The Relationship Between Innovation Internationalization and Firm Performance: An Exploration of Fashion Companies in Emerging Markets

Nesma Houmami

Student thesis: Master thesis


The research was conducted with the aim of determining how fashion companies can influence firm performance through innovation when internationalizing to emerging markets. In relation to this aim, the relationships between innovation, internationalization to emerging markets, and firm performance were examined in combination with a determination of how to best manage innovation in emerging markets.
The research utilizes both quantitative and qualitative data. Financial data were collected through the database, Osiris, and analyzed through OLS multiple linear regression models using cross-sectional data. Additionally, an explorative interview was conducted to determine themes and keywords for a thematic analysis of annual reports on four case companies.
The research discovered that innovation has a significant and positive relationship with firm performance. However, excessive investments in innovation will reduce firm performance, and fashion companies must therefore monitor their investment levels to ensure balance. Fashion companies can ensure a positive influence on firm performance by incorporating innovation in their core values and their brand identity. Furthermore, sharing and storing knowledge within the organization is crucial, and must be incorporated to encourage an innovative mindset amongst employees. Additionally, by connecting retail and design teams through communication, valuable knowledge can be utilized to ensure efficiency.
No significant relationship between internationalization to emerging markets and innovation or firm performance was found. This is likely due to a low presence of innovational activities from fashion companies in emerging markets in combination with lower innovational performance in emerging markets. Furthermore, internationalizing to emerging markets negatively influences the positive impact of innovation on firm performance. The negative impact is due to institutional voids in emerging markets that decrease protection of innovation within firms. Fashion companies are therefore advised against offshoring highly value-adding innovational activities to emerging markets and must pay attention to institutional voids that could compromise the value of the company’s innovational efforts.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
Publication date2021
Number of pages95
SupervisorsHenrik Johannsen Duus