1 s2.0 S0148296322002004 Main

Journal of Business Research 145 (2022) 347–359
Contents lists available at ScienceDirect
Journal of Business Research

journal homepage: www.elsevier.com/locate/jbusres
International sourcing and the productivity of SMEs in transition countries:

Formal and informal ‘region effects’ and the communist footprint
María Jesús Nieto , Alicia Rodríguez *, Virginia Hernández
Institute of Entrepreneurship and Family Business, Universidad Carlos III de Madrid, Avenida de la Universidad, 30, 28911 Leganés (Madrid), Spain
A R T I C L E I N F O A B S T R A C T
Keywords: We study how SMEs in transition countries can boost productivity by sourcing inputs from regions with which
International sourcing they share formal institutional links (the European Union) or informal links (the former communist bloc).
Transition countries Additionally, we discuss how the length of the communist footprint may modify these productivity gains. Using a
Region effect
sample of SMEs located in Eastern Europe, we find a positive relation between firm productivity and inputs from
Productivity
Institutional links
regions with formal and informal institutional links. We also find that this positive relation is weaker for firms
Communist footprint with longer communist footprints that source inputs from EU countries.
SMEs
1. Introduction of prosperity in Eastern Europe (Alam, 2008). Although accession to or

association with the European Union (EU) has helped firms in these
The internationalization strategies of firms in different contexts have countries increase their productivity (Friesenbichler, 2020; Holscher &
attracted the attention of scholars, especially in emerging or transition Howard-Jones, 2019) and achieve growth rates above the European
contexts (Jaklič, Obloj, Svetlicic, & Kronegger, 2020; Meyer & Peng, average (Szczepanski, 2018), they still lag far behind those of the most
2016). Given their shared geography, history and current events, Central advanced nations. It is vital, then, to understand what strategies may
and Eastern European (CEE) countries need to be re-examined by IB help them improve their levels of firm productivity and bridge the gap.
scholars (Rašković, Dikovac, & McDougall-Covin, 2020). We need to This is especially so for small and medium-sized firms (SMEs), as oper
contextualize studies of the international activities of firms since inter ating in resource-deficient transition economies obliges them to seek
nationalization theories are context sensitive (Cuervo-Cazurra, better inputs beyond their national borders. In this paper, we address
Mudambi, & Pedersen, 2019; Narula, 2012). Specifically, the unique this challenge by examining the relations between international sourc
conditions experienced in transition countries require research that fo ing1 location decisions and the productivity of SMEs in transition
cuses on the behavior and decisions of firms from these countries countries.
(Teagarden, Von Glinow, & Mellahi, 2018). The contextual richness of Previous research shows that firms may boost productivity by gain
transition countries characterized by profound institutional change, ing access to superior inputs than those available in the country of origin
different transition processes, and particular resource-restricted entre (Amiti & Wei, 2009; Görg, Hanley, & Strobl, 2008; Nieto & Rodríguez,
preneurial environments make a study of the internationalization stra 2013). The extensive availability of resources with different compara
tegies of their firms highly relevant (Jaklic, Raskasovic, & Schuh, 2018). tive advantages—better costs and/or quality—drives firms to look
Beyond this, business reforms in Eastern Europe have led to sub abroad to enhance their competitiveness and create value (Lin, 2020;
stantial variability across countries in terms of market structures and Manning, Massini, & Lewin, 2008; Mukherjee, Gaur, & Datta, 2013).
firm productivity (Gogokhia & Berulava, 2021). This situation has Traditionally, international inputs and intermediate goods were limited
generated especial interest in studying the determinants of firm-level to multinational enterprises (MNEs) that delocated activities to devel
productivity in these countries (Friesenbichler & Peneder, 2016; oping countries with lower costs. This phenomenon has evolved
Kravtsova & Radosevic, 2012), as productivity growth is seen as a driver considerably and is no longer restricted to MNEs from developed
* Corresponding author.
E-mail addresses: [email protected] (M.J. Nieto), [email protected] (A. Rodríguez), [email protected] (V. Hernández).
1
In this paper, international sourcing is defined as inputs that are produced in a foreign location, transferred to the firm’s home country via imports, and
incorporated into its production process (Cho & Kang, 2001; Coucke & Sleuwaegen, 2008; Gleich, Schmeisser, & Zschoche, 2017; Nassimbenni, 2006).
https://doi.org/10.1016/j.jbusres.2022.02.069
Received 26 July 2021; Received in revised form 18 February 2022; Accepted 24 February 2022
Available online 11 March 2022
0148-2963/© 2022 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-
nc-nd/4.0/).
M.J. Nieto et al. Journal of Business Research 145 (2022) 347–359
countries; nowadays it is common practice for firms from any country between sourcing location and origin country and (ii) analyzing the
(Cuervo-Cazurra et al., 2019; Di Gregorio, Musteen, & Thomas, 2009) moderating role of a communist footprint.
and of any size (Canham & Hamilton, 2013; Musteen, Ahsan, & Park, By examining the comparative advantages of different regions, we
2017; Roza et al., 2011; Rodríguez & Nieto, 2016). respond to the call in recent papers for further research to determine if a
In this paper, we focus on SMEs in transition countries, firms for regional strategy exerts an impact on firm performance (Demirbag et al.,
whom the resource limitations are even more severe (Wadhwa, 2020). We contribute to this line of research and cast light on the
McCormick, & Musteen, 2017). Because of their small size, these firms continuing globalization-regionalization debate (see studies by Rugman
typically lack financial resources and management skills (Musteen, & Verbeke, 2004) by examining theoretical and empirical evidence on
Datta, & Butts, 2014; Musteen, Datta, & Francis, 2014). SMEs, however, the formal and informal ’region effect’ on the potential productivity
are important for the economic development of less developed countries gains of SMEs in transition countries.
(Ullah, 2020), and in transition countries they have played a crucial role Additionally, this paper joins the growing stream of research
in the transformation of these economies (Aidis, 2005). Indeed, they studying the influence of imprinting in transition contexts (Kriauciunas
have responded better to the opportunities presented by the change to & Kale, 2006; Maksimov, Wang, & Luo, 2017; Marquis, & Tilcsik, 2013).
the economic system than larger firms. Moreover, SMEs have absorbed We add to recent studies such as Popli, Raithatha and Fuad (2021),
the bulk of jobs lost in the restructuring and privatization processes of Banalieva et al. (2017), and Thakur-Wernz and Wernz (2022) that
large firms (Hashi & Krasniqi, 2011). analyze how the length of imprinting conditions firms’ decisions. Our
Specifically, we examine how SMEs in transition countries can in study complements this research by concentrating on communist foot
crease their productivity depending on the regional origin of source print effects and providing evidence on its moderating role in the rela
inputs. Nowadays both advanced and emerging markets offer attractive tion between international sourcing strategies and the productivity of
locations for supply chain inputs (Pisani & Ricart, 2018). As suggested SMEs in transition countries.
by Mukherjee et al. (2013), to create value firms must make effective Lastly, our research adds to the literature on SMEs’ international
resource choices and remember that—despite the internal nature of sourcing strategies (Musteen et al., 2017; Roza et al., 2011), in particular
configuration processes—they are in constant interaction with the the stream that studies the different consequences of these strategies. As
environment. For this reason, these authors believe that environmental far as we are aware, few studies addressing this topic exist. Exceptions
contingencies affect firm-specific resource choices. While regions all include Di Gregorio et al. (2009), who analyze the international
differ, it stands to reason that one area may be strategically more ad competitiveness of Mexican SMEs; Munjal, Requejo and Kundu (2019),
vantageous (or problematic) than another (Demirbag, Glaister, & Sen who examine the financial performance of small firms in India; and
gupta, 2020). In line with this, studies exist that analyze what factors Rodríguez and Nieto (2016), who analyze sales growth in Spanish SMEs.
affect the choice between developed and emerging regions (Demirbag & Our study makes a special contribution to this research stream by
Glaister, 2010); the impact of cultural and institutional dimensions on analyzing the implications for the productivity of SMEs.
the selection of location (Hahn & Bunyaratavej, 2010; Hernández, Nieto
& Boellis, 2018); the importance of host country context and local 2. The research context and literature review
embeddedness (Mukherjee, Lahiri, Ash, & Gaur, 2019); and even the
consequences of the different location choices for the configuration of 2.1. Transition economies: Institutional context and resource availability
international sourcing strategies (Lin, 2020). Many factors and di
mensions influence the choice of country or region from which to obtain The term ‘transition economies’ is used to refer to those Eastern
inputs, but the implications of this decision require further study. European countries that either were part of the former USSR or were
Among the contextual factors typical of CEE countries, we analyze under Soviet influence and in recent decades have transitioned to
the formal institutional connections attributable to the EU, along with become market economies (Eddleston, Banalieva, & Verbeke, 2020).
informal links to other regions such as the former USSR. Taking into These countries offer a different context from that traditionally analyzed
account the institutional imprinting literature, we also analyze the role in developed economies. It is this context that makes it necessary to
of the communist footprint in the relation between the productivity of investigate the applicability of the relations studied in the previous
SMEs and international sourcing inputs from regions with formal or literature (Ramadani et al., 2019). Specifically, institutional theory
informal institutional links. posits that institutions shape firms’ strategies (North, 1990). While
To perform the empirical analysis, we use a sample of SMEs located stable and market-based institutions are taken for granted in developed
in Eastern Europe from the Eurobarometer Internationalisation of Small contexts, in less developed environments firms continue to be affected
and Medium-sized Enterprises. This survey compiles information on firms by contextual constraints (Peng, Wang, & Jiang, 2008).
from the 28 EU member states, along with seven additional countries Because of their history and the transformations undergone, transi
with special links to the EU. For this study we only include firms from tion countries are at the crossroads between emerging and advanced
Eastern European transition countries that were EU members or had an economies (Hoskisson et al., 2013; Jaklič et al., 2018; Jaklič et al.,
association or agreement with the EU (three of these countries are 2020). Countries that have recently joined or are aspiring to join the EU
candidates to become EU members) at the time of the survey.2 must take advantage of the new opportunities presented by membership
Our study contributes to the highly topical discussion of the inter or association status, while at the same time transforming their econo
nationalization strategies of firms in transition countries (Bahl, Lahiri, & mies to converge with European standards and battle global competitive
Mukherjee, 2021; Rašković et al., 2020; Srivastava, & Tyll, 2021). We pressures (Giannini & Vitali, 2014). In fact, EU membership or associ
extend previous work that finds a positive relation between interna ation has made it possible to introduce numerous reforms that have
tional sourcing activities and firm productivity traditionally limited to begun to invigorate the economies of these countries and make them
developed countries (Amiti & Wei, 2009; Görg, et al., 2008; Nieto & more competitive (Friesenbichler, 2020). And yet, the region’s
Rodríguez, 2013) by (i) adopting a region-level approach that in communist inheritance of the previous economic system persists in one
troduces the dimensions of formal and informal institutional links way or another (Banalieva et al., 2017; Maksimov et al., 2017). Weak
nesses in formal institutional systems remain (Bruton, Lau, & Obloj,
2014; Gelbuda, Meyer & Delios, 2008). Systems to protect intellectual
2
We examine the following countries: Albania, Bulgaria, Croatia, Czech property rights tend to be less effective (Javorcik, 2004); political sta
Republic, Estonia, Hungary, Latvia Lithuania, Moldova, Montenegro, North bility is lacking in some instances (Ahlstrom & Bruton, 2010); a multi
Macedonia, Poland, Romania, Slovakia, and Slovenia. For more detailed in tude of legal and administrative barriers clog processes (Krammer and
formation about the observations, please see the table in the appendix. Jimenez, 2020); state protectionism continues to play a key role in some
348
