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We study private firm innovation at an advanced stage of institutional transition in Central and Eastern Europe and the Commonwealth of Independent States. We adopt an integrated view, where the institution-based view of strategy is complemented by institutional imprints and entrepreneurial agency to argue that innovation at that stage of transition depends on private firm founding conditions earlier during the transition and on recent strategic initiatives to exploit specific opportunities, improving the innovation capacity of firms. In a ten-country sample of 2322 private firms, we find that firms founded earlier and those of larger size at inception are better at innovation because of imprints favoring network-based approaches. Innovation is even greater when these firms’ top manager has less industry experience, suggesting complementarity between network- and resource-based approaches. Additionally, firms that upgrade their management knowledge and improve their operational efficiency achieve higher innovation, and the effect of the former is augmented with a greater foreign market focus. Our findings also suggest that the role of entrepreneurial agency is stronger than that of institutional imprinting. These results have important implications for the institution-based view of strategy and private firm innovation in transition economies of CEE and CIS.

Alleviating poverty in the least developed countries (LDCs) requires raising the income level of local workers. We look at the poor as producers and explore drivers of higher employee wages. We focus on small and medium enterprises (SMEs) because they are a major driver of employment growth and poverty alleviation in these countries. To pay higher wages, SMEs need to increase organizational efficiency. We argue that in LDCs, characterized by substantial formal institutional constraints, SMEs can improve efficiency either by internalizing inefficient formal institutions or by taking advantage of institutional enablers, established not only by local governments, but also by international, non-governmental, non-profit, or social enterprises set up around the world. In a sample of 1273 SMEs from seven LDCs across Africa, Asia, and the Middle East, we find support for a mediated model, where SMEs with government contracts, higher exports, or female ownership achieve higher organizational efficiency, and in turn pay higher employee wages. The strongest mediation occurs for female-owned firms and the weakest for exporting firms, while the direct relationships to wages are strongest for exporting SMEs. The data support the idea that SMEs with a government contract are more efficient in transacting with other constituents in the business environment, those with higher exports have a broad base of efficiency sources, and those with female ownership are particularly adept at exploiting local business and societal relationships.

Developing compositional capability is critical for small-and-medium enterprises to compete in emerging markets. We advance a strategy tripod model embedding compositional capability in three conditions that promote the compositional blend of imitation and innovation. In a sample of 163 SMEs from China, we find that industry-level competitive intensity and intermediate market openness, firm-level cooperation orientation and upgrading orientation, and institution-level government support and weak IPR protection positively influence the development of compositional capability which stimulates firm performance with respect to both objective and subjective performance indicators. These findings have strong implications for the composition-based view and the growth of SMEs.

This article examines an important yet understudied issue—the governance mode for business process offshoring (BPO). By applying transaction cost economics and organizational control perspective in the global BPO context, we suggest that BPO's governance mode (foreign captive, joint venture, and independent vendor) is determined by task features, such as knowledge specialization, information security, and process codifiability, and by needed process integration, horizontally between departments and units within the provider and vertically between the provider and its global client and its local subcontractor. Findings from our analysis of 308 global BPO units in India and China confirm our hypotheses.