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1 – 10 of 16Alvaro Cuervo-Cazurra and Ravi Ramamurti
The purpose of this study is to use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization.
Abstract
Purpose
The purpose of this study is to use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization.
Design/methodology/approach
This paper is a conceptual paper.
Findings
We argue that the home country’s institutional and economic underdevelopment can influence the internationalization of firms in two ways. First, emerging-market firms may leverage innovations made at home to cope with underdeveloped institutions or economic backwardness to gain a competitive advantage abroad, especially in other emerging markets; We call this innovation-based internationalization. Second, they may expand into countries that are more developed or have better institutions to escape weaknesses on these fronts at home; we call this escape-based internationalization.
Research limitations/implications
Comparative disadvantages influence the internationalization of the firm differently from comparative advantage, as it forces the firm to actively upgrade its firm-specific advantage and internationalize.
Practical implications
We explain two drivers of internationalization that managers operating in emerging markets can consider when facing disadvantages in their home countries and follow several strategies, namely, trickle-up innovation, self-reliant innovation, improvisation management, self-reliance management, technological escape, marketing escape, institutional escape and discriminatory escape.
Originality/value
We explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization.
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This masterclass examines how two important new books propose to achieve cost innovation, a value creation strategy that can transform an over-priced industry.
Abstract
Purpose
This masterclass examines how two important new books propose to achieve cost innovation, a value creation strategy that can transform an over-priced industry.
Design/methodology/approach
In their book, marketing gurus Stephen Wunker and Jennifer Luo Law highlight the potential of cost innovation in helping to create new market demand and transform the competitive dynamics in any industry sector, and they offer guidance on how to develop such a strategy. In their study of transformation by value creation, Professors Vijay Govindarajan and Ravi Ramamurti highlight the potential for cost innovations in emerging markets to help transform health care delivery in the West.
Findings
The authors showcased in this masterclass demonstrate how the value-based principles highlighted by Porter and Christensen and Kim and Mauborge are key to transforming any industry to make it more reliable, accessible and affordable.
Practical implications
Cost innovation involves taking a fresh approach to the conventional way of delivering value in any given industry and looking for ways to reimagine it.
Originality/value
The notion of cost as a potential target for breakthrough innovation in its own right is still not widely recognized. As marketing consultants Wunker and Luo Law point out in Costovation: innovation and cost are still most often seen as “magnetic opposites,” the one in natural tension with the other. They set out to challenge this assumption and show how “innovation and cost-cutting” can become “a powerful duo, capable of reshaping markets and creating long-term competitive advantages.”
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State‐owned enterprises (SOEs), in general, have not been successful. Their indifferent performance has been at the center of the debate about the role of the state in the…
Abstract
State‐owned enterprises (SOEs), in general, have not been successful. Their indifferent performance has been at the center of the debate about the role of the state in the economy. To economists, the performance of SOEs is evidence of what is wrong with state intervention. And in recent years privatization has increasingly been regarded as the only way of improving the performance of SOEs. Yet, while unsuccessful SOEs abound, a few high‐performing SOEs such as POSCO (South Korea), Airbus Industrie (France), EMBRAER (Brazil), and MUL (India) can also be found.
Mary M. Cutler and Gabriela Paszkowska
Investors around the world are eager to buy shares of newly‐privatized state firms. This behavior is understandable in light of the evidence that many governments underprice…
Abstract
Investors around the world are eager to buy shares of newly‐privatized state firms. This behavior is understandable in light of the evidence that many governments underprice initial public offerings. This paper looks at Eastern Europe's first public offerings of privatized state firms (in Poland) and finds evidence of significant underpricing. We also find that the level of underpricing was masked by special discounts and the redemption, at par, of discounted government bonds. Using conservative assumptions we conclude that underpricing was almost 30%, three times the level reflected by recorded stock prices. Our study of the new Polish stock market indicates the need for caution when using data from developing capital markets. Prices, returns, trends and market capitalization rates in Poland were affected by unique, local financial practices.
Jianhong Zhang, Jan P.A.M. Jacobs and Arjen van Witteloostuijn
Multinational enterprises (MNEs) play a dominant role in the international business (IB) literature. Traditionally, by far the majority of IB studies deal with issues at the micro…
Abstract
Multinational enterprises (MNEs) play a dominant role in the international business (IB) literature. Traditionally, by far the majority of IB studies deal with issues at the micro level of the individual MNE, or at the meso level of a sample of individual MNEs in industries. This paper focuses on the impact of MNE behavior through foreign direct investment (FDI) on a country’s international trade, and vice versa. In so doing, this study responds to a recent plea for more macro‐level studies in IB into the effect of MNE behavior on the macroeconomic performance of countries as a whole, particularly developing and emerging economies. In the current study, we focus on the largest developing or emerging economy of all: China. Applying sophisticated econometric techniques, we unravel the causality and direction of FDI‐trade linkages for the Chinese economy in the 1980‐2003 period.
