Institutional distance and innovation knowledge transfer : the South African context

Abstract

This research sought to answer the question of whether South African EMNEs internationalising into developed markets, can successfully transfer the knowledge of their subsidiaries back home to improve their innovation performance. Gaining access to these strategic assets is, according to springboard theorists, the primary motives for EMNEs internationalising into developed markets. However, the evidence from this research does not support this postulation. This conclusion was arrived at after following the organisational institutionalism tradition, disaggregating the construct of institutions into the regulatory, normative, and cognitive pillars. This allowed for the hypotheses to be built on all three of these equally important aspects of institutions. Data was collected on cross border acquisitions by South African EMNEs between 2005 and 2015, and the resultant innovation activities analysed using a longitudinal strategy. After employing the Partial Least Squares-Structural Equation Modelling to test the hypotheses, it was concluded that regulatory, normative, and cognitive distance do not result in an improvement in the innovation performance of the parent, even though this has been proven by another study in a Chinese context. This research outcome uncovered contextual peculiarities in the South African environment that have an impact on the institutional theory discipline at large. Firstly, the conceptualisation of institutions needs to be granulated to focus on the aspects that relate to organisational outcomes. Secondly, the asset-seeking motive of the EMNE is a mediator between institutional distance and innovation performance. Thirdly, by disaggregating the normative distance from the other pillars, this research has reinforced a widely held view in literature, that normative distance negatively influences organisational performance.