The Role of Capabilities in International Marketing

DIONYSIS SKARMEAS
Academic
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Key Takeaways
  • Organizational capabilities are the coordinating mechanisms that enable the most efficient and effective use of the firm’s tangible and intangible assets.
  • Organizational capabilities are not easily obtainable in the marketplace and are difficult to imitate.
  • Organizational capabilities are accumulated though long-term continuous learning, have firm-specific and path-dependent characteristics, and constitute the main source of sustainable competitive advantage.
 

​Selections from the Journal of International Marketing

April 2015 |The Role of Capabilities in International Marketing

The fundamental question in the management field is why some firms outperform others. Today, the “dynamic capabilities” framework is the dominant theoretical perspective for explaining how firms achieve and sustain competitive advantage. International marketing scholars have employed this framework to unlock the riddles that lie behind competitive advantage in global markets, which is the central theme for a collection of seven articles published in the Journal of International Marketing over the last four years.

Considering the importance of capabilities in a firm’s survival and success, it comes as no surprise that their origins have attracted considerable attention in the academic community. However, the question of whether the determinants of capabilities can be subject to national culture influences remains far from settled. In “How Top Management'​s Social Capital Fosters the Development of Specialized Marketing Capabilities: A Cross-Cultural Comparison,” published in 2011, Jan Kemper, Andreas Engelen and Malte Brettel discuss top management’s social capital as a key driver of marketing capabilities and delve into the national cultural dependencies of this link. The research is set in the context of four countries with broad cultural diversity: China, Germany, Hong Kong and the United States. The findings indicate that trust and solidarity embedded within a social system—the key elements of managerial social capital—are strong drivers of marketing capabilities. Taken as a whole, this research highlights the protagonist role of top managers in fostering organization-level marketing capabilities across various national contexts.

In keeping with the sources of marketing capabilities across institutional environments, authors Lutz Kaufmann and Jan-Frederik Roesch use a qualitative research approach to investigate the challenges that Chinese firms face in their attempts to develop marketing capabilities in the European market. In “Constraints to Building and Deploying Marketing Capabilities by Emerging Market Firms in Advanced Markets,” published in 2012, the authors suggest that limited motivation, few opportunities and restricted ability constrain emerging market firms from implementing a shift from a low-cost model to a more balanced and broader marketing-driven approach in foreign markets. The authors also identify causal ambiguity and inertia as the main causes of deficiencies in motivation; market resistance and an internal perceptual gap between subsidiary managers and managers from the headquarters as the underlying reasons for low availability of opportunities; and fragmentation of general and specific marketing expertise as the roots of limited ability. From a managerial perspective, the findings enhance our understanding of the constraints to developing marketing capabilities that emerging markets’ firms face in advanced markets as they try to create a new value proposition.

While management has particular importance for marketing capabilities, it is increasingly recognized that to acquire a deeper understanding of their effectiveness and performance, firms must adopt a stakeholder perspective. In “Stakeholders and Marketing Capabilities in International New Ventures: Evidence from Ireland, Sweden and Denmark,” published in 2012, Natasha Evers, Svante Andersson and Martin Hannibal explore how different categories of stakeholders can help firms build dynamic marketing capabilities. Their work suggests that different stakeholder groups play a critical role in influencing the learning processes of new international ventures and determining the types of dynamic marketing capabilities (incremental, renewing and regenerative) that are needed to determine and meet foreign customers’ demands. All in all, this work suggests that firms can leverage their resources to co-create value from different stakeholder groups, and that a stakeholder selection strategy should be undertaken to develop specific capabilities in the new international ventures.

Another critical issue in international joint ventures is how strategic orientation and foreign parent control jointly affect the venture’s ability to provide unique and valuable customer offerings. Using a multisource data set of international joint ventures in China, Xiaoyun Chen, Alex Xin Chen and Kevin Zheng Zhou, authors of “Strategic Orientation, Foreign Parent Control, and Differentiation Capability Building of International Joint Ventures in an Emerging Market,” published in 2014, demonstrate that both technology and customer orientations are salient drivers of differentiation capability in international joint ventures. Technology and customer orientations can help international joint ventures introduce tech-savvy offerings with advanced features that uniquely fit local customer tastes in a timely manner. However, their effects on differentiation capability vary across different modes of foreign parent control. Under circumstances of higher foreign equity control or greater operational control, technology orientation is more beneficial for differentiation capability-building. In contrast, customer orientation results in stronger differentiation capability in the presence of lower foreign operational control or greater social control. Managers of foreign and local parent operations should bear in mind the importance of matching customer and technology orientations with different control modes. Increasing equity shares or exerting strong operational control is recommended for technology-oriented international joint ventures, while less operational control, more autonomy, and greater social control is needed for customer-oriented ones.

