Home Country Underdevelopment and Internationalization: Innovation-Based and Escape-Based Internationalization

Competitiveness Review, 27 (3): 217-230

13 Pages Posted: 27 Dec 2018 Last revised: 20 May 2019

See all articles by Alvaro Cuervo-Cazurra

Alvaro Cuervo-Cazurra

Northeastern University - Department of International Business and Strategy

Ravi Ramamurti

Northeastern University - D’Amore-McKim School of Business

Date Written: June 26, 2016

Abstract

We use the rise of emerging-market multinationals as a vehicle to explore how a firm’s country of origin influences its internationalization. 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 in order to escape weaknesses on these fronts at home; we call this escape-based internationalization. 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.

Keywords: merging markets, institutions, economic development, multinationals, international business

JEL Classification: F23

Suggested Citation

Cuervo-Cazurra, Alvaro and Ramamurti, Ravi, Home Country Underdevelopment and Internationalization: Innovation-Based and Escape-Based Internationalization (June 26, 2016). Competitiveness Review, 27 (3): 217-230. Available at SSRN: https://ssrn.com/abstract=3298402

Alvaro Cuervo-Cazurra (Contact Author)

Northeastern University - Department of International Business and Strategy ( email )

D'Amore-McKim School of Business
313 Hayden Hall, 360 Huntington Avenue
Boston, MA 02115
United States
16173736568 (Phone)
16173738628 (Fax)

HOME PAGE: http://cuervo-cazurra.com

Ravi Ramamurti

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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