Unbundling the Effects of Internationalization on Firm Performance in Emerging Economies: The Moderating Effects of Strategic Resource Decisions

Abstract

The authors investigate how strategic resource decisions—regarding slack resources and strategic marketing ambidexterity—influence the relationship between internationalization and firm performance of emerging-market firms. Drawing on the resource-based view, the authors synthesize two dominant, yet divergent, perspectives that explain the respective resource slack advantages and liabilities in the internationalization literature: the flexible capacity and the efficient capacity perspectives. They also explore the moderating role of strategic marketing ambidexterity, which comprises a bundle of marketing activities covering both exploitation-dominant actions and exploration-dominant actions. The authors empirically examine the hypothesized relationships with data from a sample of 1,683 firm-year observations for the period between 2005 and 2018 and find that distinct forms of resource slack have contrasting effects on the relationship between internationalization and performance. The results provide strong evidence for a positive moderation effect of unabsorbed slack resources and a negative moderation effect of absorbed slack resources on the internationalization–performance relationship. The authors also find a nonsignificant moderating effect of strategic marketing ambidexterity, demonstrating that internationalization results in higher firm performance regardless of the firm’s exploration-dominant or exploitation-dominant strategic emphasis in emerging economies.

Keywords

emerging economies firm performance internationalization slack resources strategic marketing ambidexterity

Understanding the internationalization–firm performance (I-FP) relationship in a business that expands its activities beyond national borders has been central to strategic decision making in firms for more than three decades (Kirca et al. 2011; Marano et al. 2016). In this regard, accessing new resources and capabilities are of critical importance for the internationalization process of emerging-market firms due to the typically unfavorable effects of home-country institutional factors (Bandeira-de-Mello et al. 2016; Hsu, Lien, and Chen 2013). The resource-based view acknowledges firm resources as a key instrument that helps firms change the pattern of internationalization and achieve a sustainable competitive advantage in foreign markets (Wernerfelt 1984). The resource-based view regards firms as bundles of resources and emphasizes the prominence of slack resources—that is, the available resources that can be transferred or redeployed tow firm strategies and aspirations (Mishina, Pollock, and Porac 2004; Voss, Sirdeshmukh, and Voss 2008). Within this context, we argue that slack resources play an important role in international markets. There are two perspectives that explain whether slack resources facilitate internationalization and thereby improve firm performance.

The flexible capacity perspective has long argued that slack resources help firms handle the complex process of internationalization because they can serve as a buffer mechanism, paying off extra costs arising from international activities (Mishina, Pollock, and Porac 2004). In contrast, the efficient capacity perspective delineates the unfavorable effects of greater slack resources on firm performance due to inefficient utilization of firm resources within an organization (Nohria and Gulati 1996). Notwithstanding the conflicting findings in the literature, we contend that both these perspectives are theoretically crude.

We posit that distinct types of resource slack trigger managers to engage in different internationalization activities, yielding diverse effects on firm performance by shaping the strength and direction of the I-FP relationship (Lin, Cheng, and Liu 2009). Specifically, we propose that the I-FP relationship for emerging-market firms is moderated by the differential effects of two types of resources: absorbed slack resources and unabsorbed slack resources.

Building on the lens of the dynamic capability view, which is a supplementary theory to the resource-based view, we posit that firms sustain competitive advantages by integrating, building, and reconfiguring resources (Teece, Pisano, and Shuen 1997). Whereas the resource-based view concentrates on benefiting from a firm's existing resource base, the dynamic capability view focuses on deliberate modifications to this resource base to accommodate changing environments and achieve competitive advantage (Schilke, Hu, and Helfat 2018). In this respect, the former view emphasizes the possession and exploitation of a firm's current resource base, whereas the latter view addresses to the deployment and reconfiguration of these assets and resources (Makadok 2001). Correspondingly, slack resources are those that are available beyond the extant demand level and are available to be deployed toward potential firm operations (Verbeke and Yuan 2013).

Strategic marketing ambidexterity, which emerges as one of the most important implications of dynamic capabilities, consists of a firm's capacity to create value from current resources and operations by not only concentrating on exploiting present market opportunities but also exploring potential market preferences with the purpose of meeting future customer demands (Mizik and Jacobson 2003). As this capacity has been attributed to either exploration and exploitation or ambidexterity (O’Reilly, Charles, and Tushman 2008), we contend that strategic marketing ambidexterity is a dynamic capability. Despite the importance of finding an optimum balance in strategic marketing ambidexterity, previous studies have demonstrated that it is neither common nor desirable to stabilize the firm’s strategic emphasis (e.g., Raisch et al. 2009), because they may choose to give more priority to one than the other (i.e., exploitation dominant or exploration dominant) (e.g., He and Wong 2004). In addition, the effects of exploitation and exploration actions in internationalization activities change over time (Sousa, Li, and He 2020); equally, their capabilities play influential roles in the internationalization activities of emerging-market firms (Vahlne and Jonsson 2017).

To elaborate on the mechanism as to how these forms of slack resources impact the I-FP relationship, we propose that firms need to instill strategic marketing ambidexterity, which is theorized as the composition of exploitation and exploration through strategic marketing actions (Josephson, Johnson, and John Mariadoss 2016). Slack resources thereby help organizations engage more actively in both exploitation and exploration activities (Srinivasan, Rangaswamy, and Lilien 2005). Firms in pursuit of internationalization employ available resources for discretionary use to promote their ambidextrous activities (Dasí, Iborra, and Safón 2015; Mishina, Pollock, and Porac 2004). Slack resources that are considered “shock absorbers,” offering high level of strategic flexibility, encourage both exploitation and exploration activities (Bradley, Wiklund, and Shepherd 2011). Importantly, additional resources leverage firms’ efforts devoted to exploratory and exploitative activities (Sirmon, Hitt, and Ireland 2007), where emerging-market firms can readily utilize financial and strategic slack resources to promote their ambidextrous activities in international markets (Zhou et al. 2020).

Given the diverse theoretical assumptions underlying the I-FP relationship, along with the associated boundary conditions arising from firms and countries, it is not surprising that prior studies have revealed conflicting and fragmented results (Geleilate et al. 2016). Within this context, several researchers acknowledge that the positive impact of internationalization on firm performance is not conclusive and is even weaker in emerging markets compared with advanced economies (Kirca et al. 2012; Geleilate et al. 2016). There are several explanations for the critical role of the I-FP relationship in emerging markets: (1) the exposure factor—increased levels of liberalization and globalization result in the risk-averse behaviors of managers in emerging markets that consequently result in their economies remaining closed (Agnihotri and Bhattacharya 2015), (2) the comparative factor—emerging markets lack rigid market and labor regulations due to deficiencies in home-country institutional environments that mitigate expansion opportunities for their firms (Meyer, Klaus, and Peng 2005), and (3) the late entry factor—emerging-market firms commonly suffer from being late entrants to international marketplaces and may thereby lose out on market development because they lack insights into market structure and development opportunities as customer demands evolve (Amsden 2001).

