An internalization theory perspective on the global and regional strategies of multinational enterprises

Many multinational enterprises (MNEs) claim to be pursuing a ‘global strategy’, but the majority of MNEs is not global, in the sense that these firms cannot emulate their domestic success outside of their home region. This inability is largely caused by compounded distance among regions and can be mitigated in part, by infusing a regional component into the MNE's international strategy. In this paper, we explore whether internalization theory can address the global versus regional strategy phenomenon. Specifically, we investigate whether internalization theory can predict under which circumstances MNEs will be able to pursue successfully a global strategy, and whether the theory can explain firm-level variations in utilizing regional components in international strategic governance. We argue that internalization theory can help regionalization scholars unbundle regional strategy by matching resource bundling needs with various firm-level resource recombination practices. We identify four distinct resource recombination processes with increasing complexity: fast bundling, principles-driven bundling, adaptive bundling and entrepreneurial resource orchestration, and argue that adopting the best-matched resource recombination practices will advance the MNE's success outside of its home region.     

The scope of corporate social responsibility in networked multinational enterprises

The extent of corporate social responsibility of a multinational enterprise along a global production system or chain is contested. Legal approaches highlight ownership, causation, and awareness. The stakeholder approach broadens responsibility but fails to address the directness of linkages. Adopting a social network perspective to examine international production within modern global factory systems, we argue that the extent of responsibility of the lead firm is impacted by all activities and participants in the chain. The full extent of responsibility is likely to be determined by whether indirect partners are exclusive or non-exclusive. Global factory systems, while contributing to geographical, ownership, and task fragmentation, significantly amplify linkages, interactions, and awareness implying a concomitant increase in corporate social responsibility when viewed from a social network perspective.     

Rivalry between emerging-market MNEs and developed-country MNEs: Capability holes and the race to the future

The rise of emerging-market MNEs (EMNEs) often is characterized as a process by which they catch up with the superior resources and capabilities of incumbent, developed-country MNEs (DMNEs). We argue that this characterization needs to be rethought as the requirements for competitive success in global markets are changing. Emerging markets are becoming more important, the value-for-money segment in developed countries is expanding, global retailers are gaining leverage, and the flexibility to deal with economic and political volatility is becoming a key organizational capability. Typically, EMNEs are stronger in these areas than DMNEs. This leads us to frame the competition between EMNEs and DMNEs as a race to the future in which each type of firm has capability holes that it needs to fill in order to thrive in the global economy of the future. We then discuss the strategies that EMNEs and DMNEs have been using to plug their respective capability holes. We hope future studies can apply this framework to analyze rivalry between EMNEs and DMNE in specific industries.     

The emergence of multi-sided platform MNEs: Internalization theory and networks

The rise of the digital economy provides firms across the globe with unique business opportunities. Companies such as Facebook, Alibaba, and Uber are competing in a new multi-sided platform world; the primary focus of these firms, from their inception, is to provide digital infrastructure, information and technology—intangible assets that enable direct interaction or value creation across platforms by linking different user group and complementors, often at the international level. Building on data drawn from multinational multisided Platform corporations (MMPCs) operating in China, we combine insights from internalization theory and network effects in understanding the value creation of such firms. We explore the boundaries of these new “breed” of MNEs in exploiting firm-specific advantages (FSAs) and in creating new knowledge between headquarters and subsidiaries. The findings suggest that internalization theory needs to shift its focus from the ‘boundaries of the firm’ to the ‘boundaries of the local network’. By integrating their internal and external networks of knowledge in adapting their business models in host markets, this new breed of MNEs is more likely than the traditional one to gain a sustainable competitive advantage in the new information age.     

Emerging market multinationals and internalisation theory

There is ongoing debate about the applicability of internalisation theory to Emerging Market Multinationals (EMNEs). Internalisation theory normally describes multinationals exploiting superior knowledge directly abroad rather than licensing its use to foreign firms. We argue that EMNEs can be explained readily in terms of internalisation theory. This involves internalisation in the opposite direction: knowledge is internalised by EMNEs which then exploit it utilising home-country cost advantages. However, this is normally achieved by means that avoid the licensing of key technologies from leading firms. This clarifies the theoretical basis of EMNE strategic asset seeking investment. Market-seeking investments are also linked to technology-seeking investments through fixed costs. A model formalises the arguments, establishing conditions leading to different types of equilibria when an advanced-economy firm competes with an emerging-economy firm. The range of factors that it incorporates means that it is also compatible with other theories of the EMNE.     

