Center for Emerging Markets

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.

In China, NGOs often collaborate with multinational companies to promote sustainability among their suppliers. This “two-step influence model” allows NGOs to indirectly influence local firms. The success of these collaborations depends on alignment with government priorities, with stronger impacts where the environment is a lower priority. Multinationals benefit from local knowledge and networks through these partnerships but must carefully manage trust and expectations. Moreover, collaboration with NGOs can help achieve sustainability goals but also invites scrutiny.

Multinational corporations (MNCs) often have less power over their emerging market suppliers than is commonly believed. New research suggests that MNCs can use various strategies to influence their suppliers' behavior, but these strategies have complex and paradoxical effects on their performance and reputation. MNCs should consider the goals and interests of their suppliers when creating sustainability strategies for their global value chains.

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.

Sand is a vital material for construction, but it is being depleted faster than nature can replenish it. This poses serious environmental and social problems, such as habitat loss, water pollution, and conflicts over resources. To address this issue, researchers have explored sustainable alternatives to sand, but there are no easy solutions because of availability, performance, price, and demand-related considerations, particularly in emerging markets where population growth and economic priorities will place increasing pressure on this limited resource.

Managers operating in emerging markets face a delicate balance between risks and opportunities. Corporate Social Responsibility (CSR) holds the key to navigating these complexities, and recent research shows its significance in securing competitiveness and credibility. Managers are advised to embrace global CSR standards, engage with local stakeholders, adapt flexible strategies, monitor suppliers, and seek collective action to leverage the opportunities of these fast-growing markets.

How do leaders of global companies face Corporate Social Responsibility (CSR) challenges in their supply chains? Recent research by Sheila Puffer and colleagues at Northeastern University presents a typology of four archetypes of CSR responses and analyzes the benefits and drawbacks of each archetype using real-world examples.

Multinational companies often misbehave, deviating from the expected rules of conduct in different countries. Some exploit the gaps and inconsistencies in regulations, laws, and customs, causing harm to various parties. This misbehavior requires more attention and responsibility from multinational companies to reduce the negative consequences of their actions, especially in emerging markets.

Research by Juan Bu and Alvaro Cuervo-Cazurra shows that new ventures in emerging markets, initially created informally, suffer from costs that persist and constrain a firm's ability to innovate even after they formalize their status. As a result of these informality costs, informally created new ventures are more likely to develop imitative rather than innovative new products. However, being acquired by other firms and improvements in the national innovation system can weaken the persistence of these informality costs, resulting in more innovation. To explain these findings, Bu and Cuervo-Cazurra develop the concept of internal imprinting, which captures how the internal characteristics of a company result in the establishment of practices that persist over time, affecting behavior and innovation. Managers in emerging markets should consider formalizing their firms from the beginning or joining a private business group to mitigate the negative impact of informality on their firms' innovativeness.

In 1972, Nairobi, Kenya became the first developing country to host the headquarters of a UN organization, the UN Environment Programme (UNEP). UNEP's presence in Nairobi has increased Kenya's global governance stature. However, it has not fulfilled the promise of promoting greater input from developing countries. The location has posed challenges to UNEP, including security concerns, recruitment and retention of staff, communication and infrastructure difficulties, and the need for resources. Professor Ivanova's recent book about UNEP's first 50 years identifies practical ways for improving its effectiveness as a premier multilateral institution for addressing the grand environmental challenges of our time.

Chinese companies are reinventing management through an approach called “digitally enhanced directed autonomy” (DEDA). DEDA uses digital platforms to give frontline employees direct access to corporate resources and capabilities, allowing them to organize themselves around business opportunities without managerial intervention. Autonomy is directed where it is needed and tracked. By giving teams the freedom to design, produce, and sell their products, companies can foster innovation, increase employee engagement, and improve customer satisfaction. The authors use case studies to examine how Chinese companies utilize DEDA and how Western companies might learn from it.

In our globalized world, the ability to navigate cultural differences has become a critical skill. Paula Caligiuri's recent book provides a valuable framework for achieving this goal, by emphasizing the need to build cultural agility through social learning. Her Cultural Agility framework provides executives and managers with the tools needed to build trust, gain credibility, collaborate, and communicate across cultural boundaries. It is all the more important for managers of companies in and from emerging markets, who may be facing unique cultural barriers through foreign expansion.

