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Essays on the multinational’s market introduction of product innovation in less developed countries

Wednesday, 23 November, 2011 - 16:30
Faculty: Social Sciences and Solvay Business School
Sofie Van den Waeyenberg
phd defence

For ten years now management literature has shown a growing interest in strategies of multinationals that
develop new products to expand to the markets of the poor in less developed countries (the so called
base of the global income pyramid). Current base-of-the-pyramid research, however, seeks little
connection with theories on international business. This doctoral dissertation shows the applicability of the
internalization theory broadly used in international-business research for research on business at the
base of the pyramid. The doctoral dissertation contains five essays that examine the expansion of
multinationals to the markets of the poor. Essay 1 analyses base-of-the-pyramid business using
internalization theory, leading to a model for international expansion towards the base of the pyramid. The
following four essays study this model. Essay 2 examines the current literature to find that base-of-thepyramid
research pays little attention to extant capabilities that multinationals can employ in these new
markets and to how multinationals can exactly build new capabilities locally. Three empirical essays
respond to these research gaps and study the impact of the different market environment in less
developed countries on strategies of multinationals. The empirical research entails qualitative case
studies of the strategy of Philips towards less developed countries (in particular the introduction of the
Uday Solar Lantern in Africa) and of the introduction of the Nano car by Tata Motors in India. Essay 3
shows that the different institutional context limits the transferability of a firm’s extant capabilities.
Consequently, a firm has to invest more in the local development of new capabilities. New capabilities are
partly transferable during further expansion to other base-of-the-pyramid markets. Firms need to assess
the transferability of extant and new capabilities when expanding to the base of the pyramid and ensure
that the firm’s organizational structure does not impede such expansion. Essay 4 shows that theories on
the diffusion of innovation from a consumer perspective add to the marketing framework that currently
gains interest in base-of-the-pyramid literature. The different living conditions and market environment at
the base of the pyramid require an adapted marketing model compared to high-income countries
including more pressure on affordability and greater challenges in terms of availability, acceptability, and
awareness of new products for the poor. Based on a field study of the partnership of Philips with the
Dutch government and local non-governmental organizations and distributors in Ghana, essay 5 shows
the importance of collaboration with local for-profit and non-governmental partners to set up profitable
business activities at the base of the pyramid. While non-governmental and public partners increase the
attention for the impact of the business activity on local poverty reduction, local for-profit partners keep
the focus on the commercial aspects to guard the financial sustainability of the activity. A local for-profit
partner reduces the probability of problems due to different visions and a lack of trust among partners.