Many markets are liberalizing by opening up their economies to foreign competition, with the expectation that this will increase economic growth. While foreign competitors with superior technology and management practices pose serious threats to incumbent firms, they also provide them an opportunity to gain new marketing knowledge. How do incumbent firms respond to liberalization? Can incumbent firms’ marketing-mix responses affect their performance following liberalization? Addressing these questions, the authors examine incumbent firms’ marketing-mix responses to liberalization and the impact of these responses on performance, using the quasi-experiment of liberalization reforms in India. Estimation results from a panel of 3,927 firms in the period 1989–2000 suggest that while all incumbent firms intensified their product and promotions in response to liberalization, only incumbent firms with greater domestic market knowledge intensified their advertising and distribution responses. Furthermore, incumbent firms’ marketing-mix responses significantly affect their performance outcomes. The research’s findings extend theory and provide practical guidelines on how incumbent firms can design marketing-mix responses to liberalization to improve performance.
AghionPhilippeBurgessRobinReddingStephen J.ZilibottiFabrizio (2008), “The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India,” American Economic Review, 98 (4), 1397–1412.
2.
AgosinManuel R.MachadoRoberto (2005), “Foreign Investment in Developing Countries: Does It Crowd in Domestic Investment?” Oxford Development Studies, 33 (2), 149–62.
3.
AilawadiKusum L.LehmannDonald R.NeslinScott A. (2003), “Revenue Premium as an Outcome Measure of Brand Equity,” Journal of Marketing, 67 (4), 1–17.
4.
AilawadiKusum L.ZhangJieKrishnaAradhnaKrugerMichael W. (2010), “When Wal-Mart Enters: How Incumbent Retailers React and How This Affects Their Sales Outcomes,” Journal of Marketing Research, 47 (4), 577–593.
5.
AitkenBrian J.HarrisonAnn E. (1999), “Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela,” American Economic Review, 89 (3), 605–18.
6.
AlfaroLauraChariAnusha (2014), “Deregulation, Misallocation, and Size: Evidence from India,” Journal of Law and Economics, 57 (4), 897–936.
7.
AmitiMaryKhandelwalAmit K. (2013), “Import Competition and Quality Upgrading,” Review of Economics and Statistics, 95 (2), 476–90.
8.
AtamanM. BerkMelaCarl F.HeerdeHarald J. van (2008), “Building Brands,” Marketing Science, 27 (6), 1036–54.
9.
AtamanM. BerkHeerdeHarald J. vanMelaCarl F. (2010), “The Long-Term Effect of Marketing Strategy on Brand Sales,” Journal of Marketing Research, 47 (5), 866–82.
10.
AulakhPreet S.KotabeMasaakiTeegenHildy (2000), “Export Strategies and Performance of Firms from Emerging Economies: Evidence from Brazil, Chile, and Mexico,” Academy of Management Journal, 43 (3), 342–61.
11.
BanerjeeSourindraPrabhuJaideep C.ChandyRajesh K. (2015), “Indirect Learning: How Emerging-Market Firms Grow in Developed Markets,” Journal of Marketing, 79 (1), 10–28.
12.
BarkemaHarry G.DrogendijkRian (2007), “Internationalising in Small, Incremental or Larger Steps?” Journal of International Business Studies, 38 (7), 1132–48.
13.
BergerJonahDraganskaMichaelaSimonsonItamar (2007), “The Influence of Product Variety on Brand Perception and Choice,” Marketing Science, 26 (4), 460–72.
14.
BlalockGarrickSimonDaniel H. (2009), “Do All Firms Benefit Equally from Downstream FDI? The Moderating Effect of Local Suppliers’ Capabilities on Productivity Gains,” Journal of International Business Studies, 40 (7), 1095–1112.
15.
BlattbergRobert C.NeslinScott A. (1993), “Sales Promotion Models,” in Handbooks in Operations Research and Management Science, Vol. 5, EliashbergJ.LilienG.L., eds. Amsterdam: Elsevier, 553–609.
16.
BlomströmMagnusKokkoAri (2003), Human Capital and Inward FDI. London: Centre for Economic Policy Research.
17.
ChacarAyaVissaBalagopal (2005), “Are Emerging Market Economies Less Efficient? Performance Persistence and the Impact of Group Affiliation,” Strategic Management Journal, 26 (10), 933–46.
18.
ChariAnushaHenryPeter Blair (2004), “Risk Sharing and Asset Prices: Evidence from a Natural Experiment,” Journal of Finance, 59 (3), 1295–1324.
19.
ChariAnushaMadhav RaghavanT.C.A (2012), “Foreign Direct Investment in India’s Retail Bazaar: Opportunities and Challenges,” The World Economy, 35 (1), 79–90.
20.
ChenMing-Jer (1996), “Competitor Analysis and Interfirm Rivalry: Toward a Theoretical Integration,” Academy of Management Review, 21 (1), 100–134.
