Editorial

Citation

Akbar, Y.H. (2012), "Editorial", International Journal of Emerging Markets, Vol. 7 No. 4. https://doi.org/10.1108/ijoem.2012.30107daa.001

Editorial

Article Type: Editorial From: International Journal of Emerging Markets, Volume 7, Issue 4

This issue will be the last that I will edit and so as founding Editor of the journal, in addition to reviewing the papers in this issue, I would like to take this opportunity to review the development of the journal since its creation and to offer some perspectives on the way forward as I hand over the reigns to my successor, Dr Ilan Alon.

First to the papers: there is a broad set of papers in this final issue of the volume focusing on a range of topics – subsidiary management, foreign direct investment, audit firms, mutual funds, local sourcing and financial market performance but all dominated by Asian empirical contexts.

Our first paper deals with local sourcing in China by Wei et al.. They are interested in examining the spillover impacts of multinational enterprise (MNE) sourcing in local China supply industries. Theory posits that experience of working with MNEs increases the knowledge, capacities and professionalism of local supply firms and may enhance technology transfers in addition to direct employment benefits to the local economy. Employing a survey dataset covering 493 multinational subsidiaries in China during 1999-2005, this paper applies a two-limit Tobit model. The authors find that an MNE’s local sourcing decision is influenced by characteristics such as size and learning ability and country-of-origin. More specifically, export-orientation strategy, joint venture strategy and networking with local suppliers positively impact local sourcing. Smaller and more autonomous subsidiaries tend to source more locally than bigger counterparts. What is counter-intuitive in their findings is that rather than a preferential investment regime for MNEs, the development of a more competitive business environment in general by the Chinese Government could promote more linkages and spillover.

The second paper in the issue is by Bagchi. Classical studies of financial markets of developed countries have sought to examine between volatility indices (VIX) and stock index returns. Research in this regard in emerging markets is scarce. Bagchi fills this gap and in the process extends our understanding of direct and cross-sectional relationships of India’s VIX in relation to three important parameters: stock beta, market-to-book value of equity and market capitalization. Using a multiple regression analysis, the paper finds that India VIX has a positive and significant relationship with the returns of the value-weighted portfolios sorted on the basis of beta, market-to-book value of equity and market capitalization. Furthermore, the behavior of India’s VIX in the presence of market-to-book value of equity and market capitalization as controlling variables yields a positive and significant relationship with the portfolio returns in those cases also. These results suggest India VIX is a distinct risk factor, capable of predicting the pricing mechanism of the market.

Our third paper, a study of MNE subsidiary management in emerging markets focuses on four variables: control and coordination strategies, geographic and product markets of entry, timing of entry, and organizational design for foreign subsidiaries. In a largely exploratory and conceptual piece, the author, Deeskha Singh, argues that MNEs will follow different control and coordination strategies, geographic and product market strategies, entry timing strategies and organizational design strategies depending on whether the target emerging economy’s institutional environment is characterized by a rule based or a relationship based governance structure. This paper is unique in that it provides an holistic framework that examines strategic decision making that MNEs make with specific reference to emerging markets and the institutional and relational nature of these kinds of business environments.

Paper four examines the financial services industry in Thailand and more specifically the mutual fund sector. Given the emerging nature of the research, i.e. mutual funds in emerging markets in this paper, the aim of the research is to provide data on fees and expenses charged by mutual funds in Thailand, and more importantly to investigate the economic determinants of the variations in these charges. Lamphun and Wongsurawat construct a dataset on characteristics of Thai mutual funds from annual reports filed between 2005 and 2007, and then use statistical analysis to investigate variations in fees and expenses. Funds that are small and entail higher risk and those that offer special income tax benefits levy higher fees and expenses than those who do not. Funds that produce higher returns on investment tend to charge significantly lower fees and expenses when compared to those that produce low returns. The study contributes to a small literature that investigates characteristics of asset management sectors outside the USA and Europe.

Staying in Thailand, our fifth paper examines the demand for brand name auditors and the effect of their brand names on a security’s pricing at the time of its initial public offering (IPO). Because the Thai capital market is highly regulated, especially in terms of auditor selection, it is therefore of interest to look at the demand for reputable audit firms and the importance of reputation capital as a signaling mechanism. Data was generated from a sample 100 issuing companies that had IPOs in the period 2003-2008. Logistic regression and OLS regression were applied to test the relationship between the use of reputable audit firms and the level of underpricing of new issues. Pratoomsuwan finds that only the newer large firms will select the higher quality audit firms, namely the Big 4. Furthermore, the findings illustrate that new security issues are underpriced less when they engage Big 4 audit firms, but there is no significant association between the underwriter and the level of underpricing. However, this relationship becomes more negative when Big 4 audit firms and prestigious underwriters are both employed. Therefore, when the choice of an auditor and underwriter is restricted, the issuing firms should consider hiring reputable audit firms, rather than prestigious underwriters, at the time of the IPO.

