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The purpose of this chapter is to analyze the relationship of subsidiaries of multinational companies with local partners. The focus is on MNCs from advanced markets and their influence on the development of reverse innovations in emerging markets. Unlike the regular flow, reverse innovations consist of the development of new products, processes, and services created initially to meet the local demands of EMs, but that are later understood as fundamental by the multinational for generating gains of global competitive advantage, only to be disseminated to the headquarters and applied in developed markets. Through the use of statistical techniques in 113 subsidiaries of foreign multinationals operating in Brazil, we found that the quality of the relationship with local partners is significant, as it offers subsidiaries access to both local resources and the knowledge acquired by local partners. In addition, we found that innovations developed by subsidiaries were not restricted to them, thanks to the gains in competitive advantage they provide to headquarters and other units operating in developed markets. Finally, we point out that it is not only subsidiaries but also local partners who enjoy gains from such access, an indication of the strategic importance of quality relationships between local partners and subsidiaries in emerging markets for competitive gains on both ends.
This chapter outlines the elements of an innovation framework for emerging markets. It discusses the institutional context and drivers, types, and outcomes of innovation as the basis for the book’s overall structure. Throughout, it describes the distinctive aspects of innovation in emerging markets, the relevance of institutional environments, the impact of innovation on social development, and the “catch-up” dynamics in the transition from copycats to leaders.
In this chapter, we explore the possibility that entrepreneurial ecosystems have become the engine behind innovation leadership in emerging markets. We study the experience of 11 Balkan nations and provide evidence of their dynamic entrepreneurial ecosystems, despite national institution shortcomings and low public R&D spending. We emphasize the role of entrepreneurial finance, technical talent and the culture and connectedness of the entrepreneurial community as the most significant drivers behind the bubbling entrepreneurial ecosystems in the Balkans. We also argue that these arguments are critical and can nourish innovation performance in emerging contexts. We argue that by supporting their entrepreneurial ecosystems, many emerging countries that present similar institutional shortcomings to the Balkans can become innovation leaders.
Firms are often criticized for their reluctance to embrace sustainability in their business strategies. Frugal innovation is a recent concept that represents a new way for firms to serve underserved customers in developing countries while also promoting sustainability. Based on three cases of frugal innovation at the grassroots level in India, this article demonstrates how frugal innovation presents a promising way to tackle some of today's pressing societal problems with new business models. We use a range of parameters for economic, social, and environmental sustainability to strengthen the case for frugal innovation. This article attempts to inspire scholars to consider frugal innovation further in their future research endeavors and encourage firms to integrate it into their existing business models.
To contribute to our knowledge of the capabilities that are perceived as strategic by emerging market firms, this chapter presents a study of eight Chinese companies with different internationalization levels. They includes two exporters, the high-tech bus manufacturer Higer and the low-tech manufacturer of car seats Baby First. We also examine high-tech multinationals AVIC (aviation), Advantech (computer systems), and ShangGong Group (industrial sewing machines), in addition to low-tech Chervon (hand-held outdoor tools) and Siwei-Johnson (specialized vehicles). Finally, we examine retail service firm Sanpower. By examining and comparing/contrasting the capabilities identified as strategic by these companies, we aim to gain insights into strategic capability development based on the experience of the world’s largest emerging economy. For example, more than one company mentioned their reflection capabilities, a cognitive process where people attempt to increase their awareness and learn from past business experiences, and explained how they apply this mechanism to corporate governance.
Through development of strong strategic capabilities, Chilean companies have increased their foreign presence over the last three decades. Two critical factors influenced this drive to internationalization: (1) limited potential to grow domestically due to the relatively small size of the Chilean economy, and (2) the early start of Chile’s liberalization process compared to other Latin American countries. In this chapter, we examine the strategic capabilities and internationalization initiatives of seven Chilean firms: eClass (e-learning), ALTO (loss prevention), Kunstmann (premium beer production), Forus (premium brands retail), Derco (vehicle distribution), Casas del Toqui (wine), and BeitGroup (children’s clothing). During the internationalization process of these companies, all the firms found it crucial first to transfer strategic capabilities developed at home to another country, and then to successfully adapt these capabilities to the foreign country context. These companies did not seek to acquire or upgrade their strategic capabilities through internationalization.
