and organizational learning perspectives, we examine whether, how, and when E-E firms’ knowledge acquisition from their IJV partner has a positive impact on their financial performance. Based on data collected from 127 Thai manufacturing firms with a local IJV partnered with an advanced overseas firm, our results reveal that E-E firms’ knowledge acquisition from their IJV partner has an overall positive influence on their financial performance in terms of growth and profitability. Our results further show that innovation performance mediates the relationship between E-E firms’ knowledge acquisition and their financial performance based on a moderated mediation analysis including innovation performance as a mediator and absorptive capacity as a moderator. It is also found that the positive mediation effect of innovation performance is more pronounced in the presence of higher absorptive capacity than otherwise. That is, our results show that even among E-E firms which have acquired much knowledge from their IJV partner, those with higher absorptive capacity achieve better innovation performance than those with lower absorptive capacity, and improved innovation performance subsequently contributes to producing superior financial performance. The key conclusions, implications, and limitations of our study are presented based on these findings.

Does R&D offshore outsourcing improve innovation in vendor firms from emerging economies? A study of biopharmaceutical industry in India

PurposeWhile the phenomenon of R&D offshoring has become increasingly popular, scholars have mostly focused on R&D offshore outsourcing from the point of view of the client firms, who are often from an advanced country. By examining vendor firms, in this paper the authors shift the focus to the second party in the dyadic relationship of R&D offshore outsourcing. Specifically, the authors compare vendor firms with nonvendor firms from the same emerging economy and industry to look at whether vendor firms from emerging economies can improve their innovation performance by learning from their clients. The authors also look at the role of depth and breadth of existing technological capabilities of the vendor firm in its ability to improve its innovation performance.Design/methodology/approachThis study is based on firm-level data from the Indian biopharmaceutical industry between 2005 and 2016. The authors use the Heckman two-stage model to control for self-selection by firms. The authors compare the innovation performance of vendor firms with nonvendor biopharmaceutical firms (group vs nongroup analysis) as well as innovation performance across vendor firms (within group comparison).FindingsThe authors find that, compared to nonvendor firms, R&D offshore outsourcing vendor firms from emerging economies have higher innovation performance. The authors argue that this higher innovation performance among vendor firms is due to learning from their clients. Among vendor firms, the authors find that the innovation gains are contingent upon the two factors of depth and breadth of the vendor firms' technological capabilities.Research limitations/implicationsThis paper makes three contributions: First, the authors augment the nascent stream of research on innovation from emerging economy firms. The authors introduce a new mechanism for emerging economy firms to learn and upgrade their capabilities. Second, the authors contribute to the literature on global value chains, by showing that vendor firms are able to learn from their clients and upgrade their capabilities. Third, by examining the innovation by vendor firms, the authors contribute to the R&D offshore outsourcing, which has largely focused on the client.Practical implicationsThe study findings have important implications for both clients and vendors. For client firms, the authors provide evidence that knowledge spillovers do happen, and R&D offshore outsourcing can turn vendors into potential competitors. This research helps firms from emerging economies by showing that becoming vendors for R&D offshore outsourcing is a viable option to learn from foreign firms and improve innovation performance. Going outside geographic boundaries may be a large hurdle for these resource-strapped, emerging economy firms. Providing offshore outsourcing services for narrow slices of R&D activities may be a starting point for these firms to upgrade their capabilities.Originality/valueThis paper is among the first to quantitatively study the innovation performance of vendor firms from emerging economies. The authors also contribute to the nascent literature on innovation in emerging economy firms by showing that providing R&D offshore outsourcing services to client firms from advanced countries can improve firms' innovation performance.

How Management Innovation Affects Product and Process Innovation in Turkey: The Moderating Role of Industry and Firm Size

In the last decade, studies on how firms introduce management innovations to drive product and process innovation have proliferated. It has long been assumed that management innovation enhances product and process innovation by increasing firms' exposure to new knowledge sources and improving their efficiency in the production processes. However, there is still an important conceptual debate and contradictory empirical results about the actual benefits of management innovation and the contextual conditions under which those benefits are likely to transpire. To address this gap, we aim to investigate the benefits of management innovation on product and process innovation in the context of emerging economy firms, in Turkey, and how industry affiliation and firm size influence those benefits. Using responses from 1,065 Turkish firms, we find that the benefits of management innovation on product and process innovation is greater for both service firms and small firms compared to manufacturing firms and large firms. The paper has important theoretical implications to management innovation literature by showing that the benefits of management innovation on product and process innovation show variance depending on different contextual conditions.