sectors (Bruton et al., 2014); political reforms often favor large firms 2.3. Where should firms in transition countries look for inputs to boost
(Hegerty, 2009); and high levels of corruption endure in many cases their competitiveness?
(Eddleston et al., 2020).
In addition, the norms and values of the informal institutional sys The key question for firms in transition countries to answer is where
tems that are embedded in their industries continue to be influenced by exactly they should seek inputs to boost their competitiveness, bearing
the ‘old rules’ of a planned economy (Dixon, Meyer, & Day, 2010; in mind the characteristics of the origin and destination country. The
Williams and Vorley, 2015), oriented to the short term and far removed specific institutional contexts of the home countries may explain why
from market demands (Kafouros, & Aliyev, 2016). These contextual firms in these markets follow different trajectories from those of MNEs in
conditions imply that these are economies that: (i) do not have state-of- developed economies (Gammeltoft, Pradhan, & Goldstein, 2010). The
the-art technologies (Krammer, 2009; Maksimov et al., 2017); (ii) have literature on emerging MNEs underlines how international competi
typically had to face difficulties caused by their limited access to capital tiveness is determined by the firm-specific advantages (FSAs) of each
(Smallbone & Welter, 2001); or (iii) lack a market-oriented organiza enterprise. But these FSAs largely depend on the conditions of the origin
tional culture (Crowley & McCann, 2018). country (Marano et al., 2016; Narula & Kodiyat, 2016), determined as
In line with this, the institutional theory literature recognizes that they are by a variety of national factors including cost, access to pro
institutional constraints result in firms gaining access to fewer resources ductive elements, market conditions, policies, and the interests of
and suffering competitive disadvantages (Krasniqi & Desai, 2016). Thus, different groups, etc. (Hennart, 2012; Buckley, 2014). Emerging econ
these contexts display features that constrain the resources available to omies are usually unfavorable contexts for generating significant firm-
firms and the creation of specific competitive advantages. This aspect specific ownership advantages of the traditional kind (Gammeltoft,
may also be particularly relevant for SMEs, given that the literature Barnard, & Madhok, 2010). For this reason, emerging multinationals use
reveals that these firms suffer more limitations to obtain resour international expansion as a means of alleviating some latecomer dis
ces—limitations that are likely to be even more evident in transition advantages (Luo & Tung, 2007; Thakur Wernz, Cantwell & Samant,
countries (Hashi & Krasniqi, 2011; Musteen, Francis & Datta, 2010; 2019).
Smallbone & Welter, 2001). Each origin country, however, has country-specific advantages
(CSAs) (Dunning, Kim, & Park, 2008). Because many of these home-
country advantages are not freely available to all companies or cannot
2.2. International sourcing and firm productivity: An opportunity for be easily exploited by emerging multinationals when they enter other
SMEs in transition countries countries, these firms must possess FSAs—not CSAs—when they inter
nationalize (Ramamurti, 2012). Similarly, conditions exist in the desti
Firm productivity is a key indicator of the improvement in the nation country (e.g., cultural, social, institutional, economic, etc.) that
relation between sales and the resources employed to achieve them. exercise an effect on the characteristics and behavior of firms (Luo &
International sourcing strategies may be particularly effective to Zhang, 2016). In sum, successfully marrying FSAs with new CSAs in
improve the productivity of firms in Eastern European countries. These markets where supply inputs are sought and avoiding the liability of
strategies should increase productivity via the following mechanisms: i) outsidership will depend on the degree of knowledge and experience of
providing access to better inputs; ii) reallocating resources to more these locations possessed by firms (Arregle et al., 2013).
efficient production stages; and iii) exploiting externalization advan The rise of regional integrations around the world has generated a
tages. First, firms engaging in international sourcing obtain access to series of advantages that merit attention (Beleska-Spasova, Loykulnanta,
foreign inputs, which may be available at better cost or quality than & Nguyen, 2016). Many studies, then, include a regional dimension in
domestic ones. Greater use of foreign inputs, then, may boost firm their analyses of international strategies and the performance of MNEs
productivity levels via efficiency gains resulting from lower operational (Verbeke & Asmussen, 2016; Verbeke, Kano, & Yuan, 2016; to cite a few
and labor costs (Capolupo, Amendolagine, & Ferri, 2017) or from the examples). The regionalization hypothesis stresses the advantages of
higher quality of superior inputs (Amiti & Wei, 2009; Görg, et al., 2008; internationalization in geographical or ‘regionalized’ terms (Rugman &
Nieto & Rodríguez, 2013). This may be especially important for firms Verbeke, 2007). According to this hypothesis, firms are better able to
that are operating in contexts far from the international technological exploit the specific advantages of their home regions and thus minimize
frontier (as is the case with many firms in transition countries). Second, the liabilities of foreignness. Different studies suggest that a regional
firms in the home country can concentrate on the activities they perform perspective is useful to explain the international behavior of small firms
most efficiently and import intermediate inputs from foreign countries (Baum, Schwens, & Kabst, 2015) or firms conducting their early inter
where they are produced in better conditions. In this way, firms are able nationalization efforts and attempting to ensure they profit from FSAs
to reallocate their resources to more efficient production stages and and CSAs (Sui & Baum, 2014). Thus, in line with other studies that
redirect their limited but valuable resources to core areas where they analyze the internationalization of SMEs in developing economies
can generate greater value (Mukherjee et al., 2013). Third, the supplier (Lopez, Kundu, & Ciravegna, 2009), we extend previous ideas on CSAs
advantages offered by international sourcing can raise productivity. by adopting a regional-level approach. The regional dimension becomes
Firms can achieve productivity benefits thanks to the specialization and especially important for countries that share institutional links—formal
economies of scale of the suppliers (Tang & Livramento, 2010), who and informal—with various regions simultaneously, as is the case with
may possess the required minimum size and innovative capacity that transition countries. Their international relations with EU and Eastern
input-needy firms are lacking (Kedia & Mukherjee, 2009). bloc countries require research to reveal the potential benefits of the
Previous studies of the effects of international sourcing strategies on ‘region effect.’
firm-level productivity find positive net effects in different contexts (e. Firms from transition countries face the challenge of managing an
g., Görg et al., 2008, for Irish manufacturing; Nieto & Rodríguez, 2013, ever-more global value chain while operating under conditions that
for Spanish firms; Tang & Livramento, 2010, for Canadian firms; & result from the institutional features of their origin countries. When
Wagner, 2011, for German firms). Given the characteristics and limited deciding to exploit inputs from other locations, these institutional fea
resource endowments of SMEs in transition countries, international tures can create a ‘region effect’ that may present particular challenges.
sourcing strategies could be particularly useful to deliver productivity Regional differences exist, many of them related to proximity and in
gains. Since the input sources in each country have varying degrees of stitutions. And certain regions can prove to be more or less propitious for
efficiency (Bunyaratavej et al., 2008), choosing to look to overseas lo firms looking to develop international strategies (Demirbarg et al.,
cations for inputs is a decision of great importance for the configuration 2020). Firms that seek opportunities abroad incur search and delibera
of international sourcing strategies (Lin, 2020). tion costs (Rangan, 2000). Banalieva and Dhanaraj (2013) extend
349
institutional research by incorporating these costs in their analysis of origin country. EU membership and SAAs have brought changes to
firm’s home-region orientation and performance. These authors find countries’ political and legal systems, changes that have strengthened
that spatial proximity and institutional commonality across partners their formal institutional frameworks. In contrast, though, their
within the home region influence these search and deliberation costs. informal institutions—social norms, traditions, unwritten codes (North,
Thus, the advantages obtained can stem from geographical, cultural, 1990)—have not evolved in the same way. Codes of conduct, norms and
institutional, political, or economic proximity (Ghemawat, 2001). But social values have not kept pace with the times, a so-called communist
when such proximity is lacking, firms find the task of working outside legacy or imprint endures (Banalieva, Puffer, & McCarthy, 2018;
their home regions much more difficult (Verbeke et al., 2016). Banalieva et al., 2017). Indeed, Russia continues to lead transition
We posit that the new formal institutional links resulting from EU economies in FDI outflows (World Investment Report, 2020). The
accession—in conjunction with the existence of informal links (i.e., the communist inheritance, with norms typical of a centralized economy,
old rules) left over from communist regimes—will have a marked impact allows firms from these countries to feel culturally closer to those with a
on the international sourcing location decisions of SMEs in transition similar communist heritage and/or economy based on collaborative
countries. These firms face the challenge of balancing the advantages norms (Marinova et al., 2020). We capture the impact of the informal
and disadvantages of different regions depending on their formal and institutional links that firms find in these regions via the term informal
informal institutional links. Consequently, we adopt a regional approach ‘region effect.’
that views institutional links with the origin country as a key factor that The relative costs for a firm of evaluating the reliability and capa
may influence the capacity of firms to take advantage of their interna bilities of a partner decrease as the institutional and cultural proximity
tional supply chain configurations. between them increases (Choi et al., 2018; Slangen, & Van Tulder,
2009). Indeed, firms from these contexts are especially inclined to forge
3. Research hypotheses or maintain links with partners with whom they share linguistic or
cultural ties (Gammeltoft et al., 2010). Firms’ social networks can act as
3.1. Looking for inputs from EU countries: The formal ‘region effect’ a key resource to exploit the advantages of international transactions
(Musteen et al., 2010). In transition countries, the codes of conduct often
The firms examined in this study are located in EU member states or still resemble those of former Soviet times, with systems that rely on
in countries that have signed a Stabilization and Association Agreement reciprocal networks of relationships and connections to overcome the
(SAA) with the EU. Institutions, firms and individuals from EU member weaknesses of the formal institutional environment (Tonoyan et al.,
states and signatory countries of SAAs enjoy access to a trans-national 2010). These networks may reduce transaction costs and help firms
area of action in which shared norms for doing business exist and are mobilize resources in situations of uncertainty and adverse institutional
respected. This trans-national union functions as one region insofar as conditions (Ahlstrom & Bruton, 2006). As is widely recognized, for
formal institutional links exist among the member states, generating historical reasons many firms’ social networks tend to be local or na
what we term a formal ‘region effect.’ EU development policies, both in tional (Rangan, 2000). And this is certainly the case in transition
legal and economic terms, have multiplied continuously since the mid- countries, where firms seeking to internationalize typically form net
1980s (Rodríguez-Pose & Fratesi, 2004). Economic integration permits works with others from countries with similar historical roots.
the free trade of goods and free movement of capital, which in turn Thus, firms from transition countries can still take advantage of the
hugely facilitate commercial transactions among member states (Mal informal institutional commonalities and characteristics they share with
hotra, Agarwal, & Baalbaki, 1998). Common economic regulations also those from countries with a similar background in the Soviet bloc. An
help firms implement certain international strategies in these contexts, opportunity exists, then, for these firms to lower the costs associated
such as international sourcing strategies (Tavares & Young, 2006). The with seeking, contracting, and exploiting foreign inputs, and thereby
institutional links between partners in the home region minimize increase their productivity. The preceding arguments lead us to posit our
deliberation costs associated with the search for opportunities in foreign second hypothesis:
markets (Banalieva & Dhanaraj, 2013). In addition, institutional simi Hypothesis 2. International sourcing from regions with informal links
larities may provide better conditions for obtaining benefits from with their home country will improve the productivity levels of SMEs in
offshore outsourcing by reducing switching costs and adjustments to a transition economies.
foreign institutional environment (Choi et al., 2018). Analogous regu
latory systems can facilitate and safeguard transactions—particularly
sourcing activities—among firms. As information asymmetry is reduced, 3.3. The effects of the communist footprint
the risk of opportunism is mitigated and transactions can be performed
more easily. These factors contribute to the acquisition of superior in Firms from the same country and industry may behave differently
puts from these regions, inputs that make the management of value depending on their external environments (Thakur-Wernz & Wernz,
chain activities more efficient and ultimately boost firm productivity. 2022). In particular, the organizational imprinting literature suggests
In sum, we posit that the formal institutional conditions shared by that institutional conditions during fledgling stages affects firms’ ca
firms from EU member countries (or from SAA signatory countries) will pacities, norms, strategies, and future actions (Marquis & Tilcsik, 2013;
help them obtain inputs in a more advantageous way and will contribute Simsek, Fox, & Heavy, 2015). This is especially relevant for firms in
to improved productivity. We capture this idea in our first hypothesis: emerging markets due to the influence that governments wield in these
Hypothesis 1. International sourcing from regions with formal links contexts over business decisions (Gammeltoft et al., 2010). Recent
with their home country will improve the productivity levels of SMEs in studies extend imprinting theory by considering the duration of expo
transition economies. sure to specific institutional environments in their analyses of the impact
of imprinting on individual behavior (Banalieva et al., 2017), firm
behavior (Thakur-Wernz & Wernz, 2022), or firm performance (Popli
3.2. Looking for inputs from former communist countries: The informal et al., 2021). By examining firms in the CEE transition context, we
‘region effect’ develop specific arguments on the impact exerted by their historical
institutional contexts related to the existence of a communist imprint
Firms from transition countries may also find comparative advan (Shinkle & Kriauciunas, 2012).
tages or disadvantages related to the institutional conditions of their The extent of the informal institutional influence exerted by
350
communism (the communist imprint) depends on the length of expo 4. Empirical analysis
sure—the communist footprint (Banalieva et al, 2017). We take the
concept of the communist footprint and apply it to SMEs in transition 4.1. Sample
countries. Specifically, we propose that the length of time firms operated
under communist regimes (i.e., a longer or shorter communist footprint) Our empirical analysis uses data from the Eurobarometer Inter
will modify the relation between SME productivity and international nationalisation of Small and Medium-sized Enterprises survey, which was
sourcing strategies. requested by the European Commission, Directorate-General for Inter
Drawing on the theoretical underpinnings of organizational nal Market, Industry, Entrepreneurship and SMEs and coordinated by
imprinting, we posit that a longer communist footprint exerts longer- the Directorate-General for Communication (European Commission,
lasting effects on the norms and operating practices of firms. Kriauciu 2015). The survey was performed in 2015 on a sample of manufacturing
nas and Kale (2006) argue that—when faced with a transition to a and services SMEs (firms with 1–249 employees) from the 28 EU
market-oriented context—firms from countries with longer communist member states. The sample was selected by applying quotas for size and
footprints will have to combine their existing knowledge with newly sector ranges; these quotas were adjusted to take account of the popu
acquired information. These authors also suggest that these firms are lation size of each country and to ensure that the sample was
less likely to be able to adapt their knowledge sets to the new context representative.
successfully. These factors may affect the ability of managers to operate In this study we only consider firms from Eastern European transition
in contexts with stronger institutional conditions (with their different countries that were EU members or had signed SAAs with the EU at the
rules and ways of doing business) and to negotiate with foreign firms in time of the survey. Specifically, the study includes firms from: Albania,
developed countries (with no opportunity to rely on personal networks Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania,
or ties). Moldova, Montenegro, North Macedonia, Poland, Romania, Slovakia
Thus, we argue that firms with longer communist legacies will and Slovenia (see Appendix). The final sample used in our analyses in
encounter greater difficulties to forge relationships with EU firms cludes 2768 firms.
because they lack the experience of working with partners from more
market-oriented contexts (McMillan & Woodruff, 2002). Deliberation 4.2. Variables
costs, for example, tend to be more problematic when familiarity or
experience are absent (Rangan, 2000). Indeed, the advantages that we 4.2.1. Dependent variable
postulate are supplied by formal institutional links will be offset by the Productivity: This variable captures firm-level performance via labor
practices resulting from the communist imprinting process. Therefore, productivity (sales per employee); this indicator has been used previ
we believe that relationships with EU-based partners will be more ously to analyze determinants of productivity in Eastern European
challenging as the communist footprint is magnified by increased countries (Friesenbichler & Peneder, 2016; Gogokhia & Berulava,
deliberation costs and a greater resistance to change, which ultimately 2021). Specifically, we measure Productivity as a continuous variable
result in a reduction in the efficiency of transactions. In other words, the calculated via the logarithm of each firm’s sales per employee (Crowley
degree of imprinting from a communist regime will affect the ability of & McCann, 2018; Gkypali, Love, & Roper, 2021; Konrad, & Mangel,
firms to adapt and build new relationships with EU partners, thus 2000; Mauri, Song, & Neiva de Figueiredo, 2017; Nieto & Rodríguez,
limiting the potential benefits of international sourcing on productivity. 2013).
In sum, we posit that, despite formal institutional links, firms with
longer communist footprints will encounter greater difficulty to exploit 4.2.2. Independent variables
foreign inputs in terms of productivity. We capture this idea in our third The independent variables capture international sourcing strategies
hypothesis: in different locations. This strategy occurs when the firm incorporates
inputs that are produced in a foreign location, transferred to its home
Hypothesis 3. Productivity gains achieved by SMEs via inputs from
country via imports, and incorporated into its production process (see
regions that share formal institutional links with their home country will
Coucke & Sleuwaegen, 2008; Gleich, Schmeisser, & Zschoche, 2017;
decrease as the communist footprint increases.
Nassimbeni, 2006; Rodríguez & Nieto, 2016). We construct the variables
Firms with longer communist footprints have more ingrained be for international sourcing depending on the region from which the SMEs
haviors and practices such as limited competition or relying on personal in transition countries import the inputs, in line with a regional classi
ties with bureaucrats. Networks are a fundamental asset in these con fication used by previous studies (Demirbag et al., 2020; Flores, et al.,
texts, where companies use ongoing relationships among them to sub 2013; Lorentz et al., 2016; Vos et al., 2016; among others). Specifically,
stitute for missing institutions (Peng & Heath, 1996; Tonoyan et al., we identify the following regions from which inputs originate: the EU;
2010). These practices make it possible to take greater advantage of the US; China; India and Southeast Asia; Russia, the Caucasus and other
relationships with firms from contexts with which they maintain Eastern European countries; Middle East and North Africa; Latin
informal institutional links—links that originate from their shared America; and Other regions.
communist past (McMillan & Woodruff, 2002). Specifically, we argue To test our hypotheses, we focus on two specific independent vari
that firms with longer communist footprints may be better placed (than ables that allow us to capture the international sourcing from regions
those created in the post-communist era) to deal with organizations with formal and informal links, respectively.
from these contexts. A stronger tradition of working together in past
networks and a similar knowledge set based on the previous economic (i) International sourcing from EU region is a dichotomous variable
system will contribute to reduced deliberation costs. that takes value 1 when the firm acquires inputs from the EU; it
Firms with longer communist footprints, then, may take better takes value 0 otherwise. This variable is used to test hypotheses 1
advantage of international inputs from regions with which they share and 3, as the EU is a region with which the focal firm has a formal
informal institutional links, thus increasing the potential for produc link via its home country’s membership of or association agree
tivity gains. We capture this idea in our fourth hypothesis: ment with the union.
(ii) International sourcing from Russia and CEE region is a dichotomous
Hypothesis 4. Productivity gains achieved by SMEs via inputs from
variable that takes value 1 when the firm acquires inputs from
regions that share informal institutional links with their home country
Russia, the Caucasus or other Eastern European countries; it takes
will increase as the communist footprint increases.
value 0 otherwise. This variable is used to test hypotheses 2 and
4, as Russia and the CEE is a region with which the focal firm has
351
an informal link due to its home country’s previous membership
1.15
of the USSR or time spent under communist influence.
1.27
1.11
1.40
1.12
1.22
1.15
1.08
1.08
1.04
1.23
1.09
1.12
1.13
1.31
1.04
1.08
1.18
1.08
VIF
–
International sourcing from the rest of the regions identified are
19
1
included as control variables.
0.04
18
1
4.2.3. Moderator variable
0.11*** 0.12***
0.09***
Following Banalieva et al. (2017), we employ the variable Communist
17
footprint to capture the number of years the firm operated under a
− 0.1*** 1
Mean VIF
communist system. Given the fact that some firms were founded after
− 0.04
the fall of communism in these countries, the variable takes positive and
16
1
negative values. Positive values capture the number of years the firm
− 0.19***
operated under the communist system, and negative values capture the
− 0.002
− 0.01
number of years (in negative terms) the firm was born after the fall of
0.03
15
1
communism; this variable ranges from − 25 to 51 years.
− 0.06**
0.12***
0.08***
0.11***
4.2.4. Control variables
0.00
14
1
To control if the firm imports inputs from other regions, we include
the following six dummy variables: US (International sourcing from US);
− 0.12***
0.19***
0.11***
0.1***
China (International sourcing from China), India and Southeast Asia (In
0.00
0.00
13
ternational sourcing from India and Southeast Asia); Middle East and North
1
Africa (International sourcing from MENA); Latin America (International
0.16***
0.17***
0.09***
0.08***
− 0.02
0.05**
0.00
sourcing from Latin America); and other regions (International sourcing
12
1
from other regions. In all instances these variables take value 1 if the firm
− 0.06**
imports from the region and value 0 when this is not the case.
0.12***
0.12***
0.22***
0.18***
0.16***
0.14***
0.03
Additionally, we include different control variables to collect infor
11
1
mation on factors that may affect the productivity of firms (Lee &
0.08***
0.09***
0.06***
0.07***
− 0.01
− 0.02
Rugman, 2012; Nieto & Rodríguez, 2013). These factors include: (1)
0.05*
0.03
0.00
10
international activity, measured by a continuous variable that captures
1
the percentage of exports over total sales (Export intensity) and three
0.12***
0.07***
− 0.02
− 0.02
− 0.02
0.04*
dichotomous variables that capture if the firm has performed Foreign
0.00
0.01
0.03
0.01
9
1
Direct Investment (FDI), R&D agreements with foreign partners (Inter
national R&D Agreement) and has worked as a sub-contractor for a
0.14***
0.07***
0.08***
− 0.02
0.05*
0.04*
0.03
0.02
0.03
0.03
0.01
foreign-based firm (Foreign supplier); (2) being a new firm (New venture),
8
1
this is a dichotomous variable that takes value 1 when the firm is six
0.13***
0.19***
0.11***
0.08***
0.09***
years old or younger; (3) membership of a national group (National
− 0.02
0.05*
0.04*
0.03
0.01
0.02
0.02
group), this is a dichotomous variable that take value 1 if the firm be
7
longs to a group in its origin country and value 0 otherwise; (4) mem
− 0.005
0.30***
0.19***
0.15***
0.11***
0.18***
0.06***
0.07***
0.05**
0.06**
0.06**
0.05*
bership of the firm to a foreign group (International group), this is a
0.02
Correlation matrix and collinearity diagnostics of the independent and control variables.
6
1
0.25***
0.15***
0.15***
0.12***
0.08***
0.13***
0.08***
0.08***
0.07***
0.08***
− 0.02
0.05**
Table 1
0.01
0.02
Descriptors.
5
− 0.47***
Variable Mean St. deviation Min Max

