Strategic responses of MNCs in emerging markets: addressing institutional voids associated with informal institutions

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Anne H. Koch
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Business Strategy ◽  
Informal Institutions ◽  
Social Needs ◽  
Institutional Voids ◽  
Strategic Responses ◽  
Critical Perspective ◽  
Content Type ◽  
Social Innovations

Purpose The purpose of this paper is to address the question how multinational corporations (MNCs) can respond to different domains of formal voids associated with informal institutions in emergent markets. Design/methodology/approach The author advances the institution-based view of international business strategy by developing a framework and six propositions. The theoretical distinction of informal institutions as an additional aspect when disrupting formal institutional voids are instrumental in developing a refined understanding of how MNCs can respond to institutional voids. Findings By emphasizing the notion of informal institutions that are associated with formal institutional voids, the author moves away from a unidimensional toward a multidimensional view of substituting formal voids. The presented response variety includes a variety of substitutes. Research limitations/implications Further research can apply qualitative research to further examine where, when and why social innovations can be used efficiently to address institutional weaknesses or absences. The author suggests further research opportunities in the implication section. Social implications Constituting substitutive formal institutions with complementary informal institutions can help strategic managers navigate business activities in emerging markets. Institutional weaknesses can be used as opportunities to create legitimacy and serve social needs. To help facilitate such impacts public policies need to be developed accordingly. Originality/value The paper provides a new and critical perspective on how MNCs can use institutional voids as opportunities. The author’s key contribution is to highlight specific substitutive actions from MNCs to institutional voids when different cultural-cognitive and normative circumstances apply in emerging markets.

Divergent patterns in institutional entrepreneurship of MNCs in emerging economies

2017 ◽  
Vol 13 (3) ◽  
pp. 186-203 ◽  
Author(s):  
Florian Becker-Ritterspach ◽  
Knut Lange ◽  
Jutta Becker-Ritterspach
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Emerging Market ◽  
Institutional Setting ◽  
Institutional Voids ◽  
Institutional Entrepreneurship ◽  
Content Type ◽  
Developed Economies ◽  
Institutional Settings ◽  
Institutional Embeddedness

Purpose The purpose of this paper is to develop a theoretical framework that addresses the question of how and why multinational corporations (MNCs) from developed economies engage in divergent patterns of institutional entrepreneurship (IE) in emerging markets. Design/methodology/approach The authors combine IB’s concept of institutional voids with comparative capitalism’s insights into the institutional embeddedness of firm capabilities and IE. This theoretical cross-fertilisation is instrumental in developing a refined understanding of institutional voids and how MNCs proactively engage with them. Findings The authors emphasise the notion of institutional voids as a relative concept and, thereby, move away from an ethnocentric view of emerging markets as “empty spaces” that are void of institutions. The authors’ framework proposes that MNCs from liberal and coordinated market economies experience institutional voids differently and engage in different patterns of IE. Research limitations/implications The main limitation of this work is that the propositions are restricted to the country-of-origin effect and that the observations are based on anecdotal evidence only. Against these limitations the authors call for a more comprehensive research agenda in their conclusion. Social implications The paper sensitises policymakers in emerging markets for the potentially different patterns of involvement of MNCs in their institutional environments. Specifically, the authors argue that MNCs may have a strong inclination to rebuild critical elements of their home country’s institutional setting in emerging markets. This touches upon questions of national sovereignty and highlights the need for emerging market policymakers to decide which kinds of institutional settings they would like or not like to see imported. Originality/value The paper provides a new and critical perspective of the mainstream IB concept of institutional voids. The authors’ key contribution is to highlight that the home country institutional context may substantially matter in how MNCs perceive and respond to institutional voids in emerging markets.

scholarly journals Rough diamonds in emerging markets: legacy, competitiveness, and sustained high performance