Does institutional ownership and internationalization affect corporate social responsibility in emerging economy firms? An empirical evidence from India

PurposeThe preference of firm corporate social responsibility (CSR) spending is shaped by different groups of owners and the institutional environment in which the firm operates. This paper aims to study the heterogeneity among the controlling groups and firms’ internationalization in influencing the CSR decision in emerging economy firms.Design Methodology ApproachThis paper draws understanding from institutional theory to inspect the propensities of various ownership groups such as lending institutions (LI), domestic mutual funds (MF) and foreign institutional investors (FIIs). The empirical analysis was conducted from a sample of 1,594 unique Bombay stock exchange (BSE)-listed non-financial Indian firms during the 2014–2019 period using Tobit panel regression analysis.FindingsThe findings reveal that firms’ CSR activities are impacted differently by ownership share of different types of institutional investors after controlling for firm-level resources and capabilities. Lending institutions, FIIs and MF are supportive of CSR investments by firms along with international investments by the firm. Further, the results show that the CSR spend is positively influenced by the business group affiliation of the firm compared to the unaffiliated group of firms.Practical ImplicationsThe analysis has implications for both institutional investors and multinational firms. In the merging market context, managers and owners who target long term strategies such as CSR will benefit from increasing shareholdings of creditors (lending institutions). They can also take steps to improve their transparency and corporate governance structure so as to attract foreign institutional investments, thus, in turn, helping the internationalization process of the firm.Originality ValueThis paper considers the role of the diverseness of the ownership institutional investors along with the moderating effect of business group affiliation of the firm and international investments in impacting the CSR spend. This disparity has not been previously studied with the latest data in an emerging economy context.

Board of director attributes and CSR engagement in emerging economy firms: Evidence from across Asia

This study investigates the relationship between the board of director attributes and corporate social responsibility (CSR) engagement across a sample of Asian emerging economy firms. We find a statistically positive relationship between CSR engagement and several directors' attributes including their political influence, international experience, business expertise, other directorships held and independence from management. These empirical results indicate that while corporate governance recommendations designed for developed economy firms are relevant for emerging economy firms, additional director attributes are also important in encouraging CSR engagement in emerging economy firms given the divergent institutional and resource dependency issues they face.

Explicating firm international corporate social responsibility initiatives

PurposeThe growth of the international business is a new global reality of emerging economy firms. The increasing international footprint of business firms is transpiring into firms being embedded in the nest of the international business landscape. corporate social responsibility (CSR) initiatives cater to stakeholders. Given this, it is imperative that International CSR (ICSR) initiatives are undertaken for meeting the expectations of international stakeholders. It is important that ICSR is both efficient and effective. The purpose of this paper is to explicate the concept of ICSR in this study.Design/methodology/approachThis is an exploratory study and for this, a qualitative research approach is applied. Based upon the inputs from the literature a semi-structured open-ended questionnaire is prepared. Non-probabilistic purposive snowball sampling is used to identify experts on ICSR. Qualitative in-depth personal interviews are conducted. The qualitative data is collected by in-depth personal interviews with 31 Indian ICSR experts by using a semi-structured open-ended questionnaire. Data collection was stopped after reaching thematic saturation post 31 interviews. The data is thematic and relational content analysed for seeking an answer to the research questions posed.FindingsThe author for explicating ICSR developed a moderated mediation model. The developed moderated mediation model on ICSR is having nine factors, namely – firm ICSR perspective (FICSRP), ICSR practice (ICSRP), CSR planning function (ICSRPF), organisational ICSR commitment (OICSRC), organisational stakeholder inclusivity orientation (OSIO), firm international exposure (FIE), bounded rationality of ICSR practitioners (BRICSRP), ICSR management bounded reliability (ICSRMBR) and nature of ICSR footprint (NICSRF). The author found that “firm outlook”, “CSR planning plus implementation” and “CSR commitment” are the independent variables. While firm “international exposure” and “stakeholder inclusivity orientation” are the mediating variables. CSR bounded “reliability” and “rationality” are moderating variables. The “nature of ICSR” (classified as an island or mixed or extension) is the dependent variable.Research limitations/implicationsThis study is set in the context of internationalisation of the emerging economy firms of India. This qualitative empirical research study developed a moderated mediation model on ICSR. There are nine factors in the model, namely, “firm outlook”, “CSR planning plus implementation” and “CSR commitment” as independent variables, firm “international exposure” and “stakeholder inclusivity orientation” as the mediating variables, CSR bounded “reliability” and “rationality” as moderating variables and the “nature of ICSR” as the dependent variable.Practical implicationsManagers engaging in planning and implementation of ICSR initiatives in various foreign countries could best upon this study findings improve the ICSR delivery. Managers in their firms could improve the “firm outlook” to enhance ICSR, undertake increased “CSR planning plus implementation” and “CSR commitment”. Managers could base upon this study results to improve the moderating conditions of ICSR that is CSR bounded “reliability” and “rationality”. Better firm managers “international exposure” and “stakeholder inclusivity orientation” will better mediate ICSR action. All these would finally help the ICSR managers to better deliver the more effective “nature of ICSR”.Social implicationsA better understanding of ICSR will help foreign managers to develop more efficient and effective foreign CSR initiatives. This will help a better quality of CSR work done in foreign countries. This will help the host country communities and society in general.Originality/valueThis study is one of the first set of studies in the context of ICSR. This qualitative empirical study is also one of the first studies to explicate ICSR through a moderated mediation model consisting of organisational variables such as “firm outlook”, “CSR planning plus implementation” and “CSR commitment” as the independent variables. The ICSR model is composed of the firm “international exposure” and “stakeholder inclusivity orientation” as the mediating variables, CSR bounded “reliability” and “rationality” as moderating variables and the “nature of ICSR” as the dependent variable.

