Indigenous Firms Research Articles

Critical success factors militating against competitive advantage of indigenous construction firms in developing countries

Though a plethora of studies has suggested indigenous construction firms in developing countries are competitively disadvantaged and risk being marginalized in the competition posed by their foreign counterparts, little is known of studies that empirically investigate the critical success factors militating against indigenous construction firms’ competitive advantage in developing countries to adduce empirical findings towards policy direction and formulation. Thus, this paper seeks to determine the critical success factors militating against competitive advantage of indigenous construction firms in developing countries using Ghana as a case study and suggest measures to curb them. The use of principal component analysis, varimax rotation in data analysis aided in reducing the large set of militating factors to four principal factors. Using a questionnaire survey, 667 respondents were invited to rate the 21 militating factors identified from literature based on their knowledge and experience. The correlations between the 21 variables showed that four key components underpinned the critical success factors militating against competitive advantage of indigenous construction firms in developing countries, namely market, firms’ internal, government and technology factors. Findings and recommendations of this study may be useful to construction stakeholders who are seeking innovative ways to enhance indigenous firms’ competitive advantage and policy direction.

Corporate name change: Investigating South African multinational corporations' postacquisition performance

AbstractIt has long been argued a multinational corporation (MNC) needs to be able to leverage the firm‐specific advantages to overcome the liability of foreignness in the host markets so the MNC can enjoy the benefit of internationalization while competing with the indigenous firms in the host market. However, emerging‐market MNCs, which have the nontraditional ownership advantages, such as flexibility and cost‐advantage, may require different international strategies to realize the anticipated profit in their cross‐border acquisitions. This article takes an organizational identity approach to study how the foreign identity of South African MNCs constitutes the source of liability and negatively impacts their postacquisition performance. We find South African MNCs that adopted a corporate name change for their acquired subsidiaries experienced worse postacquisition return on asset than the South African MNCs who did not do so. On the other hand, facing a large economic distance, South African MNCs that facilitate the acquired subsidiary corporate name change enjoy better postacquisition performance.

The innovation spillovers from outward and inward foreign direct investment: a firm-level spatial analysis

ABSTRACTThis paper estimates and compares the spatial spillovers from both inward and outward foreign direct investment (FDI) to the innovation activities of indigenous firms, in particular, the innovation input and output. This analytical study is based on a firm-level spatial dynamic regression, which is, for the first time, conducted on a large-scale firm-level panel in the FDI literature. Using data from Shandong province in China over the period 2002–07, we find that both inward FDI (IFDI) and outward FDI (OFDI) significantly stimulate innovation activities of domestic firms. More importantly, the spillover effect from OFDI is much larger than that from IFDI. The results tend to support the going-out strategy of the Chinese government.

Knowledge Management in Brazil: What Governance Mechanisms are Needed to Boost Innovation?

ABSTRACTThe need to innovate is relevant to many firms around the globe and is particularly pressing for those in emerging markets. They face global competition, are under-resourced, and suffer from weaker institutional support. It is suggested that to innovate successfully in this context, indigenous firms would benefit from focusing on managing their current knowledge base more efficiently. We know little about how knowledge management works outside developed economies and which knowledge governance mechanisms have more influence than others in the context of emerging economies. To address this gap, we explore how context may matter for the use of knowledge governance mechanisms and their effect on innovation performance in Brazilian firms. Using the survey data of 109 firms, structural equation modelling, and cluster analysis, our findings suggest that the joint application of knowledge-focused rewards, organizational design, and information and communication technologies that support knowledge processes is critical for boosting innovation performance. We discuss how the peculiarities of the Brazilian context may shape these findings. Our article contributes to the knowledge management and innovation literature by demonstrating that the joint effects of bundles of knowledge governance mechanisms and contextual variables should be explored in order to understand their impact on organizational outcomes.

Assembly trade and technological catch-up: Evidence from electronics firms in China

This study evaluates technological catch-up in the electronics industry by Chinese indigenous firms compared with foreign firms operating in the country. We make use of firm-level data for the period 2001–2012, a period during which the Chinese government encouraged engagement with foreign partners and entry into the global supply chain in hopes of fostering technology transfer. We apply data envelope analysis to estimate group technology frontiers for private, state, and foreign firms, and decompose total factor productivity growth into technological change and technical efficiency change. The picture that emerges is one of mixed success. Indigenous firms on the cutting edge have pushed their group productivity frontier outward at a rapid pace even as the broad mass of indigenous firms has slipped further inside this expanding frontier. For private firms as a whole, the strongest period for technological catch-up was the mid-2000s, with progress relative to the foreign standard slowing again after that. Achievement has been greatest in sub-industries at the lower end of the technological ladder (e.g., appliances) and less notable at the upper end (e.g., computers). Evidence of a contribution by research and development and by worker training is found only beyond a cumulative threshold and for firms advantaged by location or joint venture partnership.

