Internationalization of emerging market firms: A dynamic capability perspective

Abstract

The dissertation empirically explains how dynamic capabilities enable emerging market firms (EMFs) to expand into international markets and generate higher performance through international expansion. With the help of three self-standing essays, the explanation available in extant literature on dynamic capabilities that enable internationalization and enhance performance from internationalization are advanced, incorporating managerial and firm level dynamic capabilities relevant to contextual characteristics of emerging markets. Considering that superior performance from multinationality is a key managerial goal, we build our understanding of international business literature through a comprehensive literature review of multinationality and performance (M-P) relationship. We identify the absence of an integrated theoretical landscape of antecedents and moderators used in M-P relationship. With the help of an integrative framework, we first synthesize the theoretical arguments used in internationalization studies from 15 journals published in the last one decade. This literature review reveals that dynamic capability of a firm might play an important role in the context of internationalizing EMFs. Hence, there is a need for further exploration of managerial and firm level dynamic capabilities that enable EMFs to expand internationally and generate greater profits for owners as well. We have taken the managerial human capital view of dynamic managerial capability to unearth dynamic capabilities that enable internationalization of EMFs. We tested our predictions with the help of panel regression analysis of 201 large Indian firms over a five years period (2008-2012). This research finding indicates that aggregate dynamic managerial capability is beneficial for international expansion only when it crosses a certain threshold limit (U-shaped relationship) and that diversified dynamic managerial capability defines the boundary condition in this relationship. These insights indicate that dynamic managerial capability is an important determinant of internationalization of EMFs, especially when these firms orchestrate between dynamic managerial capabilities appropriately. In another independent essay, we investigated the horizontal S-curve M-P relationship and identified what form of dynamic capabilities increase benefits and/or decrease costs of internationalization of EMFs. We propose that certain forms of dynamic capability (dynamic capabilities to invest) makes these firms ambidextrous to manage conflicting R&D investment to sense and seize the right opportunities. We argue that dynamic capabilities to deploy help EMFs to catch-up with global competitors through resource re-deployment. A hypothesized model is tested using archival data on internationalization of 837 Indian firms between 1995 and 2014. These research findings reveal that EMFs need to manage its resource base by way of investment as well as re–deployment of strategic resources to maximize profit out of international expansion. Overall this dissertation contributes to the ongoing debate on the form of firm-specific assets and resource management in the context of internationalizing EMFs. Our finding provides a better understanding of the complex effect of a board’s composition on the performance of cognitive tasks in the context of EMFs and the importance of firm specific heterogeneity in facilitating higher performance for internationalized EMFs.