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

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

Exploring Cultivation Path of Building Information Modelling in China: An Analysis from the Perspective of an Innovation Ecosystem

Ecosystem theory provides a new perspective for studying the development of the architecture engineering and construction (AEC) industry in the age of information and communication technology (ICT). As an extremely ICT innovation, building information modelling (BIM) not only brings technical benefits to the AEC industry, but changes the innovation paradigm of the AEC industry towards an innovation ecosystem, which improve productivity and sustainability throughout the project life cycle. This article contributes to innovation ecosystem theory by exploring the structure of the BIM ecosystem and deriving its cultivation path. Then, as the leading city in China for developing BIM technologies, Shanghai was selected as the case study to elaborate on the cultivation path of the BIM ecosystem. The results indicate that three layers identified in the structure contribute to the understanding of the boundaries, units, and analytical focus of the BIM ecosystem, with the BIM platform being the core layer. This topology structure, with the BIM platform as the hub, promotes interdependency and symbiosis among participants in the cultivation of the BIM ecosystem, supporting the birth, expansion, maturity, re-innovation (or extinction), and sustainable development of the BIM ecosystem. This research complements and extends literature on the BIM ecosystem, and provides implications as to the construction, cultivation, and sustainability of BIM ecosystems for emerging economy firms.

Vantage of Foreignness: How Expansion Abroad Influences Resource Acquisition at Home

This paper examines how global expansion of privately-owned enterprises (POEs) from emerging economy influences their resource acquisition back in the home country. We argue that, while POEs confront the liability of foreignness in host countries, the same ‘foreignness’ through global expansion serves as a positive signal to stakeholders at home market, thus mitigating POEs’ liability of privateness and facilitating their resource acquisition. Using Chinese listed companies as our research context, we found that global expansion of Chinese POEs significantly increased their subsequent financial resource acquisition from home country banks and suppliers. We also found that this positive effect was amplified when POEs entered more advanced economies and adopted greenfield investment (versus acquisition) as the mode of entry, but was attenuated when POEs had stronger political connections. We conclude the paper by discussing the implications of our findings for research on liability of foreignness, liability of privateness and internationalization of emerging economy firms.

Feedback on Multiple Goals and OFDI Location Choices for Emerging Economies Firms

In recent years, performance feedback models have been increasingly used to explain firms’ OFDI activities. In this stream of studies, scholars often identify performance feedback relative to some performance target as a risk trigger and then examine how firms adapt their OFDI as a response to the discrepancy between realized performance and the selected aspiration level. Though the stream of studies sheds helpful light on associations between performance feed- back and OFDI, it largely overlooks the possibility that firms may make investments to different overseas locations as responses to feedback clues relative to different reference points. In this study, we aim to investigate how performance feedback on two goals including return on assets (ROA) and sales growth (SG) influences firms’ OFDI in developed and developing countries. With data collected from listed Chinese firms during a period from 2007 to 2017, our findings indicate that performance feedback relative to ROA and GS indeed results in firms’ OFDI in different locations. Explicitly, performance discrepancy relative to ROA, no matter below or above, drives firms to make OFDI in developed countries. However, though negative performance feedback relative to GS impels firms to make more OFDI in developing countries, positive feedback will not change OFDI level significantly.

