Towards a configurative view of firm innovation in emerging markets

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Innovation studies in emerging markets have highlighted the importance of firm resources and institutions for firm innovation. A majority of studies, however, tend to approach firm resources and institutions in a manner which predominantly illustrate their direct causal effects on firm innovation. Furthermore, institutions in IB research have been approached in a unidimensional manner, thus not truly capturing effects of institutions on firm innovation. I address these shortcomings by adopting a configurational comparative method and by utilizing National Business Systems theory to explore combinations among firm resources and institutional environments leading to innovation in these settings. I used data from the World Bank Enterprise Survey, Worldwide Governance Indicators, and the education component from the Human Development index to research firm innovation in a sample consisting of more than 6500 firms from seven emerging markets. Results from the crisp-set qualitative comparative analysis confirm that firm innovation in emerging markets can only be understood by considering combinations between firm resources and National business systems. Moreover, I found that innovation can only occur if emerging market firms possess experienced managers and formally trained human capital while concurrently operating in a National Business System characterized by the dominance of an equity-based financial system and the absence of strong state institutions, an advanced skill development system, and normative trust relations. The findings offer guidance to managers seeking competitive advantages through firm innovation and to policymakers seeking to encourage economic development through firm innovation.
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