− 0.06**
− 0.001
− 0.04*
0.09***
0.29***
− 0.02
− 0.01
− 0.01
0.04*
0.01
0.03
0.01
0.01
0.00
Productivity (ln) 10.49 2.82 0 16.80

4
Int. sourc. EU region 0.47 0.50 0 1

Int. sourc. Russia and CEE region 0.09 0.28 0 1
− 0.05**
− 0.001
0.07***
0.08***
0.13***
0.08***
0.16***
0.13***
0.09***
0.08***
− 0.01
0.06**
Communist footprint − 8,07 11.56 − 25 51

0.1***
0.04*
0.03
0.00
Int. sourc. US 0.04 0.20 0 1

3
Int. sourc. China 0.08 0.27 0 1

− 0.04*
0.24***
0.19***
0.22***
0.15***
0.11***
0.09***
0.31***
0.12***
0.16***
0.15***
0.16***
0.16***
0.12***
Int. sourc. India and southeast Asia 0.03 0.17 0

− 0.03
0.1***
0.02
Int. sourc. MENA 0.02 0.16 0 1

2
Int. sourc. Latin Am. 0.01 0.09 0 1

Int. sourc. Other regions 0.03 0.18 0 1
− 0.05***
0.20***
0.07***
0.08***
0.07***
0.06***
0.05***
0.15***
0.07***
0.13***
0.59***
Export intensity 15.85 29.1 0 100

− 0.03
− 0.03
− 0.04
0.06**
0.06**
0.05**
0.04*
FDI 0.04 0.19 0 1

p < 0.001.
1
International R&D 0.09 0.29 0 1

Foreign supplier 0.20 0.40 0 1
Int. sourc. India & southeast Asia
Int. sourc.Russia and CEE region
New venture 0.16 0.36 0 1

National group 0.06 0.24 0 1
***
Int. sourc. Other regions
International group 0.09 0.29 0 1

Size (empl ln) 2.82 1.19 0.69 5.52
p < 0.05; ** p < 0.01;
Communist footprint
Int. sourc.EU region
International group
Int. sourc.Latin Am
GDP origin per cap

International R&D
Sector
Int. sourc. MENA
Foreign supplier
Export intensity
Int. sourc.China
Domestic group
Manufacturing 0.23 0.42 0 1

Int. sourc.US
New venture
Productivity
Retail 0.31 0.46 0 1

Services 0.24 0.43 0 1
Industry 0.22 0.42 0 1
Size
FDI
GDP origin per capita (ln) 10.02 0.42 8.71 10.38

Table 2
10
11
12
13
14
15
16
17
18
19
1
2
3
4
5
6
7
8
9
Total observations = 2,768

*
352
dichotomous variable that take value 1 if the firm belongs to a group MENA)i + β10(Int. sourc. Latin Am.)i + β11(Int. sourc. Other
from a foreign country and value 0 otherwise; (5) the size of the firm regions)i + β12(Export intensity)i + β13(FDI)i + β14(International
(Size) measured via the logarithm of the firm’s number of employees; R&D Agreement)i + β15(International outsourcing)i + β16(New
and lastly (6) the effect of the firm’s sector, captured by categorical venture)i + β17(National group)i + β18(International group)i +
∑
variables (Sector) related to different NACE codes (which includes in β19(Size)i + β20( Sector)i + β21(GDP origin per capita)i + εi
formation on manufacturing and services sectors).
We also include control variables that collect information on the where x is the value of the constant, β’s represent the coefficients of
firm’s country of origin. Specifically, we incorporate a variable (GDP the different variables included in the model, and ε’s the error term. To
origin per capita) to capture the level of economic development of the test hypotheses 1 and 2, the significance of the β’s corresponding to
origin country (Friesenbichler, 2020). regions with formal and informal links should be checked (i.e., Inter
Table 1 displays the main features of the variables used and Table 2 national sourcing from EU region and International Sourcing from Russia
contains their correlations. The correlation matrix in Table 2 also pro and CEE region). To test hypotheses 3 and 4, the significance of the β’s
vides information on potential multicollinearity problems by including corresponding to interaction terms between Communist footprint with
the individual values and mean VIFs of the variables. None of the indi International sourcing from EU region and International Sourcing from
vidual values is greater than 10.0 and the mean value of the VIFs does Russia and CEE region should be checked, respectively.
not exceed 6.0, indicating the absence of multicollinearity problems
(Neter, Wasserman, & Kutner, 1989). 5. Results
Table 3 displays the results of our analyses. Model 1 only includes

4.3. Empirical model control variables, while models 2 to 5 include the independent variables
we use to test our study’s hypotheses. Specifically, in model 2 the co
Given the continuous nature of our dependent variable (Productiv efficients for International sourcing from EU region (β = 0.491, p < 0.001)
ity), we use lineal regression models with the following specifications: and International sourcing from Russia and CEE region (β = 0.626, p <
0.001) are positive and significant. These results confirm that firms from
(1) Productivityi = x + β1(Int. sourc. EU region)i + β2(Int. sourc. Russia transition countries boost their productivity when they obtain interna
and CEE region)i + β3(Communist footprint)i + β4(Int. sourc.US)i + tional inputs from regions like the EU, regions with which they have a
β5(Int. sourc. China) + β6 (Int. sourc. India and southeast Asia)i + formal institutional link. The findings also show that inputs from areas
β7(Int. sourc. MENA)i + β8(Int. sourc. Latin Am.)i + β9(Int. sourc. with shared informal institutional links—such as Russia, the Caucasus
Other regions)i + β10(Export intensity)i + β11(FDI)i + β12(Interna and other Eastern European countries region—increase the productivity
tional R&D Agreement)i + β13(International outsourcing)i + β14(New of firms from transition countries. Hypotheses 1 and 2, therefore, are
venture)i + β15(National group)i + β16(International group)i + supported.
∑
β17(Size)i + β18( Sector)i + β19(GDP origin per capita)i + εi Models 3, 4 and 5 include the interaction effects. Specifically, model
(2) Productivityi = x + β1(Int. sourc. EU region)i + β2(Int. sourc. Russia 3 includes the interaction term between Communist footprint and Inter
and CEE region)i + β3(Communist footprint)i + β4(Int. sourc. EU national sourcing from EU region, which shows a negative and significant
region X Communist footprint)i + β5(Int. sourc.Russia and CEE re effect (β = -0.018, p < 0.05). Additionally, model 4 includes the inter
gion X Communist footprint)i + β6(Int. sourc. US)i + β7(Int. sourc. action term between Communist footprint and International sourcing from
China) + β8 (Int. sourc. India and southeast Asia)i + β9(Int. sourc.
Table 3
Results of regression analyses of International sourcing location and SME productivity.
(1) (2) (3) (4) (5)
Productivity Productivity Productivity Productivity Productivity
Int. sourc. EU region 0.491*** (0.1) 0.341** (0.114) 0.494*** (0.1) 0.350** (0.115)
Int. sourc. Russia & CEE region 0.626*** (0.157) 0.641*** (0.157) 0.527** (0.182) 0.595** (0.184)
Communist footprint 0.004 (0.004) 0.012* (0.005) 0.005 (0.004) 0.012* (0.005)
Int. sourc. EU region X Communist footprint − 0.018* (0.007) − 0.017* (0.008)
Int. sourc. Russia & CEE region X Communist footprint − 0.0146 (0.0134) − 0.007 (0.014)
Int. sourc. US − 0.021 (0.221) − 0.170 (0.221) − 0.143 (0.221) − 0.174 (0.221) − 0.147 (0.221)
Int. sourc. China − 0.054 (0.170) − 0.142 (0.169) − 0.151 (0.169) − 0.141 (0.169) − 0.150 (0.169)
Int. sourc. India & Southeast Asia 0.297 (0.257) 0.217 (0.255) 0.223 (0.255) 0.225 (0.255) 0.226 (0.255)
Int. sourc. MENA 0.592* (0.279) 0.438 (0.278) 0.454 (0.278) 0.434 (0.278) 0.452 (0.278)
Int. sourc. Latin Am. 0.883† (0.492) 0.789 (0.488) 0.765 (0.488) 0.772 (0.488) 0.758 (0.488)
Int. sourc. Other regions 0.326 (0.237) 0.310 (0.236) 0.330 (0.235) 0.307 (0.236) 0.328 (0.236)
Export intensity 0.007*** (0.002) 0.004** (0.002) 0.004** (0.002) 0.004** (0.002) 0.004** (0.002)
FDI 0.152 (0.225) 0.0232 (0.224) 0.0221 (0.224) 0.0180 (0.224) 0.0198 (0.224)
International R&D 0.402** (0.153) 0.289† (0.153) 0.290† (0.153) 0.289† (0.153) 0.290† (0.153)
Foreign supplier − 0.046 (0.113) − 0.0729 (0.113) − 0.0727 (0.113) − 0.0681 (0.113) − 0.0705 (0.113)
New Venture 0.0759 (0.118) 0.136 (0.131) 0.141 (0.131) 0.132 (0.131) 0.139 (0.131)
ln_size_empl − 0.140*** (0.038) − 0.179*** (0.039) − 0.178*** (0.039) − 0.179*** (0.039) − 0.178*** (0.039)
National group 0.05 (0.175) 0.061 (0.174) 0.068 (0.174) 0.056 (0.174) 0.065 (0.174)
International group 0.599*** (0.151) 0.552*** (0.151) 0.541*** (0.151) 0.543*** (0.151) 0.538*** (0.151)
Sector Included Included Included Included Included
GDP origin 3.858*** (0.102) 3.840*** (0.102) 3.849*** (0.102) 3.843*** (0.102) 3.850*** (0.102)
Constant − 28.39*** (1.026) − 28.32*** (1.023) − 28.34*** (1.022) − 28.33*** (1.023) − 28.34*** (1.023)
F 98.51*** 88.34*** 84.77*** 84.38*** 81.07***
R2 0.39 0.40 0.40 0.40 0.40
Log likelihood − 6110.3 − 6084.8 − 6081.7 − 6084.2 − 6081.6
Standard errors in parentheses.

