Firms In Emerging Economies Research Articles

Ownership and corporate social responsibility in Indian firms

PurposeThe purpose of this paper is to look at the association between different ownership categories and corporate social responsibility (CSR) spending of selected Indian firms.Design/methodology/approachRandom-effects Tobit panel regression is performed on a panel of 4,388 firm years of 1,722 unique firms over a three-year period (2014-2016).FindingsDifferent categories of institutional investors have different preferences for CSR spending of a firm. Promoters of business-group affiliated and unaffiliated firms also behave differently towards CSR activities of their firms.Research limitations/implicationsHeterogeneous behavior of institutional investors is revealed through the study. Foreign institutions and domestic banks are supportive of CSR investments of a firm. Promoters of family firms and group affiliates also diligently plan CSR activities.Practical implicationsManagers cannot ignore the heterogeneities of institutional investors in their investment decisions. Individual investors can align their philanthropic preferences with those of different types of institutional investors or firms.Social implicationsFamily-owned firms play a significant role in CSR activities of emerging economies, while individual promoters are not as attracted by the reputational prospects of CSR.Originality/valueThis paper considers the role of heterogeneities of institutional investors in influencing CSR spending of emerging-economy firms. This heterogeneity has not been previously studied in this context.

Corporate expansion during pro-market reforms in emerging markets: The contingent value of group affiliation and diversification

This study examines how emerging economy firms pursue growth in the domestic market during pro-market reforms. Grounding in the literature on institutional perspective on strategic adaptation during institutional transition, we propose an inverted U-shaped relationship between pro-market reforms and firms' pursuit of growth through new investments. However, the effect of pro-market reforms is likely to vary depending on organizational forms and prior logic of competition. More specifically, we propose that business group affiliation has a positive moderating effect, while prior diversification has a negative moderating effect on the relationship between pro-market reforms and corporate expansion through new investments. Our empirical findings based on a sample of 6072 new investment projects undertaken by 3028 companies in India during 1995–2014 provide robust empirical support for the hypothesized relationships.

Ownership Groups and International Investments: Direct and Interactive Effects

We examine the direct and moderated influence of different ownership groups on international investments in emerging economy firms. We argue that the identity of owners influence internationalization decision of firms, often in different directions. Our results, based on a panel of 30385 firm years, demonstrate that higher shareholdings by promoters result in lower levels of internationalization by emerging economy firms. Furthermore, institutional investors are also significant in determining international investments of a firm, but different heterogeneous groups of institutional investors have different preferences for this strategy. We also find evidence that ownership groups moderate each other’s preference for international diversification. Pressure resistant institutions prefer promoter-owned firms, while pressure-sensitive institutions are wary of high promoter ownership when high risk strategies such as internationalization is being considered by the firm.

Corporate Governance and Returns to EE Firm Acquisitions in Tax Havens: A Test on Indian Firms

Studies have shown that cross border acquisitions by emerging economy firms yield positive stockholder returns. A non-trivial fraction of cross border acquisitions by emerging economy firms are in ...

The export performance of emerging economy firms: The influence of firm capabilities and institutional environments

We advance a two-stage theoretical model which contends that the export performance of emerging economy firms (EEFs) will depend both upon their firm-specific capabilities and their home institutional environments. Specifically, we argue that EEFs will be more likely to export when facing more uncertainty at home from greater political instability, substantial informal competition, and high corruption. Furthermore, we hypothesize that firms’ export intensities will be contingent upon specialized internal capabilities such as a skilled workforce, top managerial experience, and access to external technologies. We test these hypotheses using a dataset of more than 16,000 firms from the four BRIC economies (i.e., Brazil, Russia, China and India). Our results confirm that political instability and informal competition have robust effects on the export propensity of EEFs, whilst export intensity is contingent upon the availability of skilled workers and access to external technologies via licensing.

