External growth strategies and organizational performance in emerging markets

Abstract

Purpose Inter-organizational trust has a vital role in any external trade relationship. However, there are not many studies relating to growth strategies and inter-organizational trust in firms in emerging markets. The purpose of this paper is to identify and compare the effect of external growth strategies on the organizational performance of companies and to examine the mediating role of inter-organizational trust between growth strategies and organizational performance. Design/methodology/approach Data were collected from 240 senior managers from public listed companies (PLCs) in Malaysia and were analyzed using analysis of a moment structures. Findings The findings indicate that growth strategies have a significant effect on organizational performance. Strategic alliances and acquisitions also have significant effects on organizational performance. Moreover, inter-organizational trust fully mediates the effect of growth strategies on organizational performance. Research limitations/implications As purposive sampling was used, selecting only managers with experience of the issues concerned, any common findings are likely to be generalizable to managers in similar situations. Practical implications Building inter-organizational trust among companies and relying on strategic alliance and acquisition, rather than merger, will sharpen their competitiveness and enable them to survive and thrive. Social implications The increase in organizational performance of PLCs will have a significant effect on employment and on gross domestic product (GDP), which will have a beneficial effect on citizens. Originality/value Studies that are related to these variables in emerging economies are still in their infancy. This study compared the effect of external growth strategies and contributed to the literature in the area of trust and external growth strategies.