Playing dirty or building capability? Corruption and HR training as competitive actions to threats from informal and foreign firm rivals

• Published in: Strategic management journal 2016-10, Vol.37 (10), p.2152-2173
• Main Authors: Iriyama, Akie, Kishore, Rajiv, Talukdar, Debabrata
• Format: Article
• Language: English
• Subjects: Competition; competitive actions; competitive rivalry; Corruption; Emerging markets; foreign firms; Human resource management; human resource training; informal sector; strategic groups
• ISSN: 0143-2095; 1097-0266
• DOI: 10.1002/smj.2447

Research summary: We examine why a firm takes specific competitive action in nonmarket and resource-market spaces, particularly when it perceives threats from informal and foreign competitor groups, respectively. We address this question by combining insights from competitive rivalry, strategic groups, and nonmarket strategy literatures in an emerging economy context. Specifically, we theorize how threats from informal and foreign rival firms in an emerging market influence a firm's engagement in corruption activities and its investments in HR training, respectively. We also argue that the likelihoods of such focal firm actions against competitor group threats differ, contingent on the focal firm's market and resource profiles. Results from the empirical analyses, with survey data from the Indian IT industry, provide broad support to our hypotheses. Managerial summary: Based on a World Bank dataset on the Indian IT industry, this study finds that corruption and HR training are pursued by firms in emerging economies as mindful strategies against specific types of rivals—informal and foreign firm rivals, respectively, and are not pursued simply as culturally-based practices. Multinational companies may need to understand that domestic firms in emerging countries will engage in corruption strategically to reduce their costs and time to market of their products/services. Therefore, multinational firms may need to devise suitable strategies other than corruption to reduce their costs and time to market if they wish to compete with firms in emerging economies for customers who don't care about ethical issues and will buy a cheaper product/service that is delivered quickly.