Many empirical studies have examined the link between internationalization and firm performance in the context of advanced economies (e.g., Powel 2014; Shin et al. 2017), and recent studies have addressed emerging economies (Carneiro, Bamiatzi, and Cavusgil 2018; Kirca et al. 2012), with the preponderance being focused on China (e.g., Zhang et al. 2014; Zhou, Wu, and Luo 2007) and India (e.g., Contractor, Kumar, and Kundu 2007; Singla and George 2013). Research on emerging countries from distinct institutional settings is expected to enhance understanding of the rapid evolution of emerging-market firms during their internationalization process (Carneiro, Bamiatzi, and Cavusgil 2018).

Despite the laudable attempts of previous research to examine the I-FP relationship, several neglected areas remain with regard to whether and when a firm's internationalization activities achieve greater firm performance (Marano et al. 2016; Powell 2014). In light of these considerations, we examine the I-FP link within Turkish firms as an emerging-economy context by investigating the moderating impact of strategic resource decisions (i.e., slack resources and strategic marketing ambidexterity) on this relationship. In doing so, we draw on the resource-based view of the firm and aim to fill knowledge gaps in the extant literature by addressing two fundamental research questions: (1) How do different types of slack resources (i.e., absorbed and unabsorbed slack resources) change the shape and direction of the relationship between internationalization and firm performance in the context of emerging-market firms?; and (2) Which aspect of strategic marketing ambidexterity (i.e., exploitation or exploration dominant) is more effective in strengthening the I-FP link?

In addressing these questions, we provide three contributions to the international business/marketing literature on the I-FP relationship. First, we provide strong evidence for the positive moderating effect of unabsorbed slack resources on the I-FP relationship. Second, we theoretically derive a negative moderating effect of absorbed slack resources, supporting theoretical reasoning that the unfavorable effects arise from the inefficient use of firm resources. In doing so, this research extends the literature by synthesizing two opposing perspectives: whereas a positive moderating effect of slack resources accommodates the theoretical premises behind “flexible capacity,” a negative moderating effect of slack resources endorses the “efficient capacity.” Third, we shed light on the insignificant moderating effect of strategic marketing ambidexterity on the I-FP link, revealing that emerging-market firms’ internationalization enhances firm performance regardless of these firms’ exploration-dominant or exploitation-dominant strategic emphasis.

In this vein, our study examines a conceptual model with a unique data set of 164 publicly traded Turkish manufacturing firms over a 14-year financial window (2005–2018), concentrating on a novel, multi-industry, and longitudinal assessment of internationalization of firms. As a result, our findings provide valuable insights for both marketing scholars and practitioners regarding whether and when a firm's internationalization activities drive superior firm performance.

Literature Review and Hypothesis Development

Internationalization and Firm Performance of Emerging-Market Firms

The internationalization of firms from emerging markets has long been argued to be a significant contributor to global economic welfare (Bandeira-de-Mello et al. 2016; Keen and Wu 2011). Despite many years of investigation, no clear consensus has emerged about the link between I-FP in the emerging-economies context, as previous research has produced fragmented and inconclusive findings. Table 1 illustrates exemplars of research examining the I-FP relationship in emerging economies.

Table 1.

Representative Research on the Internationalization–Firm Performance Relationship in the Context of Emerging Economies.

Study	# of Interactions on I-FP Relationship	Theoretical Perspectives	# of Boundary Conditions	Panel Data	Method	Research Context	I-FP Link	Internationalization Measure	Performance Measure
Thomas (2006)	One (geographic distance)	RBV and organizational learning theory	Three (firm size, foreign ownership, technological intensity)	No	Hierarchical regression	386 manufacturing firms in Mexico across 7 years	U-shaped	ESTS	ROS
Contractor, Kumar, and Kundu (2007)	None	Three-stage theory	Two (firm size, firm age)	Yes	GLS regression	269 manufacturing and service firms in India across 5 years	U-shaped	FSTS	ROA, ROE, and ROS
Chen and Tan (2012)	One (firm size)	Institutional theory	Three (firm age, intangible assets, industry)	Yes	Dynamic panel regression	887 publicly listed Chinese firms across 9 years	Negative	FSTS, ISTS, and IGC	Tobin's q
Singla and George (2013)	Three (group affiliation, firm age, firm size)	Three-stage theory	Four (time effects, leverage, industry, R&D intensity)	Yes	Panel data regression	237 manufacturing firms in India across 6 years	S-shaped	ESTS	ROA and Tobin's q
Xiao et al. (2013)	Two (governance structure, degree of centralized control)	Institutional theory	Six (firm size, firm age, firm leverage, R&D intensity, advertising intensity, exchange rate)	Yes	Heckman second-stage model	114,398 foreign-invested enterprises in in China across 6 years	S-shaped	ESTS	ROS
Zhang et al. (2014)	Three (strategic flexibility, structural flexibility, operational flexibility)	Contingency theory	Five (firm size, international experience, industry, ownership, R&D intensity)	No	OLS regression	115 small and medium-sized enterprises (SMEs) in China	Positive	Geographic scope	Subjectively measured firm performance
Gaur and Delios (2015)	Two (ownership, group affiliation)	Agency and institutional theory	Five (firm size, age, technological intensity, marketing intensity, firm leverage)	Yes	GLS regression	327 publicly listed Indian firms across 14 years	Negative	FSTS and FATA	EBITDA/TA
Borda et al. (2017)	Single (business group diversification)	RBV and transaction cost theory	Four (firm size, firm age, industry, country)	Yes	Panel data regression	103 Latin American firms across 7 years	Negative	FSTS	ROA
Buckley and Tian (2017)	Single (R&D intensity)	Internalization theory	Three (firm size, firm age, financial slack)	Yes	2SLS analysis	59 emerging-market firms from different countries across 11 years	Positive	FATA, FSTS, and FETE	ROA
Purkayastha, Kumar, and Lu (2017)	Three (family ownership, domestic financial institutional ownership, foreign corporate ownership	RBV and institutional theory	Seven (age, size, leverage, diversification, current ratio, cash flow, R&D intensity)	Yes	GLS regression	185 Indian business groups across 11 years	U-shaped	FSTS	ROA
Cuervo-Cazurra et al. (2018)	Three (political risk, corruption, region of expansion)	Organizational learning and institutional theory	Three (firm, industry, country influences)	Yes	GLS regression	536 Latin American firms across 17 years	Positive	Dummy variable for exporting	EBITDA/TA
Zhang, Yang, and Zhang (2018)	Three (other kinds of absorbed slack resources, absorbed slack human resources, unabsorbed slack resources)	Agency and the resource constraints theory	Three (firm size, firm age, reputation)	Yes	OLS regression	242 engineering service firms from different countries including emerging markets across 12 years	Negative	Geographic scope	ROA, ROE, and ROS
Xiao, Lew, and Park (2019)	None	RBV and region-based view	Six (firm size, firm age, firm leverage, ownership structure, industry dummies, year dummies)	Yes	GLS regression	492 Chinese service MNEs across 9 years	U-shaped	FSTS	ROA
This study	Three (absorbed slack resources, unabsorbed slack resources, strategic marketing ambidexterity)	RBV and dynamic capability view	Five (firm size, leverage, liquidity, year effects, industry effects)	Yes	GLS regression	164 Turkish firms and of 1683 firm-year observations from 30 industries across 14 years	Positive	ESTS	ROA

Notes: RBV = resource-based view; FSTS = foreign sales to total sales; ESTS = export sales to total sales; FETE = foreign employment to total employment; ROA = return on assets; ROE = return on equity; ROS = return on sales; EBIT = earnings before interest and taxes; EBITDA = earnings before interest, taxes, depreciation, and amortization; ISTS = intraregional sales/total sales; IGC = intra–Greater China sales/total sales; TA = total assets; MNEs = multinational enterprises; 2SLS = two-stage least squares.