N. Observations: 2,768.
†
p < 0.10, * p < 0.05, ** p < 0.01, *** p < 0.001.
353
Fig. 1. Predicted margins. Productivity when importing/not importing from the EU at different levels of communist footprint.
Russia and CEE region, which shows a non-significant effect. Lastly, (Antonakis et al., 2010; Leoncini, 2016; Rodríguez & Nieto, 2016;
model 5 includes all the variables. These findings are consistent with Santamaría, Nieto, & Rodríguez, 2021). In Step 1, we estimate the most
those of the previous models. In sum, the results confirm that in the case likely value for international sourcing activities via a probit model. In
of SMEs (in transition countries) with longer communist footprints, the this first step, the probit model provides us with a prediction value that is
positive relation between acquiring inputs from the EU and firm pro then included in Step 2 in the corresponding regression model specified
ductivity is weakened, as postulated in hypothesis 3. In contrast, the to analyze firm-level productivity. The results obtained provide support
findings do not provide empirical support for hypothesis 4. In the case of for the same conclusions as those discussed in this article, thus showing
SMEs with longer communist footprints that acquire inputs from Russia, the robustness of our analyses. These results are available on request.
the Caucasus or other Eastern European countries, the relation between
importing from this region and firm productivity is not affected. 6. Discussion and conclusions
We have calculated the marginal effects and represented them
graphically in Fig. 1. As can be seen, there is a moderation effect of In this paper we advance our knowledge of international sourcing
communist footprint in the case of SMEs importing from the EU region. and the productivity of SMEs in Eastern European transition countries.
Specifically, the graph reflects that SMEs decrease their productivity as The choice of location for international sourcing activities is a strategic
their communist footprint grows. decision with important implications for competitiveness and firms must
Beyond these findings, a number of other results for some of the weigh up numerous internal and external factors in the decision process.
control variables reveal significant relations with the productivity of the Following authors who introduce a regional perspective to studies of
firms from the transition countries analyzed. Regarding other regions, MNE location strategies (Arregle et al., 2013; Demirbag et al, 2020;
the coefficient for International sourcing from MENA is positive and sig Rugman and Verbeke, 2004), our paper analyzes the impact of inter
nificant in all models. Similarly, the coefficient for International sourcing national sourcing from regions with formal and informal institutional
from Latin America is positive and significant in all models. These results links. We stress the impact exerted by the conditions of the origin
reveal that the firms in the transition countries analyzed also obtain country and the links with the region from which the international in
positive and significant productivity gains when they acquire inputs puts are acquired. We take into account the existence of formal and
from these regions. informal institutional links with these regions, as well as the moderating
Furthermore, the international activity (Export intensity and Inter effect of the length of the communist footprint on the relations analyzed.
national R&D) of the firm exerts a positive and significant effect. Other Our arguments focus on these aspects because institutional context
control variables present significant effects. Membership of an interna determines many firm-level characteristics, along with the potential
tional group (International group) is also positively and significantly comparative advantages of destination regions. We posit that firms in
related with firm productivity. For its part, the coefficient for firm size transition countries that acquire international inputs will obtain greater
(Size) is negative and significant, showing that SMEs with greater benefits when they turn to regions with which they share formal or
numbers of employees have lower levels of productivity. Lastly, firms informal institutional links. EU membership or association provides
from transition countries with higher per capita GDP levels (GDP origin formal institutional links that facilitate access to resources in the EU
per capita) display higher levels of productivity. region compared to other regions (Verbeke et al., 2016). In a similar
way, regions comprising Russia and other Eastern European or Cauca
5.1. Additional tests sian countries offer specific location advantages via informal links that
result from shared communist heritage, historical roots, or cultural
We have performed additional analyses as robustness tests. Specif norms. Indeed, we postulate that firms in European transition countries
ically, to address potential endogeneity issues, we adopt an will improve their productivity by acquiring resources in regions with
instrumental-variable approach by performing a two-stage model which they share informal institutional links (e.g., the former Soviet
354
bloc). Our first two research hypotheses capture these ideas and Beyond this, international business research stresses the importance
empirically test them via a large sample of firms in transition countries. of considering the institutional and country environment to understand
The empirical results show that productivity gains for these firms are international trajectories of multinational firms in emerging contexts
greater when they acquire inputs from the EU or from former Soviet bloc (Gammeltoft et al., 2010). Based on the premises of institutional theory,
countries. our study advances in this direction by examining institutional links to
Productivity gains derived from international sourcing from both explain the results of international sourcing strategies. Our focus on
regions can be explained by formal and informal ‘region effects,’ formal and informal institutional dimensions to reveal the relative ad
respectively. On the one hand, international sourcing from the EU helps vantages of international sourcing contributes to studies that analyze
the firms under study improve their productivity levels. Without doubt, how institutions affect the internationalization of firms in emerging
economic and commercial integration gives rise to a free trade zone that countries (Krammer, Strange, & Lashitew, 2018; Peng et al., 2008).
facilitates transactions among firms from EU member states. These Although local conditions in transition countries play an extremely
formal institutions deliver a single market without physical, technical, important role in the acquisition of resources for firms, studies of
or fiscal barriers; they promote a more efficient exchange of goods, internationalization and its results have underplayed their impact
which may explain the greater benefits experienced by the firms. And on (Marano et al, 2016). In line with Gugler (2017), our paper deepens
the other hand, informal links generate an informal ‘region effect.’ The knowledge of how firms from emerging economies combine the assets of
existence of a formal framework such as the EU is not sufficient to erase their origin countries with those of the destination countries to
historical, institutional, geographical, and cultural differences among strengthen their competitive advantages. And the special contextual
countries (Malhotra et al., 1998). This is especially so when the transi characteristics of transition countries cause these assets to form a unique
tion countries in question have joined or become associated with the EU intersection between two distinct regions: the EU (with whom they share
after (since 2004) the original member states. Differences in consumer formal links) and the other former Soviet bloc countries (with whom
behavior and codes of conduct can be decisive factors within the EU they share informal links). The richness of the context under study, then,
itself, and these differences can in turn cause inter-regional similarities allows us to analyze institutional conditions in formal and informal
to surface via informal institutional connections. This is what occurs terms. In addition, the inclusion of the concept of the communist foot
with countries from the former Soviet bloc, a region that shares close print complements recent studies (Banalieva et al., 2017; Popli et al.,
historical roots and cultural links. In such a region, then, consumer 2021) by helping us understand how the length of time spent under a
behavior, cultural values and codes of conduct are similar to those of communist system influences the strategies of firms.
transition countries, a circumstance which may make transactions with Lastly, we contribute to the stream of research studying the de
these countries more advantageous and provide an explanation for the terminants of firm-level productivity in Eastern European countries
positive relation we find with productivity. (Friesenbichler, 2020; Gogokhia & Berulava, 2021; Kravtsova & Rado
Since not all firms have been exposed to a communist system to the sevic, 2012). Specifically, our study extends previous research by
same degree, the length of this exposure and its impact should be analyzing productivity gains obtained by SMEs via international sourc
considered. The length of exposure to a communist regime—the ing. In doing this, we also contribute to the research stream that analyzes
communist footprint—determines the conditions under which firms how firms that perform international sourcing strategies can create
operate. Our results indicate that a longer communist footprint weakens value. By paying particular attention to dimensions that affect how firms
the positive relation between international inputs from the EU and may benefit from location-specific resourcing (Mukherjee et al., 2013)
increased firm productivity. The benefits supplied by formal links are and international sourcing strategies (Lin, 2020), we shine more light on
diminished because of the higher transaction costs that occur in less the creation of value in terms of efficiency.
familiar contexts with greater cultural distance and when partners have
little experience of working together. Contrary to our expectations for 6.2. Practical implications
the relation with international inputs from Russia and CEE regions, our
findings do not provide empirical support for the positive moderating This study has implications for managers and public policy makers.
effect. The productivity benefits delivered by international inputs from SMEs make up 99% of the industrial fabric of the EU (Papadopoulos et
these regions do not change on account of a longer or shorter communist al, 2018). Indeed, in transition countries these firms are the drivers of
footprint. In other words, the advantages associated with these informal the economy and systemic reforms. Access to international resources
links are a simple result of the shared communist heritage; the length of makes it possible for them to complement what is available in their
the communist footprint makes no difference. origin countries. Understanding these sources better with the aim of
improving the competitiveness of these firms, then, is an important
6.1. Theoretical implications practical contribution. The consequences of international sourcing for
firms are driven by a broad range of internal and external factors. The
Our paper contributes to the literature on internationalization by local context embeddedness of the offshoring firm is an external factor
extending and rethinking theoretical concepts in contexts distinct from that has been shown to be crucial in determining offshoring outcomes
those of more advanced economies. Specifically, this study advances our (Mukherjee et al., 2019). Managers of firms in transition countries need
knowledge of internationalization strategies and the productivity of to be aware of the increased advantages that inputs from institutionally
firms in Eastern European transition countries, thereby making it proximate regions—via formal or informal links—can provide. Firms
possible to better understand the international behavior of CEE firms searching for international sourcing in countries with which they do not
(Jaklič et al., 2020). The increasing regional focus and the specific have such formal or informal links can opt for collaborative relation
contextual nature of these countries require internationalization re ships to position themselves better in the host location. As Mukherjee
searchers to deepen the analysis of the strategies adopted by these firms et al. (2019) suggest, establishing collaborative relationships will leave
(Jaklič et al., 2018). We add to studies that examine the regional firms well-positioned to exploit the benefits of offshoring. In addition, it
dimension and call for further research into the impact of a regional has been shown that political, commercial and economic agreements
strategy on firm performance (Demirbag et al., 2020). Our study dem can change over time, resulting in new and different regional make-ups
onstrates the benefits for firms in transition countries of seeking pro (Verbeke et al., 2016). Public policy makers need to design policies that
ductive inputs in regions with which they have institutional links. This foster inter-regional links. While this can be difficult to achieve in the
conclusion is in accordance with Rugman et al. (2009), who find that a case of informal links, policy makers do have the power to introduce
regional strategy can be more beneficial than a global one for the supply integrative measures that build formal links between countries and/or
chain activities of US MNEs. regions.
355
6.3. Limitations and future research draft, Investigation, Funding acquisition, Conceptualization. Virginia
Hernández: Writing – review & editing, Writing – original draft,
Although this study delivers important findings for academics, Methodology, Investigation, Funding acquisition, Conceptualization.
managers and policy makers, it is not free of limitations. The study’s
analysis is limited to inputs from two destination regions related by Declaration of Competing Interest
formal and informal links. Future studies could deepen this analysis to
identify other regions (e.g., MENA and Latin America) with features that The authors declare that they have no known competing financial
may explain the advantages of internationalization. Additionally, future interests or personal relationships that could have appeared to influence
researchers with longitudinal data available could analyze the evolution the work reported in this paper.
of these regions over time. Another line of research could examine more
value chain activities for each firm. Research in this direction would also Acknowledgements
cast light on the inter-relations between different activities (upstream or
downstream) and the pros and cons of different locations. Although we We thank the Associate Editor, Professor Debmalya Mukherjee, and
control for the activity of the firm in our paper, we are not able to the two anonymous reviewers for their helpful comments and sugges
identify the type of input that is being imported or the extent of its tions. The manuscript has also benefited from the comments by partic
technological nature. It would be highly useful to include information of ipants and reviewers of the 46th EIBA Annual Conference on an earlier
this type to better evaluate the distinct comparative and competitive version of this paper. This project was funded by the Government
advantages of different supply chain inputs. Similarly, it would be Research Agency of Spanish Ministry of Science and Innovation
valuable to include more fine-grained variables related to innovation (PID2019-106874GB-I00/AEI/10.13039/501100011033). This work is
activities. These future lines of research present interesting opportu developed with the support of Madrid Government (Comunidad de
nities to build on the findings of our current work. Madrid-Spain) with the project Excellence of University Professors
(EPUC3M20) in the context of the V PRICIT (Regional Programme of
CRediT authorship contribution statement Research and Technological Innovation). All authors have contributed
María Jesús Nieto: Writing - review & editing, Writing - original equally to this paper.
draft, Methodology, Investigation, Funding acquisition, Conceptualiza
tion. Alicia Rodríguez: Writing - review & editing, Writing - original
Appendix A. Countries included in the sample and percentage breakdown of observations
Country Observations %
Albania 92 3.32
Bulgaria 113 4.08
Croatia 126 4.55
Czech Republic 264 9.54
Estonia 162 5.85
Hungary 158 5.71
Latvia 249 9.00
Lithuania 277 10.01
Moldova 182 6.58
Montenegro 66 2.38
North Macedonia 65 2.35
Poland 239 8.63
Romania 273 9.86
Slovakia 197 7.12
Slovenia 305 11.02
Total 2768 100%
References internationalization of MNEs. Strategic Management Journal, 34(8), 910–934. https://