Our final paper examines outward FDI (OFDI) from India. Singal and Jain analyze OFDI trends from India and attempt to identify pattern(s) of investments, in terms of geography and strategic rationale for investment. The paper aims to highlight the internationalization trajectory followed by multinationals emerging from India. As the approach to internationalization differs across the industrial sectors and also depends upon life cycle stage of the industry, the authors studied broad trends across the sectors. The study relies upon secondary data, literature studies, government reports, company annual reports, and content research of published interviews of general managers involved in OFDI. Previous studies identified four types of strategic motives for MNE activity – resource seeking, market seeking, efficiency seeking and capability seeking. The authors find that Indian firms expand internationally to leverage and exploit local advantages as well as to acquire strategic assets and newer capabilities to move up the value chain and increase product complexity. They acquire the assets of foreign firms to therefore build and sustain their competitiveness.

Thoughts about the future of IJoEM

I founded this journal with colleagues back in 2004-2005. The goal at the time was to provide a venue specifically dedicated to academic and applied research on emerging markets that at the time was relatively sparse. In just six short years and one global financial crisis later, the world’s economic balance has shifted dramatically towards the emerging markets. The global economic leadership summits of the G-8 have now become the G-20 inviting some of the largest developing countries to the top table of global economic diplomacy. China’s economy in absolute terms has overtaken that of Japan’s. China’s (and Hong Kong’s) inward FDI is close to that of the USA. The term BRIC has entered into everyday business vocabulary and we are now even talking in some measure about the Next-11 countries (a group of smaller but equally important developing countries including Malaysia, Mexico, Indonesia, The Philippines and South Africa).

In short, emerging market research is now truly and squarely located in the mainstream of academic business and management research. While in 2003-2004 when I was thinking of setting up this journal, the top ranked journals would review and invite research on the topic of emerging markets, it was frequently in the context of developed country research. Today, that is no longer the case. Emerging market research can stand in its own right and get published.

This means that IJoEM has two vital challenges in the future and these challenges are the reason I have chosen to pass on the baton to Ilan Alon. First, emerging market research must increasingly be judged by the standards of methodological rigor we expect from developed country business and management research. While data sets are still thinner than in developed contexts, we need an editor who can lead the charge in this regard. Second, emerging market researchers now see an opportunity to publish in the top ranked management journals and so may not necessarily need a specific venue for their research in earlier years. IJoEM must be an attractive journal to publish by virtue of its impact factor and its ranking. Again, Ilan Alon is an outstanding leader who can take this journal to the next stage of its development.

I leave the Editorship with the following three ideas about IJoEM’s emphasis. First, it must remain multi-disciplinary – its great strength lies in diversity and we should aim to preserve this in the years (and volumes) ahead. Second, authors needs to do more than empirical articulation of emerging market contexts – they must make the conceptual and theoretical case for why emerging markets are different and make the argument on that basis. Otherwise the journal could become a “me-too” journal fighting for empirical studies about single countries (or comparatives). Third, the journal should encourage methodological heterogeneity – both quantitative and qualitative research should be reviewed as well as welcoming methodologies from disciplines hitherto under-exploited from sociology and anthropology for example.

Ilan Alon will continue to strengthen the Editorial Advisory Board, broaden it and embed the journal firmly in the scholarly societies that drive academic research in this field. These are encouraging and I hope exciting times ahead for the journal.

On a final closing note, there are many people who have supported and worked with me over the years, in some cases tirelessly and in truly collegial fashion.

First of all, our reviewers – thank you so much for all your efforts – you make the difference to the journal with your insight and constructive critiques of the manuscripts we receive.

Second, the Editorial team at Emerald: throughout the time I have worked with you all – you have been encouraging, flexible and positive about all suggestions, initiatives and efforts from me – even when I was late on deadlines! Particular thanks to the Assistant Publishers I have worked with over the years and special thanks go to Kate Snowden who was my founding publisher and brought the journal to print for the first time and to Martyn Lawrence who has helped with the transition in the last year as well as his support before that.

Third, the regional Editors – Kate Hutchings, Mohan Eunni, Marcos Amatucci and Xiaohui Liu – your efforts and input have been invaluable throughout the time we have worked together.

Last but not least, I’d like to offer special thanks to Massood Samii, my Chair at SNHU, when I first floated the idea of a journal. You always supported me and encouraged the journal’s development. I would also like to thank my friend and colleague David Weir who with his typical enthusiasm took me to Emerald with my journal proposal without which much of what we have achieved would not have been possible.

Thanks to you all!

Yusaf H. Akbar