Innovation in Emerging Markets: The Role of Management Consulting Firms

Firms in emerging markets are often reluctant to invest in innovation because of the institutional voids endemic to such markets. Addressing the gap in the literature concerning the role of consultancy firms in emerging markets, we argue that management consultancy firms can fill institutional voids and thus help firms implement innovation initiatives. We buttress our main argument by combining strands of institutional theory with the resource-based view. Acknowledging the tensions inherent in the use of consultancy firms, we also examine two contextual variables that may mitigate their positive effects. We explore the critical aspects of the firms' internal and external environments and posit that well-functioning national institutions and a high level of firm competency attenuate the positive roles of management consulting firms because there are few voids that management consultancy can effectively address under such conditions. To test our hypotheses, we examine the effects of management consultancy on both the input and output aspects of innovation. We use a sample of 1330 establishments operating in nine emerging markets. Our findings support all main and moderating effects on innovation inputs but not on innovation outputs. We discuss the theoretical implications of our findings and provide suggestions for future research.