doi.org/10.1002/smj.2051
Bahl, M., Lahiri, S., & Mukherjee, D. (2021). Managing internationalization and
Aidis, R. (2005). Institutional barriers to small-and medium-sized enterprise operations
innovation tradeoffs in entrepreneurial firms: Evidence from transition economies.
in transition countries. Small Business Economics, 25(4), 305–317. https://doi.org/
Journal of World Business, 56(1), Article 101150. https://doi.org/10.1016/j.
10.1007/s11187-003-6463-7
jwb.2020.101150
Ahlstrom, D., & Bruton, G. D. (2006). Venture capital in emerging economies: Networks
Banalieva, E. R., & Dhanaraj, C. (2013). Home-region orientation in international
and institutional change. Entrepreneurship Theory and Practice, 30(2), 299–320.
expansion strategies. Journal of International Business Studies, 44(2), 89–116. https://
https://doi.org/10.1111/j.1540-6520.2006.00122.x
doi.org/10.1057/jibs.2012.33
Ahlstrom, D., & Bruton, G. D. (2010). Rapid institutional shifts and the co–evolution of
Banalieva, E. R., Karam, C. M., Ralston, D. A., Elenkov, D., Naoumova, I., Dabic, M., et al.
entrepreneurial firms in transition economies. Entrepreneurship Theory and Practice,
(2017). Communist footprint and subordinate influence behavior in post-communist
34(3), 531–554. https://doi.org/10.1111/j.1540-6520.2010.00373.x
transition economies. Journal of World Business, 52(2), 209–229.
Alam, A. (2008). Unleashing prosperity: Productivity growth in Eastern Europe and the
Banalieva, E. R., Puffer, S. M., McCarthy, D. J., & Vaiman, V. (2018). The impact of
Former Soviet Union. World Bank Publications.
communist imprint prevalence on the risk-taking propensity of successful Russian
Amiti, M., & Wei, S. J. (2009). Service offshoring and productivity: Evidence from the
entrepreneurs. European Journal of International Management, 12(1–2), 158–190.
US. World Economy, 32(2), 203–220. https://doi.org/10.1111/j.1467-
https://doi.org/10.1016/j.jwb.2016.12.002
9701.2008.01149.x
Baum, M., Schwens, C., & Kabst, R. (2015). A latent class analysis of small firms’
Antonakis, J., Bendahan, S., Jacquart, P., & Lalive, R. (2010). On making causal claims: A
internationalization patterns. Journal of World Business, 50(4), 754–768. https://doi.
review and recommendations. The Leadership Quarterly, 21(6), 1086–1120. https://
org/10.1016/j.jwb.2015.03.001
doi.org/10.1016/j.leaqua.2010.10.010
Beleska-Spasova, E., Loykulnanta, S., & Nguyen, Q. T. (2016). Firm-specific, national and
Arregle, J. L., Miller, T. L., Hitt, M. A., & Beamish, P. W. (2013). Do regions matter? An
regional competitive advantages: The case of emerging market MNEs—Thailand.
integrated institutional and semiglobalization perspective on the
356
Asian Business Management, 15(4), 264–291. https://doi.org/10.1057/s41291-016- Gogokhia, T., & Berulava, G. (2021). Business environment reforms, innovation and firm
0009-8 productivity in transition economies. Eurasian Business Review, 11(2), 221–245.
Bruton, G. D., Lau, C. M., & Obloj, K. (2014). Institutions, resources and firm strategies: A https://doi.org/10.1007/s40821-020-00167-5
comparative analysis of entrepreneurial firms in three transitional economies. Görg, H., Hanley, A., & Strobl, E. (2008). Productivity effects of international
European Journal of International Management, 8(6), 697–720. outsourcing: Evidence from plant-level data. Canadian Journal of Economics/Revue
Buckley, P. J. (2014). Forty years of internalisation theory and the multinational Canadienne D’économique, 41(2), 670–688. https://doi.org/10.1111/j.1540-
enterprise. Multinational Business Review, 22(3), 227–245. https://doi.org/10.1108/ 5982.2008.00481.x
MBR-06-2014-0022 Gugler, P. (2017). Emerging countries’ country-specific advantages (CSAs) and
Bunyaratavej, K., Hahn, E. D., & Doh, J. P. (2008). Multinational investment and host competitiveness of emerging market multinational enterprises (EMNEs).
country development: Location efficiencies for services offshoring. Journal of World Competitiveness Review: An International Business Journal, 27(3), 194–207. https://
Business, 43(2), 227–242. https://doi.org/10.1016/j.jwb.2007.11.001 doi.org/10.1108/CR-02-2016-0016
Canham, S., & Hamilton, R. T. (2013). SME internationalisation: Offshoring, Hahn, E. D., & Bunyaratavej, K. (2010). Services cultural alignment in offshoring: The
“backshoring”, or staying at home in New Zealand. Strategic Outsourcing: An impact of cultural dimensions on offshoring location choices. Journal of Operations
International Journal, 6(3), 277–291. https://doi.org/10.1108/SO-06-2013-0011 Management, 28(3), 186–193. https://doi.org/10.1016/j.jom.2009.10.005
Capolupo, R., Amendolagine, V., & Ferri, G. (2017). Offshore-sourcing strategies and the Hashi, I., & Krasniqi, B. A. (2011). Entrepreneurship and SME growth: Evidence from
puzzle of productivity: A micro-level analysis. Journal of Global Operations and advanced and laggard transition economies. International Journal of Entrepreneurial
Strategic Sourcing, 10(3), 282–308. https://doi.org/10.1108/JGOSS-12-2016-0039 Behavior & Research, 17(5), 456–487. https://doi.org/10.1108/
Cho, J., & Kang, J. (2001). Benefits and challenges of global sourcing: Perceptions of US 13552551111158817
apparel retail firms. International Marketing Review, 18(5), 542–561. Hennart, J. F. (2012). Emerging market multinationals and the theory of the
Choi, J. J., Ju, M., Kotabe, M., Trigeorgis, L., & Zhang, X. T. (2018). Flexibility as firm multinational enterprise. Global Strategy Journal, 2(3), 168–187. https://doi.org/
value driver: Evidence from offshore outsourcing. Global Strategy Journal, 8(2), 10.1111/j.2042-5805.2012.01038.x
351–376. https://doi.org/10.1002/gsj.1181 Hernández, V., Nieto, M. J., & Boellis, A. (2018). The asymmetric effect of institutional
Coucke, K., & Sleuwaegen, L. (2008). Offshoring as a survival strategy: Evidence from distance on international location: Family versus nonfamily firms. Global Strategy
manufacturing firms in Belgium. Journal of International Business Studies, 39(8), Journal, 8(1), 22–45. https://doi.org/10.1002/gsj.1203
1261–1277. https://doi.org/10.1057/palgrave.jibs.8400403 Hegerty, S. W. (2009). Capital inflows, exchange market pressure, and credit growth in
Crowley, F., & McCann, P. (2018). Firm innovation and productivity in Europe: Evidence four transition economies with fixed exchange rates. Economic Systems, 33(1),
from innovation-driven and transition-driven economies. Applied Economics, 50(11), 155–167. https://doi.org/10.1016/j.ecosys.2009.02.001
1203–1221. https://doi.org/10.1080/00036846.2017.1355543 Holscher, J., & Howard-Jones, P. (2019). Does accession to the European Union affect
Cuervo-Cazurra, A., Mudambi, R., & Pedersen, T. (2019). Clarifying the relationships firms’ productivity? IZA Policy Papers. https://doi.org/10.15185/izawol.458
between institutions and global strategy. Global Strategy Journal, 9(2), 151–175. Hoskisson, R. E., Wright, M., Filatotchev, I., & Peng, M. W. (2013). Emerging
https://doi.org/10.1002/gsj.1342 multinationals from mid-range economies: The influence of institutions and factor
Demirbag, M., & Glaister, K. W. (2010). Factors determining offshore location choice for markets. Journal of Management Studies, 50(7), 1295–1321. https://doi.org/
R&D projects: A comparative study of developed and emerging regions. Journal of 10.1111/j.1467-6486.2012.01085.x
Management Studies, 47(8), 1534–1560. https://doi.org/10.1111/j.1467- Jaklič, A., Obloj, K., Svetličič, M., & Kronegger, L. (2020). Evolution of Central and
6486.2010.00948.x Eastern Europe related international business research. Journal of Business Research,
Demirbag, M., Glaister, K. W., & Sengupta, A. (2020). Which regions matter for MNEs? 108, 421–434. https://doi.org/10.1016/j.jbusres.2019.06.046
The role of regional and firm level differences. Journal of World Business, 55(1), Jaklič, A., Rasković, M., & Schuh, A. (2018). Examining the contextual richness of
Article 101026. https://doi.org/10.1016/j.jwb.2019.101026 Central and Eastern Europe. AIB Insights, 18(1), 3–6.
Di Gregorio, D., Musteen, M., & Thomas, D. E. (2009). Offshore outsourcing as a source Javorcik, B. S. (2004). The composition of foreign direct investment and protection of
of international competitiveness for SMEs. Journal of International Business Studies, 40 intellectual property rights: Evidence from transition economies. European Economic
(6), 969–988. https://doi.org/10.1057/jibs.2008.90 Review, 48(1), 39–62. https://doi.org/10.1016/S0014-2921(02)00257-X
Dixon, S. E., Meyer, K. E., & Day, M. (2010). Stages of organizational transformation in Kafouros, M., & Aliyev, M. (2016). Institutional development and firm profitability in
transition economies: A dynamic capabilities approach. Journal of Management transition economies. Journal of World Business, 51(3), 369–378. https://doi.org/
Studies, 47(3), 416–436. https://doi.org/10.1111/j.1467-6486.2009.00856.x 10.1016/j.jwb.2015.06.002
Dunning, J., Kim, C., & Park, D. (2008). Old wine in new bottles: a comparison of Kedia, B. L., & Mukherjee, D. (2009). Understanding offshoring: A research framework
emerging market TNCs today and developed country TNCs thirty years ago. SLPTMD based on disintegration, location and externalization advantages. Journal of World
Working Paper Series, No. 011. Business, 44(3), 250–261. https://doi.org/10.1016/j.jwb.2008.08.005
Eddleston, K. A., Banalieva, E. R., & Verbeke, A. (2020). The bribery paradox in Konrad, A. M., & Mangel, R. (2000). The impact of work-life programs on firm
transition economies and the enactment of ‘new normal’ business environments. productivity. Strategic Management Journal, 21(12), 1225–1237.
Journal of Management Studies, 57(3), 597–625. https://doi.org/10.1111/ Krammer, S. M. (2009). Drivers of national innovation in transition: Evidence from a
joms.12551 panel of Eastern European countries. Research Policy, 38(5), 845–860. https://doi.
European Commission. (2015). Flash Eurobarometer 421 Internationalisation of Small and org/10.1002/1097-0266(200012)21:12<1225::AID-SMJ135>3.0.CO;2-3
Medium-Sized Enterprises. GESIS Data Archive, Cologne. ZA6585 Data file Version Krammer, S. M., & Jimenez, A. (2020). Do political connections matter for firm
1.0.0. https://doi.org/10.4232/1.12382. innovation? Evidence from emerging markets in Central Asia and Eastern Europe.
Flores, R., Aguilera, R., Mahdian, A., & Vaaler, P. (2013). How well do supranational Technological Forecasting and Social Change, 151, Article 119669. https://doi.org/
regional grouping schemes fit international business research models? Journal of 10.1016/j.techfore.2019.05.027
International Business Studies, 44, 451–474. https://doi.org/10.1057/jibs.2013.16 Krammer, S. M., Strange, R., & Lashitew, A. (2018). The export performance of emerging
Friesenbichler, K. S. (2020). Does EU-accession affect domestic market structures and economy firms: The influence of firm capabilities and institutional environments.
firm level productivity? Empirica, 47(2), 1–22. https://doi.org/10.1007/s10663- International Business Review, 27(1), 218–230. https://doi.org/10.1016/j.
018-9423-9 ibusrev.2017.07.003
Friesenbichler, K., & Peneder, M. (2016). Innovation, competition and productivity: Krasniqi, B. A., & Desai, S. (2016). Institutional drivers of high-growth firms: Country-
Firm-level evidence for Eastern Europe and Central Asia. Economics of Transition, 24 level evidence from 26 transition economies. Small Business Economics, 47(4),
(3), 535–580. https://doi.org/10.1111/ecot.12100 1075–1094. https://doi.org/10.1007/s11187-016-9736-7
Gammeltoft, P., Barnard, H., & Madhok, A. (2010). Emerging multinationals: Outward Kravtsova, V., & Radosevic, S. (2012). Are systems of innovation in Eastern Europe
foreign direct investment from emerging and developing economies. Journal of efficient? Economic Systems, 36(1), 109–126. https://doi.org/10.1016/j.
International Management, 16(2), 95–194. https://doi.org/10.1016/j. ecosys.2011.04.005
intman.2010.03.001 Kriauciunas, A., & Kale, P. (2006). The impact of socialist imprinting and search on
Gammeltoft, P., Pradhan, J. P., & Goldstein, A. (2010). Emerging multinationals: Home resource change: A study of firms in Lithuania. Strategic Management Journal, 27(7),
and host country determinants and outcomes. International Journal of Emerging 659–679. https://doi.org/10.1002/smj.537
Markets, 5(3/4), 254–265. https://doi.org/10.1108/17468801011058370 Lee, I. H., & Rugman, A. M. (2012). Firm-specific advantages, inward FDI origins, and
Gelbuda, M., Meyer, K. E., & Delios, A. (2008). International business and institutional performance of multinational enterprises. Journal of International Management, 18(2),
development in Central and Eastern Europe. Journal of International Management, 14 132–146. https://doi.org/10.1016/j.intman.2011.11.001
(1), 1–11. https://doi.org/10.1016/j.intman.2007.05.011 Leoncini, R. (2016). Learning-by-failing. An empirical exercise on CIS data. Research
Ghemawat, P. (2001). Distance still matters”. Harvard Business Review, 79(8), 137–147. Policy, 45(2), 376–386. https://doi.org/10.1016/j.respol.2015.10.006
PMID: 11550630. Lin, N. (2020). Designing global sourcing strategy for cost savings and innovation: A
Giannini, M., & Vitali, L. (2014). Productivity growth of transition economies: An configurational approach. Management International Review, 60(5), 723–753. https://
assessment. Advances in Economics and Business, 2(3), 133–147. https://doi.org/ doi.org/10.1007/s11575-020-00428-5
10.13189/aeb.2014.020303 Lopez, L. E., Kundu, S. K., & Ciravegna, L. (2009). Born global or born regional? Evidence
Gkypali, A., Love, J. H., & Roper, S. (2021). Export status and SME productivity: from an exploratory study in the Costa Rican software industry. Journal of
Learning-to-export versus learning-by-exporting. Journal of Business Research, 128, International Business Studies, 40(7), 1228–1238. https://doi.org/10.1057/
486–498. https://doi.org/10.1016/j.jbusres.2021.02.026 jibs.2008.69
Gleich, W., Schmeisser, B., & Zschoche, M. (2017). The influence of competition on Lorentz, H., Töyli, J., Solakivi, T., & Ojala, L. (2016). The effect of a geographically
international sourcing strategies in the service sector. International Business Review, dispersed supply base on downside risk: Developing and testing the N-shaped theory.
26(2), 279–287. https://doi.org/10.1016/j.ibusrev.2016.07.005 International Business Review, 25(4), 872–882. https://doi.org/10.1016/j.
ibusrev.2015.10.009
357
Luo, Y., & Zhang, H. (2016). Emerging market MNEs: Qualitative review and theoretical Peng, M. W., Wang, D. Y., & Jiang, Y. (2008). An institution-based view of international
directions. Journal of International Management, 22(4), 333–350. https://doi.org/ business strategy: A focus on emerging economies. Journal of International Business
10.1016/j.intman.2016.05.001 Studies, 39(5), 920–936. https://doi.org/10.1057/palgrave.jibs.8400377
Luo, Y., & Tung, R. L. (2007). International expansion of emerging market enterprises: A Pisani, N., & Ricart, J. E. (2018). Offshoring innovation to emerging countries: The
springboard perspective. Journal of International Business Studies, 38(4), 481–498. effects of IP protection and cultural differences on firms’ decision to augment versus
