Developing new innovation models: Shifts in the innovation landscapes in emerging economies and implications for global R&D management

Over the past two decades, there has been a substantial shift in the global innovation landscape. Multinationals from developed economies are increasingly globalizing their R&D activities and are developing an “open innovation” model to source innovations from outside the firm, including from emerging economies such as those in Asia. In addition, emerging economy firms, which traditionally have played a secondary role in the global innovation landscape, have now begun to catch up in developing their own innovative capabilities. This study explores the implications of this new innovation landscape for CEOs of multinationals and emerging economy firms, as well as for international management scholars and educators. While the multinationals might appropriate rents from their existing capabilities and source new ones in emerging economies, they may be threatened by weak intellectual property rights regimes and unintended knowledge spillovers to local firms, creating potential competitors. Firms in the emerging economies can learn from and catch up with investing multinationals, but to do so they need to develop their own innovative capabilities and move from a process to a product focus and from imitation to innovation.     

Complex technological capabilities in emerging economy firms: The role of organizational relationships

Formal organizational relationships are important sources for capability building in emerging economy firms eager to move up the value chain. We examine how access to valuable knowledge available to firms via organizational relationships creates learning opportunities necessary for the development of complex technological capabilities. Using a sample of 852 observations of emerging economy firms from the Indian software industry between 1992 and 2000, we find that developing strong domestic intra-organizational relationships, through affiliation with a moderately diversified business group or operating in a related industry, promote more complex technological capabilities. In the case of foreign inter-organizational relationships, we find that greater foreign client contact enhances the complexity of firm technological capabilities. However, accessing knowledge from domestic inter-organizational relationships appears to hinder the development of firm complex technological capabilities. An interesting result from our research was that having greater access to knowledge from foreign intra-organizational relationships, embedded within foreign subsidiaries, did not lead to the development of complex firm technological capabilities. The results of our study highlight that for emerging economy firms wanting to improve their complex technological capabilities, there may be diminishing benefits to learning from and acquiring knowledge available within specific types of formal organizational relationships.     

Strategic responses to institutional changes: ‘Indigenous growth’ model of the Indian pharmaceutical industry

This paper examines the strategic response of the Indian pharmaceutical industry to the dual institutional changes arising from economic liberalization of the Indian economy and the WTO mandated intellectual property regime. An analysis of the relative position and growth of Indian firms vis-à-vis foreign multinationals, changes in the resources and capabilities of these firms, and scope in terms of product market internationalization and overseas acquisitions during the 1995–2005 period, suggests an ‘indigenous growth’ model in the Indian pharmaceutical industry which is in contrast to the FDI initiated growth witnessed through full or partial privatization of state-owned firms in other geographical contexts. Second, internationalization of both inputs and product markets has been the dominant mode to overcome the pressures arising from institutional changes. We discuss the drivers of this model and provide implications for future research on strategic responses to institutional changes within other industries in India as well as for comparative research across different political and institutional settings.     

Internationalization paths of Indian pharmaceutical firms — A strategic group analysis

This paper is an attempt to throw light on the internationalization paths of emerging economy firms through a strategic group analysis of internationalizing firms in the Indian pharmaceutical industry. Strategic group analysis of a proprietary data set of strategic variables from forty firms revealed significant variation in their internationalization strategies. The distinct strategies exhibited different value creation potential, but led to similar levels of performance in terms of return on assets, thus indicating equifinality of different paths to multinationality. Inductively drawing from in-depth analysis of firms from each of the strategic groups, the paper proposes a conceptual model of internationalization for emerging economy firms through a combination of exploitation and exploration strategies along the dimensions of products and markets. Firms that are able to supplement the conventional exploitation strategies with exploration through new products and new markets, by taking advantage of increasingly liberalized economies, could emerge as Third-world multinationals with capabilities that could potentially challenge even MNCs from the developed world.     

