Dynamics of Catching Up: Exploring National, Sectoral, and Ownership Influences in Two Emerging Economy Firms

Extant literature has extensively studied innovation-capability building in emerging economy firms (EEFs) from South Korea and China, but tends to neglect EEFs in somewhat less successful emerging economies, like Brazil and Turkey. Compared to the Asian countries, Brazil and Turkey liberalized and opened up their markets to global competition and the investments of multinational enterprises (MNEs) earlier, which implied other opportunities as well as restrictions for innovation-capability building in local firms. By analyzing different ways of catching-up in two Turkish firms, this study reveals that, unlike the East Asian cases, national factors such as state support did not significantly promote the innovation activities. Instead, sectoral and firm-level factors, such as competition, learning trajectories, and technological dynamics were the key ones affecting the studied firms’ processes of innovation-capability building. These factors, particularly the learning trajectories, were heavily influenced by ownership characteristics. In one of the cases, the involvement of a Turkish diversified business group played a vital role in a locally engineered and independent learning process; in the other case, the technological and organizational learning process exploited the advantages of being a joint venture between a foreign multinational and a Turkish owner group. The study suggests that technological catch-up alone is insufficient for emerging economy firms. To build an enduring competitive advantage, they also need to develop organizational and international marketing capabilities. Thus, the alignment among technology innovation, marketing, and organizational capabilities is vital for a firm catch-up in competitive market environments.