How do business group affiliated firm in emerging markets outperform standalone firms? A knowledge-based view

Abstract

Purpose This study seeks to understand how business group-affiliated firms perform in emerging markets. Previous studies identify that in spite of changes in the competitive landscape, seemingly counter-intuitively, business group affiliates outperform their standalone counterparts in emerging markets. This study adopts a knowledge-based view to resolve this apparent paradox. Design/methodology/approach This study uses a problematization methodology to qualitatively analyze the strategic decisions of Indian business group-affiliated firms. This study cross-validates their analysis with the empirical results available in published academic and practitioner articles. Findings Previous studies explain this outperformance paradox based on assumptions that include filling institutional voids, access to strategic resources and leveraging political connections. By questioning these assumptions, this study identifies an alternative explanation that is based on affiliates’ ability to adopt a strategic approach that balances knowledge capital acquired through international expansion and innovation. Practical implications The findings have important implications for managers of business group-affiliated firms in emerging markets, as well as for those in developed markets seeking to compete or collaborate in emerging markets. Originality/value This study provides a framework for managers of business group affiliates to identify suitable pathways to higher levels of competitive advantage.

A knowledge-based view of emerging market firm internationalization: the case of the Indian IT industry

“…In contrast, EMFs (Child and Rodrigues, 2005; Kumar et al , 2020; Luo and Tung, 2007; Mathews, 1999, 2006b) bear the hallmarks of latecomer firms as they lack proprietary assets (Sun et al , 2015). Many firms have grown in resource constrained environments having to overcome not only their liability of foreignness (Gaur et al , 2011; Hymer, 1976) but also their liability of country of origin (Madhok and Keyhani, 2012) and the confronting regulatory environment at home (Hoskisson et al , 2000; Nachum, 2004; Khanna and Rivkin, 2001; Purkayastha et al , 2022). The fact that EMFs are entering the global competitive landscape later and “Competing from Below” (Lee et al , 2015) places EMFs at a double disadvantage vis-à-vis MNCs of developed economies.…”

“…The KBV framework emphasizes competitive advantage emanates from development of tacit and explicit knowledge, through activities and experiences within the firms (Purkayastha et al, 2022;Scuotto et al, 2022aScuotto et al, , 2022bGrant 1996;Felin and Hesterly, 2007;Martı ´n-de Castro et al, 2011). In the KBV perspective, entrepreneurs can use individual and collective loci of knowledge to recombine resources through innovative ways (Scuotto et al, 2022a(Scuotto et al, , 2022b.…”