21.
ChhibberPradeep K.MajumdarSumit K. (1999), “Foreign Ownership and Profitability: Property Rights, Control, and the Performance of Firms in Indian Industry,” Journal of Law and Economics, 42 (1), 209–38.
22.
ChittoorRaveendraKalePrashantPuranamPhanish (2015), “Business Groups in Developing Capital Markets: Towards a Complementarity Perspective,” Strategic Management Journal, 36 (9), 1277–96.
23.
CohenWesley M.LevinthalDaniel A. (1990), “Absorptive Capacity: A New Perspective on Learning and Innovation,” Administrative Science Quarterly, 35 (1), 128–52.
24.
CookThomas D.CampbellDonald T.ShadishWilliam (2002), Experimental and Quasi-Experimental Designs for Generalized Causal Inference. Boston: Houghton Mifflin.
25.
DebruyneMarionReibsteinDavid J. (2005), “Competitor See, Competitor Do: Incumbent Entry in New Market Niches,” Marketing Science, 24 (1), 55–66.
ErikssonKentJohansonJanMajkgårdAndersDeo SharmaD. (1997), “Experiential Knowledge and Cost in the Internationalisation Process,” Journal of International Business Studies, 28 (2), 337–60.
28.
FaroleThomasWinklerDeborah (2012), Foreign Firm Characteristics, Absorptive Capacity and the Institutional Framework: the Role of Mediating Factors for FDI Spillovers in Low- and Middle-Income Countries. Washington, DC: The World Bank.
29.
FornellClaesMithasSunilMorgesonForrest V.IIIKrishnanMayuram S. (2006), “Customer Satisfaction and Stock Prices: High Returns, Low Risk,” Journal of Marketing, 70 (1), 3–14.
30.
GielensKatrijnDekimpeMarnik G. (2007), “The Entry Strategy of Retail Firms into Transition Economies,” Journal of Marketing, 71 (2), 196–212.
31.
GoldbergPinelopiKhandelwalAmitPavcnikNinaTopalovaPetia (2009), “Trade Liberalization and New Imported Inputs,” American Economic Review, 99 (2), 494–500.
32.
GolderPeter N.TellisGerard J. (1993), “Pioneer Advantage: Marketing Logic or Marketing Legend?” Journal of Marketing Research, 30 (2), 158–70.
33.
GrantRoberts M. (1996), “Toward a Knowledge-Based Theory of the Firm,” Strategic Management Journal, 17 (S2), 109–22.
34.
GreenawayDavidMorganWynWrightPeter (2002), “Trade Liberalisation and Growth in Developing Countries,” Journal of Development Economics, 67 (1), 229–44.
35.
GrewalRajSainiAmitKumarAlokDwyerRobert F.DahlstromRobert (2018), “Marketing Channel Management by Multinational Corporations in Foreign Markets,” Journal of Marketing, 82 (4), 49–69.
36.
GrubaughStephen G. (1987), “Determinants of Direct Foreign Investment,” Review of Economics and Statistics, 69 (1), 149–52.
37.
HaskelJonathan E.PereiraSonia C.SlaughterMatthew J. (2007), “Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?” Review of Economics and Statistics, 89 (3), 482–96.
38.
HittMichael A.DacinTina M.LevitasEdwardArregleJean-LucBorzaAnca (2000), “Partner Selection in Emerging and Developed Market Contexts: Resource-Based and Organizational Learning Perspectives,” Academy of Management Journal, 43 (3), 449–67.
39.
IrwinDouglas A. (2005), “Trade and Globalization,” in Globalization: What’s New?, Michael Weinstein, ed. New York: Columbia University Press, 19–35.
JohnsonJosephTellisGerard J. (2008), “Drivers of Success for Market Entry into China and India,” Journal of Marketing, 72 (3), 1–13.
42.
KellerKevin Lane (1993), “Conceptualizing, Measuring, and Managing Customer-Based Brand Equity,” Journal of Marketing, 57 (1), 1–22.
43.
KosováRenáta (2010), “Do Foreign Firms Crowd Out Domestic Firms? Evidence from the Czech Republic,” Review of Economics and Statistics, 92 (4), 861–81.
MacGarvieMegan (2006), “Do Firms Learn from International Trade?” Review of Economics and Statistics, 88 (1), 46–60.
46.
MajumdarSumit K. (1997), “The Impact of Size and Age on Firm-Level Performance: Some Evidence from India,” Review of Industrial Organization, 12 (2), 231–41.
47.
MeyerKlaus E.SinaniEvis (2009), “When and Where Does Foreign Direct Investment Generate Positive Spillovers? A Meta-Analysis,” Journal of International Business Studies, 40 (7), 1075–94.
48.