The stock market performance of exploration-oriented and exploitation-oriented cross-border mergers and acquisitions: Evidence from emerging market enterprises

This study builds on insights from mergers and acquisitions (M&A) studies and the perspective that stock market performance is affected by the M&A strategies of firms. Past studies show that acquisitions are an effective way to exploit existing knowledge and explore new possibilities. We argue that stock market performance can be a response to exploration/exploitation strategies in the context of cross-border M&As by emerging market multinationals. Based on cross-border M&A data of Chinese multinationals, we find that exploration-oriented acquisitions have worse stock market performance than exploitation-oriented acquisitions. Furthermore, we find support for our premise that acquiring firms can reduce the risk of exploration-oriented acquisitions by having more high-discretion slack resources or by maintaining a high level of equity share of the target firm. In addition, acquiring firms perform better if they conduct exploration-oriented acquisitions in related industries. Our results contribute to a better understanding of exploration and exploitation in the context of M&As.     

Production transfer within multinational enterprises and American wages

This paper tests whether the transfer of production stages within US-headquartered multinational enterprises (MNEs) from US parents to foreign affiliates has contributed to within-industry shifts in US relative labor demand toward the more-skilled. There are two main empirical results. First, there is evidence of MNE transfer during the past 20 years. Second, regression analysis does not support the MNE hypothesis. MNE transfer tends to have small, imprecisely estimated effects on US relative labor demand. This finding is inconsistent with models of MNEs in which affiliate activities substitute for parent unskilled-labor-intensive activities.     

跨国广告集团全球扩张模式的选择及其影响因素

本文运用对外直接投资理论和交易费用理论的相关原理，具体阐述了跨国广告集团全球市场扩张的经济动因，即跨国企业全球市场拓展和广告公司自身业务发展的双重需要。在此基础上，作者深度剖析了跨国广告集团全球扩张模式的三种主要模式及其选择不同模式的影响因素。文章最后重点分析了跨国广告集团在中国的市场扩张战略，以期为民族广告公司的可持续发展和国际化转型提供策略参考。     

Differentiated effects of formal and informal institutional distance between countries on the environmental performance of multinational enterprises

This research examines the influence of environmental institutional distance between home and host countries on the standardization of environmental performance among multinational enterprises using ordinary least-squares (OLS) regression techniques and a sample of 128 multinationals from high-polluting industries. The paper examines the environmental institutional distance of countries using the concepts of formal and informal institutional distances. The results show that whereas a high formal environmental distance between home and host countries leads multinational enterprises to achieve a different level of environmental performance according to each country's legal requirements, a high informal environmental distance encourages these firms to unify their environmental performance independently of the countries in which their units are based. The study also discusses the implications for academia, managers, and policy makers.     

Willingness to work for multinational enterprises from emerging countries: The case of Chinese multinational enterprises in the Netherlands

How do perceptions of country-of-origin image (COI) relate to willingness of Western people to work for subsidiaries in advanced countries of multinational enterprises from emerging countries (EMNEs)? We seek to shed light on this question by exploring six hypotheses based on environment-processing metatheory. Applying a PLS-SEM analysis of online survey data from the Netherlands, we find that the COI and familiarity with the EMNE’s home country are positively associated with willingness to work. Additionally, we reveal a few mediating effects indicating that familiarity and individual difference are indirectly related to willingness to work. This study contributes to our understanding of the inability of EMNEs to attract talent in the Western world by adding a macro perspective to the human resource management literature. Furthermore, we extend environment-processing metatheory by expanding the focus from the perceived internal context (corporate information) to the perceived external environment (country of origin), as well as to the antecedents (familiarity and individual differences) of the perceived environment.     

Natural resources,multinational enterprises and sustainable development

The natural resources sectors have not been prominent in the recent international business (IB) or management literature. We argue that the natural resources sectors, if not unique, are certainly characterized by a set of features that make them different, and raise issues that are central to international business. We identify two broad areas: the theory of FDI and the MNE, and the link between MNEs and sustainable development. We survey the relevant literature, much of it from outside IB, and identify a rich menu of research opportunities for IB scholars, many of which are addressed in the papers in this Special Issue.     

The diffusion of innovation theory and the effects of IFRS adoption by multinational corporations on capital market performance: a cross-countryanalysis

This article seeks to contribute to International Financial Reporting Standards (IFRS) literature by examining the effects of adopting IFRS on stock market performance worldwide from the diffusion of innovation theory perspective. Our study revealed several interesting findings after using combinations of unique panel data sets from 110 countries worldwide and conducting a robust empirical analysis from 1995 to 2014. First, we found a positive association between late mandatory IFRS adoption and stock market integration in Europe. Second, our findings indicate a significant negative association between early IFRS adoption and the following financial indicators: stock market trading volumes, stock market capitalization, market turnover, and market return. Third, our study reveals an insignificant association between early IFRS adoption and stock price volatility alongside stock market development. Our findings are robust and have significant practical and policy implications for regulators and policymakers of multinational corporations.     

