Subsidiaries’ behavioural responses to volatile local contexts in emerging African markets: evidence from Nigeria

Purpose This paper aims to explore subsidiaries’ behavioural responses to volatile institutional pressures in the local context of the emerging Nigerian market. Design/methodology/approach The authors built on institutional and contingency theory to analyse previous literature on developed markets and apply it to African contexts. The authors used a context-specific volatile local context model to show how porous formal and strong informal institutions constitute international business (IB) as a contested terrain in the host country. The authors also used a qualitative methodology, involving multiple actors, to investigate this phenomenon in practice. Findings The findings indicated different types of institutional pressures shaping volatile local contexts, which together or separately impact subsidiaries, depending on their degree of exposure. Subsidiaries behaviourally respond to cope with these pressures through inclusive negotiations involving their home and host countries’ networks. Originality/value Previous research has imposed developed markets’ norms on emerging African markets, regardless of their volatility. As subsidiaries’ responses to local contexts in emerging African markets are poorly understood, the authors developed a volatile local context model, showing how IB becomes a contested terrain in host countries and the authors proposed a model that differentiates between informal institutions. The authors highlighted the impact of contextual pressures on subsidiaries, according to their levels of exposure to the local context. The authors concluded that committed alignment with a local context is necessary for presenting an effective contingent response to its volatilities.

Litigations with the home State and internationalization

Purpose This paper aims to investigate whether Foreign Direct Investment (FDI) can be driven by the creative compliance knowledge that firms gather in their home country through litigations with the government. Design/methodology/approach The authors draw on the knowledge-based view and organizational learning theory to argue that there is an inverted U-shaped relationship between experience in litigating with the home State and a firm’s level of FDI. The authors test this hypothesis using negative binomial regressions on a sample of Spanish listed firms for the period between 1986 and 2008. Findings The findings of this study confirm the hypothesized inverted U-shaped relationship between a firm’s experience in litigating with the home State and its FDI levels. Firms seem to face an exploration–exploitation dilemma regarding their compliance with domestic regulation. Once they have accumulated a certain amount of creative compliance knowledge, it would be better for them to exploit it both domestically and internationally in the form of creative compliance routines, instead of continuing to push the limits of regulation. Originality/value Firms willing to explore the gray areas of the law are usually forced to litigate with the State. As a result, they develop creative compliance knowledge that they can incorporate into their legal routines and capabilities so that they can later exploit it in foreign countries. To the best of the authors’ knowledge, this is the first paper that attempts to understand the influence of creative compliance knowledge on a firm’s international investments.

Are Latin American business groups different? An exploratory international political economy perspective

Purpose This study aims to advance an international political economy (IPE) perspective that geo-political events can have long-lasting imprint effects on countries and their firms. The study also aims to explore the idea that shared political history and geography combine to create specific structural conditions that shape the international competitiveness of all firms in a region. In particular, the authors consider whether the Monroe Doctrine of 1823, which asserted American influence in the Western Hemisphere, contributed to the creation of institutional structures across Latin America (LA) affecting the strategies of all firms to this day. The authors also illustrate the IPE perspective using the example of the contemporary international competitiveness of LA business groups. Design/methodology/approach The authors illustrate the IPE perspective using the example of the contemporary international competitiveness of LA business groups. The exploratory framework of this study leads to a proposition about the export performance of Latin American business group affiliates. The authors use firm-level performance data for 32,000 firms across emerging economies to explore the proposition empirically while controlling for alternative explanations. To do this, the authors draw on the World Bank Economic Surveys. Findings The authors derive a proposition that argues the Monroe Doctrine has had a long-run imprint effect on economic policymaking in LA, resulting in a common, persistent and negative impact on the international competitiveness of firms. The authors find strong and consistent evidence that in terms of export performance, all Latin American firms export less and group affiliates do not outperform independent firms, This finding contrasts with the results for all the other emerging market regions around the world. Research limitations/implications The main contribution of this study has been to suggest the potential importance of shared regional geopolitical history and geography in explaining firm-level outcomes. However, this study is preliminary and introductory, although the authors seek to control for alternative country-specific explanations of the results. The analysis considers the effects of one particular IPE phenomenon, the Monroe Doctrine, in one particular location: LA. Future work should seek to contrast LA with other geopolitical security and alternative IPE structures. They might also address the time dimension from a historical perspective: is imprinting in LA driven by the length of the Monroe Doctrine arrangements? Practical implications The most important managerial learning point concerns the relevance of geography and political economy factors for multinational enterprises strategy formation. There is widespread understanding that context is an important determinant of subsidiaries’ performance, and that strategies need to be constructed to take account of country-specific characteristics, most importantly, in emerging economies and institutional arrangements. This paper proposes that managers also need to take account of IPE structures, including security arrangements, and to consider the resulting regional as well as national context. Social implications The analysis suggests that not only the performance of firms, including emblematic firms, but also the socially beneficial spillovers that might be generated from them, are contingent on the regional as well as national characteristics. Thus, business groups in most emerging economies are found to yield better performance and to provide higher levels of social impact, including concerning ESG goals. However, the findings of this study suggest that the former is not true for LA, which, the authors argue, is a consequence of imprinting as a result of the Monroe Doctrine. Further work is needed to establish whether the latter effect is also not true, but if that is the case, then regionally specific policies may be required to address the resulting corporate social shortfalls. Originality/value The core idea is that geo-political events can have long-lasting imprint effects on countries and their firms: that shared political history and geography create specific structural conditions that shape the international competitiveness of all firms in a region. The authors explore this concept with reference to the Monroe Doctrine, asking whether its assertion of US influence across the Americas contributed to the creation of institutional structures across LA affecting the strategies of all firms to this day.