MinSungwookKalwaniManohar U.RobinsonWilliam T. (2006), “Market Pioneer and Early Follower Survival Risks: A Contingency Analysis of Really New Versus Incrementally New Product-Markets,” Journal of Marketing, 70 (1), 15–33.
49.
MinerAnne S.BassofPaulaMoormanChristine (2001), “Organizational Improvisation and Learning: A Field Study,” Administrative Science Quarterly, 46 (2), 304–337.
50.
MitraDebanjanGolderPeter N. (2002), “Whose Culture Matters? Near-Market Knowledge and Its Impact on Foreign Market Entry Timing,” Journal of Marketing Research, 39 (3), 350–65.
51.
MorckRandallYeungBernard (1991), “Why Investors Value Multinationality,” Journal of Business, 64 (2), 165–87.
52.
MudambiRamSwiftTim (2012), “Multinational Enterprises and the Geographical Clustering of Innovation,” Industry and Innovation, 19 (1), 1–21.
53.
MukherjiProkritiSorescuAlinaPrabhuJaideep C.ChandyRajesh K. (2011), “Behemoths at the Gate: How Incumbents Take on Acquisitive Entrants (and Why Some Do Better Than Others),” Journal of Marketing, 75 (5), 53–70.
54.
NagarajRayaproulu (2003), “Foreign Direct Investment in India in the 1990s: Trends and Issues,” Economic and Political Weekly, 38 (17), 1701–12.
55.
Office of the Economic Advisor (2001), Handbook of Industrial Policy and Statistics. New Delhi: Government of India.
56.
ParkKyung M.ChintaguntaPradeep K.SukInho (2019), “Capital Market Returns to New Product Development Success: Informational Effects on Product Market Advertising,” Journal of Marketing Research, 56 (1), 37–56.
RobertsKenneth M. (2008), “The Mobilization of Opposition to Economic Liberalization,” Annual Review of Political Science, 11 (1), 327–49.
59.
ShankarVenkatesh (1999), “New Product Introduction and Incumbent Response Strategies: Their Interrelationship and the Role of Multimarket Contact,” Journal of Marketing Research, 36 (3), 327–44.
60.
SharmaAmaleshKumarV.CosgunerKoray (2019), “Modeling Emerging-Market Firms’ Competitive Retail Distribution Strategies,” Journal of Marketing Research, 56 (3), 439–58.
61.
SpencerJennifer W. (2008), “The Impact of Multinational Enterprise Strategy on Indigenous Enterprises: Horizontal Spillovers and Crowding Out in Developing Countries,” Academy of Management Review, 33 (2), 341–61.
62.
SrinivasanRajiLilienGary L.SridharShrihari (2011), “Should Firms Spend More on Research and Development and Advertising During Recessions?” Journal of Marketing, 75 (3), 49–65.
63.
SteenkampJan-Benedict E.M.NijsVincent R.HanssensDominique M.DekimpeMarnik G. (2005), “Competitive Reactions to Advertising and Promotion Attacks,” Marketing Science, 24 (1), 35–54.
64.
TheodosiouMariosKatsikeaEvangelia (2013), “The Export Information System: An Empirical Investigation of Its Antecedents and Performance Outcomes,” Journal of International Marketing, 21 (3), 72–94.
65.
ThornhillStewartAmitRaphael (2003), “Learning About Failure: Bankruptcy, Firm Age, and the Resource-Based View,” Organization Science, 14 (5), 497–509.
66.
TopalovaPetiaKhandelwalAmit K. (2011), “Trade Liberalization and Firm Productivity: The Case of India,” Review of Economics and Statistics, 93 (3), 995–1009.
67.
VigVikrant (2013), “Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment,” Journal of Finance, 68 (3), 881–928.
WiesSimoneHoffmannArvid Oskar IvarAsparaJaakkoPenningsJoost M.E. (2019), “Can Advertising Investments Counter the Negative Impact of Shareholder Complaints on Firm Value?” Journal of Marketing, 83 (4), 58–80.
70.
YiuDaphne W.LuYuanBrutonGarry D.HoskissonRobert E. (2007), “Business Groups: An Integrated Model to Focus Future Research,” Journal of Management Studies, 44 (8), 1551–79.
71.
ZanderUdoKogutBruce (1995), “Knowledge and the Speed of the Transfer and Imitation of Organizational Capabilities: An Empirical Test,” Organization Science, 6 (1), 76–92.
72.
ZhangYanLiHaiyangLiYuZhouLi-An (2010), “FDI Spillovers in an Emerging Market: The Role of Foreign Firms’ Country Origin Diversity and Domestic Firms’ Absorptive Capacity,” Strategic Management Journal, 31 (9), 969–98.
73.
ZhangYanLiYuLiHaiyang (2014), “FDI Spillovers over Time in an Emerging Market: The Roles of Entry Tenure and Barriers to Imitation,” Academy of Management Journal, 57 (3), 698–722.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