https://doi.org/10.1057/palgrave.jibs.8400275 exploit home-base-knowledge. Management International Review, 58(6), 871–909.
McMillan, J., & Woodruff, C. (2002). The central role of entrepreneurs in transition https://doi.org/10.1007/s11575-018-0362-2
economies. Journal of Economic Perspectives, 16(3), 153–170. https://doi.org/ Popli, M., Raithatha, M., & Fuad, M. (2021). Impact of institutional imprinting on the
10.1257/089533002760278767 persistence of superior profits: A study of regulatory punctuation in India. Journal of
Maksimov, V., Wang, S. L., & Luo, Y. (2017). Institutional imprinting, entrepreneurial Business Research, 124, 223–235. https://doi.org/10.1016/j.jbusres.2020.11.039
agency, and private firm innovation in transition economies. Journal of World Ramadani, V., Hisrich, R. D., Abazi-Alili, H., Dana, L. P., Panthi, L., & Abazi-Bexheti, L.
Business, 52(6), 854–865. https://doi.org/10.1016/j.jwb.2017.06.002 (2019). Product innovation and firm performance in transition economies: A multi-
Malhotra, N. K., Agarwal, J., & Baalbaki, I. (1998). Heterogeneity of regional trading stage estimation approach. Technological Forecasting and Social Change, 140,
blocs and global marketing strategies. International Marketing Review, 15(6), 271–280. https://doi.org/10.1016/j.techfore.2018.12.010
476–506. https://doi.org/10.1108/02651339810244787 Ramamurti, R. (2012). Competing with emerging market multinationals. Business
Manning, S., Massini, S., & Lewin, A. Y. (2008). A Dynamic perspective on next- Horizons, 55(3), 241–249. https://doi.org/10.1016/j.bushor.2012.01.001
generation offshoring: The global sourcing of science and engineering talent. Rangan, S. (2000). Search and deliberation in international exchange: Microfoundations
Academy of Management Perspectives, 22(3), 35–54. https://doi.org/10.5465/ to some macro patterns. Journal of International Business Studies, 31(2), 205–222.
amp.2008.34587994 https://doi.org/10.1057/palgrave.jibs.8490902
Marano, V., Arregle, J.-L., Hitt, M. A., Spadafora, E., & van Essen, M. (2016). Home Rašković, M., Dikova, D., & McDougall-Covin, T. P. (2020). International business with
country institutions and the internationalization-performance relationship: A meta- Central and Eastern Europe: From tyranny of history to revisited laboratories of
analytic review. Journal of Management, 42(5), 1075–1110. https://doi.org/ learning”. Journal of Business Research, 108, 417–420. https://doi.org/10.1016/j.
10.1177/0149206315624963 jbusres.2020.01.005
Marinova, S. T., Larimo, J. A., Leposky, T., & Marinov, M. A. (2020). International Rodríguez, A., & Nieto, M. J. (2016). Does R&D offshoring lead to SME growth? Different
business and emerging economy firms: The contexts of Central and Eastern Europe governance modes and the mediating role of innovation. Strategic Management
and Africa. In J. Larimo, M. Marinov, S. Marinova, & T. Leposky (Eds.), International Journal, 37(8), 1734–1753. https://doi.org/10.1002/smj.2413
Business and Emerging Economy Firms. Cham: Palgrave Studies of Internationalization Rodríguez-Pose, A., & Fratesi, U. (2004). Between development and social policies: The
in Emerging Markets. Palgrave Macmillan. https://doi.org/10.1007/978-3-030- impact of European Structural Funds in Objective 1 regions. Regional Studies, 38(1),
27285-2_1. 97–113. https://doi.org/10.1080/00343400310001632226
Marquis, C., & Tilcsik, A. (2013). Imprinting: Toward a multilevel theory. Academy of Roza, M., Van den Bosch, F. A. J., & Volberda, H. W. (2011). Offshoring strategy:
Management Annals, 7(1), 195–245. https://doi.org/10.5465/ Motives, functions, locations, and governance modes of small, medium-sized and
19416520.2013.766076 large firms. International Business Review, 20(3), 314–323. https://doi.org/10.1016/j.
Mauri, A., Song, S., & Neiva de Figueiredo, J. (2017). Determinants of corporate ibusrev.2011.02.002
international expansion beyond the home region: An empirical examination of US Rugman, A. M., Li, J., & Oh, C. H. (2009). Are supply chains global or regional?
Multinational Enterprises expansion to Europe and Asia-Pacific. Global Strategy International Marketing Review, 26(4–5), 384–395. https://doi.org/10.1108/
Journal, 7(4), 400–426. https://doi.org/10.1002/gsj.1155 02651330910971940
Meyer, K. E., & Peng, M. W. (2016). Theoretical foundations of emerging economy Rugman, A. M., & Verbeke, A. (2004). A perspective on regional and global strategies of
business research. Journal of International Business Studies, 47(1), 3–22. https://doi. multinational enterprises. Journal of International Business Studies, 35(1), 3–18.
org/10.1057/jibs.2015.34 https://doi.org/10.1057/palgrave.jibs.8400073
Mukherjee, D., Gaur, A. S., & Datta, A. (2013). Creating value through offshore Rugman, A. M., & Verbeke, A. (2007). Liabilities of regional foreignness and the use of
outsourcing: An integrative framework. Journal of International Management, 19(4), firm-level versus country-level data: A response. Journal of International Business
377–389. https://doi.org/10.1016/j.intman.2013.03.015 Studies to Dunning et al. (2007), 38(1), 200–205. https://doi.org/10.1057/palgrave.
Mukherjee, D., Lahiri, S., Ash, S. R., & Gaur, A. S. (2019). Search motives, local jibs.8400242
embeddedness, and knowledge outcomes in offshoring. Journal of Business Research, Santamaría, L., Nieto, M. J., & Rodríguez, A. (2021). Failed and successful innovations:
103, 365–375. https://doi.org/10.1016/j.jbusres.2017.10.035 The role of geographic proximity and international diversity of partners in
Munjal, S., Requejo, I., & Kundu, S. K. (2019). Offshore outsourcing and firm technological collaboration. Technological Forecasting and Social Change, 166, Article
performance: Moderating effects of size, growth and slack resources. Journal of 120575. https://doi.org/10.1016/j.techfore.2021.120575
Business Research, 103, 484–494. https://doi.org/10.1016/j.jbusres.2018.01.014 Shinkle, G. A., & Kriauciunas, A. P. (2012). The impact of current and founding
Musteen, M., Ahsan, M., & Park, T. (2017). SME s, intellectual capital, and offshoring of institutions on strength of competitive aspirations in transition economies. Strategic
service activities: An empirical investigation. Management International Review, 57 Management Journal, 33(4), 448–458. https://doi.org/10.1002/smj.1946
(4), 603–630. https://doi.org/10.1007/s11575-017-0315-1 Simsek, Z., Fox, B. C., & Heavey, C. (2015). “What’s past is prologue” A framework,
Musteen, M., Datta, D. K., & Butts, M. M. (2014). Do international networks and foreign review, and future directions for organizational research on imprinting. Journal of
market knowledge facilitate SME internationalization? Evidence from the Czech Management, 41(1), 288–317. https://doi.org/10.1177/0149206314553276
Republic. Entrepreneurship Theory and Practice, 38(4), 749–774. https://doi.org/ Slangen, A. H., & Van Tulder, R. J. (2009). Cultural distance, political risk, or governance
10.1111/etap.12025 quality? Towards a more accurate conceptualization and measurement of external
Musteen, M., Datta, D. K., & Francis, J. (2014). Early internationalization by firms in uncertainty in foreign entry mode research. International Business Review, 18(3),
transition economies into developed markets: The role of international networks. 276–291. https://doi.org/10.1016/j.ibusrev.2009.02.014
Global Strategy Journal, 4(3), 221–237. https://doi.org/10.1002/gsj.1077 Smallbone, D., & Welter, F. (2001). The distinctiveness of entrepreneurship in transition
Musteen, M., Francis, J., & Datta, D. K. (2010). The influence of international networks economies. Small Business Economics, 16(4), 249–262. https://doi.org/10.1023/A:
on internationalization speed and performance: A study of Czech SMEs. Journal of 1011159216578
World Business, 45(3), 197–205. https://doi.org/10.1016/j.jwb.2009.12.003 Srivastava, M., & Tyll, L. (2021). The effect of industry-specific networking behaviour on
Narula, R. (2012). Do we need different frameworks to explain infant MNEs from the internationalization performance of Czech SMEs. European Business Review, 33
developing countries? Global Strategy Journal, 2(3), 188–204. https://doi.org/ (2), 361–382. https://doi.org/10.1108/EBR-10-2019-0244
10.1111/j.2042-5805.2012.01035.x Sui, S., & Baum, M. (2014). Internationalization strategy, firm resources and the survival
Narula, R., & Kodiyat, T. P. (2016). How weaknesses in home country location of SMEs in the export market. Journal of International Business Studies, 45(7),
advantages can constrain EMNE growth. Multinational Business Review, 24(3), 821–841. https://doi.org/10.1057/jibs.2014.11
249–278. https://doi.org/10.1108/MBR-07-2016-0026 Szczepanski, M. (2018). The productivity riddle Supporting long-term economic growth
Nassimbeni, G. (2006). International sourcing: Empirical evidence from a sample of in the EU. European Parliamentary Research Service PE, 630, 319.
Italian firms. International Journal of Production Economics, 103(2), 694–706. https:// Tang, J., & do Livramento, H. (2010). Offshoring and productivity: A micro-data
doi.org/10.1016/j.ijpe.2006.01.003 analysis. Review of Income and Wealth, 56(1), 111–134. https://doi.org/10.1111/
Neter, J., Wasserman, W., & Kutner, M. H. (1989). Applied regression models. Homewood, j.1475-4991.2010.00392.x
IL: Irwin. Tavares, A. T., & Young, S. (2006). Sourcing patterns of foreign-owned multinational
Nieto, M. J., & Rodríguez, A. (2013). The challenge of R&D offshoring: Implications for subsidiaries in Europe. Regional Studies, 40(6), 583–600. https://doi.org/10.1080/
firm productivity. In T. Pedersen, L. Bals, P. Ørberg Jensen, & M. Larsen (Eds.), The 00343400600868739
offshoring challenge (pp. 175–190). London: Springer. https://doi.org/10.1007/978- Teagarden, M. B., Von Glinow, M. A., & Mellahi, K. (2018). Contextualizing international
1-4471-4908-8_10. business research: Enhancing rigor and relevance. Journal of World Business, 53(3),
North, D. C. (1990). Institutions, institutional change and economic performance. 303–306. https://doi.org/10.1016/j.jwb.2017.09.001
Cambridge, U.K.: Cambridge University Press. Thakur-Wernz, P., Cantwell, J., & Samant, S. (2019). Impact of international entry
Papadopoulos, G., Rikama, S., Alajääskö, P., Salah-Eddine, Z., Airaksinen, A., & choices on the nature and type of innovation: Evidence from emerging economy
Luomaranta, H. (2018). Eurostat - Statistics on small and medium-sized enterprises. ISSN firms from the Indian bio-pharmaceutical industry. International Business Review, 28
2443-8219. (6), Article 101601. https://doi.org/10.1016/j.ibusrev.2019.101601
Peng, M. W., & Heath, P. S. (1996). The growth of the firm in planned economies in Thakur-Wernz, P., & Wernz, C. (2022). Impact of stronger intellectual property rights
transition: Institutions, organizations, and strategic choice. Academy of Management regime on innovation: Evidence from de alio versus de novo Indian bio-
Review, 21(2), 492–528. https://doi.org/10.5465/amr.1996.9605060220 pharmaceutical firms. Journal of Business Research, 138, 457–473. https://doi.org/
10.1016/j.jbusres.2021.08.074
358
Tonoyan, V., Strohmeyer, R., Habib, M., & Perlitz, M. (2010). Corruption and María Jesús Nieto is Professor of Strategic Management at University Carlos III of Madrid
entrepreneurship: How formal and informal institutions shape small firm behavior in (Spain). She holds a PhD in Economic from this University. She is the Director of MSc in
transition and mature market economies. Entrepreneurship Theory and Practice, 34(5), Entrepreneurship and Deputy Director of Research Institute of Family Business and
803–832. https://doi.org/10.1111/j.1540-6520.2010.00394.x Entrepreneurship. Her current research interests include internationalization, innovation
Ullah, B. (2020). Financial constraints, corruption, and SME growth in transition management and strategic alliances. Her research has been published in journals as
economies. The Quarterly Review of Economics and Finance, 75, 120–132. https://doi. Strategic Management Journal, Journal of International Business Studies, Long Range Planning,
org/10.1016/j.qref.2019.05.009 Research Policy, Technological Forecasting and Social Change, Technovation, Journal of World
Verbeke, A., & Asmussen, C. G. (2016). Global, local, or regional? The locus of MNE Business, among many others. She is a Senior Editor of Business Research Quarterly.
strategies. Journal of Management Studies, 53(6), 1051–1075. https://doi.org/
10.1111/joms.12190
Alicia Rodríguez is an Associate Professor at University Carlos III of Madrid (Spain). She
Verbeke, A., Kano, L., & Yuan, W. (2016). Inside the regional multinationals: A new value
holds a PhD in Strategic Management from this University (with Honors). She stud
chain perspective on subsidiary capabilities. International Business Review, 25(3),
ies firms’ innovation and internationalization strategies, with a particular focus on off
785–793. https://doi.org/10.1016/j.ibusrev.2016.01.019
shoring and knowledge intensive activities. Her research has been published in leading
Vos, F. G., Scheffler, P., Schiele, H., & Horn, P. (2016). Does global sourcing pay-off? A
journals such as Strategic Management Journal, Journal of International Business Studies, Long
competitive dynamics perspective. Journal of Purchasing and Supply Management, 22
Range Planning, Journal of International Management, Technovation, Technological Fore
(4), 338–350. https://doi.org/10.1016/j.pursup.2016.07.002
casting and Social Change, Industry and Innovation, among others. She has been a Visiting
Wadhwa, P., McCormick, M., & Musteen, M. (2017). Technological innovation among
Scholar at the D’Amore-McKim School of Business at Northeastern University (Boston,
internationality active SMEs in the Czech economy. European Business Review, 29(2),
USA) in 2012 and 2017.
164–180. https://doi.org/10.1108/EBR-12-2015-0156
Wagner, J. (2011). Offshoring and firm performance: Self-selection, effects on
performance, or both? Review of World Economics, 147(2), 217–247. https://doi.org/ Virginia Hernández is an Assistant Professor at University Carlos III of Madrid (Spain).
10.1007/s10290-010-0078-2 She holds a PhD in Strategic Management from this University (with Honors). Her research
Williams, N., & Vorley, T. (2015). Institutional asymmetry: How formal and informal interests include internationalization strategies, such as the analysis of location and entry
institutions affect entrepreneurship in Bulgaria. International Small Business Journal, mode decisions, with a special interest in the role of institutional factors on them. Her
33(8), 840–861. https://doi.org/10.1177/0266242614534280 research has been published in leading journals such as Journal of World Business, Long
World Investment Report (2020). International production. Beyond the pandemic. Retrieved Range Planning, International Business Review, Global Strategy Journal and Business Research
from https://unctad.org/system/files/official-document/wir2020_en.pdf. Quarterly. She has conducted research stays at Copenhagen Business School (2013) and
University of Edinburgh (2018).
359

