Improving Exporting through Innovating in the Developing Country Context: An Abstract

Abstract

Exporting is believed to hold the key to growth for developing countries, as exemplified by their government policies supporting firms to seek international markets. However, exporting leaves developing country firms vulnerable to the race-to-the-bottom, low-price, commodity game. As foreign buyers troll for bargains among indistinguishable offerings, developing country firms witness eroding margins and vanishing sales. Increasingly, these firms are turning to innovation to ensure long-term export sales by creating new products that are unique and provide higher value to international customers. But how can these businesses, with their weaker capabilities and hostile environments relative to developed country counterparts, pursue the innovating-for-exporting strategy? To address this question depth interviews were conducted with firms and experts in Romania, a country transitioning from totalitarian rule to a capitalist market economy. The Contingent Resource-Based View was then applied to the qualitative data set to identify the exogenous and endogenous determinants of the innovating-for-exporting strategy. A host of factors at managerial, organizational, national, regional, and global levels were found to drive pursuit of this strategy. The nested nature of these factors suggested they form complex and embedded impacts on whether and how developing country firms proceed with innovating for exporting. For instance, Romania was found to have a negative country image within Western Europe. This resulted in a bias that restricted the volume and nature of Romanian exports into the region despite economic and regulatory integration. To circumvent this constraint, Romanian companies developed new products for select markets outside the region, specifically markets with neutral to positive views of the country. Another finding is that after developing these innovations for international sales, firms were able to direct the new products to domestic markets. Hence innovations originally intended to shore up exporting produced the added benefit of new domestic audiences. Based on the findings, theoretical and managerial implications for developing country firms were formulated for the strategy of innovating to export.