Do corporate boards affect firm performance? New evidence from an emerging economy

PurposeThe purpose of this paper is to examine an association between board demographics and corporate performance using a sample of Pakistani firms listed on the Pakistan Stock Exchange in the 2014 year.Design/methodology/approachThis study is unique in that corporate performance is examined using a mixture of performance measures: accounting-based measures (return on assets), market-based measures (Tobin’s Q, earnings per share, and total return) and economic profit measures (economic value added).FindingsThe results of this research show a significant positive relationship between board size, minority representation on the board and the appointment of a family director and enhanced firm performance. However, contrary to expectations, the authors also find that instead of adding value, the appointment of independent directors to Pakistani firm boards negatively impacts firm value.Originality/valueThis study adds to a growing body of empirical evidence that suggests that agency theory-based corporate governance recommendations adopted in developed economies may not be relevant to emerging economy firms.

Firm age, marketization, and entry mode choices of emerging economy firms: Evidence from listed firms in China

Prior entry mode studies have not paid close attention to the impact of firm age. This study applies an organizational ecological perspective to address the impact of firm age on international entry mode choices. This study also utilizes the institution-based view to theorize on the interaction effect of firm age and the degree of marketization in a firm’s local economy. Using listed firms from China as the study sample, an inverted U-shaped relationship between firm age and the choice of high-equity modes was found, and a higher degree of marketization further reinforced this relationship. Hence, this study contributes to entry mode research by building new theoretical mechanisms and by providing new empirical results, while incorporating marketization.

The home country of the MNE: The case of emerging economy firms

Research on multinational enterprises that originate from emerging economies has highlighted the importance of the home country for firms’ strategies of internationalization. In this paper, we outline a simple analytical framework linking institutions and resource munificence in the home country to the domestic business eco-system in an emerging economy, and thereby to strategies of outward investments. Specifically, we argue that businesses interact with each other in their home economy, and these patterns of interactions influence strategies of internationalization as companies not only compete with each other, but share resources, coordinate actions and serve as each other’s role model. Strategies of outward investment thus reflect the competition and collaboration in their home country business eco-system.

Emerging-economy firms' FDI motivations: the case of Indian pharmaceutical MNEs in Ireland

The growing phenomenon of emerging-economy firms investing abroad, particularly in the developed countries, calls for an in-depth study of their FDI motivations. This study builds upon several studies that suggest that capabilities-based approach is central to the theory of the MNE. Employing a case study approach, we examine the FDI motivations of Indian pharmaceutical firms in Ireland. Our analysis reveals that the FDI motivations of the firms are associated with their degree of internationalisation, and both are sequential as well as evolutionary in nature. Based on this study, we propose a four stage pyramid model of FDI motivations. The findings from this study have both theoretical and policy implications in relation to emerging-economy firms undertaking FDI.

Emerging-economy firms' FDI motivations: the case of Indian pharmaceutical MNEs in Ireland

The growing phenomenon of emerging-economy firms investing abroad, particularly in the developed countries, calls for an in-depth study of their FDI motivations. This study builds upon several studies that suggest that capabilities-based approach is central to the theory of the MNE. Employing a case study approach, we examine the FDI motivations of Indian pharmaceutical firms in Ireland. Our analysis reveals that the FDI motivations of the firms are associated with their degree of internationalisation, and both are sequential as well as evolutionary in nature. Based on this study, we propose a four stage pyramid model of FDI motivations. The findings from this study have both theoretical and policy implications in relation to emerging-economy firms undertaking FDI.

