Academic journal article Journal of East European Management Studies

Obtaining International Results through Partnerships: Evidence from Russian MNEs in the IT Sector

Academic journal article Journal of East European Management Studies

Obtaining International Results through Partnerships: Evidence from Russian MNEs in the IT Sector

Article excerpt

1. Introduction

The internationalisation of firms from emerging markets has increasingly come to the attention of academics and practitioners during recent decades. Meanwhile the number of these firms has been growing rapidly. This process became obvious in the early 2000s. Multinational enterprises (MNEs) from India, China, Russia and Brazil have been the leading players in the process. Researchers expect this trend to continue because tariffs and knowledge barriers are being reduced and markets, globally, are becoming more integrated (Aulakh 2000).

Scholars have attempted to analyse the internationalisation strategies, the choice of entry modes and the sources of competitive advantage of companies from emerging markets and have tried to compare them to developed market MNEs (Collinson/Rugman 2007; Luo/Tung 2007; Demirbag et al. 2009). While the focus of previous research was the internationalisation of manufacturing firms, service companies, and in particular IT firms, have received significantly less attention. As a consequence, theoretical and empirical knowledge about the internationalisation of service sector firms is still limited and the analysis of factors influencing the results of internationalisation has not yet been conducted in sufficient depth (Pauwels/Ruyter 2005). The recent increase in the international operations of service sector companies is an important characteristic of emerging economies, and the growth rate of these operations has been documented as being even higher than those of manufacturing sector firms (Braga 1996; Svetlicic/Rojec 2003). Service firms from emerging markets and particularly from Russia are increasing their efforts to integrate into the global economy and have already started exporting abroad (Panibratov 2012). Cardone-Riportella and Cazorla-Papis (2001) have suggested a set of drivers for the considerable growth of the service sector, such as increasingly intense competition within domestic markets, profit margin pressure and the opportunity to develop business in foreign markets.

The existing studies of IT firms have been conducted using mostly empirical evidence from Indian and Chinese firms (Narayanan/Bhat 2009), meanwhile other contexts are still under-researched. The IT sector in Russia plays an important role in the Russian economy and is worth of $15 billion. The value of exports from this sector has been estimated to be $2.75 billion in 2009, despite the crisis, and in 2010 the total net value of IT products and services increased by 23.4%. In the Russian context, IT service renders itself as a particularly interesting focus for research into international competitiveness, as the majority of studies have been conducted in analysing the overall competitiveness of Russian firms (Kalotay/Sulstarova 2010) and those firms in the natural-resource sector (Panibratov/Verba 2011).

In this paper, we aim to fill this gap by investigating the role of partnership and its effects on the internationalisation of Russian IT firms. Having recognised the positive impact of recent trends of technological development on the rise of the international activities of service sector companies (Vandermerwe/Chadwick 1989) , our paper focuses on how partnership as an international strategy correlates with the specifics of IT firms. We analyse what particular characteristics of service firms define the actual choice of a given strategy, and how home-country specifics and domestic market characteristics explain the international results of Russian IT companies.

Our analysis is based on three research questions, namely: 1) How does partnership as an entry mode correlate to the service firm specifics in the IT industry? 2) What important characteristics of the Russian IT firm define partnership as the entry mode selected? 3) How do home-country specifics and domestic market characteristics explain the international results of Russian IT companies?

2. Internationalisation of service companies and IT firms' perspective

Internationalisation refers to the process whereby a company moves from operating solely in its domestic market to additionally operating in international markets (Andersen 1993; Buckley/Casson 1998). …

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