Dancing in the Tigers' Den: MNCs versus Local Firms Leveraging IT-Enabled Strategic Flexibility

Institutional settings in emerging markets pose challenges for multinational corporations (MNCs). We argue that information technology (IT) can be used to develop strategic flexibilities to complement organizational capabilities in emerging markets. We explore how MNCs and local firms compare in leveraging IT-enabled strategic flexibilities and organizational capabilities to improve performance in emerging markets. We focus on two capabilities: marketing capability and relational capability. We theorize that IT-enabled strategic flexibility in customer services (ITCS) complements the firm’s marketing capability, and IT enabled strategic flexibility in transaction services (ITTS) complements the firm's relational capability to influence firm performance. Further, we posit that the complementary effect of ITCS with marketing capability is lower for MNCs than for local firms, whereas the complementary effect of ITTS with relational capability is higher for MNCs than local firms. Our empirical analysis of primary data collected from MNCs and local firms in India broadly supports our theory.