A comparative analysis of the internationalization of sub-national and central state-owned enterprises: shreds of evidence from Latin America

Purpose In this exploratory multiple case study, we aim to compare the internationalization of two state-owned enterprises (SOEs) owned by subnational governments with three owned by central governments in Latin America. This study provides a contextualized answer to the question: What are the differences in the internationalization of subnationally owned SOEs compared to central SOEs? This study finds that the speed and diversification of these two types of SOEs’ internationalization differ because they have a different expansion logic. Subnationally owned SOEs have a gradual and diversified expansion following market rules. Central government’s SOEs are specialized and take more drastic steps in their internationalization, which relates to non-market factors. Design/methodology/approach This study builds an exploratory qualitative comparative case analysis that uses multiple sources of data and information to develop a comprehensive understanding of SOEs through process tracing. Findings The study posits some assumptions that are confirmed in the case analysis. This study finds relevant differences between sub-national (SSOEs) and central authority (CSOEs’) strategies. SSOEs’ fewer resources and needs to increase income push them to follow a gradual market-driven internationalization and to diversify abroad. CSOEs non-gradual growth is justified by non-market factors (i.e. national politics). CSOEs do not diversify abroad due to the broader set of constituencies they have to face. Research limitations/implications Given the exploratory comparative case study of this research, the findings are bounded by the particularities of the cases and their region (Latin America). This paper and its findings can be useful for theory building but it does not claim any generalization capacity. Originality/value This study adds complexity into the SOEs phenomenon by distinguishing between different types of SOEs. This paper contributes to the study of subnational phenomena and its effect in SOEs’ internationalization process, which is an understudied topic. To the authors’ best knowledge, this is among the first studies that explore subnational SOEs in Latin America.

The role of subsidiary dual embeddedness and absorptive capacity in a transition economy

Purpose This study aims to focus on dual embeddedness as an important channel through which foreign subsidiaries access and share valuable and idiosyncratic knowledge within the multinational corporation (MNC). The authors examine the dual embeddedness challenges of foreign subsidiaries based in the context of Iran as a transitional market. Design/methodology/approach The final sample includes 144 active foreign subsidiaries in Iran from across a broad range of industries. A structured questionnaire was distributed to firms and structural equation modeling was adopted to analyze the results. Findings The findings reveal how building external embeddedness in an environment with potentially poor access to valuable knowledge, and risk of knowledge leakage impacts the subsidiary’s ability to subsequently transfer this knowledge within the MNC. The authors identify the significance of absorptive capacity as a way for the subsidiary to access knowledge from and share knowledge with firms in the local market. Originality/value Departing from existing work on subsidiary embeddedness in developed markets, the authors reveal how competence creating subsidiaries manage dual embeddedness and knowledge transfer in transition economies that are low in knowledge stocks. The authors unpack how subsidiary absorptive capacity enables access to local knowledge in a transitional market and increases reverse knowledge transfer in the MNC. In doing so, the authors answer calls for work on the dynamic and complementary relationships that exists between subsidiary dual embeddedness, absorptive capacity and knowledge sourcing in less open markets. Focusing on Iran as a transitional economy, this study provides greater contextual nuance to the extant literature on subsidiary dual embeddedness.

Open for business in a closed world? Managing MNE nonmarket strategy in times of populism and geopolitical uncertainty

Purpose This paper aims to consider how multinational enterprises are increasingly augmenting their international strategies with insights on, and approaches to, external stakeholders and nonmarket dynamics. The rise of populism and increased geopolitical uncertainty have accelerated these efforts, particularly for business leaders anticipating and engaging external agents, events, and issues that challenge the strategic objectives of their enterprises. Design/methodology/approach This paper aims to explain why the increased preponderance of populism and geopolitical uncertainty are simultaneously posing an existential threat to the post-Cold War global economy predicated on free trade and (relatively) open borders, and consequently, challenging the structures and strategies of international business. Findings We provide an overview of the four papers in our special issue, and consider how each advances insights on how multinational enterprises effectively navigate the nonmarket uncertainties of the contemporary global economy. We then advance four important areas for international business research around multinational nonmarket strategies: (i) resilience and legitimacy; (ii), diversification; (iii), market and nonmarket strategy integration; and (iv), institutional arbitrage. Research limitations/implications We anticipate that nonmarket strategy scholars can build on these themes to assess how nonmarket strategies can better enable multinational enterprises to survive and thrive in an age of heightened global risk and uncertainty. Originality/value This paper and the related special issue provide new theoretical insights by bringing attention to the relatively under-researched realm of multinational enterprise nonmarket strategy, particularly in populist contexts and during periods of geopolitical uncertainty. We identify four promising domains – resilience and legitimacy, diversification, the integration of market and nonmarket strategy, and institutional arbitrage – for international business scholars investigating nonmarket strategy to consider. We hope that our paper, as well as other papers in this special issue, provide further momentum to this growing area of research.