The future of health in Sub-Saharan Africa is both uncertain and promising. Life expectancy in this region has increased significantly, and growing economies may provide opportunities for increased financing for health. To effectively improve health in Sub-Saharan Africa, deliberate political investments and African-led models are necessary, as well as robust health systems that can adapt to changing disease and demographic patterns. Community health workers will play a crucial role in achieving universal health coverage and combating pandemics. However, Sub-Saharan Africa remains reliant on foreign financing and must combat corruption and improve domestic health governance to achieve autonomy. Ultimately, interventions to improve health in the region must target the population's changing needs and infrastructure demands.

The COVID-19 pandemic has caused significant shifts in how companies manage their supply chains, with three major changes emerging. First, reshoring is becoming a dominant trend, with companies shifting production and manufacturing to domestic locations from overseas factories to reduce risk and maintain business continuity. Companies are also investing in digital technologies to improve visibility and transparency along their supply chains. Finally, firms are becoming more flexible in their supply chain management by diversifying their sources of supply and holding more inventory. These shifts are likely to have a significant impact on the way goods are produced, distributed, and consumed in the years to come, with government policies playing an important role in managing the impact of these changes.

Reverse innovation, which involves transferring new ideas and innovations from emerging economies to developed economies, can help fix the American healthcare system, which suffers from high costs, uneven quality, and less-than universal access. Developing countries like India are under great pressure to use their very limited medical resources to serve the greatest number of people, at the lowest cost, while maintaining quality. As a result, a handful of Indian healthcare exemplars have mastered clever ways to simultaneously lower healthcare costs, improve quality, and expand access. Govindarajan and Ramamurti identify their secret sauce and recommend that healthcare organizations in the US and elsewhere consider emulating those strategies and practices.

Emerging countries have been able to make use of the liberal trade and investment regime to support their development strategies without having to adopt the full gamut of neoliberal prescriptions. This is evident in a number of ways, including dispute settlement, the use of flexibilities such as trade remedies, and resistance to the expansion of free trade disciplines. Recent research explores how different emerging countries are positioned in regards to trade and investment law, how tensions develop between development policies and the demands of trade and investment legal frameworks, and how alternative visions will be driven by pragmatism and strategic self-interest rather than neoliberal orthodoxy.

Recent research examines business practices in the Arab world and how they differ from Western practices. Wasta is a practice in Arab society where people use their personal relationships to gain favor. The practice is seen differently by different groups, with some seeing it as generally desirable and others seeing it as generally undesirable but potentially necessary. Foreign firm managers operating in Arab societies will need to develop a solid understanding of the practice and its different perceptions among varying Arab groups in order to be successful in conducting business in the Arab world.

Recent research examines 310 privately owned small and medium-sized companies from 22 transition economies in Eastern Europe and Former Soviet Republics to see how the payment of bribes affects entrepreneur perceptions of the business environment. Those who more frequently pay bribes create a “new normal” business environment that is perceived as increasingly harsh. However, for entrepreneurs who infrequently bribe, their “new normal” is likely to be perceived as more supportive of business.

In recent years, private entities are providing more aid to less developed countries relative to foreign governments. Recent research seeks to understand how different types of aid affect the strategic choices local firms and entrepreneurs make in the assisted markets, as well as the resulting outcomes. This will allow for better informed policy decisions that consider a more nuanced understanding of the entrepreneurial process.

Blockchain solutions can overcome the shortcomings of current supply chain processes. They enhance reliability and efficiency by providing transparent and secure tracking of goods and related digital documentation. One example of a blockchain solution is TradeLens, which provides accurate real-time supply chain visibility, together with collaboration and analytics tools. Another example is Ambrosus, which links Internet of Things (IoT) real-time sensors and electronic IDs with blockchain to improve supply chain monitoring, provide quality assurance, and prevent counterfeiting.

