Is Chain Affiliation a Strategic Asset or Constraint in Emerging Economies? Competitive Strategies and Performance in the Russian Hotel Industry.
| Verfasser | Karhunen, Paivi |
| Posten | RESEARCH ARTICLE |
1 Introduction
"What determines firm strategy and performance" is a fundamental question in strategic management and international business alike (Peng 2004). To answer this question, existing literature has often focused on the characteristics of the firm, in particular its resources and capabilities (Barney 1991; Barney et al. 2011). This resource-based view (RBV) initially maintains that the firm competes in the market either by offering differentiated products, or by attaining low cost position relative to its rivals (Conner 1991), and that the competitive advantage it gets is dependent on firm resources and its ability to deploy them efficiently.
The RBV was introduced as a firm-centered approach, implicitly assuming that the firm operates in an environment where market-supporting institutions are in place. This is understandable, taken that where institutions are strong in developed economies, their role maybe almost invisible (Meyer et al. 2009). In contrast, when markets malfunction, as in some emerging economies, the importance of institutions for firm strategies becomes evident (Ingram and Silverman 2002). Consequently, the RBV has been extended since its introduction to take into account the contextuality of resources. Researchers have argued that firm resources developed to fit certain institutional environment, would not be as applicable in a different institutional framework (Brouthers et al. 2008). Hence, resources and capabilities of firms from developed economies, where institutions are capable of supporting marketbased business activities, would not be effectively applicable in emerging economies with institutional voids (Khanna and Palepu 2000). Consequently, a direct transfer of strategies and business models from developed to emerging markets is often not possible. This is due not only to institutional voids, but also due to market characteristics such as consumer preferences and market behavior (Khanna and Palepu 2010; London and Hart 2004).
The notion of contextuality of resources has inspired an alternative approach to firm strategy: The institution-based view that suggests that competitive advantage can arise also from non-market resources (Peng et al. 2005), referred to as institutional advantage. Li and Zhou (2010) conceptualize such advantage as consisting of both tangible benefits such as access to government-controlled resources, and intangible benefits such as political support and goodwill. Such resources can be accessed through pursuing a non-market strategy by, for example, establishing close ties with political decision-makers (Guo et al. 2014; Li and Zhang 2007; Peng and Luo 2000).
The importance of institutions as determinant of firm strategy and performance is particularly great in emerging economies (Wright et al. 2005), and there is a mounting body of empirical research on non-market strategies and firm performance in these economies, predominantly China (Fan et al. 2013). Most studies explicitly focus on non-market strategies, whereas others link non-market and market-based components of firm strategy (Li and Zhou 2010). Existing research has mainly focused on firm characteristics such as size, ownership or age, or industry influence in terms of service versus manufacturing firms as moderators of the strategy-performance nexus (Fan et al. 2013). Studies that would investigate the implications of institutions and resources on firm performance in emerging economies at industry level have started to emerge only recently (Jiang et al. 2018; Tang et al. 2019). Yet, strategy and performance are very much industry-specific constructs, as the RJ3V inherently looks at the firm resources and their effect on strategies and performance relative to other firms in the same industry (Acquaah and Chi 2007; Mauri and Michaels 1998). This paper contributes to the debate on firm strategy as determinant of firm performance in emerging economies by providing an industry-level analysis.
In this paper we empirically analyze how chain affiliation, an important strategic choice and one of the key industry-specific determinants for hotel performance (Menicucci 2018), influences the strategy-performance nexus in the Russian emerging hospitality industry. We build on Ingram and Baum's (1997) argument that chain affiliation may be a strategic asset for hotels as it provides operating knowledge and economies of scale, but also a strategic constraint as fitting into the global strategy designed for the chain reduces the degrees of freedom that managers of individual hotels have to respond to their local environments. We combine resource- and institution-based views on firm strategy to make a distinction between market-based strategies, eventually leading to differentiation advantage or cost leadership as suggested by the RBV (Barney 1991), and non-market strategies that manifest in institutional advantage (Li and Zhou 2010). We suggest that chain affiliation would be an asset for hotels pursuing market-based strategies, but constrain the implementation of non-market strategies.