2019 ◽  
Vol 26 (3) ◽  
pp. 363-386
Author(s):  
Seung Ho Park ◽  
Gerardo R. Ungson
Keyword(s):  
Human Capital ◽  
Emerging Markets ◽  
High Performance ◽  
Core Competencies ◽  
Market Potential ◽  
Government Support ◽  
Screening Tests ◽  
Institutional Voids ◽  
Content Type ◽  
Over Time

Purpose The purpose of this paper is to uncover the underlying drivers of sustained high performing companies based on a field study of 127 companies in Brazilian, Russian, Indian and Chinese (BRIC) and Association of Southeast Asian Nations (ASEAN) emerging markets. Understanding these companies provides a complementary way of appraising the growth, development and transformation of emerging markets. The authors synthesize the findings in an overarching framework that covers six strategies for building and sustaining legacy that leads to the succession of intergenerational wealth over time: overcoming institutional voids, inclusive markets, deepening localization, nurturing government support, building core competencies and harnessing human capital. The authors relate these strategies to different levels of development using Prahalad and Hart’s BOP framework. Design/methodology/approach This study examines the underlying drivers of sustained high-performance companies based on field studies from an initial set of 105,260 BRIC companies and close to 500 companies in ASEAN. The methods employed four screening tests to arrive at a selection of the highest-performing firms: 70 firms in the BRIC nations and 58 firms from ASEAN. Following the selection, the authors constructed cases using primary interviews and secondary data, with the assistance of Ernst & Young and with academic colleagues in Manila. These studies were originally conducted in two separate time periods and reported accordingly. This paper synthesizes the findings of these two studies to arrive at an extended integrative framework. Findings From the cases, the authors examine six strategies for building and sustaining legacy that lead to high performance over time: overcoming institutional voids, creating inclusive markets, deepening localization, nurturing government support, building core competencies and harnessing human capital. To address the evolving state of institutional voids in these countries, the authors employ similar methods to hypothesize the placement of these strategies in the context of the world economic pyramid, initially formulated as the “bottom of the pyramid” framework. Originality/value This paper synthesizes and extends the authors’ previous works by proposing the concept of legacy to describe the emergence and succession of local exemplary firms in emerging markets. This study aims to complement extant measures of nation-growth based primarily on GDP. The paper also extends the literature on institutional voids in shifting the focus from the mix of voids to their evolving state. Altogether, the paper provides a complementary narrative on assessing the market potential of emerging markets by adopting several categories of performance.

Mcdonald’s versus Vikram Bakshi

2021 ◽  
Vol 11 (4) ◽  
pp. 1-27
Author(s):  
Nitin Pangarkar ◽  
Neetu Yadav
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Service Industry ◽  
Executive Development ◽  
Content Type ◽  
Academic Level ◽  
Quick Service ◽  
Term Performance ◽  
The Impact

Learning outcomes The case illustrates the challenges of managing JVs in emerging markets. specifically, after going through the case, students should be able to: i.Analyze the contexts in which firms need to form JVs and evaluate this need in the context of emerging markets such as India; ii.Understand how multinational corporations can achieve success in emerging markets, specifically the role of strategic (broader than the product) adaptation in success; iii.Evaluate the impact of conflict between partners on the short-term and long-term performance of a JV; and iv.Create alternatives, evaluate each alternative’s pros and cons, and recommend appropriate decisions to address the situation after a JV unravels and the organization is faced with quality and other challenges. Case overview/synopsis McDonald’s, the global giant in the quick service industry, entered India in 1993 and formed two JVs in 1995 one with Vikram Bakshi (Connaught Plaza Restaurants Ltd or CPRL) to own and operate stores in the northern and eastern zones, and another with Amit Jatia (Hardcastle Restaurants Private Limited or HRPL) to own and operate stores in the western and southern zones. Over the next 12 years, both the JVs made steady progress by opening new stores while also achieving better store-level metrics. Though CPRL was ahead of HRPL in terms of the number of stores and total revenues earned in 2008, the year marked the beginning of a long-running dispute between the two partners in CPRL, Bakshi and McDonald’s. Over the next 11 years, Bakshi and McDonald’s tried to block each other, filed court cases against each other and also exchanged recriminations in media. The feud hurt the performance of CPRL, which fell behind HRPL in terms of growth and other metrics. On May 9, 2019, the feuding partners reached an out-of-court settlement under which McDonald’s would buy out Bakshi’s shares in CPRL, thus making CPRL a subsidiary. Robert Hunghanfoo, who had been appointed head of CPRL after Bakshi’s exit, announced a temporary shutdown of McDonald’s stores to take stock of the current situation. He had to make a number of critical decisions that would impact the company’s performance in the long-term. Complexity academic level MBA, Executive MBA and executive development programs. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 11: Strategy.

