How much does country matter in emerging economies? Evidence from Latin America

Abstract

Purpose

The purpose of this paper is to examine the magnitude of country, industry and firm‐specific effects for firms competing in emerging economies and also explore differences between high and low performers.

Design/methodology/approach

The authors use ANOVA methodologies on samples from firms competing in Latin America between 1990‐2006.

Findings

It was found that the firm‐specific effect is the most important one, and relatively equivalent in magnitude to the firm‐specific effects found in developed countries. Country and industry effects are less important than the firm‐specific effect. Contrary to previous studies that indicate that the country effect is relatively more important in emerging economies, the authors found that it is even less important than the industry effect, a result that has important implications for strategic management and international business theory. The source behind the strong firm‐specific effects might stem from their resources and capabilities to manage and take advantage of the institutional and macroeconomic environments. Further analysis indicates that the firm‐specific effect is relatively more important for firms showing high performance than for those firms showing low performance.

Research limitations/implications

Through these findings the authors feel that further research is needed so as to arm future managers with a more clear and comprehensive strategy when doing business in a Latin American country. The paper's findings are specific for large public corporations in Latin America.

Practical implications

The paper allows managers to think about sources of competitive advantages in emerging economies.

Originality/value

The paper shows that, despite weak institutional contexts and highly volatile macroeconomic environments, managers in the region should be able to obtain substantial differences in economic performances within the region. Activities needed for such differentiation might differ from those carried out in developed countries, with more emphasis on managing institutional voids and periods of economic and political cycles but the result should be the same.

Citation

Diaz Hermelo, F. and Vassolo, R. (2012), "How much does country matter in emerging economies? Evidence from Latin America", International Journal of Emerging Markets, Vol. 7 No. 3, pp. 263-288. https://doi.org/10.1108/17468801211237009