New research examines how corporate environmental, social, and governance (ESG) programs influence the financial performance of emerging market companies. This research proposes and shows that in emerging markets, social investments have a larger impact on financial performance than governance or environmental initiatives because they help create capabilities that more directly compensate for government failures in the provision of public goods and services needed by firms to operate efficiently. It also shows that government policy nudges enhance the efficacy of such initiatives. Thus, in emerging markets, ESG programs, particularly social initiatives, help improve the quality of life of local communities and companies' bottom lines.

In institutional regimes with weak creditors' rights, some company insiders might take advantage of bankruptcy rules by intentionally making their companies look less valuable. This creates problems for creditors and makes it harder for these companies to succeed in the future. To shed new light on the drivers of such opportunistic behaviors, recent research compares bankrupt British, American and Indian firms. It shows that Indian firms were more likely to be classified as “willful defaulters” indicating that bankruptcy decisions may be due to insiders' opportunistic behavior. It also suggests that such fraudulent bankruptcy behaviors can be countered through market reforms.

China is rapidly moving from imitation to innovation, with Chinese companies taking a key role in the emerging paths of Chinese company innovation. Non-Chinese executives need to understand the six major paths to innovation taken by Chinese companies. While all these paths have also been taken by many Western companies, we discuss here the unique Chinese adaptation or intensification of each approach. Our findings indicate that the innovation advantages of Chinese companies may well be in the creative combinations of available innovation practices.

New multinational corporations from emerging markets have begun to compete fiercely with old multinationals from developed countries. Each type of multinational possesses unique strengths and weaknesses, and the weaknesses of one happen to be the strengths of the other. Global success will depend on the speed at which each type of multinational can learn and build new capabilities in areas where it is weak. To win this learning race, Western multinationals must guard against hubris and be willing to reexamine traditional strategies and practices.

Companies acquire third-party certifications, such as ISO certificates, to authenticate the quality of their products and services. But do these certifications really make a difference? Research indicates that while companies from developing markets seek these certifications more than those from more economically advanced institutional environments, the latter usually enjoy greater benefits from their adoption. This is largely because the products and services of companies from developing markets are often negatively stereotyped by consumers, because of their negative perceptions about these companies' countries of origin. Importantly, this distortion is less prominent for companies that operate in more established industries.

Climate change, extreme poverty, and social inequality are just a few of the global societal challenges of our time. As societies wrestle with these issues, multinational companies can choose to be part of the solution and use their influence to bring about positive change. By implementing the United Nations' 17 Sustainable Development Goals into their operations, they can maximize their positive impacts and minimize harm.

Multinational companies hold significant power and influence in the less economically advantaged countries in which they operate. For instance, when accused of contributing to human rights violations in Thailand, Nestlé responded by launching a training program and other initiatives to eliminate forced labor from their supply chain. This suggests that multinationals can, in fact, help address the developmental needs of the poorer countries where they have economic interests by promoting sustainable development practices in their operations.

Multinational companies from emerging markets should align their sustainability reports and actual impacts. Global expansion (especially to more economically advanced markets) can help emerging market multinationals learn best practices for aligning their sustainability communications (i.e., “talk”) and impacts (i.e., “walk”).

In rapidly evolving emerging and transition economies such Russia, informal social networks between individuals, companies, and the government play a key role for companies' ability to gain access to information, knowledge, and power. While such informal networks help companies' profitability, they can also entail significant costs for businesses and society at large. Understanding the deep roots of today's corruption trends in Russia can help the survival of domestic and foreign companies operating in the country.

The Middle East and North Africa (MENA) region displays distinct corporate governance trends. These differences are due, at least in part, to the influence of Sharia law and the region's varied political regimes. Research suggests that advancing gender diversity on boards, directing attention towards corporate social responsibility, increasing the transparency of corporate disclosures, and investigating different ownership models can help further align local companies with established global best practices in the corporate governance area.

China's approach to inward foreign direct investment (IFDI) has remained remarkably consistent since the onset of its economic opening. While the rules governing IFDI have changed, the primary goal of improving the competitiveness of Chinese companies and the secondary goal of enhancing economic development have remained. As Chinese companies become more capable and as China declares more industries “strategic,” the space for foreign invested enterprises (FIEs) may narrow. To address this, FIEs need to demonstrate their full economic impact to make their case for continued access to the world's second largest economy.