Online retailing: determinants of competition between multinationals and local firms in emerging markets

Ilke Kardes, Leisa Reinecke Flynn, Michael Dugan

Research output: Contribution to journalArticlepeer-review

Abstract

Purpose: The fundamental research question is which aspects of the external environment are most strongly associated with the differential market share between large multinational online retailers and smaller, local retailers in emerging markets. For the purposes of this study, the differential market share refers to the likelihood of having a higher market share for multinational online retailers than for local online retailers. Design/methodology/approach: The theoretical framework of the study is based on PESTLE analysis. This study uses longitudinal country-level archival data and conducts a stepwise logistic regression analysis to investigate the impact of environmental factors. Findings: The results indicate that the effectiveness of law-making bodies and government involvement with information and communications technologies (ICTs) among other factors are significantly associated with a higher market share for multinational online retailers relative to local retailers. Research limitations/implications: The study examines the impact of certain external factors (i.e. socioeconomic variables and legal environment) on the differential market share between multinational online retailers and local ones. Future research should investigate additional factors such as cultural roles and internal operating dynamics of online retailers. The research emphasizes online retailing. A logical extension of the current study is to examine how the online retailing environment differs from the brick-in-store retailing environment relative to the competition. The current study investigates the differential market share between multinational and local online retailers only in the emerging markets setting. The results may differ if the developed market setting is also considered. We recommend that future research compares the developed markets and emerging markets settings relative to the differential market share between multinational and local online retailers. Practical implications: Not all improvements in legal institutions are associated with improved market conditions for multinational online retailers. Managers of multinational online retailers must pursue some mitigation strategies to prevent institutional voids in emerging markets. Therefore, adapting the business model by collaborating and establishing relationships with local online retailers is an effective strategy to mitigate institutional voids (Doh et al., 2017; Yang et al., 2012). Moreover, multinational online retailers are recommended to collaborate with local governments to change unfavourable legal conditions (Doh et al., 2017; Boddewyn and Doh, 2011). Originality/value: The extant literature on online retailing frequently addresses internal company characteristics and consumer behaviour. This study focuses exclusively on environmental factors associated with differential market share. We contribute to the literature on online retailing, retailing strategies and competition dynamics in emerging markets.

Original languageEnglish (US)
Pages (from-to)263-280
Number of pages18
JournalInternational Journal of Retail and Distribution Management
Volume49
Issue number2
DOIs
StatePublished - Jan 26 2021

Keywords

  • Competition
  • Emerging markets
  • Online retailing
  • PESTLE analysis

ASJC Scopus subject areas

  • Business and International Management
  • Marketing

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