We extend internalization theory by examining the contingencies associated with market internalization and its impact on foreign subsidiary survival. Based on a sample of 6170 subsidiary–year ...observations in 63 countries belonging to 292 MNCs from Korea during 1995–2013, we find that greater product and labor market internalization have weaker impacts on the survival of subsidiaries operating in countries with more developed institutional environments but stronger for subsidiaries of MNCs affiliated with business groups. The impact of business group affiliation is further dependent on host country institutional development, and the diversification and size of the business group.
In this study we seek to explain how firms from emerging markets build capabilities to operate in international markets through learning from parental networks. The building of these capabilities is ...of particular interest, as firms from emerging markets may not necessarily possess the monopolistic advantages commonly referred to in IB literature, which allow a firm to succeed in international markets. Using lagged cross-sectional regression models on a sample of 794 Indian firms, we found that firms draw on the international experience of their parental and foreign networks to build such capabilities. Findings also indicate that network scope is beneficial for increasing exposure to international markets only in the case of networks that are either small or medium sized. Additionally, we found that firms lacking market power in their home market benefit through foreign partnerships when internationalizing operations.
Current debates on organizational learning distinguish between two distinct and mutually exclusive learning modes: exploration and exploitation. This paper deals with the concept of ambidextrous ...routines in knowledge management (KM) initiatives. Specifically, drawing on a sample of 1468 MNEs from 24 regions in China, we find that a synergetic combination of explorative and exploitative virtual knowledge is positively associated with MNE performance. In contrast, an imbalance between explorative and exploitative virtual knowledge hurts MNE performance. Furthermore, the effect of imbalanced ambidexterity in virtual knowledge sharing is moderated by the cultural distance in the uncertainty avoidance between the R&D team and the region where the team operates. This paper elaborates on the characteristics of ambidextrous KM initiatives at the micro-level; firms use ambidextrous KM practices to create a learning context, defined by guidelines and methods rather than by a definite purpose. The clear separation of KM initiatives' purpose and their embedded learning routines and methods enables them to be used ambidextrously. Furthermore, this analysis indicates that ambidextrous KM initiatives follow a path characterized by an increasing variety of purposes but a decreasing variety of underlying structures. Consequently, firms create a learning context that can be activated when necessary in ways required in an exploratory and/or in an exploitative mode.
This study examines the difference in corporate transparency of firms affiliated with business groups and unaffiliated firms in India. Based on previous studies we measured corporate transparency ...using equity analysts’ forecast error and dispersion. We find that firms affiliated with business groups are less transparent than unaffiliated firms. Lack of transparency leads to higher analyst forecast error and dispersion. This study also finds that business group-affiliated firms with more intra-group capital transactions have higher forecast error and dispersion. The findings of this study suggest that firms affiliated with business groups are less transparent due to their reliance on internal capital markets, and therefore lack incentives to disclose information to market participants. As a result, the information asymmetry between business groups and the capital market is higher, restricting the activities of information intermediaries such as equity analysts, who play an important role in the external capital market.
The adoption of pro-market economic reforms by emerging market economies in last two decades has transformed the institutional context for firms in these economies. The objective of this volume is to ...better understand how domestic and foreign firms have transformed their strategy, organization and management system in response to this change. Understanding of such transformation will provide implications to integrate contextual factors in theorizing about firm behaviour in emerging as well as developed economies. These studies will also assist practicing managers to comprehend various configurations of firm activities and complexities of competition in diverse institutional settings.
•We investigate the impact of exposure to foreign competition in and out the home country on the imitative innovation of emerging economy firms.•We use a dataset of 949 firms in the Middle East and ...North Africa (MENA) region.•Results confirmed that exposure to foreign competition through inward FDI and exporting activity are positively associated with imitative innovation.•Additionally, we find that government ownership and strength of legal rights moderate the relationship between exposure to foreign competition in the home country and imitative innovation.•We also find that natural resources abundance negatively moderates the impact of exposure to foreign competition through exporting activity on imitative innovation.
We examine the effect of increased competitive pressures within and outside the home market on the innovation of local firms. We argue that the relationship between exposure to foreign competition in domestic and international markets and firm innovation is better captured by imitative innovation than by radical innovation. We hypothesize that exposure to foreign competition inside and outside the home country is positively associated with local firms’ imitative innovation. Further, we argue that this relationship is contingent on institutional factors, including the role of the government, the legal system, and natural resource endowment. Using a dataset of 949 firm-year observations in the Middle East and North Africa (MENA) region, we find empirical support for the positive impact of competitive pressure on imitative innovation.
•A coevolutionary model shows how firms adapt and leverage home country and institutional support for internationalization.•Businesses, government officials and industry players coevolve through ...multidirectional interactions of mutualism and competition.•Home country institutional support is selective based on stringent criteria linked to governance of internationalization activities of firms.•Firms influence institutional support through leveraging political connections and capitalise on markets and industry to facilitate internationalization or pursue independent internationalization decisions.
This study explores the role of diverse home country support for the internationalization of emerging market firms through a coevolutionary approach. A coevolutionary approach can improve our understanding of the complexities of comprehensive institutional transition in emerging market economies which allows firms to adapt and leverage institutional support for internationalization. Based on institutional theory and the strategic choice perspective, we present a coevolutionary model of mutualism and competition among businesses, government officials and industry players through multidirectional interactions. Our research offers an alternative and nuanced explanation of selective and relevant home country support, the role of independence of firms, support criteria and reinforcement of governance for internationalization of emerging market firms. This study contributes to the literature of home country support for internationalization through an enrichment of the institutional framework and strategic choice with a political perspective.
Operating in the home country provides firms with substantial experience and learning opportunities. Emerging market economies provide a rich context in terms of diversity of sub-national ...institutions, competitors, consumers, and business networks. Operating in such context enables EMNEs to experience and learn about developed and underdeveloped institutions, building relationships with firms within and outside of their networks, customers with diverse income levels, tastes and preferences, and competition from firms with multiple ownership groups. The experience and learning that EMNEs gain from such diversity in their home environments assist them in their international expansion. Focusing on the pre-internationalization stage, we identify different aspects of home country diversity that facilitates EMNE internationalization. Additionally, we discuss the firm-specific contingencies that enable or restrict learning from home environments.
This study examines how diversification in Indian business groups creates multiple forms of agency problems and has performance implications for group-affiliated firms. Departing from prior ...literature which emphasizes the principal–principal agency conflict in business groups, we argue that business group diversification leads to dual agency problems between controlling and minority shareholders (principal–principal) and shareholders and managers (principal–agent) in affiliated firms. Both these agency problems arise in diversified business groups through cross-subsidization of affiliated firms by inefficient capital investment, continuing presence of affiliated firms in declining industries, tunneling of resources from profitable affiliated firms, lack of attention by business group headquarters to affiliated firms, and affiliated firm managers' sense of perceived security, which negatively impacts affiliated firms’ performance. These agency issues are reduced with the increase in product market competition from exposure to international markets and through concentrated promoter ownership in the affiliated firms. Our hypothesized model finds empirical support in a sample of 828 business group–affiliated firms in India.