Quantifying Financing Needs in the Belt and Road Countries

ABSTRACTThis paper provides a thorough analysis to quantify the financing needs in the Belt and Road countries during 2009 and 2014. By examining financial constraints using financial data of firms in the Belt and Road countries, this study constructs a Financing Needs Index for Belt and Road countries and highlights the characteristics of financing needs across 36 countries and 6 years. By further incorporating information from World Bank Enterprise Surveys, this paper builds an Augmented Financing Needs Index for 56 Belt and Road countries. The findings of this paper provide important policy implications by showing that countries can improve their financial liberalization and institutional environment to address the financing needs of their indigenous firms and thus achieve economic growth.

A Critical Understanding of the Impact of Monetary Policy on Nigerian Indigenous Firms: Lessons from Ten Years of Military Leadership, After 2nd Republic Nigeria (1983 – 1992)

The contradictory activities of the Apex Bank (Central Bank of Nigeria, which was contractionary) and that of the Commercial and Merchant Banks (which was expansionary), revealed the ineptitude of the Apex Bank, or its leadership, to effectively re-direct the economy towards sustainable development. The persistent above the maximum 16% loanable funds given to small-scale indigenous firms (16% in 1983; (1985, 1986; 18.7% in 1987; 21% in 1988, 1989; 22.9% in 1990; 20% in 1991-1992) is the Achilles-Heel, the missing link in adequate macroeconomic management of the real sector productivity and employment. The resultant excess liquidity of the economy had cataclysmic effect on inflation making cost of capital expensive and thus, adversely affected Balance of Payment and employment. In all, precautions should be taken against expansionary policies as well as accretion of foreign assets (net) and other assets in the hope to actualize the policy objective.

Positioning strategies of foreign and indigenous firms in an African cultural milieu

Despite the pivotal role of positioning in marketing strategy formulation, few studies explicitly examine positioning strategies employed by foreign and indigenous firms operating in the same cultural milieu. Relying on the concepts of culture and positioning as the backdrop, this research contributes to the literature by answering two key research questions: What are the differences between African indigenous firms' and Africa-based foreign firms' pursuits of positioning strategies? And is a Western-developed typology of positioning strategies applicable in an African cultural milieu, and more specifically, in the Ghanaian cultural environment? The results of the study demonstrate that indigenous and foreign firms replicate each other's positioning strategies to carve out positions, although foreign firms aggressively pursue a wider range of strategies than indigenous firms. While there is a uniform attempt by indigenous and foreign firms to reach the mass-market and lower- to middle-class target audiences, foreign firms focus more on middle-class audiences than do indigenous firms. The authors discuss implications for marketing theory and practice.

The mediating effect of trust on the relationship between high‐performance work systems and employee outcomes among Chinese indigenous firms

In this article, we explore the mediating effect of trust on the relationship between high‐performance work systems (HPWS) and employee outcomes. Using a mixed method design, we first conducted focus groups and interviews to gain an understanding of the HPWS in Chinese indigenous firms. Extracting data from the interviews, we then developed a survey which tested our hypotheses. As predicted, data from 907 questionnaires illustrated that employees’ perceptions of the impact of enacted HPWS on building the trust relationship between manager/supervisor and employee in Chinese indigenous firms have a positive effect on employee job satisfaction and intention to stay. The results suggest that organisations may influence how employees perceive manager trustworthiness. It is likely that organisations can design systems that address employee needs, build trust, enhance employee satisfaction and deter them from leaving.

Factors affecting the efficacy of the Australian indigenous business exemption

PurposeThis paper aims to describe a qualitative research project that investigated factors leading to the very low use of the Australian Commonwealth Government’s indigenous business exemption (IBE), particularly from 2011 to 2015.Design/methodology/approachThe project involved interviews with 12 selected stakeholders from Indigenous firms, procuring agencies and policy designers, which took place in 2016.FindingsAnalysis of the interviews suggested that poor use of the IBE was primarily attributed to risk aversion inside government and limited communication of the existence of the policy outside government.Originality/valueA range of other factors and methods of overcoming these problems are also identified; principal amongst these is the need for procuring agencies to engage with Indigenous suppliers in a coordinated and deliberate fashion.

