Contents lists available at ScienceDirect Industrial Marketing Management journal homepage: www.elsevier.com/locate/indmarman Target and position article Enhancing product innovation performance in a dysfunctional competitive environment: The roles of competitive strategies and market-based assets ☆ Weiping Liu ⁎ , Kwaku Atuahene-Gima a Department of Management, School of International Business Administration, Shanghai University of Finance & Economics, 777 Guoding Road, Shanghai, China b Nobel International Business School (NIBS), Accra, Ghana ARTICLE INFO Keywords: Dysfunctional competition Product innovation Performance Strategy Market-based assets China ABSTRACT Dysfunctional competition (typically involving violation of intellectual property rights) is common in emerging economies, making it difficult for innovators to profit from their innovation activities. Firms operating in emerging economies must choose appropriate strategies to address the idiosyncratic challenges of dysfunctional competition and achieve competitive advantage. The utility of competitive strategies (cost leadership and dif- ferentiation) and market-based assets (customer orientation, competitor orientation, and marketing creativity) were assessed for their ability to help an innovating firm deal with dysfunctional competition and improve the returns from innovation. Data from a survey of managers in 282 Chinese high technology companies demon- strates that an emphasis on cost leadership, a customer orientation and creative marketing predicts better product innovation performance in environments with a high level of dysfunctional competition. Differentiation and a competitor orientation were found to be less effective. 1. Introduction At the time when the French fashion house Yves Saint Laurent was selling only its brand of cigarettes in China, copies of its leather goods, belts, suits and shirts were already available in China's major cities with slightly altered versions of the YSL logo (Wall Street Journal, 1993). Dysfunctional competition is also pervasive in technology-based in- dustries, not only in China, but also in many emerging economies that share a “well-earned reputation as a free-for-all when it comes to pa- tents and copyrights” (The Economist, 2008). For example, piracy of computer software has been found to be widespread in China (von Krogh & Haefliger, 2007). The International Intellectual Property Alli- ance estimates that approximately 80% of business computer software in use in China in 2010 consisted of pirated editions (International Intellectual Property Alliance, 2012). Dysfunctional competition has been a key feature of emerging economy markets, especially in the early years of development. Without the governance of formal developed institutions such as IPR, competition in such markets is often unhealthy, unfair or even unlawful (Li & Atuahene-Gima, 2001). Pervasive dysfunctional competition re- sults in illicit and/or immoral competitive actions including hostile imitation, counterfeiting, patent violations, trademark infringements, and the widespread availability of “me-too” products. 1 It can also provoke escalating price wars (Guo, 1997). A situation thus arises in which “generically weak institutions at the macro-level permit varia- tions in dysfunctional conditions at the meso-level” (Du, Kim, & Aldrich, 2016, p. 473). Developing and introducing innovative products which satisfy consumer needs is a good basis for competitive advantage, but dys- functional competition may significantly affect the outcomes of cor- porate innovation activities. Due to weak IPRs and inadequate contract enforcement (Cao & Lumineau, 2015; Poppo & Zenger, 2002), the in- novator's core technology and ideas may easily leak to others. The product design, patented technology, trademarks or even brand may be used without authorization by hostile competitors. These dysfunctional competitive practices make the management and protection of knowl- edge difficult. Competitors can freeride on the innovator's efforts and match their offers quickly, compromising the distinctiveness of a firm's new products and corroding its returns. Unfair competition has been widely recognized as key barriers to innovation in emerging economies like China (Zhu, Wittmann, & Peng, 2012). A survey of Western com- panies trading in China also identified “…unfair competition and poor https://doi.org/10.1016/j.indmarman.2018.01.006 Received 23 December 2016; Received in revised form 20 December 2017; Accepted 9 January 2018 ☆ This work was supported by Program for Innovative Research Team of Shanghai University of Finance and Economics (IRTSHUFE). We thank Luigi M. De Luca, a Professor of Marketing and Innovation at Cardiff University, for his helpful comments and suggestions. ⁎ Corresponding author. E-mail address: liu.weiping@mail.shufe.edu.cn (W. Liu). 1 In this discussion, “dysfunctional competitors” refers to companies using dysfunctional competitive practices, and “dysfunctional products” refers to the products offered by dys- functional competitors. Industrial Marketing Management 73 (2018) 7–20 Available online 03 February 2018 0019-8501/ © 2018 Elsevier Inc. All rights reserved. T