Resources

Aline Gatignon of the Wharton School and Laurence Capron of INSEAD examined how Natura, a leading Brazilian cosmetics company, achieved success by building a strong and collaborative business ecosystem. Faced with underdeveloped infrastructure, limited access to capital, and other institutional weaknesses common to developing countries, Natura adopted a unique strategy, fostering deep relationships with diverse stakeholders, including local communities, suppliers, NGOs, and government agencies. This strategy, focused on empowering communities and building trust, allowed Natura to overcome obstacles, achieve sustainable growth, and generate positive social impact. In light of these achievements, Natura's approach offers valuable lessons for other businesses seeking to thrive in similar environments.

The Spring 2024 issue of Insights @ Center for Emerging Markets brings together researchers from Northeastern University and the broader global academic community to explore a diverse set of topics including sustainability, trade policy, supply chains, family business and global leadership in emerging markets. These topics shed light on sustainable growth opportunities in emerging markets and the pivotal roles that both regional and multinational firms play in supporting that growth.

Economists have long predicted the rise of Asia as a powerhouse in the global economy. Transitioning from its initial role primarily as a low-cost manufacturing center for the West, Asia has recently shifted towards innovation, establishing itself as a leader that challenges old stereotypes.

Greg Distelhorst and Anita McGahan of the University of Toronto conducted a comprehensive study of more than 4,000 companies across developing countries, investigating the impacts of wage theft, abusive disciplinary practices, and other exploitative behaviors on firm performance. They drew a comparison between “high road” employers, who treat employees with fairness and value their contributions, and “low road” employers, who exploit workers to minimize costs and enhance control. The study found that companies on the low road experienced more frequent issues with quality control, delivery timelines, and lower order values than their high road counterparts. Consequently, the researchers suggest that NGO efforts to eliminate inhumane employee treatment could actually help companies enhance their productivity and profitability. 

In their analysis of 194 publicly listed, non-state-owned Chinese companies across 24 provinces, Banalieva and colleagues observed that rapid implementation of pro-market reforms was associated with increased internationalization. Conversely, quick reversals had a deleterious effect on international expansion. The presence of family involvement, however, made family-owned companies more resilient in the face of such reversals, enabling firms to sustain their international presence, despite regulatory headwinds.

Cheng Li and Alvaro Cuervo-Cazurra investigated the relationship between misconduct by multinationals’ foreign suppliers and subsidiaries and the multinationals’ corporate social responsibility (CSR). They explain and find that multinationals whose foreign suppliers or subsidiaries experienced major environmental, social, and governance (ESG) breaches improved their CSR performance after the incident when compared to multinationals without such breaches. Additionally, these responses by multinationals to supplier and subsidiary misbehavior are more robust for multinationals from home countries with CSR mandates. Finally, they found that while major subsidiary misbehavior led to higher internal CSR performance, major supplier misbehavior resulted in higher external CSR performance. The findings provide valuable insights for managers of multinationals dealing with the challenges of managing misbehavior in far-flung suppliers and subsidiaries. They need not only to solve the particular misbehavior, but also implement multinational-wide initiatives to compensate for the breach in the social contract with stakeholders.

Researchers at Rutgers University and the University of Manchester examine the central role of managerial perceptions in shaping a company's response to its country joining the World Trade Organization (WTO). They find that firms from emerging markets whose managers view domestic institutions positively are more likely to expand internationally post-accession. This suggests that, to promote the internationalization of emerging markets-based companies, policymakers should prioritize improving domestic institutions and fostering positive perceptions towards those institutions among managers.

Research by Luis Dau and his colleagues at Northeastern University and Villanova University shows how international trade and sustainability agreements facilitate the adoption of corporate social responsibility (CSR) standards by state-owned enterprises (SOEs) in emerging market countries. By exploring how SOEs respond to increasing pressure from global institutions, the authors reveal the social and political factors affecting national-level decision-making and subsequent company behavior. Overall, the findings provide valuable insights for both academics and practitioners regarding the intricate relationships between trade policies, business practices, and ownership structures.

Read the fourth issue of Insights @ Center for Emerging Markets, bringing together researchers from Northeastern University and the broader global academic community to explore the topic of sustainability and Corporate Social Responsibility in emerging markets. Understanding these concepts enables managers and policymakers to make ethical decisions, safeguard long-term business success, and effectively handle the unique socio-environmental contexts of these key growth areas.

Global brands increasingly set sustainability standards for their first-tier suppliers in emerging market countries and expect them to ensure that similar standards are met by their lower-tier suppliers. This cascading approach encourages sustainability practices to be adopted throughout the supply chain.