Whereas some scholars find a positive relationship between internationalization and firm performance in the context of emerging markets (e.g., Cuervo-Cazurra et al. 2018; Zhang et al. 2014), others report a negative link among the constructs (e.g., Gaur and Delios 2015; Singla and George 2013). Furthermore, some studies report nonlinear and quadratic relationships between internationalization and performance (e.g., Contractor, Kumar, and Kundu 2007; Xiao et al. 2013). Addressing these contradictory findings based on two controversial theoretical premises, some scholars advocate a positive effect of internationalization on firm performance, considering its inherent benefits such as economies of scale, experiential learning curve, and flexible access to resources (Cardinal, Miller, and Palich 2011), whereas other scholars focus on additional costs derived from complex nature of internationalization activities and report the negative impact of internationalization on firm performance (Hennart 2011).

Regarding the resource-based view, emerging-market firms employ internationalization as a means to both seek out and utilize strategic resources, as these firms are exposed to higher liability of foreignness and competitive detriments from being late entrants to the market and exhibiting few of the requisite resources and capabilities (Luo and Tung 2007). The resource-based view advocates that firms with specific resources and capacities are better able to cultivate these resources in the international arena by exploiting valuable opportunities (Bausch and Krist 2007).

In this sense, emerging-market firm behavior can be explained by two internationalization theories following either incremental or accelerated internationalization pathways. In line with the internationalization process theory, emerging-market firms are inclined to choose foreign markets sequentially considering their perceived proximity (Johanson and Vahlne 1977). Evidence demonstrates that Germany, with a lower degree of psychic distance from Turkey, is Turkey's most exported destination (World Trade Organization 2019). However, emerging-market firms that face severe institutional shortcomings expand into developed markets with the aim of avoiding weak institutional climates at home (Wu and Deng 2020) and exhibit springboard behavior to make up for local institutional constraints by acquiring strategic resources and offsetting their existing disadvantages (Luo and Tung 2007). In this regard, we note that emerging-market firms may also exhibit springboard behavior when they expand into other emerging markets to gain expertise in mass production to gain competitive advantage and decrease their future liability of foreignness (Luo and Tung 2018). From the springboard perspective, emerging-market firms accelerate their internationalization process by heavily engaging in original equipment manufacturing (OEM) activities so as to attain economies of scale and mitigate their liability of foreignness, which, in turn, generates favorable impacts on firm performance (Klossek, Linka, and Nippa 2012; Yaprak, Yosun and Cetindamar 2018).

The Moderating Effects of Strategic Resource Decisions

The moderating role of slack resources

According to the resource-based view, firm resources are essential catalysts for firms to promote their international presence and sustain competitive positions in global marketplaces (Wernerfelt 1984). Resource availability serves a critical function in governing a firm's international development because this process generates significant organizational and operational costs that underpin their liability of foreignness (Tseng et al. 2007). However, this is particularly important for firms from emerging markets, which are characterized by an uncertain structural environment with higher risks, resulting in greater necessity for regulatory and compliance resources in the international arena (Contractor, Kumar, and Kundu 2007). Excess resources have come under scrutiny as the existing literature presents two countervailing arguments: (1) slack is a form of flexibility that plays an impetus role in accomplishing planned projects (e.g., Bourgeois 1981) or (2) slack is a sign of inefficiency indicating waste that should be eliminated in an organization (e.g., Nohria and Gulati 1996). Scholars have long discussed whether slack resources enhance or inhibit a firm's ability to expand into foreign markets (Paeleman, Fuss, and Vanacker 2017). We refer to this as “flexible capacity,” whereby slack resources are defined as “a flexible pool of unused resources in an organization that is in excess of the minimum necessary to produce a given level of organizational output” (Nohria and Gulati 1996, p. 1246). Nonetheless, slack resources have been conceptualized in several ways, relying on their nature in terms of redeployability, accessibility, and location (Voss, Sirdeshmukh, and Voss 2008). Empirical evidence demonstrates that emerging-market firm managers pursue different internationalization patterns that conflate varying international performance levels attributable to different types of resource slack (e.g., Lin, Cheng, and Liu 2009).

Researchers have distinguished slack resources as “absorbed” and “unabsorbed” (Bourgeois 1981). A key conceptual consideration here is whether it is a shortage or multitude of slack resources put toward emerging-market firms’ internationalization activities that results in improved firm performance in international markets (Paeleman, Fuss, and Vanacker 2017; Tan and Peng 2003). Because emerging-market firms face a plethora of challenges from internationalization activities in overseas markets, such as liability of foreignness, liability of newness, and supplementary operational and regulatory costs (Contractor 2007; Hsu, Lien, and Chen 2013), slack resources are expected to play a facilitator role in absorbing environmental shocks encountered in international markets (Lin, Cheng, and Liu 2009).

Unabsorbed slack resources describe the uncommitted and readily available excess resources that provide flexibility to firms, as they can be easily diverted into different strategic projects (Bourgeois 1981). Many studies have emphasized the adequacy or abundance of resources, acknowledging the importance of finding an optimum degree of slack resources held within an organization from an emerging economy (Tan and Peng 2003). Their rationales are founded on several tenets: slack resources are required (1) to adapt to unfamiliar and varying international environments, (2) to create a buffer effect in absorbing uncertain and unmanageable shocks and deal with additional costs derived from international activities, and (3) to retain flexibility in addressing unexplored opportunities and initiating new investments in foreign markets (Lin, Liu, and Cheng 2011; Mishina, Pollock, and Porac 2004). Firms from emerging markets that are characterized by weaker institutional environments may exploit unabsorbed slack with the aim of investing in developed markets as an approach to avoid ambiguities and liabilities of the local climate (i.e., institutional escapism) (Geleilate et al. 2016). For instance, financial slack resources, which are considered the least committed resources and comprise liquid assets such as cash reserves and receivables, can be readily transferred to different activities (Voss, Sirdeshmukh, and Voss 2008). Emerging-market firms can gain from uncommitted resources when expanding into developed economies through the springboard effect, thereby overcoming their resource constraints at home (Luo and Tung 2007). In this regard, unabsorbed slack resources are expected to encourage the internationalization activities of emerging-market firms and yield favorable impacts on firm performance.

H₁: Unabsorbed slack resources have a positive moderating effect on the I-FP relationship in emerging markets, such that higher levels of unabsorbed slack resources strengthen the I-FP relationship.

