Companies can control their own fate even amidst a global financial meltdown, according to research by Tomas Hult, director of Michigan State University’s International Business Center, and several colleagues at MSU.
“The results are encouraging and important both for the public and the companies themselves,” said Hult, author of an article recently published in the Strategic Management Journal. “Tough economic times mean drawing even more on a company’s core competencies, but if a company does well it will be able to sustain its operations during financial turmoil. Consumers can expect these companies to deliver on their promises during hard times.”
The research found that during adverse economic conditions, such as those seen in the economic crisis of 2008, a company’s resources and capibilities become the most important factors in its success or failure. The circumstances of the country in which a company is headquartered or the industry in which it participates become less important to company performance.
“We have found that a company’s own fate is to a great extent self-determined, a reality that is markedly more evident during periods of extreme economic hardship,” said Hult, who is the Byington Endowed Chair and professor of marketing in the Eli Broad College of Business.
The research examined 15,008 companies in 20 countries throughout a period of seven years, with data collected both before and after the global economic crisis in 2008. It included 10 developed countries and 10 countries from emerging markets, and focused on the effects of countries, industries and companies’ capabilities on bottom-line profits.
The developed countries examined in the study included Australia, Canada, Switzerland, Germany, the United Kingdom, Japan, Netherlands, Norway, Sweden and the United States.
“Often it is perceived that companies from developed countries such as the U.S. have an advantage over companies from countries with a weaker infrastructure, such as Indonesia,” Hult said. “We wanted to check this premise and see what was really true.”
The researchers found that the effects of a company’s capabilities are even more pronounced in emerging markets. The emerging markets examined included Brazil, China, Indonesia, India, South Korea, Mexico, Philippines, Poland, Turkey and South Africa.
“Our goal was to better understand how companies operate within these diverse markets, their specific industries and how they handle a global economic crisis such as what the world saw in 2008,” Hult said. “These results are great for companies from both developed and emerging markets.”
Researchers Vassiliki Bamiatzi, Konstantinos Bozos and Tamer Cavusgil were coauthors of the article.