EMNEs are catching up: a theoretical synthesis and empirical research on the heritage of EMNE innovation and competitiveness in foreign markets

Abstract

Traditional IB theory is said to be unable to systematically explain EMNE internationalization strategy and competitiveness. EMNEs do not have conventional ownership advantages such as managerial experience, technology or trademarks. A recent school, springboard theory, proposes that EMNEs can become global leaders by acquiring strategic assets from developed markets and subsequent capability upgrading at home. Since these assets are location bound and EMNEs are relatively unfamiliar with developed markets, this thesis argues that springboarding is not enough for global competitiveness. EMNEs are proposed to increase capabilities from home location traits and incremental foreign experience. An empirical analysis is done to substantiate the importance of home institutions and resources and developed-market experience in regard to firm-level innovation. Firm-level innovation is in turn hypothesized to be an important driver for foreign competitiveness. The sample consists of 187 firms from 17 emerging countries that have acquired firms in developed countries. It is found that the quality of the national innovation system is positively related to springboarding (S)EMNE firm-level innovation. Developed-market experience does not seem to have an influence. Furthermore, firm-level innovation is positively related to foreign competitiveness. Research on EMNE competitive advantages should incorporate both traditional constructs on location resources and FSAs, and springboard theory’s stance towards EMNE ambitions and internationalization. Together they can address EMNE international competitiveness.