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Prior research on international diversification has focused primarily on multinational enterprises (MNEs) from developed economies, such as the U.S. and other developed nations. As an increasing number of MNEs are now located in emerging economies, new theoretical frameworks are needed to better understand the motivations of these MNEs to diversify internationally. This paper contributes to the theory development of MNEs by examining the characteristics of international diversification by business groups from emerging economies. Using the resource-based view (RBV) of the firm and organizational learning theory, we suggest that the international diversification motives of business groups from emerging economies vary by host country context. Business groups from emerging economies are more likely to enter developed economies (rather than other emerging economies) when their primary aim is exploring new resources and capabilities, and more likely to enter other emerging economies (rather than developed economies) when their primary aim is to exploit existing group resources and capabilities. We also suggest that these motives influence business-group performance. We identify two important moderators of these relationships: product diversification and social capital. Because of the importance of the business-group organizational form in emerging economies, understanding business-group international diversification may lead to improved MNE theory.

Do multinational enterprises evolve differently in emerging and developed economies? Although one camp argues that emerging economy multinationals are different from their developed country counterparts owing to the underdeveloped institutions in their home countries, another camp counters that they are the same and the existing international business theories can fully explain their strategies. A third camp suggests a more nuanced perspective by finding value in both approaches. In this introductory chapter, we review this debate and offer new perspectives on how to extend existing theories by accounting for four specific aspects of the home country institutional environments of emerging economies: breadth, depth, timing, and duration of exposure to institutional development. We then discuss how the chapters in this volume extend these ideas.

Many 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.

To 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.

The 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.

By 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.

The purpose of this paper is to highlight the motivation for firms in emerging economies to engage in constraint absorption. It illustrates the mechanisms that enable business group (BG) affiliated firms to manage interdependencies vis-à-vis standalone firms in emerging economies.

The propositions outlined in this study are rooted in the theoretical lens of resource dependence theory (RDT). The authors integrate RDT with the resource-based view and institutional theory to explain the effect of BG affiliation on the relationship between the two types of interdependence (i.e. mutual dependence and power imbalance) and the likelihood of constraint absorption.

This paper theorizes that BG affiliation influences the relationship between mutual dependence/power imbalance and the likelihood of constraint absorption. However, if both the firms in a dyad are affiliated to a BG, the likelihood of constraint absorption is likely to be low owing to a process called “co-optation” even if mutual dependence or power imbalance between the firms is high.

This paper highlights how BG affiliated firms are better at managing contingencies in the external environment vis-à-vis standalone firms. This paper also advises managers that the type of organizational form is an important factor to be considered while engaging in constraint absorption in an emerging economy.

While 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.

This 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).

The 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.

This 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.

The 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.

This 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.

The purpose of this paper is to investigate the impact of R&D sourcing strategies and their governance modes on basic and developmental R&D. Following the concept of cognitive distance, this research proposes that there are trade-offs between basic and developmental R&D when emerging economy firms engage in different R&D sourcing strategies. R&D sourcing can enable emerging economy firms to access different level of heterogeneity of knowledge inputs depending on the cognitive distance between the firm and its suppliers. Distance in cognition increases when firms obtain knowledge from abroad and independent suppliers in comparison to the acquisition of knowledge from home boundaries and affiliates.

Tobit maximum likelihood estimation approach is used.

Using data from Turkish firms, this study finds out that offshore R&D with an outsourcing governance mode affects basic R&D. In contrast, domestic R&D with an insourcing mode influences developmental R&D.

This research extends recent efforts to better understand the determinants of different R&D types by examining offshore and domestic R&D together and by taking into account different governance modes of each R&D sourcing strategy. This study becomes important because it investigates this issue from the perspective of emerging economy firms.

The purpose of this paper is to explore location effects on firm performance in emerging economies simultaneously accounting for permanent and transitory country, industry, country-industry and firm-specific effects.

The authors utilize a novel methodological approach: an autoregressive, cross-classified, mixed-effect linear regression model that allows them to simultaneously estimate a permanent (long-run) component, a transitory (short-run) component and the speed of decay of the transitory (autoregressive) component.

The authors find that the firm-specific effect is most important in explaining permanent and transitory differences. The country–industry interaction is the second most important effect, confirming that industries are not completely global and are still subject to country conditions. Broader views of the country–business context and industry conditions taken independently would be incomplete unless the country–industry interactions are considered. In other words, country matters because industry matters and vice versa. Country effects are also significant, but only transitory emphasizing the dynamic nature of emerging economies and the shortcomings that may result from considering the country business context static. Finally, the authors find that the chances of achieving sustainability of abnormal returns in emerging economies are dynamic and have significantly increased recently.