Gaining from the global ambitions of emerging economy enterprises: An analysis of the decision to sell a German firm to a Chinese acquirer

This paper examines the issue of cross-border acquisitions by companies from emerging economies in industrialised countries: an important phenomenon that has recently found increasing emphasis in international business research. In analysing Chinese acquisitions of German firms in the machinery and equipment industry, the paper addresses the question of why firms from industrialised countries are sold to companies from emerging economies. Several real and imagined reasons may induce the German side not to sell; nevertheless, this type of acquisition occurs with increasing frequency. Using case study evidence and interview data, the study finds explanations for the decision to sell to a Chinese company. The results show that German firms can gain substantially from the global ambitions of the Chinese firms for advancement of their own business objectives. This is due to complementarities in the motivations for engaging in the deals, as well as the underlying strategic needs of both firms. In addition, the specific nature of the cooperation between both firms instils in the German managers a sense of control and security—either real or merely perceived—creating conditions that are favourable to the selling decision. Most importantly, in the context of emerging economy enterprises acquiring advanced economy firms, motivations on both sides of the acquisitions appear to go beyond the commonly known goals such as capital transfer and additional market access, as the acquisitions provide the companies involved with conditions favourable to expansion into previously inaccessible market segments. The findings of this study provide useful guidance for the development of future strategic relationships between firms from industrialised and emerging economies.     

Strategic Network Orchestration in Emerging Markets: China's Catch‐up in the High‐Speed Train Industry

Transitioning from catch‐up in production to catch‐up in innovation capabilities is essential to emerging market firms (EMFs) achieving internationalization and a competitive advantage. While some EMFs are now positioned among the world's most advanced firms, many struggle to become independent innovators. Thus, understanding how EMFs can develop internal absorptive capacity and progress towards catching up in innovation capabilities remains important. Our study seizes this research opportunity and develops a network‐based explanation of catch‐up, which complements existing technological and organizational explanations. Specifically, we address the question of ‘How does the orchestration of collaborative networks enable EMFs to catch up in production and innovation capabilities?’ by describing an important yet under‐researched process of strategic network orchestration and showcasing the dynamic interdependencies between network orchestration and organizational learning. Our study provides a detailed account of Chinese high‐speed train (HST) development from 1990 to 2020 and opens the possibility for future research on network orchestration in emerging market contexts. This provides EMF managers with a set of actionable network orchestration mechanisms that can be used when designing and purposefully managing their strategic nets of domestic and foreign partners.     

Linking Dynamic Absorptive Capacity and Service Innovation for Born Global Service Firms: An Organization Innovation Lens Perspective

Grounded in the dynamic capabilities approach and organizational sub-system view on internationalization, this quantitative study develops and empirically tests a model of international market performance of born global service firms. While several scholars highlighted innovativeness as a driver of competitiveness for born global firms, the capacities underlying the born global firm's innovativeness have received limited scholarly attention, specifically, dynamic absorptive capacities (exploratory, transformative, and exploitative learning capacities). The uniqueness of this paper posits that dynamic absorptive capacities in a born global service firm have contributed to innovation and resulted in international market outcomes. The data was collected using the survey method from born global service firms and was analyzed using structured equation modeling. The findings of this study reveal that service innovation and business strategy are critical drivers of international performance for born global service firms. The paper contributes to the literature on the significance of absorptive capacity in born global service firms by identifying those dynamic absorptive capacities that operate in a composite set of relationships with other capabilities and significantly contribute to their innovation, impacting their internationalization outcomes. This study also supplements the theoretical and practical implications derived from the key findings of this study and provides future research directions.     

Local, regional, or global? Geographic orientation and relative financial performance of emerging market multinational enterprises

We extend the regional/global strategies literature by analyzing the relative performance of emerging market (EM) multinational enterprises (MNEs) based on their geographic orientation. We develop a framework showing that firms adopt three geographic orientations—local, regional, and global—and test our framework with the market penetration strategies (sales) of 701 MNEs from 28 EMs during 2000–2006. Our analysis shows that distinguishing among these three geographic segments is important, as not all of these geographic segments enhance firms’ financial performance relative to their industry: a combination of local and global orientations enhances while regional orientation reduces the relative financial performance of EM MNEs.     

Modelling the effects of institutional support and international knowledge on competitive capabilities and international performance: Evidence from an emerging economy

This paper explores the process through which institutional support initiatives contribute to the international performance of firms from the small open economy of Malaysia. We examine both direct and indirect causal effects of institutional support (informational, training, trade mobility and financial aid-related support) on internationalization. We develop a model to address how institutional support initiatives affect the performance of export-oriented or so-called born global firms. From a survey of 250 firms from Malaysia, an emerging Southeast Asian market, we find that government support initiatives do not have significant impacts on firm performance unless examined based on processes of government support initiatives, international knowledge, commitment, competitive capabilities, and international performance. Government support initiatives play a critical role in export-oriented firms from small open economies (SMOPECs) in emerging markets by contributing to a number of contextual deficits that determine the international performance of a firm. This study provides guidelines for policy makers and business owners on how institutional support can facilitate the accumulation of knowledge about international markets, enhance commitment to exports and help firms gain competitive capabilities in the export market for greater success in international markets.     

