Home country underdevelopment and internationalization

Home country underdevelopment and internationalization PurposeThe 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/approachThis paper is a conceptual paper.FindingsWe 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/implicationsComparative 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 implicationsWe 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/valueWe explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Competitiveness Review: An International Business Journal incorporating Journal of Global Competitiveness Emerald Publishing

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1059-5422
D.O.I.
10.1108/CR-04-2016-0021
Publisher site
See Article on Publisher Site

Abstract

PurposeThe 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/approachThis paper is a conceptual paper.FindingsWe 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/implicationsComparative 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 implicationsWe 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/valueWe explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization.

Journal

Competitiveness Review: An International Business Journal incorporating Journal of Global CompetitivenessEmerald Publishing

Published: May 15, 2017

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