Title

Emerging market firms' internationalization : how do firms' inward activities affect their outward activities?

Document Type

Journal article

Source Publication

Strategic Management Journal

Publication Date

12-1-2017

Volume

38

Issue

13

First Page

2704

Last Page

2725

Publisher

John Wiley and Sons Ltd

Keywords

emerging market, internationalization, inward activities, outward activities, resource fungibility

Abstract

Research summary: In this study we examine how an emerging market firm's inward international activities (“inward activities”) are related to its outward international activities (“outward activities”) by focusing on the role of the firm's gain from its inward activities. On the one hand, drawing upon the organizational learning perspective, we propose that a firm's gain from inward activities may facilitate its outward activities through improving its resource fungibility. On the other hand, we draw upon the prospect theory to propose that a firm's gain from inward activities may hinder its outward activities by discouraging the firm's top managers from taking risks that are inherent in outward activities. With detailed data from a sample of manufacturing firms in China, we find empirical support for both lines of arguments.

Managerial summary: Are emerging market firms with higher inward gain more likely to engage in outward internationalization activities? We argue that it depends upon how a firm uses its gain from inward activities. If the firm can improve its resource fungibility (particularly organizational resource fungibility) from its inward gain, it is more likely to engage in outward activities. If the firm cannot improve its resource fungiblity, the answer is no. Our findings suggest that for emerging market firms, internationalization is not just a path toward new markets; instead, it reflects how these firms exploit and explore what they have learned from their interactions with foreign firms at home in foreign markets. Therefore, managers must think more strategically on developing (organizational) resource fungibility from their inward activities.

DOI

10.1002/smj.2679

Print ISSN

01432095

E-ISSN

10970266

Funding Information

Financial support from National Natural Science Foundation of China (Project Number: No. 71132007). {71132007}

Publisher Statement

Copyright © 2017 John Wiley & Sons, Ltd. Copyright © 2017 John Wiley & Sons, Ltd. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Li, H., Yi, X., & Cui, G. (2017). Emerging market firms' internationalization: How do firms' inward activities affect their outward activities? Strategic Management Journal, 38(13), 2704-2725. doi: 10.1002/smj.2679

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