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This article suggests that under weak institutional arrangements, adverse economic conditions, and institutional voids in a late liberalizing economy, local firms that are part of the global value chains of multinational enterprises develop international networks as a balancing strategy to engage in exploratory innovations. We argue that local firms do so in order to counter the negative influences of local institutions on exploratory innovations. Using exploratory in-depth qualitative analysis, we study the suppliers of motorcycle parts in Pakistan that are working with leading Japanese and Chinese motorcycle assemblers. The results suggest that in adverse economic situations local institutional factors can sustain only the development of exploitative innovations. As a balancing strategy, motorcycle part suppliers develop international networks with global Tier 1 suppliers, international trade fairs, and international institutions. This strategy helps circumvent the negative influence of home institutional factors on developing exploratory innovations. Our study highlights the importance of global networks as a balancing strategy for creating exploratory innovations by firms in a late liberalizing economy.
Author(s): Khan Z, Rao-Nicholson R, Tarba S
Publication type: Article
Publication status: Published
Journal: Journal of World Business
Print publication date: 01/04/2018
Online publication date: 17/10/2016
Acceptance date: 07/10/2016
Date deposited: 07/01/2017
ISSN (print): 1090-9516
ISSN (electronic): 1878-5573
Publisher: Pergamon Press
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