In contrast, absorbed slack resources refer to the committed and embedded excess resources that are difficult to redeploy within an organization (Bourgeois 1981), as these resources are extensively engaged with daily activities and less flexible to be deployed to alternative purposes (Dasí, Iborra, and Safón 2015). For example, human resource slack, which is regarded as the most committed form of resource and consists of specialized and qualified personnel, offers lower managerial discretion and greater lock-in, which challenges their redeployment to alternative situations (Mishina, Pollock, and Porac 2004). This implies that firms adopt the efficient capacity perspective and fail to leave sufficient time to explore new strategic alternatives that change the strategic behavior of the firm (Voss, Sirdeshmukh, and Voss 2008). This includes engaging in rapid and high-risk internationalization activities, particularly in emerging markets with greater uncertainty avoidance in their trade cultures (Agnihotri and Bhattacharya 2015). Absorbed slack resources suggest that emerging-market firms do not exhibit the strategic or operational capacity to pivot when required. Due to their difficult-to-redeploy nature, absorbed resources lead to nontransmissibility of resources toward activities that could help emerging-market firms enhance international operations such as entering into new foreign markets or conducting explorative market research in the global arena.

H₂: Absorbed slack resources have a negative moderating effect on the I-FP relationship in emerging markets, such that higher levels of absorbed slack resources weaken the I-FP relationship.

The moderating role of strategic marketing ambidexterity

Regarding the international business landscape, dynamic capabilities help firms grasp new market knowledge and opportunities with the intent of expanding into foreign markets and achieving success in the international arena (Prange and Verdier 2011). Given this, ambidexterity emerges as one of the most pivotal manifestations of dynamic capabilities (e.g., Tushman and O’Reilly 1996). We contend that strategic marketing ambidexterity is conceptualized as a bundle of marketing activities involving both exploitation- and exploration-dominant actions. Whereas the former refers to the creation of value through current knowledge and expertise, the latter implies the development of new value opportunities to meet customer preferences (Josephson, Johnson, and John Mariadoss 2016). Ambidexterity as a dynamic capability is a source of competitive advantage owing to its facilitator role in both resource deployment and resource configuration within an organization (Eisenhardt and Martin 2000).

Within this context, dynamic capabilities are critical for a firm to offset exploitation-dominant and exploration-dominant actions in international markets, as different bases are demanded for their evolution (Villar, Alegre, and Pla-Barber 2014), with the important roles of both capabilities on the internationalization pathways of emerging-market firms (Vahlne and Jonsson 2017). Nevertheless, while strategic marketing ambidexterity plays a fundamental role within a firm (Rapp et al. 2013), particularly in emerging economies (Bandeira-de-Mello et al. 2016; Lin and Si 2019), empirical insights are limited regarding the ideal alignment among these two disparate and competing strategic choices and emerging-market firms' performance implications in international markets.

Exploitation activities concentrate on knowledge acquisition, such that firms rely on their existing competencies or prior experience by following identical and previously used paths to gain or maintain a competitive advantage (Voss and Voss 2013). However, this can dupe firms into an organizational myopia (Levinthal and March 1993). Further, this may blinker emerging-market firms operating in international markets from the diversity of new and different demands that confront them, as marketing-based exploitation practices largely consist of advertising and promotion-related strategies, with a focus on developing value by leveraging existing knowledge (e.g., McAlister, Srinivasan, and Kim 2007).

Exploration consists of proactive activities related to foreign-market information acquisition and the development of new opportunities (Voss, Sirdeshmukh, and Voss 2008), which constitute essential instruments of the internationalization process for firms from emerging economies (Bandeira-de-Mello et al. 2016). Therefore, exploration activities essentially comprise research and development (R&D) capabilities (e.g., Josephson, Johnson, and Mariadoss 2016) with the aim of enhancing competitive standing over rivals through innovative and explorative activities in emerging markets (e.g., Zhou et al. 2020).

In the pursuit of strategic marketing ambidexterity, it is critical for managers to arbitrate their strategic emphasis in terms of exploration–exploitation, as exploitation and exploration have diverse effects on internationalization activities (Sousa, Li, and He 2020). Extending our “differential reasoning,” we argue that an emerging-market firm’s strategic marketing ambidexterity enables it to help integrate, build, and reconfigure resources with the aim of creating competitive advantage in international markets. Furthermore, firms adopting exploitation-dominant actions follow a distinct path that supports an incremental internationalization process, in contrast to firms adopting exploration-dominant actions that encourage an accelerated internationalization process (O’Reilly, Charles, and Tushman 2008). We expect that emerging-market firms may demonstrate springboard behavior to tackle home-country institutional constraints and latecomer disadvantages (Luo and Tung 2007). This is particularly noteworthy for firms originating from emerging markets that compete for scarce resources when making investments in unknown (and, for them, unpredictable) environments with unfavorable home-country institutional conditions (Hsu, Lien, and Chen 2013). Thus, we expect that emerging-market firms with exploration-dominant strategic emphasis tend to proactively delve into unidentified opportunities and venture into new and riskier international operations to improve their firm performance.

H₃: Strategic marketing ambidexterity has a negative moderating effect on the I-FP relationship in emerging markets, such that firms with exploration-dominant strategic emphasis (negative score) strengthen the I-FP relationship compared with firms with exploitation-dominant strategic emphasis (Figure 1).

Research Methodology

Sample and Data

Since the 1990s, globalization activities have increased significantly, which is partly attributable to the greater engagement in international trade for firms in emerging economies such as China, India, Brazil, Turkey, and Mexico (Satta, Parola, and Persico 2014). The Turkish context therefore provides a suitable research setting for scholars because it is one of the top emerging markets (Kirca 2011), having both comparable institutional climates with other emerging economies and serving as a bridge among Central Asian, European, and Middle Eastern countries because of its strategic geopolitical position and cultural familiarities with these markets (Demirbag, McGuinness, and Altay 2010). In addition, Turkey is a rapidly growing emerging market that has restructured its economy into a liberal, active, and munificent marketplace, and a preponderance of Turkish firms have expanded to overseas markets (Uner et al. 2013); thus, it provides a fertile ground in which to study the I-FP relationship. Further, the substantive development of the Turkish economy is largely attributed to export trade, in which more than half of international firms adopt a direct exporting model (Turkish Statistical Institute 2021). Turkey's total export of manufactured goods was $180.5 billion in 2019, compared with $73.4 billion in 2005 (Turkish Exporters Assembly 2021). For Turkish exporting firms, Germany has become the most attractive and sustained market for many years (Turkish Exporters Assembly 2021) because there are many Turkish immigrants residing and doing business there, which helps decrease perceived psychic distance between the two countries and accelerate internationalization. Further, Turkish firms export to over 160 foreign markets and have mostly been involved in OEM activities, which allow firms to manufacture and export foreign firms’ products under their own brand names and distribution networks (Saavedra et al. 2013). Consequently, emerging-market firms can increase their production capacities, achieve economies of scale in the home market, and sell other firms’ recognized brands in many countries throughout North Africa, Europe, America, and Asia. Due to the serious economic and political crisis Turkey experienced in 2001, internationalization has become an appealing alternative for Turkish manufacturing companies to survive in these highly competitive and globalized arenas and enhance profits by expanding into foreign markets.

Figure 1.

Conceptual framework.

Our data set consists of a sample of Turkish publicly traded firms operated internationally between 2005 and 2018. The data were collected and integrated from several secondary sources including the Compustat and Bloomberg databases. Figure 2 depicts our data sampling process. The unbalanced nature of our data, along with our lagged dependent variable, yielded a final sample of 1,683 firm-year observations for 164 firms.