Capacity utilization in emerging economy firms: Some new insights related to the role of infrastructure and institutions

This paper adds to the literature on capacity utilization at the firm level by considering the influences of institutions. Specifically, we consider the threat of informal competition as a sign of weakness of internal institutions, and corruption as a signal of the weakness of external institutions. The extant literature has generally considered the role of market and technical factors in dictating capacity utilization. Results, using data across more than 100 nations, show that both corruption and informal competition undermine firms' incentives to use capacity maximally. We also consider the role of infrastructure bottlenecks. Our findings showed that water supply constraints and severe electric supply restrictions limited firms’ ability to utilize capacity, but transportation limitations were not similarly binding. Further, firms' attributes, including size, age, ownership structure, and managerial experience have important bearings. An important implication is that firms’ inability to utilize capacity might be rooted in factors beyond technical constraints.

Exploring Firm-Level Antecedents that Drive Motives of Internationalization: A Study of Knowledge Intensive Indian Firms

ABSTRACTWe study firm level antecedents that drive different motives of internationalization of emerging economy firms. Based on firm's resource based considerations of asset exploitation versus asset augmentation and locational advantages of host countries, we provide a framework to classify the motives of internationalization of emerging economy firms belonging to knowledge intensive industries. Motives of internationalization have been classified into three broad categories – market-seeking, opportunity-seeking, and strategic asset-seeking. We determine motives behind different modes of internationalization – alliances, acquisitions, and greenfield ventures. Drawing upon the adaptability, amalgamation, and ambidexterity (AAA) advantages from the springboard perspective, we find that firm characteristics like R&D investments, availability of financial slack, firm's ownership structure, and family control shape up its motive of internationalization.

Ties' repeatedness, partners' social value, and alliance portfolio performance in emerging economy: The moderating roles of firm-government linkages

Repeatedly collaborating with previous partners or following peers' decisions are two primary strategies employed by emerging economy firms in selecting their alliance partners. As a result, the alliance portfolios of firms often feature a high level of ties' repeatedness and partners' social value—the extensiveness of a firm's partners being selected by other players in the industry. However, few studies examine whether these two features can result in superior alliance portfolio performance. Leveraging data collected from 566 fund product distribution alliances initiated by 62 fund companies in a 5-year period (2007–2011), we find that ties' repeatedness does not significantly improve alliance portfolio performance. In fact, a high level of social value of the current partners produces a negative effect. However, firms' linkages to governments can change the performance consequences of these two features. As a category of formal government–firm linkages, state ownership improves the positive effect of ties' repeatedness on alliance portfolio performance, while it strengthens the negative effect of partners' social value. As a category of informal linkages, political ties weaken the positive effect of ties' repeatedness on alliance portfolio performance but cannot significantly alleviate the negative effect of the social value of current partners.

The role of informal competition in driving export propensity of emerging economy firms

PurposeCompetitive pressure from informal firms has always been a threat to the formal enterprises. However, the strategic choices a firm makes to deal with such competitive pressures still remain under-explored. The purpose of this paper is to examine the influence of informal competitive pressures in driving export propensity of formal firms.Design/methodology/approachThe paper is based on a standard error logistic model, and the model takes into account the contingent relationships along with the primary relationship. The authors draw the sample of 9,812 manufacturing firms spanning across the Indian sub-continent from the World Bank enterprise survey conducted in the year 2014.FindingsThe empirical results indicated that the level of competition from informal firms is positively associated with the propensity to export. The primary relationship is also affected by various contingent factors such as regulatory obstacles, bribery and new product development.Research limitations/implicationsAlthough the World Bank enterprise survey data provide a broad coverage, the study warranted few proxy measures in order to operationalize formal competition as it was not captured directly in the concerned data set.Practical implicationsThe analysis demonstrates that informal competition has direct effect on the firm’s propensity to export. The findings indicate that export is an attractive action alternative for firms facing informal completion in an emerging economy. The results further indicate that this effect strengthens as institutional factors such as regulatory obstacles and bribery increase.Social implicationsThe paper is an attempt to alter the prevailing negative view on informality. The findings indicate that informal competition spurs competitiveness in the formal sector indicating its positive role in the economic growth of the nation.Originality/valueThe paper takes cue from attention-based view of the firm and the institutional escapism logic to affirm the role of informal competition and various contingent institutional and strategic factors in driving export propensity.

