Premium
Are Firms in Developing Countries in Spider Webs or Iron Cages? Geographic Traps and Firm Performance
Author(s) -
Zoogah David,
Mburu Henry K.
Publication year - 2015
Publication title -
thunderbird international business review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.553
H-Index - 37
eISSN - 1520-6874
pISSN - 1096-4762
DOI - 10.1002/tie.21722
Subject(s) - profit (economics) , curse , economies of agglomeration , industrial organization , business , economic geography , net profit , context (archaeology) , economics , marketing , microeconomics , geography , sociology , archaeology , anthropology
We explore the question of whether a geographic context represents opportunity or threat using two competing theories — geography of opportunity and curse of geography — and multilevel techniques to analyze data from 366 firms in six African countries (and validated with 128 firms from 24 countries). We find that location (landlockedness and bad neighbors) relate negatively to both sales and net profit. Infrastructure, however, does not relate directly to firm performance at a significant level but interacts with one firm characteristic — multinationality — in relating to sales and net profit. Locational traps — landlockedness and bad neighbors — also interact with multinationality and CEO origin in relating to sales and net profit. We discuss the implications of these findings for research and practice. © 2015 Wiley Periodicals, Inc .