Subnational Institutions and Location Choice of Emerging Market Firms

I examine how subnational institutions of emerging markets affect the location choice of emerging market firms. I argue that the weak institutions in emerging markets push firms to acquire the skills needed for survival in unfavorable institutional environments. When they start their international venturing, such knowledge, skills, and capabilities will become their unique advantage, which makes them more resilient to red tape, nepotism, and corruption in the host countries. Using a sample of 143 outward FDI events of Chinese multinationals, I test the relationship between subnational institutions at home and firm propensity to enter a target market with weak institutional systems and found robust empirical support for the use of different estimation strategies. Further, my results demonstrate that the effect of subnational institutions at home on location choice is more pronounced in private enterprises compared to state-owned enterprises. This study reveals the importance of home country effects in location choice research and tests empirically the existence of institutional advantage.     

Managerial and economic barriers and incentives to the commercialization of solar energy technologies

This paper considers the emerging solar industry with emphasis on the active solar systems industry. Active solar systems use thermal collectors, pumps, storage devices and associated equipment to provide hot water and space-heating. Solar systems can provide an important portion of the nation's energy in the future. However, diffusion of these technologies will require several years or decades depending upon the innovation characteristics of the systems. The innovation characteristics of active solar systems are measured, in part, by economic measures, reliability, and communicability of the qualities of the system among others. The active solar systems industry is characterized as emerging, struggling, underfinanced and diverse. A questionnaire and interview survey of 97 solar industry firms was accomplished. Based on the survey results it is recommended that while the government continue incentive tax credits, the industry develop itself as a strong, high-quality industry through the emergence of industry leaders dependent upon improved manufacturing process innovation.     

Governance Structure,Innovation and Internationalization: Evidence From India

We examine the impact of firm-level governance structure on the innovation and internationalization strategies of emerging market firms. We propose that in the case of emerging market firms, governance is a response to the prevailing institutional environment and affects the innovation and internationalization strategies of firms. Based on a longitudinal sample of 16,337 firm-year observations of Indian listed firms over a year time period from 2002 to 2009, we find a positive effect of family ownership and group affiliation on R&D intensity and new foreign investments. Institutional ownership also positively affects new foreign investments, but has no effect on R&D intensity. Further, we find that R&D intensity interacts with family ownership, institutional ownership and group affiliation in affecting new foreign investments.     

新创企业及浙江新创企业的创业基础与成长特征

新创企业已成为各种新兴产业的主要缔造者,是创造新经济的主要力量。文章对新创企业的类型、特征和浙江省新创企业依托企业集群的创业活动进行了探讨,并且指出,尽管浙江省半数以上的创业活动仍处在生存型创业阶段,很多新创企业仍处在较差的工作环境下,以低工资和低价格作为自己的生存基础。但是,对市场的了解、依托于企业集群构建适合自己的创业模式,以及捕捉商业机会是它们取得成功的关键因素。     

Are multinational enterprises from the emerging economies global or regional?

While there is ample statistical evidence that the top 500 multinational enterprises (MNEs) are predominantly home-region-bound or bi-regional, the operations of MNEs from the emerging economies have not been comprehensively analyzed. This constitutes a vital gap since firms from emerging economies have been making prominent acquisitions in recent years, and these economies are expected to post impressive growth despite the global economic slowdown. MNE managers cannot ignore such opportunities and threats. This study analyzes the operations of MNEs from four leading emerging economies – Brazil, Russia, India and China (BRIC). Since aggregated FDI data often lack transparency due to off-shore tax havens, we supplement that analysis by examining 1430 mergers and acquisitions undertaken by MNEs from BRIC economies during 2000–2007. We also develop insights into their dispersion pattern across five industry sectors in six geographical regions.     

Ethics and human resource management and development in a global context: case study of an Indian multinational

A firm's orientation to ethics is influenced largely by its national and organizational culture. Research shows that a growing number of Indian firms place a distinct emphasis on long-term orientation to business strategy with a social mission, underpinned by firm commitment to core organizational values, employee development and welfare. Through a case study of a large Indian multinational conglomerate, this article provides preliminary evidence of how some emerging economy firms are successfully mixing and matching indigenous business and people management strategies with the Western emphasis on meritocracy and professionalism to compete in the contemporary global economy. It further shows how the human resource development (HRD) discipline can play a pro-active role in embedding ethics and values throughout the organizational and HR architecture. The HRD professionals in the case study firm also face several structural and cultural challenges in discharging their ethics-driven HR mandate, such as management's ethnocentric attitude to global staffing and clash of work cultures.     

