Emerging Market Footholds and Knowledge: An Examination of New Product Launch Performance

• Author: Matthew T. Jenkins,Stephanie Eckerd,Mary C. Holcomb,David J. Ketchen,Timothy P. Munyon,Christopher W. Craighead
• Published date: 01 March 2020
• DOI: http://doi.org/10.1111/jbl.12229
• Date: 01 March 2020

Emerging Market Footholds and Knowledge: An Examination of

New Product Launch Performance

Matthew T. Jenkins

1

, Christopher W. Craighead

2

, Mary C. Holcomb

2

, Timothy P. Munyon

2

,

David J. Ketchen Jr.

3

, and Stephanie Eckerd

4

1

East Tennessee State University

2

The University of Tennessee

3

Auburn University

4

Indiana University –Purdue University Indianapolis

As developed markets become more saturated, managers increasingly recognize the value of emerging markets as venues for growth oppor-

tunities. Yet, launching products into these markets is extremely risky due to weak institutional environments (e.g., lack of physical

infrastructure), making success more uncertain. To alleviate this challenge, theory points to using emerging market footholds that yield market-

specific knowledge. However, it is unclear whether knowledge is realized and, if so, what facets of harvested knowledge are effective in driving

performance. Accordingly, we used data collected from a survey of business professionals to examine emerging market footholds and market-

specific knowledge (i.e., customer, competitor, and logistics knowledge). Our results show that the extent of market presence held by an emerg-

ing market foothold is positively associated with all types of knowledge, yet only competitor and logistics knowledge—not customer knowl-

edge—is positively associated with product launch performance. A supplemental sample of new product launches in developed markets

revealed the opposite results wherein customer knowledge was the only significant predictor. Viewed collectively, the results suggest a market

maturity threshold wherein logistics and competitive knowledge becomes less influential in driving performance, and customer knowledge

becomes more influential.

Keywords: knowledge; product launch; strategic footholds; emerging market footholds; emerging markets

INTRODUCTION

Aproduct launch refers to the physical introduction of an offer-

ing into a market where it was previously unavailable for pur-

chase (cf., Zhao et al. 2015). Launching a product is the most

costly and risky element of the product development and man-

agement processes (Langerak et al. 2004). These costs and risks

are magnified in emerging markets where firms face weak insti-

tutional environments characterized by inadequate hard infras-

tructure (i.e., modern roads, bridges, and ports) and soft

infrastructure (i.e., contract enforcement, logistics service provi-

ders, qualified suppliers; Khanna and Palepu 2010). Such condi-

tions can undermine the efficiency (Leff 1978) and performance

(Johnson and Tellis 2008) of product launches.

Despite these difficulties, firms often view emerging market

product launches as a viable way of growing in the face of glo-

bal competition and market maturation (Gielens and Dekimpe

2007; Khanna and Palepu 2010; Rayappa et al. 2015). However,

anecdotal evidence suggests that product launch failure rates are

reasonably high, and it is unclear what factors differentiate pro-

duct launch success in emerging markets. Recent theory (Craig-

head et al. 2017) provides potential insight into this dilemma by

proposing that success in emerging markets depends partly on

how firms leverage emerging market footholds to gain market-

specific knowledge generated by local experience (Hilmersson

and Jansson 2012). This type of knowledge is acquired mostly

through a firm’s activities (Malhotra and Hinings 2010), aided

by direct experience in the market. In this context, emerging

market footholds refer to a presence established in a market

fraught with institutional weaknesses in order to create the

opportunity, but not the obligation, for future expansion (adapted

from Upson et al. 2012; Craighead et al. 2017). In theory, these

footholds enable the acquisition of market-specific knowledge

over time (Wowak et al. 2013; Craighead et al. 2017), and such

footholds may evolve as a firm exercises its option to launch

products and realize subsequent emerging market growth.

Here, emerging market footholds may provide at least three

forms of market-specific knowledge which are important for pro-

duct launch success in emerging markets: knowledge of cus-

tomers, competitors, and logistics systems. Customer knowledge

informs the design of products and services by shedding light on

customers’wants and needs (Day 1994; Luca and Atuahene-

Gima 2007). Competitor knowledge increases a firm’s awareness

of its competitors’supply chain processes and strategies, as well

as features of the competitors’products and services (Kohli and

Jaworski 1990; Drew 1997; Tseng 2009). Finally, logistics

knowledge provides a firm with understanding of product distri-

bution. These three knowledge types are not exhaustive but

studying them holds merit because they relate to critical activities

needed to effectively manage supply and demand processes

(Mentzer et al. 2004), including processes in emerging markets.

To date, the value of emerging market footholds has been

asserted (Craighead et al. 2017), but not demonstrated. Thus, it

is unclear whether emerging market footholds yield such market-

specific knowledge that can improve performance, particularly in

the case of product launches that are inherently risky supply

chain projects (Hult et al. 2010). Furthermore, the relative useful-

ness of different types of market-specific knowledge in a product

Corresponding author:

Matthew T. Jenkins, Department of Management and Marketing,

East Tennessee State University, Johnson City, TN 37614, USA;

E-mail: jenkinsmt@etsu.edu

Journal of Business Logistics, 2020, 41(1): 31–53 doi: 10.1111/jbl.12229

© 2019 Council of Supply Chain Management Professionals

launch scenario (i.e., comparative importance of logistics knowl-

edge in emerging markets) is unknown. Thus, our purpose is

investigating how emerging market footholds and market-specific

knowledge differentiate the performance of product launches in

developing countries.