Figure 2.

Data sampling process.

Variables and Measures

Table 2 presents an overview of all variables modeled in our study with definitions, measurements, and data sources.

Table 2.

Variable Definitions and Operationalization.

Construct	Definition	Operationalization	Data Source
Firm performance (ROA)	Overall level of firm profitability	The ratio of firm net income to total assets	Compustat
Firm performance (EBITDA/TA)	Overall financial performance, emphasizing the overall enterprise value	Earnings before taxes, interest, and depreciation divided by total assets	Compustat
Internationalization (ESTS)	Firm's sales resulting from its exporting operations	The ratio of export sales to total sales	Bloomberg and Compustat
Absorbed slack resources	Committed resources that are difficult to reposition and embedded within a company as surplus of resources	The ratio of net working capital (working capital—cash) divided by total assets	Compustat
Unabsorbed slack resources	Uncommitted resources that can be redistributed without difficulty in a company	The ratio of current assets to current liabilities	Compustat
Strategic marketing ambidexterity (SMA)	Firm's strategic emphasis toward exploitation (positive score) versus exploration (negative score)	The ratio of SG&A expenses minus R&D expenditures scaled by total assets	Compustat
Firm size	The overall size of the firm	Natural log of a firm's total assets	Compustat
Liquidity	A financial measurement that demonstrates current cash holdings within a company	Cash and short-term investments divided by total firm assets	Compustat
Leverage	A financial measure that represents exporting behavior of a firm influenced by extrinsic financing assured	A firm's total debts (short term debts + long-term debts) divided by total assets	Compustat

Notes: R&D = research and development; SG&A = selling, general, and administrative expenses; ROA = return on assets; EBITDA = earnings before interest, taxes, depreciation, and amortization; TA = total assets; ESTS = export sales to total sales.

Firm performance

Return on assets (ROA) is used to measure firm performance. We employed this accounting-based measure for two main reasons. First, it is the most appropriate indicator that demonstrates how well economies of scale have been achieved within a firm, because firm internationalization is mostly related to the attainment of economies of scale and scope (Kim, Hwang, and Burgers 1989). Second, we ensure that our study is comparable with others, because previous studies in the international business literature examining the relationship between internationalization and firm performance have typically adopted this measure (e.g., Contractor, Kumar, and Kundu 2007; Gomes and Ramaswamy 1999). However, we dismissed the use of another accounting-based measure, return on equity, which is more susceptible to fluctuations in firms’ capital structure (Hitt, Hoskisson, and Kim 1997), as well as market-based measures of firm performance such as Tobin's q or market value, which are highly influenced by factors such as revenue inconstancies or future economic forecasts rather than merely internationalization (Ball and Kothari 1991). Further, we did not use multiple measures to examine firm performance, as several scholars have noted the similarity of the results derived from using interchangeable measures (e.g., Chen and Tan 2012). Therefore, firm performance that was operationalized by ROA was measured by the ratio of firm net income to total assets (Fang, Palmatier, and Steenkamp 2008). Owing to the nature of panel data (Imbens and Wooldridge 2009), we lagged ROA by two years to allow for a longer time period for the effects of internationalization activities to materialize, which is in line with the convention employed in comparable studies (e.g., Hitt et al. 2006).

Firm internationalization

Firm internationalization is calculated as the ratio of export sales to total sales (ESTS), which has been widely used to investigate the I-FP relationship (Contractor, Kumar, and Kundu 2007; Kirca et al. 2012). We selected this measure instead of foreign sales to total sales for three salient reasons: (1) exporting is the most used foreign-market entry mode as the first phase of internationalization, conforming with the “Uppsala model” in emerging economies (Figueira-de-Lemos, Johanson, and Vahlne 2011); (2) more than 50% of companies employ a direct exporting model in Turkey (Turkish Statistical Institute 2016); and (3) it is critical to identify relevant measures with an intent of building credible cumulative knowledge in an academic discipline (Katsikeas et al. 2016). However, the unavailability of data on Turkish firms prevents the use of composite measures such as the number of countries of operation or international firm experience (e.g., Gomes and Ramaswamy 1999).

Moderating variables

Our conceptual model specifies three moderating variables: absorbed slack resources, unabsorbed slack resources, and strategic marketing ambidexterity. We measured absorbed slack resources using net working capital (working capital − cash) divided by total assets, which allows researchers to make a clear comparison between absorbed and unabsorbed types of slack in terms of their potential effects on firm performance (Kim and Bettis 2014). In addition, we calculated unabsorbed slack resources as the ratio of current assets to current liabilities, in line with previous studies (e.g., Zhang et al. 2016).

With respect to the measure of strategic marketing ambidexterity, we align with previous work and employ indicators derived from selling, general, and administrative expenses (SG&A) and R&D expenses to create measures of exploitation and exploration (Josephson, Johnson, and John Mariadoss 2016; Mizik and Jacobson 2003): the ratio of SG&A expenses subtracted from R&D expenses, divided by total assets. In line with this operationalization, whereas a positive result reflects strategic market ambidexterity, which is exploitation dominant, a negative value represents an exploration-dominant emphasis (Josephson, Johnson, and John Mariadoss 2016).

Control variables

Our model specifies a series of control variables. First, we expect firm size to encourage international operations, such that larger firms with stronger resources and capabilities are more advantageous in acquiring foreign-market knowledge (Quer, Claver, and Andreu 2007). We operationalized firm size as the natural logarithm of total firm assets in a given year for all models (e.g., Agnihotri and Bhattacharya 2015; Chen and Tan 2012), as log transformation approaches the data to the normal distribution (Contractor, Kumar, and Kundu 2007). Second, leverage was controlled for in all models by the impact of debt on firm performance and operationalized as the total debts of the firm (i.e., short-term and long-term debts) divided by total assets (e.g., Paeleman, Fuss, and Vanacker 2017). However, when considering our market share robustness check (Web Appendix B), we operationalized leverage by dividing a firm's total debt by its shareholders’ equity, which represents the capital structure of the firm and the shareholders’ earnings. This is the most frequently used operationalization of leverage when examining effects on market share (e.g., Curley, Hexter, and Choi 1982; Sullivan 1974). We measured firm liquidity as cash and short-term investments divided by total firm assets, following Kim and Bettis (2014). In addition, we employed yearly fixed effects to control for unforeseen macroeconomic factors, while industry-specific effects that may influence the relationship between I-FP differently were considered on the basis of two-digit Standard Industrial Classification codes. Finally, we controlled for the type of products (i.e., intermediary vs. end products) to acknowledge how different product types shape the direction and the strength of the I-FP relationship, as these have a crucial role in the decisions of international marketers (e.g., Wiersema and Bowen 2011).

