EXPRESS: Emerging Market Firms’ Internalization Pricing Strategies: the Role of Country-of-Origin and Organizational Learning

Abstract

Over the last decade there has been significant interest in international expansion of emerging market firms (EMFs) due to their distinctive patterns compared to developed market firms (DMFs). In this paper, the authors develop an analytical model to generate prescriptive insights for pricing strategies when EMFs enter new foreign markets. Grounded in the international marketing and organizational learning literatures, the model accounts for local and multinational competition, the influence of country-of-origin effects and the role of organizational learning in foreign markets. The results suggest that when an EMF enters a host market with a local competitor, they could generate higher profits even when charging a lower price than the local competitor. Additionally, we find that DMFs enjoy greater profitability than EMFs in foreign markets as a result of positive country-of-origin effect. Finally, we propose and validate the use of organizational learning as a process EMFs can use to surmount the negative impact of country-of-origin effects and achieve greater profitability than DMFs.