Technology is a key force influencing the face and pace of business, and how to maintain technological superiority constitutes a central challenge for all organizations. In “Technological Capability Growth and Performance Outcome: Foreign Versus Local Firms in China,” published in 2013, Min Ju, Kevin Zheng Zhou, Gerald Yong Gao and Jiangyong Lu explore and assess the extent to which foreign and local firms in China experience different technological capability growth patterns and, as a result, enjoy differential performance outcomes. Based on a multilevel analysis of five-year panel data of technology-oriented firms, the authors conclude that foreign firms exhibit higher levels of technological capability, whereas local firms can build their technological capability faster than foreign firms. Also, the findings indicate that while local firms enjoy a stronger performance return from their technological capability, it is foreign firms that have a higher growth rate in the contribution of technological capability to their performance over time. Interestingly, firms can develop technological capability faster in regions characterized as having better intellectual property protection, and technological capability exerts a stronger effect on performance in the presence of higher industrial uncertainty. Taken together, these findings provide valuable insights into how foreign firms can proactively learn from local markets to maintain their technological advantage, as well as how local firms can catch up with their foreign counterparts.

Other contemporary issues in the global marketplace are service quality and competitive advantage. Services account for an increasingly large percentage of the gross domestic product globally, and marketing theory and practice have embraced the shift from being goods-centered to service-dominant. In “When Exporting Manufacturers Compete on the Basis of Service: Resources and Marketing Capabilities Driving Service Advantage and Performance,” published in 2011, Anna Kaleka stresses that exporting manufacturers can achieve competitive advantage in overseas markets based on the level of service that they offer to their foreign customers. The author shows that exporting experience fosters informational capabilities and customer relationships, while the availability of finance facilitates informational and product development capabilities. Customer relationship and product development capabilities, in turn, result in service advantage and superior performance in overseas markets. The findings can help export managers obtain a more detailed picture of the role that capabilities play in determining overseas service advantage, and hence assist them in deciding on their resource allocation and investment plans.

Finally, in “Business and Cultural Aspects of Psychic Distance and Complementarity of Capabilities in Export Relationships,” published in 2014, David A. Griffith and Boryana V. Dimitrova highlight an important but often neglected strategic issue in international marketing: the complementary nature of foreign partners’ capabilities. To enhance understanding of the structuring of export relationships, this work investigates whether psychic distance enhances or dampens the leveraging of complementary capabilities to increase an export manager’s satisfaction with export performance. Interestingly, the authors decompose psychic distance into cultural distance and business distance (i.e., differences in the economic environment, the legal and political system, business practices, market structure and language), which are positioned to influence important export issues through different pathways. Based on a survey of the relationships of U.S. exporting firms with their primary foreign buyers, this work documents that export managers select foreign partners with fewer complementary capabilities when they experience greater business psychic distance. Further, the findings indicate that complementary partner capabilities take on greater importance in enhancing satisfaction with export performance under conditions of greater cultural psychic distance, while greater business psychic distance dampens the positive influence of complementary partner capabilities on satisfaction. Given that managerial perceptions essentially drive managerial actions, the takeaway for export managers is that while the concepts of business and cultural psychic distance are closely related, they are unique and have differing effects on the structuring and ongoing operation of export relationships.

This collection of essays demonstrates several key takeaways. First, a firm’s capabilities are affected, directly or indirectly, by the different institutional environments present in international markets. Second, firms that possess superior levels of marketing and technological capabilities experience superior performance outcomes in the global marketplace. Third, capabilities not only help international firms overcome the liability of foreignness, but also help local firms compete against foreign firms. Fourth, capability possession, deployment and upgrading are essential for sustained business success in today’s global economy.​

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Articles Featured in This Collection

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Ju, Min, Kevin Zheng Zhou, Gerald Yong Gao, and Jiangyong Lu (2013), “Technological Capability Growth and Performance Outcome: Foreign Versus Local Firms in China,” Journal of International Marketing, 21 (2), 1–16.




Author Bio:

DIONYSIS SKARMEAS
DIONYSIS SKARMEAS
DIONYSIS SKARMEAS (Ph.D., Cardiff University, UK) is an associate professor of marketing at the Athens University of Economics and Business. His research interests focus on international marketing, relationship marketing, entrepreneurship and innovation, CSR and sustainability. His work has been published in leading journals in marketing, management and international business. He serves on the editorial review board of the Journal of International Marketing.
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