scholarly journals Overcoming African institutional voids: market entry with networks

2019 ◽  
Vol 31 (3) ◽  
pp. 304-316 ◽  
Author(s):  
Kerry Chipp ◽  
Albert Wocke ◽  
Carola Strandberg ◽  
Manoj Chiba
Keyword(s):  
Emerging Markets ◽  
Strategic Alliances ◽  
Market Entry ◽  
Business Groups ◽  
Institutional Voids ◽  
Dominant Form ◽  
Firm Level ◽  
Content Type ◽  
Case Examples ◽  
Mode Of Entry

Purpose Literature on modes of entry has focussed on firm-level strategies. The predominant theories used are institutional theory and the resource-based view. Using an alternate approach – network theory – this paper aims to demonstrate an additional mode of entry: multiple firms entering together as an extension of an existing loose network, known as a bridging network. The extension of an external network across borders is an appropriate mode of entry in emerging markets, with no pre-existing networks or existing networks within a market that are weak, immature or missing. Design/methodology/approach A conceptual review, which develops four propositions, demonstrating that market entry with bridging networks may be the preferred mode of entry in the presence of institutional voids. Alternative modes may not be viable because of costs and risks associated with overcoming such voids. Findings Existing theory and case examples support the contention that market conditions facilitate firms to enter as networks rather than as singular entities. These conditions are found in markets with institutional voids and explain the dominant form of business groups in many countries and the operation of loose strategic alliances in emerging markets. Network entry facilitates market access speed may allow for local ties to remain undeveloped or be a first step in building in-country networks. Originality/value This paper heeds to the call for a network ecosystem approach to market entry, arguing that firms may enter as a collective in subsistence and emerging markets, which would explain the preponderance of business groups and loose alliances found.

Innovation capabilities for global R&D projects in subsidiaries

2019 ◽  
Vol 22 (4) ◽  
pp. 639-659 ◽  
Author(s):  
Elisangela Lazarou Tarraço ◽  
Roberto Carlos Bernardes ◽  
Felipe Mendes Borini ◽  
Dennys Eduardo Rossetto
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Structural Equation ◽  
Emerging Market ◽  
Process Innovation ◽  
Equation Modeling ◽  
Foreign Subsidiaries ◽  
Content Type ◽  
Product And Process Innovation ◽  
Product And Process

Purpose Is the development of local innovation capabilities enough for foreign subsidiaries in emerging markets to be able to integrate into global R&D projects? The authors argue that it is not. The purpose of this paper is to show the central role of R&D capacities when it comes to inserting foreign subsidiaries in emerging markets into global R&D projects. Design/methodology/approach The study investigated 131 foreign multinational subsidiaries operating in Brazil. For each subsidiary, the authors surveyed two to five directors or C-level executives from innovation, R&D, engineering, product development and projects. the authors used structural equation modeling for analysis. Findings The results indicate that product and process innovations alone do not guarantee the insertion of the emerging market subsidiaries into global innovation projects. Such insertion depends on the subsidiary’s accumulation of R&D capacities. Practical implications The results reinforce the central issue of building product and process innovation capabilities as the first step toward a blueprint for global projects. However, the effort is not limited to these initiatives. Product and process innovation efforts need be reverted in headquarters’ eyes in order for subsidiaries to gain R&D center status. To achieve this, subsidiaries must align their technological innovations with multinational corporations’ innovation strategies. Originality/value In authors’ view, this study contributes to the literature in three main areas: the evolutionary process of innovation capability in subsidiaries, the reverse innovation debate and the discussion of subsidiaries’ initiatives.