In this chapter, we integrated data obtained from the interviews conducted with business leaders from seventy-two companies across twelve emerging markets in five continents to better understand which capabilities leaders of emerging market multinationals identify as being strategic. In doing so, we examined which capabilities appear to be commonly assessed as being strategic across our study contexts, and which ones varied by industry, company multinationality, and country of origin. In particular, we examined emerging market companies headquartered in Eastern Europe (Russia and Poland), Asia (China, India, and Kazakhstan), Latin America (Argentina, Brazil, Chile, Colombia, Mexico, and Peru) and Africa (South Africa). Looking across the various capabilities identified by the senior managers in our study, our results suggest that the strategic capabilities needed by emerging market firms to be successful outside their home markets occur at multiple levels, including management level, firm level, industry level, and national level. These capabilities influence both a firm’s ability to internationalize and its ability to be successful, abilities that often have reinforcing influences on each other.
Firms from different countries face different challenges to growth and development, with firms in emerging markets generally being at a disadvantage compared to developed countries’ firms. Despite this, some emerging market firms have started expanding to other countries, becoming progressively more established. This chapter will present the case of seven Mexican firms that have undergone an internationalization process and have become multinational corporations and exporters. To analyze this, the study focused on the capabilities each firm had that provided an advantage locally and globally, and whether these capabilities were different for each market. In the comparison, it was discovered that the most common and relevant capabilities for these firms were understanding local customer needs, corporate brand and reputation, and relationship capabilities.
This chapter introduces the background and key research question of the project for this book, which is an output of a multi-country study on a highly important subject in emerging markets: what types of capabilities do emerging market firms need, and how do they acquire and upgrade these capabilities in order to achieve competitiveness in the global market? The chapter highlights two unique aspects of emerging markets: weak institutions and lack of endowment. The main theme of the book thus becomes how emerging market companies develop competitive capabilities to international levels facing these two critical constraints. The chapter also discusses the organization of the book, which comprises twelve different country studies, and presents the methodology used to select and evaluate the firms studied.
We analyze how firms from emerging markets upgrade their capabilities to improve their international competitiveness. We argue that firms use a combination methods, the four-I mechanisms, to upgrade their capabilities – imitation, integration, incorporation, and internal development – and that the underdevelopment of emerging markets affects this catching-up process. We propose that initially, as laggards in global competition, firms are more inclined to imitate products and services from more sophisticated firms, leveraging the relatively weak intellectual property protection of their home countries and aiming to serve low-income consumers. As they catch up, firms are more likely to integrate best practices through alliances to obtain technologies, or to learn by serving as suppliers of more sophisticated firms. Firms then incorporate best practices by acquiring technologies or firms that own sophisticated knowledge. Finally, as they catch up to leaders, firms focus more on internal development of capabilities. We highlight how the four-I mechanisms evolve with the development stages of firms and emerging economies.
To what do we ascribe the far-reaching success of companies from emerging economies in domestic and global markets? What do emerging markets companies do differently? This chapter studies and provides a comparison of the cases of seven successful Colombian companies in different industries to identify specific attributes and capabilities that have helped these firms to overcome the liabilities associated with being situated in emerging markets, enabling them to become market leaders domestically or internationally. The findings of this study suggest that the most relevant capabilities for the success of these companies are their ability to obtain resources, their product adaptation capabilities, and their understanding of local consumers’ needs.
In this article, we study the role that media plays during a speculative bubble on an emerging market, and in particular the London financial press’s relation to the West African mining bubble of the early twentieth century. The focus is on the leading company in this sector at the time, Ashanti Goldfields Corporation. The London financial press lacked access to independent, reliable information on the ground, so it often failed to provide readers with relevant factual information. In some instances, the press might have even fueled the speculative cycles through the reporting it provided.
We investigate the presence of nonlinear effects of government spending shocks during good and bad times in a panel of 17 emerging markets through the lens of a Bayesian panel threshold VAR model. We find that the responses of gross domestic product, consumption, investment, trade balance, real exchange rate, and real interest rates vary depending on the state of the economy. Particularly, in slump periods, both consumption and investment may respond negatively to a government purchase stimulus, unlike in normal times. Our estimated government spending multipliers are less than one in the two regimes and can be zero in bad times.