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Aruna Chandra, Tim Fealey and Pradeep Rau
The IT industry, particularly IT enabled services (ITES), in India has shown remarkable growth over the past decade and continues to show resilience even in the face of a global…
Abstract
The IT industry, particularly IT enabled services (ITES), in India has shown remarkable growth over the past decade and continues to show resilience even in the face of a global downturn in the sector. While India has not been able to match China in manufacturing prowess, it may have found its competitive advantage in the area of knowledge‐based services to which its factor endowments are uniquely suited. Yet, the tremendous potential and promise of this sector in spurring economic growth and national competitiveness may not be realized, if the numerous obstacles to the sector’s growth are not removed. This paper traces the evolution of the IT industry in India, its positives and negatives and its potential to contribute to India’s global competitiveness. Structural barriers in the national environment to the growth of this industry are identified and discussed. Conclusions and policy implications are presented.
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Conventional theories of market entry assume choice availability. This investment assumption is subject to challenges in the power generation market of an emerging economy where…
Abstract
Conventional theories of market entry assume choice availability. This investment assumption is subject to challenges in the power generation market of an emerging economy where the host government controls most key resources and market entry choices. With such constraints, entrants become heavily dependent on their host country partners. This study investigates how the resource dependency frameworks explain better in respect of some US power generation firms that manage to operate electricity facilities in China whereas some have to abort. Using cross‐case analysis, patterns emerged illustrate how two groups of entrants manage key resources differently.
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Attempts to establish a decision‐making model by which multinational enterprises (MNEs) front‐end financial target can be evaluated and determined. Explains and defines the…
Abstract
Attempts to establish a decision‐making model by which multinational enterprises (MNEs) front‐end financial target can be evaluated and determined. Explains and defines the financial range. Identifies their strategic concerns in order to do this. Continues by exploring the pattern of front‐end financial target variation and the process of its determination, constructing an international joint venture investment supply‐demand model. Elaborates upon how contingency factors in international operations exert direct impact on this matter and gives some considerations for future research.
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The purpose of this paper is to combine notions from the POST Model of Economic Geography and Learning Theory from International Business to study how firms may enhance their…
Abstract
Purpose
The purpose of this paper is to combine notions from the POST Model of Economic Geography and Learning Theory from International Business to study how firms may enhance their responsiveness to institutional processes and changes through different forms of international learning. Focussing on one form of institutional changes, namely pro-market reforms, the paper analyzes how firms may boost the potential benefits from such changes through international strategies that increase their access to knowledge spillovers and absorptive capacity. These strategies include international product diversification, enhancing innovation capabilities, informal institutional exposure, accumulated internationalization knowledge, and overall experiential knowledge.
Design/methodology/approach
The hypotheses are tested using generalized least squares models with AR(1) panel-specific autocorrelation and heteroskedasticity correction. Based on the preliminary analyses performed in these studies, the author also executes a Hausman test, Bartlett’s test, and James/Alexander’s test. The results of these analyses indicate that the use of random effects is appropriate; that moderating effects are present; and that multivariate analyses using these moderators are suitable, respectively.
Findings
The results indicate that pro-market reforms have a positive and significant effect on the profitability of firms from developing countries. Furthermore, they provide support for the positive moderating effects of international product diversification, innovation capabilities, informal institutional exposure, accumulated internationalization knowledge, and overall experiential knowledge. Together, these findings suggest that through their international strategic decisions, MNEs can enhance their access to knowledge and become more responsive to institutional changes in their home market.
Research limitations/implications
This paper contributes to the economic geography literature by linking the POST Model with the classification of types of knowledge from Learning Theory. The paper analyzes how characteristics of place, organization, space, and time play a different role for each of the three basic types of knowledge that is relevant for international firms: institutional, business, and internationalization. Furthermore, the paper contributes to the literature on reforms and firm profitability by delving deeper into the moderating effect of strategic decisions on the relationship between reforms and firm performance. This allows us to have a deeper comprehension of how various sources of international learning may enhance the responsiveness of firms to institutional changes.
Originality/value
The paper provides several important contributions to the international strategy literature. First, it contributes to Learning Theory by combining it with the POST Model of Economic Geography to study how each of the three sources of knowledge (and their subcomponents) can be further broken down into factors of place, organization, space, and time. Second, it contributes to the literature of institutional change by studying how knowledge acquired through vastly different means can provide firms with sources of competitive advantage over other local competitors when responding to institutional changes in their home market. Third, it contributes to the literature on reforms and profitability by studying five novel moderators of this relationship.
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