Model Development

We employ an unbalanced panel data methodology because of the data characteristics comprising both cross-sectional (i.e., 164 firms) and time series (i.e., 2005–2018) structure. Echoing previous studies (Kumar, Sunder, and Sharma 2015), we performed two essential preestimation tests to capture heterogeneity and cross-sectional dependence across the panel data. First, we conducted the Breusch–Pagan Lagrangian multiplier test to formally test the significance of heterogeneity (Breusch and Pagan 1980) (χ² = 150.37, p ≤ .001). Further, we used the Hausman specification test to determine the suitability between random-effects and fixed-effects models (Hausman 1978) (χ² = 1.38, p > .1). Both demonstrated the suitability of the random-effects generalized least squares (GLS) model instead of the pooled ordinary least squares (OLS) regression and fixed-effects models, respectively. In this regard, GLS enables researchers to meet standard least-square assumptions while minimizing potential problems related to autocorrelation and heteroskedasticity in time-series analysis and avoid unobserved heterogeneity in OLS regression (Greene 2012). Our empirical analysis relied on the following structure (Wooldridge 2002):

\begin{aligned} PERF & = α + β_{1} ESTS + β_{2} ABSORB + β_{3} UNABSORB \\ + β_{4} AMBI + β_{5} ABSORB \times ESTS \\ + β_{6} UNABSORB \times ESTS + β_{7} UNABSOR B^{2} \\ \times ESTS + β_{8} AMBI \times ESTS + β_{9} CONTROLS + ε . \end{aligned}

(1)

In Equation 1, the dependent variable PERF represents firm performance and the independent variable ESTS corresponds to internationalization. Because our hypotheses imply linear moderating impacts for unabsorbed slack resources, absorbed slack resources, and strategic marketing ambidexterity, these variables are interacted with ESTS. Further, β indicates the regression coefficients and α represents the intercept, whereas ε shows the error term, and CONTROLS are the control variables.

We present the findings of GLS panel regressions, where the explanatory variables are inserted sequentially throughout Models 1–3, testing H₁–H₃. In this sense, Model 1 constitutes the baseline model, indicating the effects of three control variables (i.e., firm size, leverage, and liquidity) on the dependent variable (i.e., firm performance). In this model, we also include the measure of internationalization as a control variable. Model 2 tests the impact of the main effects (i.e., absorbed slack resources, unabsorbed slack resources, and strategic marketing ambidexterity) on firm performance with four control variables, including the internationalization measure. Model 3 is an overall model comprising main effects as well moderating effects of strategic resource decisions on the I-FP relationship. Finally, in line with prior research (e.g., Josephson, Johnson and John Mariadoss 2016), we standardized all measures to ensure consistent interpretation.

Robustness Checks

To test the robustness of the findings, we repeated our sets of models with two alternative measures of firm performance, comprising both efficiency and effectiveness dimensions (Walker and Rueker 1987). Whereas the former is related to the ratio of performance outcomes attained (i.e., return on measures), the latter is closely associated with the degree to which desired success (i.e., nonfinancial goals) is achieved (Homburg, Krohmer, and Workman 1999; Katsikeas et al. 2016; Morgan, Kaleka, and Katsikeas 2004). In this regard, for the efficiency firm performance measure, we employed an alternative index of profitability: earnings before interest, taxes, depreciation, and amortization (EBITDA) divided by total assets. This is consistent with other studies employing robustness of alternative profitability indices (e.g., Cuervo-Cazurra et al. 2018; Gaur and Delios 2015). Web Appendix A shows our additional tests, which reveal similar findings, fundamentally support the main results, and represent the robustness of our empirical evidence. In our robustness analysis, all hypothesized results were consistent with the exception of H₃, demonstrating the positive and significant moderating impact of strategic marketing ambidexterity (i.e., exploitation-dominant strategic focus) on the I-FP relationship. Second, we performed another, alternative, measure of firm performance in the form of its effectiveness, and for this we examined market share, which is the most extensively used measure of product-market performance (Katsikeas et al. 2016). Web Appendix B illustrates these results, which are again consistent with the main results except for H₁, reflecting a nonsignificant moderating impact of unabsorbed slack resources on the I-FP relationship. This draws a remarkable interference, elaborating on not only inconsistent minor variation between two robustness checks but also interesting departures from our main results with the alternative dependent variables, which could prompt further research.

Analysis and Results

Table 3 presents the descriptive statistics and correlations of the variables included in our analysis. As some correlations among the variables demonstrate significant values, we calculated variance inflation factors (VIFs) to test the likelihood of multicollinearity in this study. Multicollinearity is a problematic issue for researchers, because it increases the variance of regression coefficients, complicating the interpretation process of the data (Hair 2010). A basic rule is that multicollinearity may create a problem if the VIF values for any independent variable exceed 10 (Koutsoyiannis 1977). The greatest VIF value in our analysis is 2.70, indicating that multicollinearity is not likely to be an issue in our study (Neter, Wasserman, and Michael 1990). Furthermore, tolerance coefficients validate the empirical evidence, as the values are far from zero (Moore, McCabe, and Craig 2012). We also exploited other approaches to reduce any potential multicollinearity issues by mean-centering relevant variables (Aiken and West 1991).

Table 3.

Descriptive Statistics and Correlation Matrix.

	Mean	SD	1	2	3	4	5	6	7
1. Firm performance (lagged)	.03	.19
2. Internationalization	27.47	25.17	.07*
3. Absorbed slack resources	.05	.34	.04	.07*
4. Unabsorbed slack resources	2.28	4.81	.06*	.03	.21*
5. Strategic marketing ambidexterity	.13	.11	.05*	−.15*	−.12*	−.07*
6. Firm size ^a	2.60	.77	.09*	.04*	−.09*	−.12*	−.27*
7. Liquidity	.10	.11	.16*	.01	.09*	.27*	−.08*	.19*
8. Leverage	.27	.32	−.04*	.02	−.76*	−.33*	.20*	−.01	−.15*

*p ≤ .05 (two-sided).

Firm size is transformed to the logarithm form.

Table 4 demonstrates the results of GLS regression coefficient estimates for the interaction effects of a firm's internationalization, absorbed slack resources, unabsorbed slack resources, and strategic marketing ambidexterity on that firm's performance. Results from Model 1, which includes only control variables, show a reasonably good fit (R² = .03, χ² = 44.13, p ≤ .01), indicating significant effects of three control variables (firm size, leverage, and liquidity) on firm performance in the expected directions, which are all consistent with prior research (e.g., Lin, Liu, and Cheng 2011; Paeleman, Fuss, and Vanacker 2017). Moreover, larger firms and firms with greater cash holdings in emerging economies achieve outstanding firm performance in international marketplaces. Unsurprisingly, higher debt ratio, particularly for firms in emerging markets, is negatively related to firm performance, as firms’ internationalization patterns are poorly influenced by their capital structure (Hitt, Hoskisson, and Kim 1997). In Model 1, we also controlled for the effect of internationalization on firm performance (β = .0, p ≤ .1). Thus, emerging-market firms with higher internationalization attain better firm performance, which is in line with the prior research (e.g., Cuervo-Cazurra et al. 2018; Zhang et al. 2014). This positive association is consistent in both Model 2 (β = .08, p ≤ .01) and Model 3 (β = .07, p ≤ .05).

Table 4.

Results of GLS Regression Analysis.