This chapter uses the OECD’s newly assembled Structural Policy Indicators Database for Economic Research (SPIDER) to gauge on the impact of regulation and institutions on economic growth. We investigate for a sample of around 100 countries and for a set of OECD countries the extent to which product and labour market regulations and policies influence per capita income levels. Our estimation results indicate that more business-friendly product market regulations are associated with higher per capita income levels. At the same time, it is more difficult to identify precisely estimated effects of labour market regulation and policies, perhaps with the exception of spending on ALMP, which tend to have a positive relation to per capita income. We also find that the quality of institutions influences a country’s level of development and that institutions interact with product market regulations. Finally, our results also show that labour market regulation and policies may attenuate or accentuate the impact of product market regulations on per capita income levels.
Organisations and managers are increasingly being held accountable for CSR in their spheres of operation. While a few organisations already have structures to deal with competing demands from stakeholders with regards to corporate social responsibilities, some are caught flatfooted. This paper takes a look at the theoretical underpinning of CSR and CRS education in the literature. It also focuses on exploring the following questions. How do leaders or managers acquire the sensibilities of being in tune with the social responsibilities of an organisation? How do managers acquire the necessary knowledge and sense to handle corporate social responsibilities expectations? How are MBA institutions handling this critical task of preparing mangers as decisionmakers in charge of CSR for the future? Can a model emerge from current CSR education practices? These issues are addressed in this chapter.
Offshoring has become a popular practice for multinational corporations (MNCs), with emerging markets being regarded as attractive locations. Although offshore outsourcing has economic benefits, it also involves several ethical issues, such as poor working conditions, child labour and environmental pollution. To identify implications for how to establish ethical practices in MNCs’ offshoring operations, we discuss theoretical perspectives (i.e., institutional, instrumental and normative) on MNCs’ motivations for being socially and environmentally responsible. Based on a review of these perspectives, this chapter provides practical guidelines for both MNCs and policymakers, including (1) re-designing governance, (2) establishing industry-level action and (3) developing institutional capacity. Developing both public (e.g., government regulation) and private (e.g., corporate code of conduct) governance mechanisms is important. Also, MNCs should take collective action at the industry level. Lastly, MNCs should provide resources and capacity to outsourcing companies and local communities to contribute to alleviating ethical concerns in emerging markets.
Corporate social responsibility (CSR) has emerged as a tool for public and private institutions to promote sustainable development in developing and emerging markets. This work brings together contributors from a variety of fields and international perspectives to assess and improve the effectiveness of CSR by addressing the following questions: what are the linkages between CSR and sustainable development? What does CSR mean for developing or emerging economies and in what ways does this deviate from orthodoxies and universalist approaches? What institutional factors and actors influence the effectiveness of CSR in developing and emerging economies? How can developing and emerging economies promote a flexible, diverse and reconstructed form of CSR that leads to inclusive and sustainable development? This book should be read by anyone interested in understanding what normative factors, theoretical models, policy strategies, and corporate practices best facilitate effective CSR and sustainable development.
This chapter describes important elements of the corporate governance system in Russia, such as the structure of stock ownership, the basic laws and regulations. Special attention is given to related-party transactions, the use of foreign law and the new Corporate Governance Code. The chapter summarizes the empirical literature on the relation between corporate governance and corporate sustainability in emerging markets and provides evidence on measures of corporate sustainability and the quality of corporate governance in Russia. It is argued that the weakness of civil society and independent media effectively limits the demand for corporate sustainability. This demand is therefore potentially represented only by the government, which in turn faces a conflict of interest as the regulator and as a shareholder of large companies, in particular in the oil and gas sector.
The financial crisis of 2008 brought with it a renewed interest in the study of capitalism across disciplines. While historians have since led the way with writings on commodities, labor, finance, and institutions, these have been largely conveyed from the Euro-American perspective without necessarily probing other values, parameters, and conditions beyond western political economy that have shaped business over time. This article suggests that to assess the benefits and limits of the global capitalist experience, we must prioritize unconventional subjects, sources, and styles in how we frame research questions, analyze evidence, and cast narratives. Such an endeavor is especially timely given the growing influence of regional markets around the world and the increasing prominence of computational tools to generate and analyze novel datasets.