Our empirical analysis draws from the survey data on 162 Russian hotels located in the cities of Moscow and St. Petersburg and their suburbs. Our results suggest that first, in Russia, the competitive edge of chain-affiliated hotels largely arises from market-based advantage, but only in terms of cost advantage. Our finding that differentiation advantage is not an important factor of performance for chain-affiliated hotels indicates that firm-level resources derived from chain affiliation are not necessarily transferable into competitive advantage in the emerging economy context. Finally, we found that institutional advantage is more important determinant of performance for independent hotels, which demonstrates the importance of local knowledge and relationships for firms in emerging economies.
The article is structured as follows. We first present the theoretical framing of our study and construct our hypotheses. Then we describe our empirical methodology, including the data and methods of analysis, after which we present the results of the empirical analysis. We finish the paper with discussion of the results, including the limitations of our study and suggestions for future research.
2 Theory and Hypotheses
The theoretical framing of our study builds on two core concepts of strategic management: competitive advantage and performance. Strategic management theories have traditionally treated competitive advantage and superior performance as interchangeable constructs (Ma 2000), but there have been repeated attempts to detangle them conceptually (e.g., Ma 2000; Newbert 2008). In this paper, we treat competitive advantage and performance as two different constructs, and investigate their mutual relationship moderated by firm strategic choice, i.e., the hotel's decision to affiliate to a chain.
We investigate competitive advantage and its relationship to performance by integrating the RBV that builds on market-based sources of competitive advantage, and the institutional approach on business strategy that view non-market resources as sources for competitive advantage.
The RBV (Barney 1991) looks to the internal resources of the firm for the explanation of its performance relative to other firms in the same industry (Acquaah and Chi 2007). Hence, to gain an advantage over its competitors, the firm needs to possess firm-specific resources superior to its competitors, and be able deploy them efficiently. According to Barney (1991, p. 101), firm resources include "all assets, capabilities, organizational processes, information and knowledge, etc. controlled by a firm that enable the firm to implement strategies." These resources may be either tangible or intangible, or a combination of both. The understanding of the RBV on firm competitive advantage as based on a unique value creating strategy (Barney 1991, p. 102) echoes Michael Porter's (1980) classic definition of competitive advantage as resulting from the firm's ability to create for its buyers value that exceeds the firm' cost of creating it (Porter 1985). The two generic strategies to create superior value are to offer lower prices than competitors for equivalent benefits, or to provide unique benefits that more than offset a higher price, leading to competitive advantage in terms of cost leadership or differentiation, respectively (Porter 1985). In this paper we conceptualize these two forms of competitive advantage through the lens of the RBV, viewing them as resulting from the ownership and deployment of firm resources to implement either low-cost or differentiation strategy.
The RBV--or theory (Barney et al. 2011)--has been extended since its introduction to take into account the contextuality of resources. Researchers have argued that firm resources developed to fit certain institutional environment, would not be as applicable in a different institutional environment (Brouthers et al. 2008). Hence, resources and capabilities of firms from developed economies, where institutions are capable of supporting market-based business activities, would not be effectively applicable in emerging economies with institutional voids (Khanna and Palepu 2000).
The notion of contextuality of resources links to the institution-based view on business strategy that suggests that competitive advantage can also arise from nonmarket resources (Peng et al. 2005), referred to as institutional advantage. Li and Zhou (2010) conceptualize such advantage as consisting of both tangible benefits such as access to government-controlled resources, and intangible benefits such as political support and goodwill. Such resources can be accessed through managerial political ties (Guo et al. 2014; Li and Zhang 2007; Peng and Luo 2000).
In this paper, we address the sources of competitive advantage and firm performance in the Russian hotel industry through the lens of chain affiliation as a...
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