Institutional support, hazards, and internationalization of emerging market firms

AbstractResearch SummaryWe utilize the institution‐based view to study the effect of home institutions on the internationalization of emerging economy firms. We argue that institutional support and institutional hazards co‐exist and can influence firm internationalization simultaneously. However, institutional support has a stronger effect on internationalization than institutional hazards. Further, we argue that when the institutional environment is supportive of the internationalization effort, state ownership provides proximity to institutional resources and thus amplifies the relationship between institutional support and firm internationalization. However, when the institutional environment is perilous to business activities, state ownership increases dependency on the institutional environment and constrains the escape from the domestic market. Results based on the World Bank Enterprises Survey of 9,337 manufacturing firms from 81 emerging economies largely support our arguments.Managerial SummaryHome country institutions have different components, some of which can support while others can hinder the internationalization of emerging economy firms. Our study helps managers to identify different types of home‐based institutional supports that can help international expansion and home‐based institutional hazards that firms can avoid by diversifying their sales geographically. The findings suggest that leveraging institutional support at home country has a stronger effect on internationalization than escaping institutional hazards because institutional supports can complement other home‐based advantages that emerging economy firms have. Furthermore, state ownership can increase a firm's proximity to institutional resources, providing firms greater access to institutional support for international expansion.

An ecosystem-based analysis of design innovation infringements: South Korea and China in the global tire industry

Formal intellectual property right (IPR) protections under global agreements are a policy linchpin of the new global knowledge economy. However, we observe that while some emerging-economy firms have successfully transitioned from imitation to innovation, others persist in imitation, sometimes resulting in IPR violations. In this paper, we study design innovation in the global tire industry, focusing on South Korean and Chinese firms, and uncover IPR violations by both groups. However, by the 2000s, Korean tire firms had transitioned to developing their own design innovations while Chinese firms persisted in imitation, as evidenced by continuing IP lawsuits. We trace this difference to the fact that South Korea is home to globally successful multinational automobile manufacturers, whereas China is not. These automobile multinationals function as “keystone organizations” in a national industry ecosystem and are critical to facilitating the transition to innovation. Our study emphasizes the importance of linkages to keystone organizations as crucial elements supporting operations that comply with global IP regulations.

Corporate governance and returns to emerging economy firm acquisitions in tax havens: An empirical test on Indian firms

AbstractCross‐border acquisitions (CBAs) by emerging economy firms are known to yield positive stockholder returns. A nontrivial fraction of CBAs by emerging economy firms are in tax havens. We argue because of weak corporate governance in emerging economies and the secrecy afforded by tax havens, emerging economy firm CBAs in tax havens yield lower stockholder returns than their CBAs in nontax havens. We also argue the negative effect of tax haven destinations is greater for firms with greater business group ownership and for firms with greater foreign insider ownership. Furthermore, we argue the negative effect of tax haven destinations is mitigated for firms whose stock is actively traded in the market. Empirical tests in a sample of nearly 800 CBAs by Indian firms from 2002 to 2011 support our hypotheses. Our study contributes to a better understanding of stockholder returns to CBAs by emerging economy firms and the influence of corporate governance on these returns.

Board of Director Attributes and CSR Adoption in Emerging Economy Firms: Evidence from Asia

Board of Director Attributes and CSR Adoption in Emerging Economy Firms: Evidence from Asia

Impact of R&D Offshore Outsourcing on Innovation Performance of Outsourcing Vendors

We study the question of whether emerging economy firms that are offshore outsourcing vendors for R&D activities learn from knowledge spillovers from their clients and gain in innovation performanc...

Impact of international entry choices on the nature and type of innovation: Evidence from emerging economy firms from the Indian bio-pharmaceutical industry

As emerging economy multinational enterprises (EMNEs) enter foreign countries in search of new markets, seeking to expand their knowledge bases, research on the type and nature of innovation activity is needed to address the impact of EMNEs’ choices related to international expansion. Building on prior literature on entry mode and location choices, as well as on organizational learning, we argue that how and where an EMNE expands internationally will impact the nature of its innovation. We carry out empirical analysis on a sample of 167 Indian bio-pharmaceutical firms for the period from 1997–2017. Our findings suggest that greenfield ventures foster innovation in core technologies, while cross-border mergers and acquisitions (M&As) foster innovation in non-core technologies. In addition, locating subsidiaries in high income countries encourages product innovations, while locating in low income countries encourages process innovations. Our findings contribute to the growing literature on differences in learning outcomes of EMNE internationalization.