Extract

Emerging markets have become increasingly important in the world economy thanks to their economic growth as well as increasing innovation capability. The Economist (2010, p. 17) reports that ‘the emerging world, long a source of cheap labor, now rivals the rich countries for business innovation’ and ‘developing countries are becoming hotbeds of business innovation in much the same way as Japan did from the 1950s onwards’. As this trend is getting stronger, researchers have become particularly interested in finding out factors determining innovation in emerging markets. Numerous studies have been devoted to examining macro-level determinants of innovation in developing countries but firm-level research is still rare. The literature suggests that innovation by emerging market firms is simulated by globalization and their home country’s economic liberalization (Gorg and Greenaway, 2004; Wagner, 2007). Furthermore, the literature also suggests that innovation is enhanced by firms’ internationalization (Hitt et al., 1997; Kafouros et al., 2008; Weeks and Feeny, 2008). At the same time, several studies show that management decisions have important implications for innovation (Verona, 1999; Teece, 2009).