Emerging Market Firms competing in other emerging markets: beyond institutional voids

Abstract

Academic research on emerging markets (EM), emerging market companies and their internationalization has increased in recent years. Much of the work though has been about the attractiveness of emerging markets to many developed market MNCs, and the threats to the established MNCs in their home markets. The focus of this paper is exploring the factors that influence success in the market-seeking activities of emerging market firms into other emerging markets. We advance the concept of institutional arbitrage to explain emerging market firm competiveness in other EMs, introduce the concept of industry voids and propose that both institutional and industry conditions in home and host countries explain the potential likelihood of success of EM firms in emerging markets. Further, we argue that this potential success is only realized through business model innovation. We draw on examples of firms from the Indian market across a range of industries to illustrate the validity of our propositions and conceptual model. We suggest that EM MNEs may need to develop or possess a dynamic capability that enables them to innovate upon their existing business models developed in their home countries to truly take advantage of similar institutional and industry conditions in other emerging markets.