IESE Research Papers,
IESE Business School

Abstract: Strategy in low-income markets is a new but emerging field of international strategy research. Because low-income markets remain largely unexplored and unknown to most companies, it has been argued that developing embedded ties and alliances with traditional and non-traditional partners is critical in order to better understand customer needs and market characteristics. Following this logic, the purpose of this paper is to explore the antecedents and consequences of developing a capability in social embeddedness in low-income markets. Using a multiple-case inductive analysis of business ventures and their embedded ties and partnerships in this context, we propose an emergent theoretical framework to explain the factors that influence the development of such a capability and its positive outcomes. Our findings suggest that a firm has a greater incentive to build embedded ties and partnerships under three conditions: when the market-oriented ecosystem is underdeveloped; when the firm's psychic distance with respect to low-income markets is high; and when the firm offers a large number of product complementarities. A capability in social embeddedness can be beneficial for obtaining fine-grained information, increasing operational efficiency, gaining trust and legitimacy, and having prior access to new markets. At the same time, the social network in which a firm is embedded gives access to network resources that can provide competitive advantage.

Keywords: Low-income markets; social embeddedness; networks

25 pages, June 15, 2005

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