infonet-economy

New York - Frankfurt - Shanghai: what seemed like an almost impossible journey only one hundred years ago, has become a matter of course today. In 2011, airlines served a staggering number of 2.8 billion passengers worldwide. Falling transport prices have transformed our lives and the way we think about distance. Together with advances in communication technology, the increased speed and lower cost of transport has been a major driver of integration for markets, people and ideas over the course of the past 250 years.

While economic historians have identified advances in transport as an important technological driver of global economic development over the past 250 years, scholars of economic history have traditionally pointed out the significance of different legal and political institutions, culture, geography and human capital in explaining persisting inequalities in economic development. More recently, as innovation and entrepreneurship have been confirmed to positively influence economic development, some scholars have shifted their attention to the role that businesses and in particular entrepreneurs have had in driving economic development (Jones, 2013), and to analyze what led to the foundation and persistence of entrepreneurship in the first place. However, most previous contributions have either been limited to the study of one particular company or innovation, or have been studies of broad long-term economic trends from a historical perspective, seeking to explain historical divergence in regional development. For example, Chandler (1992), Freeman (1992) and Murmann (2000) studied the emergence of the synthetic dye industry in Germany in the second half of the 19th century. However, few scholars have considered the emergence of innovations, and in particular disruptive ones, over an extended time period encompassing significant changes in the institutional, economic, technological and social context.

This paper seeks to fill this missing gap in the literature by analyzing the emergence of related types of innovation - in this study, disruptive innovations in the transport sector - in the context of evolving institutional, economic and social settings. Besides their functional similarity in reducing travel time and cost, the cases investigated in this paper also share the disruptive nature of their innovation. The term "disruptive" was particularly shaped by Clayton Christensen and describes innovations that, rather than improving previously existing products in an incremental or evolutionary way, help create new markets and value networks and eventually disrupt or replace existing markets. For example, while the invention of the first internal combustion engine automobile was clearly an innovation, only the introduction of automobiles for mass consumer markets through Henry Ford truly disrupted the transport sector by irrevocably replacing horse carriages as the most common form of local transportation.

Therefore, this paper seeks to shed light on the following main research question: what drives disruptive innovation in the first place, and how may these factors evolve and change over time. For this purpose, the paper considers the historical context in which three distinct innovations in the transport industry emerged. First, the paper considers the development of the steam engine in the 18th century. Second, the paper studies the emergence of railroads in Britain and the United States in the 18th and 19th century. Third, the introduction of automobiles for the mass consumer market by Henry Ford provides relevant insights into the significance of individual entrepreneurs in the innovation process. By taking a long-term view in analyzing drivers of innovative business activities across different time periods, this paper also seeks to enable scholars and practitioners to derive contemporary insights from the study of economic and business history.

In recent years, a growing body of literature has found that the institutional context of firms matters for innovation and that more developed institutions are positively correlated with technological innovation, while weaker institutional regimes in transition economies like China have a detrimental effect. However, in recent years, transition economies and emerging markets have become increasingly important as centers of research and development (R&D). This is especially true for the development of good-enough, no-frills products that initially respond to local customer demands, which have the potential to be marketed globally as disruptive innovations.

Few previous studies have taken a systematic institutions-based view on why and how the institutional context of transition and emerging markets influences the emergence of this type of innovation. Taking an institutions-based perspective, this paper uses evidence from four high technology companies operating in China to show that in the case of low-end disruptive innovation, the institutional context of transition economies is actually conducive, as inadequate institutions (e.g. insufficient enforcement of intellectual property rights) matter less for disruptive innovation, while other characteristics of transition economies benefit innovation.

Despite the fact that many firms in a wide range of industries in various countries internationalize at or near inception, research on factors leading to the formation of born-globals has been limited to firms from advanced, open economies. In order to give a voice to the phenomenon of Vietnamese founding born-globals, we conducted an exploratory, multiple-case study. Three findings of this study are: (1) the major driver to the formation of Vietnamese born-globals is the entrepreneurs' leadership desire together with the need for short-term profits; (2) their choice of internationalization mode is influenced by market conditions as well as the internationalization degree of the industries in which they find their business opportunities; and (3) the reason why other motivators found in earlier studies do not apply lies in the peculiarity of the Vietnam context.