Interpretations

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The revised conceptual model reveals that no significant relationship between internationalization to emerging markets and innovation or firm performance exists, given the lack of evidence from the data.

However, a significant relationship between innovation and firm performance was found, and a negatively modifying effect from internationalization is supported by the data. Considering these findings, it becomes apparent that fashion companies need to focus on how to operate in emerging markets to avoid a reduced influence from innovation on firm performance. These findings will be further discussed to determine their contribution to the goals of this research and their implications to the research field in addition to managerial implications.

5.1.2 THE RELATIONSHIP BETWEEN INNOVATION, INTERNATIONALIZATION TO EMERGING MARKETS AND FIRM PERFORMANCE

By performing a regression analysis on the relationship between innovation and internationalization to emerging markets, results revealed that innovational activities in fashion companies are not impacted by entering emerging markets. This suggests that fashion companies will not gain nor lose knowledge that contributes to innovational capabilities, and hypothesis 1 is thereby rejected. This contradicts expectations of this research. By internationalizing, companies are provided access to location-specific knowledge and skills, which is found to improve the innovational capabilities (Alcácer & Chung, 2007).

The lack of a significant relationship thereby suggests two possible explanations. The first is that fashion companies do not offshore innovation to emerging markets, and as a result, the local knowledge is not absorbed, as the departments required to absorb the knowledge and skills are not locally present. This is a viable explanation, as highly value-adding activities, such as innovation, are often conducted in advanced economies rather than emerging markets (Mudambi, 2008). The second explanation could be that emerging markets offer low innovational advancements within fashion in comparison to advanced economies, and fashion companies are therefore not impacted by the presence in the market. Research found that emerging markets do in fact show lower developments within innovation, however, this explanation mostly accounts for why no positive relationship exists, as low innovational developments in a market could still lead to a significant negative relationship (Liu et al., 2017; Page, 1994). It is therefore more likely that lack of innovational presence in emerging markets results in an insignificant relationship.

The research further found that firm performance in fashion companies is improved by innovational activities. This was expected, as no prior research has suggested otherwise. This finding thus supports the second hypothesis of a significantly positive relationship between innovation and firm performance. Results revealed that high innovational intensity reduces firm performance. This means that although higher

investments in innovation would improve firm performance, excessive investment will have the opposite effect. This was likewise expected from the results, given prior research (Vithessonthi & Racela, 2016).

Thus, the finding from the collected data regarding innovational intensity and firm performance, supports

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expectations, and hypothesis 3 is furthermore not rejected. Clarifying the relationship between innovation and firm performance is important, as it is necessary to first determine whether it is possible to influence firm performance through innovation before determining how. This finding further indicates that innovational management should be balanced which is a key element in determining how to best influence firm performance through innovation.

Contrary to expectations, firm performance is not significantly impacted by internationalization to emerging markets and hypothesis 4 is thereby rejected. This does not mean that no impact exists from entering

emerging markets, but rather that no abnormal increase or decrease in firm performance will occur. This is especially surprising, as many fashion companies internationalize to emerging markets due to high growth (Różański & Sekuła, 2016). This could, however, be explained by increased risks when operating in emerging markets which may offset the economic gains (Carnahan et al., 2010; Henisz & Zelner, 2010).

Despite this, internationalization to emerging markets will impact firm performance by reducing the positive influence from innovation. Internationalization to emerging markets therefore has a modifying impact rather than a direct impact, and hypothesis 5 on the moderating effect of internationalization to emerging markets is supported by the data. This is an important contribution to the research, as fashion companies that enter emerging markets can be directed towards a focus point that may otherwise have been ignored.

To sum up, fashion companies can positively influence firm performance through innovation but should avoid excessive innovational investments, as this would counter the positive influence. By operating in emerging markets, the positive influence from innovation on firm performance is reduced, which therefore requires specific attention from fashion companies.

5.1.3 MANAGING INNOVATION IN EMERGING MARKETS

The positive relationship between innovation and firm performance was a result of integrating innovation to the core values and brand identity as this increases innovative capabilities from making innovation part of company processes. Furthermore, all case companies show high focus on productivity and efficiency, which suggests that a positive relationship may be dependent on the productivity level. However, there is not enough evidence from the thematic analysis to conclude on this theory. Nonetheless, high efficiency can be achieved through digitization, which is increasingly becoming a focus point in the fashion industry.

Furthermore, fashion companies have an opportunity of improving efficiency by linking sales and design teams through communication, thereby utilizing retail as a knowledge source.

The positive influence of innovation on firm performance is also a result of high commitment to storing and sharing knowledge within the company, while ensuring transparent communication when new strategies are implemented. These findings are important to the research purpose, as they identify underlying causes for the identified relationships and thereby offer concrete methods for insuring a positive relationship between

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innovation and firm performance. However, the optimal balance of innovation cannot be concluded, as this would likely vary depending on variables such as company size, level of integration of digitization,

subindustry and more. It is, however, certain that fashion companies should have higher focus on core products and resources than indicated by the golden ration (Nagji & Tuff, 2012).

The quantitative data further revealed that fashion companies should focus on minimizing the reduced effect on innovation from operating in emerging markets. A suggestion for minimizing the reduced effect is by actively participating in actions against knowledge spillover and IP infringement, while regularly analyzing and assessing the markets. This finding is a valuable contribution to the research as it identifies focus areas for fashion companies and offers possible solutions that may combat disadvantages.