By Henry Lopez-Vega and Nicolette Lakemond
The rise and downfall of well-known EMNEs has raised interest in understanding how these firms build and destroy innovation capabilities. Even though investments in R&D, manufacturing, and acquisition of global innovation capabilities played a crucial role in the rise of global EMNEs (e.g., Huawei, Wipro, Cemex), we observe some emerging markets to prematurely promote a process of deindustrialization toward sectors not regarded as knowledge intensive or technology dynamic. Hence, EMNEs situation can be somewhat paradoxical as they need to build and accumulate innovation capabilities to remain or become globally competitive, but the knowledge and robust national institutional setting (e.g., research infrastructure, supply chain networks, patent protection) they need to support technology creation may be absent or going in reverse.
We identify the complementarity conferred by collaborative market and nonmarket strategies that link the local emerging market and global market context can help EMNEs to build innovation capabilities.
In our study in the Global Strategy Journal, we identify the complementarity conferred by collaborative market and nonmarket strategies that link the local emerging market and global market context can help EMNEs to build innovation capabilities. Specifically, this study explains how the Brazilian EMNE Natura & Co formulate both local and global open innovation strategies and processes. Also, this study highlights how and why collaborative nonmarket strategies help EMNEs build innovation capabilities to respond to the requirements of the emerging market and global environment (e.g., sustainability, involvement of indigenous communities, local natural resources).
- Our findings suggest that the benefits of global open innovation processes only prevail when EMNEs also implement local open innovation processes that identify mutually beneficial forms of collaboration with local actors (e.g., from problem solving to co-development) and continuously involve new home-country partnerships. Moreover, EMNEs’ innovation capability building requires difficult-to-imitate open innovation process that cannot be copied by foreign MNEs interested in the resource or market opportunities present in the emerging market.
- Second, we found that Natura implement three nonmarket strategies to overcome the disadvantages in the Brazilian institutional setting and create opportunities to benefit from local natural resources for innovation: developing local relationships, connecting location-specific resources, and addressing societal concerns. These nonmarket strategies responded to incomplete institutions present in Brazil and sought to enable innovation-driven change. For example, our study suggests that the strategy of developing local relationships through technology programs that support resource endowments are effective to develop partnerships and cultivate legitimacy from local stakeholder groups.
- Finally, this study recommends innovation leaders to devise innovation capability building processes that allow for (1) continuous evaluation of their open innovation strategies to explore in the vicinity of their existing innovation portfolio and potential local and global market resources (e.g., natural resources, knowledge infrastructure) and (2) nonmarket strategies to respond to local institutions, such as the local innovation system and global system changes (e.g., sustainability).
We hope our findings highlight the importance for EMNEs to mobilize their local institutional setting by involving local actors (e.g., customers, universities, suppliers) to address the needs of both the emerging market and the supranational level. Over time, EMNEs might use different strategies to do so, including both formal nonmarket strategies to establish structural initiatives (e.g., an ecosystem) and informal nonmarket strategies to influence the local innovation ecosystem as a whole (e.g., building relationships to address global challenges).
Henry Lopez-Vega is Associate Professor at University of Surrey, UK. His research contributes to the burgeoning discussions on the implementation of open innovation, ecosystems, digital strategy.
Nicolette Lakemond is Professor at Linköping University, Sweden. Her research explores how could organizations be managed so that they can responsibly contribute to, and benefit from, the emergence of artificial intelligence and complex intelligent systems.