Corporate strategic responses to foreign entry: insights from prospect theory

2014 ◽  
Vol 22 (3) ◽  
pp. 294-323 ◽  
Author(s):  
Thomas Hutzschenreuter ◽  
Ingo Kleindienst ◽  
Florian Groene ◽  
Alain Verbeke
Keyword(s):  
Prospect Theory ◽  
Business Strategy ◽  
Foreign Firms ◽  
Geographic Diversification ◽  
Import Penetration ◽  
Strategic Responses ◽  
Firm Level ◽  
Corporate Response ◽  
Content Type ◽  
Foreign Entry

Purpose – The purpose of this paper is to address how firms adapt their product and geographic diversification as a response to foreign rivals penetrating their domestic market by adopting a behavioral perspective to understand firm-level strategic responses to foreign entry. Design/methodology/approach – The study proposes that strategic responses to foreign entry selected by domestic incumbents have both a framing component and a related, strategic choice component, with the latter including changes in product and geographic market diversification (though other more business strategy-related responses are also possible, e.g. in product pricing and marketing). This study tests a set of hypotheses building on panel data of large US firms. Findings – The study finds, in accordance with our predictions, that domestic incumbents reduce their product and geographic diversification when facing an increase in import penetration. However, when increased market penetration by foreign firms takes the form of FDI rather than imports, the corporate response appears to be an increase in product and geographic diversification, again in line with our predictions. Originality/value – The study develops a new conceptual framework that is grounded in prospect theory, but builds on recent insights from mainstream international strategic management studies (Bowen and Wiersema, 2005; Wiersema and Bowen, 2008).

Institutions and emerging markets: effects and implications for multinational corporations

2016 ◽  
Vol 11 (1) ◽  
pp. 2-17 ◽  
Author(s):  
Daniel Rottig
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Local Governments ◽  
Emerging Market ◽  
Social Institutions ◽  
Social Adaptation ◽  
Institutional Pressures ◽  
Institutional Environments ◽  
Content Type ◽  
Institutional Features

Purpose – The purpose of this paper is to discuss the role of institutions in emerging markets by sketching out the unique institutional features of these markets and their implications for multinational corporations (MNCs). Design/methodology/approach – The study is conceptual in nature and provides an examination and interrelation of some of the key developments of institution-based research in the context of emerging market studies. Findings – This paper examines several idiosyncratic institutional features of emerging markets, including institutional voids, the relative importance of informal compared to formal institutions, institutional pressures by local governments, as well as institutional change and transitions. Practical implications – The paper discusses key effects and implications of the unique institutional environments of emerging markets for managers of MNCs, such as the relevance and importance of context, political, economic and social adaptability, as well as institutional arbitrage. Social implications – The paper discusses institutional legitimacy pressures in emerging markets for MNCs’ social performance, the relevance and importance of social institutions in these markets, as well as the need for social adaptation in order to successfully do business in emerging markets. Originality/value – This paper provides a current and relevant discussion of the key formal and informal institutional idiosyncrasies of emerging markets compared to developed markets and forwards a number or practical prescriptions for how to navigate these different and unique institutional environments.

scholarly journals Internationalisation of service firms through corporate social entrepreneurship and networking

2014 ◽  
Vol 31 (6) ◽  
pp. 576-600 ◽  
Author(s):  
Pervez Ghauri ◽  
Misagh Tasavori ◽  
Reza Zaefarian
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Social Entrepreneurship ◽  
Service Firms ◽  
Base Of The Pyramid ◽  
Content Type ◽  
Sustainable Solutions ◽  
Social Value Creation ◽  
Bop Markets ◽  
Corporate Social

