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The growth of the firm in (and out of) emerging economies

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Abstract

Starting with Peng and Heath (Academy of Management Review, 21: 492–528, 1996), the growth of the firm in emerging economies (EE) has received increasing attention in the literature in the last two decades. This line of research has not only extended our knowledge on firms’ strategic choices to the context of EE, but also proposed new perspectives on the growth of the firm. Leveraging prior research, this article focuses on three major modes for firm growth—organic, acquisitive, and network-based. For each mode, we identify new themes and insights emerging from the last two decades of research. They center on (1) compositional capabilities and frugal innovations for organic growth, (2) business groups and cross-border acquisitions for acquisitive growth, and (3) network capitalism and institutional transitions for network-based growth. Overall, we not only identify new themes and insights, but also outline important yet unresolved debates as future research directions.

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Notes

  1. According to Peng and Heath (1996: 498), Penrose’s (1959) theory and related work up to the early 1990s can be summarized by five propositions: “(1) Firm growth is driven by the strategic choice for growth adopted by top management teams. (2) The firm is considered to be a collection of resources, which include physical and human resources as well as organizational routines. (3) The existence of excess resources is a precondition for such growth. The principal motivation for growth is the desire to fully employ underutilized resources. (4) The firm has three basic strategic choices for growth: (a) undertake generic expansion, (b) conduct mergers and acquisitions, and/or (c) develop interorganizational relationships, which correspond to hierarchy, market, and hybrid modes of organizing, respectively. (5) The growth of the firm is limited by two constraints: (a) its capability to articulate and codify its organizational routines and transmit this information to its members and (b) its ability to overcome transaction cost and bureaucratic cost problems incurred in the course of growth.”

  2. These 64 EE are: Albania, Argentina, Armenia, Azerbaijan, Bangladesh, Belarus, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, Chile, China, Colombia, Cote d’Ivoire, Croatia, Czech Republic, Ecuador, Egypt, Estonia, Georgia, Ghana, Greece, Hungary, India, Indonesia, Israel, Jamaica, Jordan, Kazakhstan, Kenya, Korea, Kyrgyzstan, Latvia, Lithuania, Macedonia, Malaysia, Mauritius, Mexico, Moldova, Morocco, Nigeria, Pakistan, Peru, Philippines, Poland, Portugal, Romania, Russia, Saudi Arabia, Slovakia, Slovenia, South Africa, Sri Lanka, Taiwan, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, Uzbekistan, Venezuela, and Zimbabwe.

  3. For example, if membership in the European Union (EU) is regarded as attaining the status of DE (Kostova & Hult, 2016: 27), 11 of the 64 countries on Hoskisson et al.’s (2000) list of EE have now become EU members: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. In addition, two EU members as of 2000 are also on Hoskisson et al.’s (2000) original list of EE: Greece and Portugal (p. 250). It is not clear, according to Hoskisson et al. (2000) and related later work (Hoskisson et al., 2013), whether these 11 new EU members as well as Greece and Portugal should now be considered DE or still be considered EE.

  4. These 28 DE are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, the United Kingdom, and the United States.

  5. In August 2017, Tencent had over 200 million users and enjoyed a market value exceeding US$400 billion, becoming the second Asian company (after Alibaba) to reach such a high level.

  6. For example, one Chinese expatriate said that “We were not allowed to switch off our mobile phones because we were required to provide 24/7 services to our customers. This is definitely not possible for DMNCs [multinationals from DE] in this market” (Rui et al., 2017: 132).

  7. To enhance the clarity of our presentation, we number the new debates in this section and the next section following the number of the first two debates in the previous section.

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Acknowledgements

We thank Jane Lu (Editor-in-Chief) and our reviewer for constructive guidance. This research has been supported by the Jindal Chair and the Jindal PhD Research Fellowship at UT Dallas, and the College of Business at SFSU.

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Authors and Affiliations

  1. Jindal School of Management, University of Texas at Dallas, 800 West Campbell Road, SM 43, Richardson, TX, 75080, USA

    Mike W. Peng & Joyce C. Wang

  2. College of Business, San Francisco State University, 1600 Holloway Avenue, San Francisco, CA, 94132, USA

    Sergey Lebedev

  3. University of Massachusetts Amherst, 121 President’s Drive, Amherst, MA, 01003, USA

    Cristina O. Vlas

  4. Aviall – Boeing Global Services, 2750 Regent Blvd., Dallas, TX, 75261, USA

    Jason S. Shay

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  1. Mike W. Peng
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  4. Joyce C. Wang
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Correspondence to Mike W. Peng.

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Peng, M.W., Lebedev, S., Vlas, C.O. et al. The growth of the firm in (and out of) emerging economies. Asia Pac J Manag 35, 829–857 (2018). https://doi.org/10.1007/s10490-018-9599-3

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