From philanthropy to strategic corporate sustainability: a case study in India

PurposeThis paper aims to explore the drivers and barriers in the transition of the social responsibility agenda of large, emerging economy (EE) firms from non-strategic philanthropy to strategic corporate sustainability. This study also suggests a strategy that such firms may adopt for obtaining the desired corporate social responsibility (CSR) manifestation.Design/methodology/approachThe paper follows an in-depth case study approach of a large, family-managed Indian firm in a pollutant industry – Sudarshan Chemicals. The article is based on direct observation and in-depth interviews with key stakeholders, namely, senior management, employees and the local community members (villagers) in the company’s plant in Maharashtra.FindingsThe study exposes a lack of alignment between firm size (large) and firm CSR manifestation (small) as the key challenge that EE firms face in transforming their social responsibility agenda. Stuck in the mould of non-strategic corporate philanthropy, even large EE companies are not exposed to the three essential elements of the Western conceptualization of CSR, namely, stakeholder pressure, environmental concerns and integration into core business. Sudarshan’s small-firm CSR orientation can be seen as symptomatic of most Indian companies which are family-led, family-managed businesses.Practical implicationsFaced with strong drivers to incorporate CSR, EE firms can strategize to leap-frog from philanthropy to corporate sustainability through obtaining the desired CSR manifestation.Originality/valueThe significance of this paper lies in the “on the ground”, detailed and empirical study of the drivers and challenges faced by a large Indian company, as it proactively sought to transition from the philanthropy orientation towards strategic CSR/sustainability. The paper identifies the major challenge large, Indian corporates are likely to face going forward, as they respond to drivers in a globalized business environment.

The Primacy of Institutional Explanation of Chinese Outward FDI: Is It Understated or Overstated?

An institutional perspective has been increasingly adopted in recent studies to explain various aspects of internationalization activities of firms from emerging economies (Meyer & Peng, 2016; Peng, Wang, & Jiang, 2008), particularly China (Cui & Jiang, 2012; Morck, Yeung, & Zhao, 2008). Scholars often claim that the role of institutions in emerging economy firms’ internationalization is understated, hence more research is needed. In this commentary, which reflects on the intended contributions and theoretical and empirical issues of Buckley, Yu, Liu, Munjal, and Tao (2016), I aim to extend a discussion on whether and when such institutional explanations can be overstated. I focus on three issues: (1) conceptualization of institutions, (2) theorizing institutional effects, and (3) testing institutional effects. On each of these issues, I start by providing an overview of some common challenges in the literature. I then focus specifically on the paper as an illustration of how some of these challenges may be manifested. This is then followed by some recommendations for future research. Overall, I argue that pitfalls related to the conceptualization, theorizing and testing of institutional effects can lead researchers to overstate the institutional effects on firm strategic behaviors. These pitfalls can be avoided if researchers clarify the theoretical boundary of the institutional argument they adopt, properly model the institutional effects while taking into consideration other theoretically relevant constructs and mechanisms, and employ empirical design to overcome measurement errors and selection biases when testing not only the statistical significance, but also substantive (economic) significance of institutional effects.

Talenthouse India: crowdsourcing the Indian national anthem

Purpose This paper aims to understand the process of value creation and value capture through open innovation strategies such as crowdsourcing in emerging economies (EEs) like India. The paper seeks to understand that crowdsourcing strategies offer both potential as well as challenges to value creation and capture in EEs. Design/methodology/approach The paper follows a case study approach. Building on interviews with company officials, the paper looks at the process of value creation and value capture by Talenthouse India through its unique “My Nation My Anthem” (MNMA) initiative. Findings With growing internet penetration and the presence of a demographic dividend, crowdsourcing presents high potential in EEs like India. EE firms may strategize to use the creativity and ideas of “crowds” to drive value creation and value capture. However, understanding the limits of such strategies, in particular those relating to the crowds (their composition, access to them and their motivators) and the access to technology, is important. The result of the MNMA initiative was a 52-second crowdsourced national anthem that generated sufficient value for the crowdsourcing intermediary (Talenthouse), the client firm (PVR) and the entire ecosystem. Originality/value The significance of open innovation models has been demonstrated in settings involving high-tech industries, producing high-value goods, in advanced economies. The paper finds the applicability of such models to low-tech, less mature industries, involving experience goods in EEs like India.

FOREIGN MARKET KNOWLEDGE, COUNTRY SALES BREADTH AND INNOVATIVE PERFORMANCE OF EMERGING ECONOMY FIRMS

We examine the impact of foreign market knowledge on innovative performance in emerging economy firms. We also study how this relationship is moderated by country sales breadth, i.e., the diversity of countries in which the firm derives sales. We test two competing theoretical perspectives on this relationship: diversity logic suggesting country sales breadth is beneficial to innovative performance, and time compression diseconomies logic suggesting the opposite. Drawing from a sample of 92 Chinese firms, we show that foreign market knowledge has a positive impact on innovative performance, and that this relationship is positively moderated by country sales breadth. Our study suggests that managers in Chinese firms develop effective capabilities in accessing, integrating and utilising foreign market knowledge from a breadth of international sources in their quest for innovation.