The role of market orientation and innovation capability in export performance of small- and medium-sized enterprises: a Latin American perspective

Purpose This study aims to extend the existing base of knowledge of proactive and reactive market orientation and innovation capability by testing their impact on the export performance of emerging-market small- and medium-sized enterprises (SMEs) in a Latin American context. Design/methodology/approach This paper is a replication study, and its data were collected through a survey answered by general, marketing, sales or export managers at 155 Mexican SMEs. The research model was tested using partial least squares. Findings The study results indicate that innovation capability and reactive market orientation are drivers of export performance in Latin American SMEs. Moreover, proactive market orientation has been found to have an indirect effect on export results. Practical implications This study highlights to managers of Latin American SMEs the importance of capability development and deployment to improve export performance. Social implications SMEs enabled by strategic and technological innovation based on current and latent customer needs can advantageously perform in foreign markets and can drive economic growth and social and human development in Latin America. Originality/value Recent studies have focused on emerging-market enterprises and the necessity of developing dynamic capabilities to achieve internationalisation. This study extends previous research by assessing the robustness and generalizability of drivers in export performance for manufacturing SMEs in Latin America. In particular, it provides empirical insights on the capabilities to develop by Latin American SMEs to achieve better export performance.

The death of distance, revisited: disseminative capacity and knowledge transfer

Purpose The purpose of this paper is to assess how the transfer of explicit and tacit knowledge is affected by the knowledge disseminative capacity of a foreign parent firm, with an emphasis on the moderating role of psychic distance, by developing and testing a theoretical model of international joint venture (IJV) learning. Design/methodology/approach The author tested the hypotheses with survey data collected from 199 IJVs in South Korea, estimating a structural equation model using AMOS 23.0. Findings The authors found that the capacity of the foreign parent to disseminate knowledge to the IJV has a greater impact on explicit knowledge transfer than tacit knowledge transfer. He also found that the relationship between disseminative capacity and explicit knowledge transfer is significantly moderated by psychic distance, but the relationship between disseminative capacity and tacit knowledge transfer is not. Originality/value The results are critical for IJVs and parent firms seeking to improve knowledge transfer, as they establish the importance of parent firms’ disseminative capacities and the moderating role of psychic distance in the process of both tacit and explicit knowledge transfer. This research addresses the research gap regarding disseminative capacity by providing empirical evidence.

Chairpersons’ hubris and internationalization: evidence from emerging market’s family business groups

PurposeThis paper aims to explore the association between chairperson hubris and the internationalization of firms belonging to business groups in an emerging market, India, under the boundary conditions of business group internationalization and the tenure of independent board members. Design/methodology/approachArchival data of 163 Indian family firms over a five-year period were used. FindingsThe study highlights the significance of chairperson hubris in determining the internationalization of family firms in India and the influence that business group internationalization and the tenure of independent board members have on the chairperson hubris and firm internationalization relationships. Originality/valueAlthough literature exists on drivers of internationalization, micro-foundations theories such as chairperson hubris have been less explored in the international business literature, especially in the context of emerging markets. Contribution to Impact

Industry life cycle, geographic diversification and performance of international new ventures

Purpose The purpose of this paper is to examine how geographic diversification affects the performance of international new ventures. Design/methodology/approach This study develops hypotheses about the individual and joint effects of geographic diversification and industry life cycle on the performance of international new ventures. This paper also introduces industry technology characteristics as a contingent factor for the above relationships and tests the hypotheses on a large panel data set. Findings Based on the analyses of the strategies and performance of 699 listed Chinese international new ventures between 1991 and 2014, this study finds that the impact of geographic diversification on performance is contingent on the stage of the industry life cycle and that the moderating effect differs across high-technology and low-technology industries. The results suggest that it is fruitful for international new ventures in high-technology industries to undertake geographic diversification in earlier stages of the industry life cycle, but international new ventures in low-technology industries are better off undertaking geographic diversification during the later stages of the industry life cycle. Originality/value The study contributes to the literature on international entrepreneurship by identifying the industry life cycle conditions under which the learning advantages of international new ventures are effective and facilitate the achievement of better performance. This paper also shows that industry technology type matters for geographic diversification strategies of international new ventures.