International Indigenous Business and Trade and the Role of Culture: A Comparison between Aotearoa Maori and Alaska Native Enterprises

Indigenous enterprises are increasingly engaging in international business and trade, mainly in agriculture, forestry, fishing, and tourism, to grow Indigenous economies. The experiences of the Indigenous peoples of Aotearoa New Zealand (the Maori) and of Alaska provide a context and case through which to explore cross-cultural exchanges in business. In this conceptual paper, we review literature on the role of culture in international business and trade, focusing on indigeneity in international Indigenous business. We find that when commonality and mutual respect are established in cross-cultural exchanges in business, there is said to be cultural congruity. When material cultural differences inhibit cross-cultural business, there is cultural discordance. Specific examples are used to show how Indigenous firms in Aotearoa New Zealand and in Alaska compare. This paper provides scope for other Indigenous peoples to explore how their cultures influence firm-level performance and international trade.

Project finance and investment in the oil and gas industry in developing countries: a case study of Ghana

Raising start-up and working capital are challenges faced by indigenous oil and gas entrepreneurs in many developing countries. The absence of sufficient collateral, good business plans, and high interest rates are barriers to acquiring bank loans in Ghana. The study was to identify possible avenues for funding oil and gas projects and challenges indigenous firms (SMEs) within the oil and gas value chain encounter in accessing funds. A questionnaire survey was performed with some banks and oil and gas service providing companies in Ghana. We showed that SMEs have lower success rate in accessing bank loans compared to well-established firms due to repayment risk. Therefore, financial institutions could resort to the project finance method to reduce such risk for projects within the oil and gas industry. We conclude that project finance is a viable avenue for SMEs to finance oil and gas projects in developing countries despite the associated bottlenecks.

Project finance and investment in the oil and gas industry in developing countries: a case study of Ghana

Raising start-up and working capital are challenges faced by indigenous oil and gas entrepreneurs in many developing countries. The absence of sufficient collateral, good business plans, and high interest rates are barriers to acquiring bank loans in Ghana. The study was to identify possible avenues for funding oil and gas projects and challenges indigenous firms (SMEs) within the oil and gas value chain encounter in accessing funds. A questionnaire survey was performed with some banks and oil and gas service providing companies in Ghana. We showed that SMEs have lower success rate in accessing bank loans compared to well-established firms due to repayment risk. Therefore, financial institutions could resort to the project finance method to reduce such risk for projects within the oil and gas industry. We conclude that project finance is a viable avenue for SMEs to finance oil and gas projects in developing countries despite the associated bottlenecks.

Investigating the Cost Management Practices of Indigenous Firms in the Ghanaian Construction Industry

Cost management is key to project implementation and an important tool for maximizing profit nonetheless it has been a major challenge for most indigenous construction firms in Ghana. The study seeks to investigate the important factors influencing cost management practices among indigenous construction firms in Ghana and to ascertain whether there is a significant difference between the responses of the categories of the firm (construction and consultancy firms) in Ghana. A total of 82 questionnaires were retrieved from 100 administered questionnaires to professionals with indigenous construction firms representing 82% response rate. Data gathered were analyzed descriptively using Mean Item Score (MIS) via SPSS version 24 to identify the most important factors. The Kaiser-Meyer-Olkin Measure of Sampling Adequacy and Bartlett’s test of sphericity conducted showed a KMO score of 0.894. Bartlett’s test of sphericity also revealed a significance level of 0.000 (p˂0.05). The ANOVA suggest that there is no significant difference between the responses between the categories of firms. Indigenous firms are encouraged therefore to consider managing disagreement between project team members by ensuring constant project implementation meetings and to understand ground conditions of projects by visiting proposed sites prior to estimation and tendering. Finally, communication and expenditure control measures should be enhanced and introduced respectively. The implication of this study while contributing to the discourse on cost management practices of indigenous constructions firms in Ghana, also outlines the major (highly ranked) factors influencing indigenous firms in the management of project cost, before, during and after project implementation.

How and When Do Subnational Institutions Matter for R&D Investment? Evidence From the Chinese Pharmaceutical Sector

Drawing on new institutional economics and the innovation literature, this paper examines how subnational institutions can impact corporate research and development (R&D) investment in emerging economies. The study further investigates a key contingency of this institutional effect: a firm's country/ownership identity. Using China's pharmaceutical sector as the empirical context, we find that the quality of subnational institutions, such as the degree of government deregulation and the effectiveness of local contracting institutions, has a significantly positive impact on corporate R&D intensity. Moreover, this institutional effect is more salient in indigenous firms and international joint ventures than in wholly owned foreign subsidiaries. This study serves to shed light on future research on how multifaceted subnational institutions shape innovation activities across different types of business organizations in emerging economies.