Purpose – The purpose of this paper is to explore how employing corporate social entrepreneurship and developing a network of relationships with non-governmental organisations (NGOs) can support and contribute towards the internationalisation of service firms into the base of the pyramid (BOP) markets in emerging markets. Design/methodology/approach – This research adopts an exploratory approach employing qualitative multiple case studies. Three service firms that have targeted the BOP markets in India were studied. In total, 25 in-depth interviews were conducted with multinational corporations (MNCs) and their NGO partners. Data analysis was facilitated through pattern matching and systematic case comparison. Findings – The findings reveal that, by engaging in social entrepreneurship, these MNCs have focused on the neglected needs of the BOP population, developed sustainable solutions and empowerment, and started with social value creation and postponed value capturing. The pursuit of corporate social entrepreneurship has paved the way for them to establish relationships with NGOs. While the MNCs have mainly had the technical knowledge and financial resources required, collaboration with NGOs have allowed them to learn about the BOP’s specific needs and benefit from the NGOs’ knowledge, human resources and good relationships in this market. Originality/value – This research unravels how service firms can seize opportunities at the BOP. The authors build on social entrepreneurship theory and bring new insights to the field of international business. In addition, the authors broaden the network view and show how networking with social actors such as NGOs enables the mobilisation of resources, actors and activities in emerging markets.

Going East: a framework for reverse innovation in SMEs

2017 ◽  
Vol 38 (3) ◽  
pp. 30-39 ◽  
Author(s):  
Dominik Dellermann
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Single Case ◽  
Case Study Research ◽  
Past Research ◽  
Business Networks ◽  
Reverse Innovation ◽  
Content Type ◽  
Management Literature

Purpose Past research demonstrated that reverse innovation initiatives generate tremendous returns for innovators. However, the focus is on multinational corporations (MNCs). This paper aims to provide a framework how Western small and medium-sized enterprises (SMEs) can drive reverse innovation success. Design/methodology/approach The author adopted an exploratory single case study research design. It draws on the findings from a German SME operating in the healthcare industry. Findings The research reveals that SME can use emerging markets growth opportunities by leveraging open business networks and a clear strategic focus on emerging economies as well as reverse commercialization. The findings provide a framework for managers of SMEs. Originality/value This paper analyses an important way for SMEs to enter emerging markets that has not been explored yet in the management literature and business practice. It offers deep insights of a unique case.

The influence of institutional factors on MNC’s triple bottom-line reporting

2016 ◽  
Vol 11 (4) ◽  
pp. 497-513 ◽  
Author(s):  
Boris Urban ◽  
Rutendo Hwindingwi
Keyword(s):  
Emerging Markets ◽  
Multinational Corporations ◽  
Triple Bottom Line ◽  
Policy Implications ◽  
Institutional Factors ◽  
Validity And Reliability ◽  
Bottom Line ◽  
Cross Sectional ◽  
Content Type ◽  
Targeted Interventions

Purpose Recognising the rapid institutional changes multinational corporations (MNCs) face in emerging markets, the purpose of this paper is to investigate the influence of various institutional factors on their triple bottom-line (TBL) reporting. The study builds on existing research where it has been noted that international business theory needs to adapt to the changes in the global economy, particularly the need to recognise the influence of several contingent variables in African emerging markets (AEMs). Design/methodology/approach The study design was cross-sectional where a survey was administered to MNCs operating in four leading countries situated in key economic regions in Africa. Following validity and reliability testing, hypotheses were tested using regression analysis. Findings Findings show that an independent judiciary system and an adequate national security system were found to have a positive and significant influence on the MNC’s TBL reporting. These institutional factors highlight the perceived importance of “law and order” for MNCs in AEMs. Research limitations/implications Policy implications relate to the need for specific and targeted interventions aimed at improving institutional factors in AEMs. Originality/value Instead of focusing on the internationalisation of AEM firms, the study took a different approach by focusing instead on countries previously under researched and how MNCs are affected by the institutional regimes in these AEMs.

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