	Dependent Variable: Firm Performance (ROA_lagged)
Variables	Model 1	Model 2	Model 3
Intercept	.01 (.15)	.003 (.04)	.21** (2.13)
Main Effects
Unabsorbed slack resources		.31*** (3.05)	.48*** (4.75)
Absorbed slack resources		−.07 (−1.62)	−.14*** (−3.04)
Strategic marketing ambidexterity		.16*** (4.73)	.16*** (4.66)
Interaction Effects
Internationalization × Absorbed slack resources			−.08* (−1.93)
Internationalization × Unabsorbed slack resources			.29** (3.30)
Internationalization × Strategic marketing ambidexterity			.04 (1.17)
Control Variables
Internationalization	.06* (1.69)	.08*** (2.52)	.07** (2.28)
Firm size ^a	.07* (1.94)	.13*** (3.48)	.11*** (3.41)
Leverage	−.06* (−1.81)	−.11** (−2.27)	−.05 (−1.23)
Liquidity	.13*** (3.43)	.08** (2.305)	.08** (2.27)
Year effects	Included	Included	Included
Industry effects ^b	Not included	Not included	Included
Product type effects ^c	Not included	Not included	Included
No. of firms	164	164	164
Observations	1683	1683	1683
R²	.03	.05	.11
Wald χ²	44.13***	76.18***	205.62***

*p ≤ .10.

**p ≤ .05.

***p ≤ .01.

Firm size is transformed to the logarithm form.

Industry effects (two-digit Standard Industrial Classification code).

Product type effects (i.e., intermediary vs. end-user products).

Notes: Two-sided tests of significance. Coefficients are standardized betas from panel regression and Z-values are in parentheses.

Model 2 gives an even better fit (R² = .05, χ² = 76.18, p ≤ .01), involving both significant linear effects of unabsorbed slack resources (β = .31, p ≤ .01) and absorbed slack resources (β = −.07, p ≤ .1). In addition, strategic marketing ambidexterity has a significant and positive linear impact on firm performance in international marketplaces (β = .16, p ≤ .01). This shows that firms from emerging markets that adopt an exploitation-dominant strategic emphasis (i.e., positive score) perform better than firms that adopt an exploration-dominant focus (i.e., negative score) in their internationalization activities.

As for the three critical moderating impacts—unabsorbed slack resources, absorbed slack resources, and strategic marketing ambidexterity—moderation terms were introduced in Model 3. The results indicate a significant and positive moderating impact of unabsorbed slack resources in Model 3 (β = .29, p ≤ .01), in support of H₁. In addition, the positive relationship between internationalization and performance is weaker in a firm with a higher level of absorbed slack resources (β = −.08, p ≤ .05), which supports H₂. Further, the moderating effect of strategic marketing ambidexterity on the relationship between internationalization and performance shows nonsignificant results (β = .04, p ≥ .1), rejecting H₃. This nonsignificant moderating effect of strategic marketing ambidexterity indicates that internationalization attains higher firm performance regardless of its exploration-dominant or exploitation-dominant strategic emphasis in emerging economies. In line with the results, we obtained the best fit with Model 3, which comprises all variables that may influence firm performance (R² = .11, χ² = 205.62, p ≤ .01).

Figure 3, Panels A–C, illustrates the graphical representation of these interaction plots, where the horizontal axis represents the degree of internationalization and the vertical axis indicates firm performance. Figure 3, Panel A, shows that under the conditions of high unabsorbed slack, greater firm internationalization results in a higher firm performance (i.e., steeper positive slope). In contrast, Panel B illustrates that a firm with a high level of absorbed slack shows stable performance over time as the degree of internationalization increases, whereas a firm with a low level of absorbed slack demonstrates a steeper and positive slope over time,, as hypothesized in H₂. Moreover, Panel C shows that strategic marketing ambidexterity slightly increases firm performance over time, regardless of emerging-market firms’ strategic focus on exploration or exploitation.

Figure 3.

Moderation of strategic resource decisions on the I-FP relationship.

Discussion and Conclusions

This research contributes to the debate on the relationship between internationalization and firm performance. Specifically, we contribute to understanding of the boundary conditions that may change the shape and direction of this well-established link in the existing literature. This is particularly critical for firms from emerging markets that aim to prudently manage limited resources when entering new foreign markets (Hsu, Lien, and Chen 2013). We underpin our theoretical reasoning with the resource-based view, which has been frequently employed to empirically examine the I-FP relationship of emerging-market firms. We do this by focusing on the moderating effects of strategic resource decisions—namely, absorbed slack resources, unabsorbed slack resources, and strategic marketing ambidexterity. With respect to our empirical findings, we consistently demonstrate a positive and significant link between internationalization and firm performance. In contrast to much of the extant literature, we highlight how the internationalization activities of firms from emerging markets cultivate firm performance. This is a noteworthy attempt to deepen our understanding of the relationship, as it reveals that emerging-market conditions may promote internationalization and outstanding firm performance when appropriate boundary conditions occur.

Importantly, our findings indicate a positive and significant moderating effect of unabsorbed slack resources on the I-FP relationship. In line with the synthesis of two dominant and contradictory perspectives—flexible capacity and efficient capacity—this provides evidence for how unabsorbed slack resources play a catalytic role in fostering the I-FP link, particularly in emerging markets, by helping firms diminish the effects of liability of foreignness and newness in foreign markets (Contractor 2007). Because the local-market conditions are typically less satisfactory for firms from emerging economies, these firms tend to invest into markets beyond the national boundaries as a function of institutional escapism with the aid of unabsorbed slack resources (Geleilate et al. 2016). Regarding the flexible capacity perspective, we find that these uncommitted slack resources help firms tackle resource pressures, representing a springboard effect of firms from emerging markets in their internationalization process (Luo and Tung 2007).

In contrast, absorbed slack resources exhibit a negative moderating effect on the relationship between internationalization and firm performance, resulting in a significant decrease in firm performance over time. Fundamentally, absorbed slack resources do not trigger firms to invest in more internationalization due to their difficult-to-redeploy and nontransferable nature (Bourgeois 1981). For example, it is difficult to enter a new foreign market for firms from emerging markets with slack resources that are committed and nontransferable, as they compete for scarce resources and have a more risk-averse business culture (Agnihotri and Bhattacharya 2015). In addition, this reflects efficient capacity, supporting the notion that abundant slack resources result in unfavorable impacts on firm performance due to the inefficient use of existing resources, which prevents firms from exploring new strategic alternatives (Nohria and Gulati 1996).

Our findings further reveal no evidence that strategic marketing ambidexterity (from exploration-dominant to exploitation-dominant strategic emphasis) moderates the relationship between internationalization and firm performance. Contrary to our expectation, the superior performance of emerging-market firms does not rely on firms’ strategic focus on either exploitation or exploration. An interpretation of this is that these activities may create an economic burden for emerging-market firms that compete for scarce resources. Accordingly, this can make it more challenging for them to invest in risky and uncertain returns in foreign markets. Furthermore, this may be the case in the context of Turkey, where firms are heavily engaged in OEM activities in international markets (Yaprak, Yosun, and Cetindamar 2018) and mostly export to countries with a lower degree of psychic distance (e.g., Germany) (Håkanson and Ambos 2010). These strategies are primarily based on the exploitation of existing manufacturing capabilities (Li 2010), in line with the results of our robustness checks. However, our empirical evidence, based on Model 2, also reveals that strategic marketing ambidexterity has a positive and significant effect on firm performance, such that an exploitation-dominant focus (positive score) improves performance of emerging-market firms’ internationalization activities.

