Project performance in emerging market: The influence of cultural distance and business group affiliation
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Project performance in emerging market: The influence of cultural distance and business group affiliation Somnath Lahiri 1 & Karthik Dhandapani 2
# Springer Science+Business Media, LLC, part of Springer Nature 2018
Abstract Although foreign multinational enterprises (MNEs) often collaborate with firms in emerging markets to help execute capacity expansion projects, the current literature does not adequately explain what factors influence execution performance of such projects. Drawing on the cultural difference- and partner selection literature we investigate in this paper how cultural distance (CD) between MNE’s home and host nation, and businessgroup (BG)-affiliation of host country partner influence duration and completion-likelihood of capacity expansion projects. Our analysis reveals that high CD is associated with lower project-duration and greater likelihood of project-completion. Results further suggest that BG-affiliation is associated with greater likelihood of project-completion. In addition, we find that BG-affiliation negatively moderates the relationship between CD and projectduration. These findings are new to the literature and enhances our theoretical and practical understanding of project execution in emerging markets. Keywords Project duration . Project completion . Cultural distance . Business group affiliation . Emerging market . India Prior research has established that host country institutional attributes and resourcefulness of local partners are two important determinants of interfirm collaboration success (Abdi & Aulakh, 2012; Hitt, Dacin, Levitas, Arregle, & Borza, 2000; Yu & Sharma,
* Somnath Lahiri [email protected] Karthik Dhandapani [email protected]
1
Management and Quantitative Methods Department, College of Business, Illinois State University, Normal, IL 61790-5580, USA
2
Indian Institute of Management Tiruchirappalli, NIT Campus, Thanjavore Main Road, Tiruchirapalli, Tamil Nadu 620015, India
S. Lahiri, K. Dhandapani
2016). Emerging markets (EMs) are known to possess significantly different institutional setups compared to developed economies (Meyer & Peng, 2016). Moreover, emerging market firms (EMFs) are known to lack advanced technological, managerial, and financial resources that characterize developed economy firms (Luo & Bu, 2018). Despite these unique attributes that result in liability of foreignness and increased transaction costs, foreign MNEs continue to enter EMs and establish joint ventures (JVs) or other collaborations with EMFs (Lu & Ma, 2008; Meyer, Estrin, Bhaumik, & Peng, 2009). The purpose of this study is to shed light on a hitherto understudied phenomenon in EMs: collaborations involving foreign MNEs and local EMFs in capacity expansion projects. Capacity expansion projects are initiated by EMFs to augment their productive capacities. Such projects are often implemented in response to pro-market reforms sweeping many EMs such as India. Pro-market reforms have spurred firms’ growth opportunities by minimizing the factors that pose as hindrances t
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