Defying Distance? Cross-Border Acquisitions by Emerging-Economy Firms

We argue that emerging-economy firms’ international location choices are driven by the pursuit of dynamic efficiency rather than the immediate minimization of transaction and learning costs, and hence the relationship between country distance and the number of cross-border acquisitions will be less negative for these firms relative to advanced-economy firms. We then test the hypothesis with respect to four measures of country distance—geographic, economic, cultural, and institutional—and find support for the hypothesis. Our study provides empirical support for claims in the literature about differences in the international expansion behavior of emerging-economy firms with respect to location. In addition, our study makes a theoretical contribution by showing that the theoretical perspective of dynamic efficiency can explain the difference in the location choices for cross-border acquisitions by emerging-economy firms relative to those by advanced-economy firms. © 2016 Wiley Periodicals, Inc..

Spatial distribution of innovation networks, technological competencies and degree of novelty in emerging economy firms

ABSTRACTThis paper analyses the relationship of the accumulation of technological competencies at the firm level, the spatial distribution of the firm's innovation networks and the degree of novelty of product innovation. Firm-based primary data collected in two innovative regions in emerging economies are used to predict higher degrees of novelty in emerging economy firms. Similarly to advanced economy firms, the results show that international linkages are associated with higher degrees of novelty. However, new-to-the-world innovation in emerging country firms is fundamentally externally driven, suggesting that international linkages seem to be a compensating mechanism for the initially lower technological capabilities rather than a complementary source of knowledge.

"Absorptive Capacity of Emerging Economy Firms: Rationalization, Professionalism and Isomorphism"

Absorptive capacity has been an under-researched aspect of relationships between MNEs and local firms in emerging economies. The effectiveness of local firms as suppliers and their ability to withstand new competition often rely on rapid upgrading of skills and technology. Knowledge transfer from foreign sources is a critical element of upgrading, but many emerging economy firms lack the absorptive capacity to effectively utilize new knowledge from advanced economy partners. Emerging economy firms face a conundrum; they often lack the absorptive capacity to access and utilize new knowledge, but it is difficult to develop needed absorptive capacity without forms of upgrading that rely on new knowledge. We explore ways that institutional sociology can help us understand the processes by which emerging economy firms deal with this problem. We develop an expanded analysis of “relative absorptive capacity” (Lane & Lubatkin, 1998) in order to understand how isomorphic changes can make emerging economy firms bet...

Performance Feedback and Outward Foreign Direct Investment by Emerging Economy Firms

Drawing on the behavioral theory of the firm, this study examines how performance feedback-the discrepancy between actual performance and aspiration levels-affects the international expansion of em...

Balancing exploitation and exploration in FDI location choices

In this paper, I examine the location trajectory of foreign direct investments by emerging economy firms. I consider entries into countries with low cultural distance as exploitation, and entries into countries with high cultural distance as exploration in the internationalization process. Building on the organizational learning literature, I argue that the internationalization process is composed of a series of alternating exploitative and exploratory activities for a firm over time. Empirically, I propose to measure this process by the magnitude of the divergence in added cultural distance (i.e. the cultural distance that each new entry incurs relative to prior entries). In support of my argument, I find that the divergence in added cultural distance over time is far greater than what is predicted by the Uppsala internationalization process model and the springboard perspective. Moreover, I find that several firm- specific attributes can explain a sizable portion of the volatility of the internationalization process. Specifically, firm size, firm age, firm performance and organizational slack are significant antecedents of the fluctuations in the internationalization process.

Emerging Economy firms and Speed of International Venturing

Internationalization is recognized as a key strategic entrepreneurial action. This paper contributes to our understanding of international venturing by examining the speed with which firms conduct ...