Theoretical Implications

We contribute to the international marketing literature in several significant ways. First, much of the early literature paid little attention to the growing role of emerging-market firms in the global economy (Keen and Wu 2011). Prior studies have neglected to investigate how these firms can tackle the challenges in the global arena and exploit opportunities in international markets (Zhang et al. 2014; Zhou, Wu, and Luo 2007). We address this gap by enhancing understanding of the I-FP relationship and unpacking the moderating effects of strategic resource decisions in an emerging market (Kirca 2011).

Second, we enrich theoretical insights into the determinants of the I-FP relationship. There is a dearth of research devoted to identifying key moderating variables that significantly change the direction and shape of the I-FP relationship. We make a valuable contribution by empirically examining the moderating effects of slack resources on this relationship and distinguishing the effects of different types of slack resources (i.e., absorbed and unabsorbed slack resources) based on two dominant, yet divergent, perspectives that explain the respective resource slack advantages and liabilities in the internationalization literature: flexible capacity and efficient capacity.

Third, even though strategic marketing ambidexterity has drawn increased interest in both management and marketing areas, this topic of inquiry in international marketing research remains limited (Sharma, Nguyen, and Crick 2018; Sousa, Li, and He 2020). Therefore, this study adds a valuable effort into investigating the moderating effect of strategic marketing ambidexterity via exploration of the distinction between exploitation-dominant and exploration-dominant strategic emphasis when going global.

Managerial Relevance

We offer valuable practical insights for international marketers. Figure 4 exhibits the key managerial implications of the study findings on a two-by-two matrix, with the axes representing internationalization and firm performance, and four quadrants assisting emerging-market managers as a planning tool for their internationalization activities.

Figure 4.

Managerial implications of the findings.

First, managers of emerging-market firms should not be discouraged by higher initial costs of internationalization and unfavorable home-country institutional conditions. Rather, unpredictable local circumstances lead these firms to invest in advanced economies or expand into foreign markets, tactics that are congruent with the view of institutional escapism. Managers should therefore set appropriate strategies to initiate internationalization efforts, which attain superior firm performance in the long term. However, it is also crucial to hold sufficient unabsorbed slack resources that can be transferred to strategic activities during internationalization. Unabsorbed slack resources such as financial slack resources—which are highly related to the extent of liquid assets held in excess within a firm—are necessary to carry out internationalization activities and act as a buffer to assist in recognizing unforeseen factors and implementing better internationalization strategies that improve firm performance in international marketplaces.

Further, managers are advised not only to invest in unabsorbed slack resources, which provide flexibility to firms because they can be easily diverted into different strategic projects, but also to divest high levels of absorbed slack resources such as human resource slack resources (i.e., the total number of employees held in excess within a firm) or to ignore their negative effects in the long run. The reason for this is that such resources cannot be transferred or strategically redeployed to other areas given their absorbed nature and therefore cannot help improve the firm's competitive standing in international markets. Moreover, managers need to understand that emerging-market firms do not necessarily adopt merely exploration-dominant strategic emphasis or exploitation-dominant strategic emphasis to enhance the relationship between internationalization and firm performance. Nevertheless, our advice is for emerging-market firms to adopt a maintain/expand approach by concentrating on an exploitation-dominant strategic emphasis, which relies on the experience-based learning by eliminating high risk and ensuring higher firm performance without higher costs, but with the special knowledge of observing existing customers’ preferences in existing markets and strengthening current-market linkages in foreign markets (Lisboa, Skarmeas, and Lages 2013; Sousa, Li, and He 2020). However, it is critical for emerging-market firms to reassess and scrutinize the role of slack resources and consider whether the types of slack held within the firm are a form of flexibility or a sign of inefficiency and accordingly eliminate additional costs derived from activities that may create an economic burden to enhancing firm performance in international markets.

Third, given that one of the most intriguing results of our study is the stronger I-FP relationship realized for firms from emerging economies, managers should appreciate that while home-country characteristics may well be a catalyst for internationalization, they are by no means a key determinant of a firm's international success, as many studies have reported (e.g., Kirca et al. 2012).

Limitations and Future Research

This study has several limitations that present promising avenues for further research. First, our empirical findings were derived from a sample of publicly traded Turkish companies. Despite the use of several control variables (e.g., firm size, leverage, liquidity), other factors could still challenge the generalizability of the findings. Therefore, future studies should validate our results in different settings. Second, in common with prior studies, we based our operationalization of slack resources on financial measures (Bourgeois 1981). Thus, this study does not consider the effect of nonfinancial and intangible sources of slack resources. Third, further studies could examine the performance construct by integrating both market-related and financial measures. Another important future opportunity could be to extend the scope of internationalization. Our study focuses on the most common entry mode (i.e., exporting), but other foreign entry modes include alliances, mergers and acquisitions, and foreign direct investment alternatives. More work exploring firms with different foreign entry strategies would be insightful for future studies. In addition, researchers could focus on the temporal aspects of internationalization in examining the interaction effects of strategic resource decisions; as Hilmersson et al. (2017) indicates, emphasis on the concept of time is important to appreciate the nature of international expansion dynamics in different ways.

In addition, further research should incorporate the firm's international experience as a control variable; we could not consider this in the current study due to lack of data availability. Moreover, scholars could produce more research investigating other potential moderating influences on the I-FP relationship. We focused on merely firm-level variables. Thus, further studies could incorporate country-level variables in their analyses. In addition, researchers are advised to distinguish whether there are any differences among service and manufacturing industries in future studies. Another fruitful consideration might be to investigate nonlinear moderation effects of strategic marketing ambidexterity, which could help managers determine the optimum balance on the continuum of two complementary poles of strategic marketing ambidexterity. This would contribute to the ongoing debate on how to appropriately calibrate firms’ emphasis on strategic marketing ambidexterity when going global (Bandeira-de-Mello et al. 2016; Dasí, Iborra, and Safón 2015). Finally, future studies could also consider other factors that may affect the allocation of resources such as domestic market needs, choices between different foreign markets, and various strategic dilemmas (e.g., market concentration vs. spreading, marketing standardization vs. adaptation).

Supplemental Material

sj-docx-1-jig-10.1177_1069031X211030686 - Supplemental material for Unbundling the Effects of Internationalization on Firm Performance in Emerging Economies: The Moderating Effects of Strategic Resource Decisions

Supplemental material, sj-docx-1-jig-10.1177_1069031X211030686 for Unbundling the Effects of Internationalization on Firm Performance in Emerging Economies: The Moderating Effects of Strategic Resource Decisions by Nilay Bıçakcıoğlu-Peynirci and Robert E. Morgan in Journal of International Marketing

Footnotes

Acknowledgments

The authors would like to thank Kerry Hudson and Stephen Ratcliffe for their assistance during the database development phase as well as Andreas Eggert and Ad de Jong for comments provided on a previous version of this article.

Associate Editor

Amir Grinstein

Declaration of Conflicting Interests

The authors declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: The authors acknowledge the support of the Scientific and Technological Research Council of Turkey (Grant 2219 International Postdoctoral Research Fellowship Program).

ORCID iDs

Nilay Bıçakcıoğlu-Peynirci

Robert E. Morgan

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