Home country underdevelopment and internationalization: Innovation-based and escape-based internationalization

Abstract

Purpose

The purpose of this study is to use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization.

Design/methodology/approach

This paper is a conceptual paper.

Findings

We argue that the home country’s institutional and economic underdevelopment can influence the internationalization of firms in two ways. First, emerging-market firms may leverage innovations made at home to cope with underdeveloped institutions or economic backwardness to gain a competitive advantage abroad, especially in other emerging markets; We call this innovation-based internationalization. Second, they may expand into countries that are more developed or have better institutions to escape weaknesses on these fronts at home; we call this escape-based internationalization.

Research limitations/implications

Comparative disadvantages influence the internationalization of the firm differently from comparative advantage, as it forces the firm to actively upgrade its firm-specific advantage and internationalize.

Practical implications

We explain two drivers of internationalization that managers operating in emerging markets can consider when facing disadvantages in their home countries and follow several strategies, namely, trickle-up innovation, self-reliant innovation, improvisation management, self-reliance management, technological escape, marketing escape, institutional escape and discriminatory escape.

Originality/value

We explain how a firm’s home country’s comparative disadvantage, not just its comparative advantage, can spur firms its internationalization.

Citation

Cuervo-Cazurra, A. and Ramamurti, R. (2017), "Home country underdevelopment and internationalization: Innovation-based and escape-based internationalization", Competitiveness Review, Vol. 27 No. 3, pp. 217-230. https://doi.org/10.1108/CR-04-2016-0021