Performance Impact of Temporal Strategic Fit:Entrainment of Internationalization with Pro‐Market Reforms

Abstract

Research summary Pro‐market reforms in emerging markets evolve in a temporal pattern, however extant studies examining the impact of pro‐market reforms have eschewed temporality. We propose that the net impact of reforms on firm performance is contingent on the temporal strategic fit of the firm's strategic choice with the external environment. Using internationalization as the strategic choice, we posit that a positive impact of internationalization is contingent on whether or not firms entrain (synchronize) the temporal parameters of their internationalization activities with those of pro‐market reforms. Robust empirical support for these arguments comes from longitudinal panel data related to Indian automotive firms from 2001 to 2010, contributing to our understanding of the role of the temporal strategic fit of firms’ strategic choices during institutional transitions. Managerial summary Managers of emerging market (EM) firms have faced pro‐market reforms in their home markets, leading to a high degree of competition. Hence, it is pertinent for EM firms to know the intricacies of their response during such changes. We suggest that managers should frame their strategic responses by considering not only the role of “what” and “how,” but also the impact of “when” and “at what rate.” We find firms that shape their responses in synchronization with the changes in the external environment are in the best position to mitigate the erosion of their profitability. As such, this study focuses on the impact of temporal fit of internationalization activities with pro‐market reforms by EM firms and has implication for managers of economies in transition.

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“…4% in 19904% in to 22.2% in 20164% in (UNCTAD, 2018a. Furthermore, the foreign direct investment (FDI) outflow from India more than doubled to USD 11 billion for the fiscal year 2017(UNCTAD, 2018b.…”