When is Centrality-based Advantage Absent? The Case of Cross-Border Venture Capital Syndication

I re-evaluate the classic positive centrality-performance relationship in the setting of nascent venture capital (VC) industry in China, where foreign entrants from Western developed markets and indigenous firms born in the transitional economy operate in the same market space. Mixed methodologies are employed in this study. Network visualizations reveal two findings on macro-level structures of the industry network. First, a network structural change in the level of interaction between foreign VCs and domestic VCs in China happened when equity market -- the most import financial institution supporting VC, was installed. Second, during the low interaction stage, foreign VCs formed a highly interconnected sub-network, while domestic VCs’ sub-network remained fragmented. Further, regression analysis results from multi-year data show nuanced findings on the classic centrality- performance relationship. Firms reside in networks whose composition is heterogenous and therefore provide diverse information and resources would benefit from occupying central positions. When the composition of the network is homogenous, central firms in fragmented network would experience better performance, while central firms in highly interconnected network no longer show superior performance than their peers.

Knowledge transfer in collaborations between foreign and indigenous firms in the Nigerian oil industry: The role of partners' motivational characteristics

Previous empirical studies on determinants of interfirm knowledge transfer have been largely focused on knowledge transfer between symmetrical partners, where there are relatively similar levels of knowledge sophistication and complementary knowledge‐transfer motives. Determinants of knowledge transfer between partners in asymmetric “market‐exploitation” alliances, where there are large differences in capabilities, and in motives, of the collaborating partners, have been understudied. This article presents a qualitative case study‐research of knowledge transfer in such collaborations in the Nigerian oil industry. Four cases of interfirm collaborative arrangements between foreign and local indigenous firms in the industry were studied and analyzed. Based on the results of the case study research, this article highlights the dominant role of partners' motivational characteristics, as against, their cognitive characteristics in the knowledge‐transfer process of asymmetric market‐exploitation alliances. It develops a set of theoretical propositions to expand the understanding of the key determinants of learning and knowledge transfer.

Meeting the Global Challenges of Doing Business in the Five Candidate Countries on the Road to Join the European Union

The success of indigenous business firms is no longer exclusively an internal process given increasing competition and globalization. Achieving success under dynamic conditions requires active involvement of governments to provide proper environments for local businesses to survive global challenges. Many also want to attract foreign investors to start new businesses. The role of governments is no longer limited to providing preconditions for basic infrastructure needs but now also includes fortifying business environmental factors such as the Internet, legal systems, trained work forces, and equitable tax systems. The purpose of this study is to investigate the conditions in Albania, The Former Yugoslav Republic of Macedonia (FYROM), Montenegro, Serbia, and Turkey. Using the Enterprise Survey from the World Bank, this study evaluates these nations’ adaptation to the global challenges of doing business. These five nations were selected because of their status of potentially joining the European Union (EU). The findings indicate that there are problems and significant gaps among these nations. Suggestions include that national leaders develop policies that go beyond simply addressing the identified obstacles. Additionally, company managers can also use the insights from this study when evaluating these nations as potential EU members before entering these markets.

Factors influencing technology and innovation capability in the Nigerian indigenous oil firms

This study investigated the factors influencing technology and innovation capabilities in Nigerian indigenous oil and gas firms. Primary data were collected through the use of questionnaire to elicit information from 150 indigenous oil firms. The result of the ordered logit regression showed that the extent of the firm's R&D captured by in-house R&D and R&D fund allocation were significant at 10% level of significance. Also, work experience of staff, qualification of staff and size of technical staff which captured human and knowledge capital of firm were significant in influencing the firms' technology capabilities. Acquisition of advanced machinery, firm's size and age and training were also significant in influencing technology capabilities of indigenous oil firms. The study suggests that both government and industry should ensure improvement in extensive training, R&D and education of the work force to enhance local capabilities in oil and gas field development.

Local content in Tanzania: Are local suppliers motivated to improve?

Firms located in developing countries generally encounter difficulties with meeting the challenging standards posed by the oil and gas supply chain. It is against this background that the present study aims to reveal to what extent Tanzanian indigenous firms are ‘motivated’ to compete and close the performance gaps vis-à-vis corporate expectations in the petroleum industry. The willingness to share costs and allocate time for an Enterprise Developing Programme are examined. The study reveals that more motivated and well-connected firms blame the government and – to a lesser extent – foreign companies, whereas less motivated firms tend to hold themselves responsible for lack of competitiveness. These results run counter to theories about competitive motivation and catch-up, and therefore lead to interesting implications for each of the actors involved in the Local content dynamic in Tanzania.