1 s2.0 S0148296322002004 Main

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

1 s2.0 S0148296322002004 Main

Uploaded by

Copyright:

Available Formats

Journal of Business Research 145 (2022) 347–359

Contents lists available at ScienceDirect

Journal of Business Research

International sourcing and the productivity of SMEs in transition countries:

1. Introduction of prosperity in Eastern Europe (Alam, 2008). Although accession to or

an informal link due to its home country’s previous membership

Variable Mean St. deviation Min Max

Productivity (ln) 10.49 2.82 0 16.80

Int. sourc. EU region 0.47 0.50 0 1

Communist footprint − 8,07 11.56 − 25 51

Int. sourc. US 0.04 0.20 0 1

Int. sourc. China 0.08 0.27 0 1

Int. sourc. India and southeast Asia 0.03 0.17 0

Int. sourc. MENA 0.02 0.16 0 1

Int. sourc. Latin Am. 0.01 0.09 0 1

Export intensity 15.85 29.1 0 100

FDI 0.04 0.19 0 1

International R&D 0.09 0.29 0 1

New venture 0.16 0.36 0 1

International group 0.09 0.29 0 1

GDP origin per cap

Manufacturing 0.23 0.42 0 1

Retail 0.31 0.46 0 1

GDP origin per capita (ln) 10.02 0.42 8.71 10.38

Total observations = 2,768

Table 3 displays the results of our analyses. Model 1 only includes

Standard errors in parentheses.

Appendix A. Countries included in the sample and percentage breakdown of observations

References internationalization of MNEs. Strategic Management Journal, 34(8), 910–934. https://

You might also like