Market Penetration and Acquisition Strategies for Emerging Economies

Multinational enterprises (MNEs) are expanding their global reach, carrying their products and brands to new and diverse markets in emerging economies. As they tailor their strategies to the local context, they have to create product and brand portfolios that match their competences with local needs. A multi-tier strategy with local and/or global brands may provide MNEs with the widest reach into the market and the potential for market leadership. However, it has to be supported with an appropriate combination of global and local resources. Foreign entrants therefore have to develop operational capabilities for the specific context, which requires complementary resources that are typically controlled by local firms. As institutional obstacles and weaknesses of local firms often inhibit the direct acquisitions, foreign investors may pursue unconventional strategies to acquire local resources.We outline the strategies for penetrating local markets through multi-tier branding and the acquisition of local firms, and offer new typologies that describe staged, multiple, indirect, or brownfield acquisitions. We illustrate them by analysing the entry and growth of Carlsberg Breweries in four very different emerging economies: Poland, Lithuania, Vietnam and China.     

"引进-模仿-改进-创新"模型与韩国企业技术学习的演进过程

韩国企业通过技术的引进-模仿-改进-创新,实现了自主创新和技术跨越,对我国现实发展阶段的创新型国家建设具有重要的启发和借鉴意义.本文以技术学习理论为研究基础,考察了韩国企业技术学习过程,分析了韩国半导体行业、汽车行业和电子行业的技术学习路径,构建了基于技术学习的知识创新过程模型,最后提出了值得中国企业研究和借鉴的地方.     

The Distinctive Patterns of Dynamic Learning and Inter‐firm Differences in the Indian Pharmaceutical Industry

Technological or institutional change has proven to be a major cause of the failure of established firms, and history is full of examples. In a globalized world the capability of a firm to reconfigure existing competencies and create new knowledge for innovation has emerged as a dynamic capability to succeed. I examine the learning processes involved in the development of innovative R&D capabilities in Indian pharmaceutical firms as a response to the strengthening of patent law. The strong patent law represented a major institutional change for Indian firms which had grown in a weak patent era. The analysis shows that the development of new capabilities involved the removal of rigidities and the acquisition of new knowledge, and reveals that Indian firms are adopting strategies such as hiring of Indian scientists educated or working overseas in pharmaceutical R&D and collaborative R&D to acquire innovative R&D capabilities. It further points out the inter–intra firm heterogeneity in learning processes and suggests that the move from basic to advance level capabilities is neither linear nor automatic. It requires a deliberate effort and investment by firms in different mechanisms of learning. The Indian pharmaceutical firms' responses provide important insights for firms from other developing countries.     

Entrepreneurial Cognition,Entrepreneurial Orientation and Firm Capability in the Creative Industries

Creative industries are firms which are characterized largely by the labour inputs of creative individuals, and surrounded by a degree of rhetoric as to their significance, but are a comparatively under‐researched sector. In this study we developed a research framework which integrated entrepreneurial cognition, entrepreneurial orientation and firm capabilities and explored the relationships between these variables, market conditions and the performance of small creative industry enterprises. The data suggest that high growth small firms are characterized by well‐developed internal capabilities allied to an entrepreneurial orientation and that the combination of the various sub‐attributes associated with each of these appear to be especially salient under conditions of intense competition. The policies, managerial and educational implications of the findings are discussed.     

Build-operate-transfer Outsourcing Contracts in Services – Boon or Bane to Emerging Market Vendor Firms?

Build-operate-transfer (BOT) contracting has been widely used in the engineering and construction industry and has recently spread into the service industry domains. Notably, service provider firms from emerging markets, India in particular, are now offering BOT outsourcing contracts in which the client firms are allotted call options, i.e. the right, but not the obligation, to transfer pre-specified assets from the service provider. As such, BOT outsourcing contracts seems to be an interesting contractual novelty that combines the advantages of outsourced and captive offshoring operations. In this paper we investigate under which circumstances a BOT outsourcing contract (i.e. a contract where the client firm exercises its call option) is beneficial, or the opposite, to the emerging market vendor firm. Whether BOT outsourcing contracts are boon or bane to an emerging market vendor basically hinges, we submit, on its internal diffusion of client-specific knowledge and capabilities prior to the execution of the call option.