We offer several intended contributions. First, Upson et al.

(2012) examined some consequences of footholds, but we extend

the concept to an emerging market context and help establish the

generalizability of the concept. Second, we shed light on how

emerging market footholds accentuate performance by proposing

that they facilitate the acquisition of strategically valuable mar-

ket-specific knowledge, consistent with recent theorizing (Craig-

head et al. 2017). Third, although supply chain research has

generally found knowledge to be a performance driver (Wowak

et al. 2013), we found this not to be the case with customer

knowledge in the emerging market context. By doing so, we dif-

ferentiate the effects of customer, competitor, and logistics

knowledge in and demonstrate the importance of logistics knowl-

edge for product launch performance in emerging markets. This

finding does not, per se, indicate that customer knowledge is not

valuable, but rather that other types of knowledge (i.e., competi-

tor and logistics knowledge) overshadow customer knowledge’s

influence in emerging markets.

Furthermore, while theory claims that knowledge is an endur-

ing, rent-yielding asset (Grant 1996), our results imply that mar-

kets may have “thresholds”wherein certain types of knowledge

may be more or less valuable in driving performance. In a sup-

plemental analysis, we demonstrate that customer knowledge is

the key differentiator for product launch success in developed

markets, adding specificity to the literature by showing which

forms of knowledge affect product launch success under varying

economic conditions. Thus, although customer knowledge is

linked to product launch performance in developed markets, our

results suggest that the context of emerging markets strengthens

the importance of logistics and competitor knowledge relative to

customer knowledge. We certainly do not claim this intriguing

finding to be a direct challenge to well-established knowledge-

based theory (Grant 1996), but rather a potential boundary to it

—a much-needed addition to supply chain research (Goldsby

et al. 2013). Finally, and more broadly, our study offers insight

to alleviate the daunting challenges inherent in emerging markets

(Khanna and Palepu 2010).

BACKGROUND, THEORY, AND HYPOTHESES

The product launch represents a specific stage in the new product

development (NPD) process and is delineated by the point in

time when the product is first available to customers for purchase

(i.e., when the product is “introduced”into the market; Zhao

et al. 2015). Product launches are difficult and time-consuming

(Langerak et al. 2004), but are especially challenging in emerg-

ing markets, which represent unique and challenging environ-

ments plagued by uncertainty and institutional voids. Thus,

emerging market footholds may provide organizations with a

position that enables them to leverage valuable knowledge, such

as logistics knowledge, to build capabilities which counteract

these challenges. Such emerging market footholds may also help

firms develop real options, which can then be “exercised”via a

product launch to create value and facilitate growth.

Emerging markets

Emerging market countries are characterized by a lack of hard

and soft infrastructure (Fawcett and Waller 2015) or “institu-

tional voids”(Khanna and Palepu 2010; Kistruck et al. 2013).

The presence of institutional voids reduces the effectiveness and

efficiency of market transactions and presents challenges to a

firm’s operations (Mair and Marti 2009; Khanna and Palepu

2010; Parmigiani and Rivera-Santos 2015), increasing the need

for market-specific supply chain capabilities and solutions (Hens

2012). Here, market transactions are supported by both hard and

soft infrastructure. When this infrastructure is inadequate, institu-

tional voids are present and internal market-specific distribution

capabilities are needed to bridge the gap.

Hard infrastructure is comprised of a country’s physical infras-

tructure, including roads and bridges, which are essential for the

low-cost movement and storage of goods (Khanna and Palepu

2010). Soft infrastructure includes service providers (i.e., market

intermediaries), which are the “economic entities that insert

themselves between a potential buyer and seller to bring these

actors together and reduce transaction costs”(Khanna and Palepu

2010, p. 54). From a supply chain perspective, these market

intermediaries take the form of suppliers, import brokers, and

third-party logistics providers (3PLs) among others. Each market

intermediary type plays a critical role in the supply chain sys-

tems within a country by offering operational expertise and com-

petence gained over years of experience. However, when

competent supply chain intermediaries are scarce, a firm is left to

its own devices to develop appropriate product distribution capa-

bilities (Khanna and Palepu 2010).

Research has examined the uniqueness of the emerging market

environment compared to more developed markets, and the

impact institutional voids, on productive processes. For instance,

Parmigiani and Rivera-Santos (2015) analyzed the effects of

institutional voids on MNCs in emerging markets. Building on

Khanna and Palepu’s (1997) typology of institutional voids, the

authors found that voids in the labor market and contracting lead

to difficulty in managing logistics and distribution. Additionally,

Price (2006) examined the logistics of European and North

American companies in Kazakhstan and found that poor infras-

tructure design and condition impeded extensive use of IT sys-

tems and cost-effective transportation.

Furthermore, studies of the relationship between logistics

infrastructure in emerging markets and subsequent distribution

performance suggest that the logistics infrastructure in a country

plays a critical role in supporting cost-effective product distribu-

tion (Handfield and Withers 1993; Abdur Razzaque 1997). More-

over, relationship management difficulties between supply chain

intermediaries within emerging markets have also been examined

(Taylor 1994; Beier and Ardishvili 1995); this work suggests that

long-term collaborations with market intermediaries are difficult

and potentially risky in these environments (Price 2006).

Due to these well-documented difficulties, achieving success

in an emerging market is problematic. The lack of hard and soft

infrastructure, interorganizational relationship barriers, and the

32 M. T. Jenkins et al.