To the authors' knowledge, this is the first to simultaneously estimate country, industry, country–industry and firm effects on the permanent and transitory components of abnormal returns in a sample of emerging economies. The study generates important evidence regarding the sources of sustainable differentiation for firms competing in emerging economies. Finally, the authors find that chances of achieving sustainability of abnormal returns in emerging economies are dynamic and have significantly increased recently.

Context characteristics of emerging economies differ significantly from those in developed economies. Considering this substantial difference, this study aims to identify the drivers and barriers for new product development (NPD) success in the context of an emerging economy by drawing on the resource-based view.

Data was collected from firms in different sectors in the Aegean Region of Turkey using the Wageningen Innovation Assessment Tool. Of 189 responses, 94 fit the criteria and used for statistical analysis. The data is analyzed using a two-step procedure, namely, a confirmatory factor analysis followed by a binary logistic regression that is used to model the probability in the study of the success of NPD.

The results reveal that along with the context characteristics of an emerging economy setting, internal capabilities matter for NPD success. Based on interviews with NPD managers, it was found that, among other factors, the close relationship with local customers is key for new product success, while introducing high innovative products to the market of an emerging economy may not be appropriate due to the specific conditions of such economies.

This study will be useful to the managers to understand the extent to which the degree of newness of a product affects NPD success in an emerging economy setting. It also highlights the importance of securing firm resources before starting an innovation activity in this setting where resources such as financial resources, knowledge and physical resources are limited. From a policy perspective, this study provides certain insights as well. That is, government officials in emerging economies should be very careful about their informal actions that might disrupt the investment and innovation environment.

Emerging economies are important for large firms seeking growth. They initiate manufacturing activities and increasingly perform innovation activities in those countries. However, the conditions to innovate are different from those in developed economies. Research into the factors that drive innovation is largely in an embryonic state. This study offers NPD researchers a deeper understanding of the drivers and barriers to innovation, particularly internal ones that may affect the NPD success in an emerging economy setting, in this case, that of Turkey. The results provide suggestions for policymakers to consider during the development of new innovation policies. For practitioners, this study outlines novel combinations of internal factors that lead to NPD success.

This paper investigates whether sustainability performance (SP) protects financial performance (FP) for firms in both developed and emerging economies during the COVID-19-induced economic downturn.

Using a recent sample of firms in 34 countries between 2003 and 2021, the authors employ ordinary least squares regressions, moderations and the Heckman two-step method to test the hypotheses.

Firms with strong SP have higher FP in developed and emerging economies in the upcoming year. During the COVID-19 crisis in 2020–2021, the impact of sustainability on FP is pronounced in developed but not in emerging economies. Furthermore, cross-listings expose firms in emerging economies to high-standard institutional mechanisms in developed economies. Thus, sustainable firms in emerging economies cross-listed on European stock exchanges are more profitable.

For regulators and standard setters, the global-level comparative analysis helps them find solutions that may assist firms in improving SP globally (e.g. mandatory reporting) and enduring crises resiliently. For institutional investors, the study reveals the relatively different impact of sustainability risk for firms in developed and emerging economies. For practitioners and private sector firms, this study contributes to the dialogue on what makes firms more resilient in COVID-19. Although COVID-19 might be temporary, the lessons learned could protect firms from future crises.

The authors contribute to the contingency perspective between sustainability and financial performance by providing recent empirical evidence in a global setting during the COVID-19 pandemic. The authors demonstrate how different external institutional mechanisms (rule-based governance and relation-based governance) and cross-listing affect the SP-FP relationship during a crisis. The authors extend the knowledge in crisis management literature with a comparative study and fill the research gap on how SP affects FP for firms in emerging economies compared to developed economies.

The purpose of this article is to analyze the impact of the rise of emerging economies and emerging economy firms on multinational corporations (MNCs) with respect to four important strategic decisions for MNCs' foreign investment – control and coordination strategies, geographic and product markets of entry, timing of entry, and organizational design for foreign subsidiaries.

The author utilizes an integration of institutional perspective with the existing explanations of MNC activities, to support their arguments about the impact of the rise of emerging economies on MNCs' strategy and structure decisions. The author presents propositions linking the type of external governance structure in the emerging economy's institutional environment (rule based or relationship based) with the strategy and structure decisions for MNCs.

The paper proposes that MNCs will follow different control and coordination strategies, geographic and product market strategies, entry timing strategies and organizational design strategies depending on whether the target emerging economy's institutional environment is characterized by a rule based or a relationship based governance structure.

Increasing globalization and rapid rise of emerging economies and emerging economy firms has not only opened up many opportunities for MNCs, but also raised many challenges. Extant literature has, however, not paid enough attention to how MNCs can best make use of the opportunities available in emerging markets, while taking care of the associated challenges. This paper is unique in providing a holistic framework pertaining to important strategic decisions that MNCs have to make, with specific reference to emerging markets.