From travel to virtual work: The transitional experiences of global workers during Covid-19

The Covid-19 pandemic has transformed how global work is conducted in multinational enterprises. There has been a rapid and forced shift from global mobility to global virtual work. Taking a transition perspective and drawing on event system theory, this paper examines the transitional working experiences of global workers amid a global health pandemic. Through 32 in-depth interviews (pre- and in-Covid-19), our findings reveal how this exogenous event has transformed previously unquestioned and enshrined global work routines. By unpacking the transition process, we find that global workers were challenged to reconfigure the structural and relational dimensions of their global work. We disentangle the strategic and sustainable lessons learnt on the future of global working for multinational enterprises.     

The role of experiential and non-experiential knowledge in cross-border acquisitions: The case of Indian multinational enterprises

This paper investigates the antecedents of the internationalization of emerging economy multinational enterprises (EMNEs) through cross-border acquisitions. Using a panel data set of 1138 cross-border acquisitions made by 515 Indian multinational enterprises (MNEs) during 2000–2013, it examines interactions of in-house resources with experiential and non-experiential knowledge to explore how EMNEs manage and exploit their knowledge base when internationalizing. The results show that Indian multinational enterprises have ‘interface competence’. They combine in-house resources with experiential market and externally sourced technological knowledge for undertaking cross-border acquisitions. The Uppsala model provides insights in analyzing the role of market knowledge and the Global Factory model helps in analyzing the role of technology in cross-border acquisitions by EMNEs.     

Micro-foundational ambidexterity and multinational enterprises: A systematic review and a conceptual framework

During the past decade, ambidexterity research has broadened from its traditional macro-level focus to examine the micro-level perspectives of ambidexterity on various settings. The authors systematically review and critically appraise the literature of ambidexterity from a micro-foundational perspective, within the context of Multinational Enterprises (MNEs). By synthesizing the review findings, the authors develop a comprehensive framework that maps extant literature within and across various disciplines and multiple levels of analysis. As part of their review, the authors also identify and discuss important emerging themes and fruitful areas for future research and present the implications to both research and management practice.     

The performance effects of vertical and horizontal subsidiary knowledge outflows in multinational corporations

Horizontal and vertical subsidiary knowledge outflows in multinational corporations (MNCs) are argued to be central to effective MNC performance. Building on the knowledge-based view of the firm, we develop a conceptual model to investigate the performance consequences, determinants and interaction effects due to coordination and control mechanisms, of horizontal and vertical MNC subsidiary knowledge outflows. The hypotheses are empirically tested with a dataset comprised of survey and archival data from over 200 MNC subsidiaries. Results indicate that explicitness and communication positively influence vertical and horizontal subsidiary knowledge outflows and that national cultural distance, centralization, formalization, and specialized resources moderate these influences. We also find that knowledge outflows to headquarters and to peer subsidiaries enhance an MNC's financial performance (i.e., return on assets). The results provide substantive evidence as to how vertical and horizontal knowledge operate within MNCs.     

The overlooked distinction of multinational enterprise subsidiary learning: Its managerial and entrepreneurial learning modes

The theme concerning modes of learning in multinational subsidiaries is the focus of enquiry in the current study. This theme is closely linked to the issue of how subsidiaries become alert and seize opportunities. Such an investigation is also important for management practice because effective subsidiary learning can render sustainable competitive advantage in the host country. We performed an in-depth case examination on six multinational subsidiaries of a large Finnish firm. We identify two learning modes of multinational subsidiaries that we refer to as managerial and entrepreneurial learning. We find that managerial learning shares characteristics with the systems-structural learning perspective; is facilitated by embeddedness of the subsidiary in the MNE system; and, transferred in the MNE through many conventional and reverse knowledge flows. On the contrary, entrepreneurial learning shares characteristics with the interpretive learning perspective; is facilitated by embeddedness of the subsidiary in the host country; and, transferred in the MNE through relatively fewer reverse knowledge flows. The distinction between these two learning modes and their discrete characteristics enlighten past research that has largely failed to pinpoint the importance of the two modes for MNE subsidiary activities.     

The Impact of the home country on internationalization

We analyze how a firm’s home country influences its internationalization. We propose two complementary types of influence. First, we conceptualize a firm’s international trade as shaped by four drivers: comparative advantage, comparative disadvantage, country-of-origin advantage, and country-of-origin liability. Second, we conceptualize the firm’s foreign direct investment as shaped by four other drivers: institutional learning, competitive learning, institutional escape, and competitive escape. Taken together, these eight drivers help pull together recent theoretical advances on topics such as emerging-market multinationals, investment in tax havens, and cross-border acquisitions of firms in advanced countries. We also highlight other home-country related issues, such as strategic responses and home-host country links, in the spirit of fostering future research on home-country effects that warrant a more nuanced understanding.     

A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises

This paper addresses two important issues at the nexus of the literatures on international trade, foreign direct investment (FDI), foreign affiliate sales (FAS), and multinational enterprises (MNEs). First, the introduction of a third internationally-mobile factor (physical capital) to the standard 2 × 2 × 2 “knowledge-capital” model of MNEs with skilled and unskilled labor allows us to resolve fairly readily the puzzle in the modern MNE literature that foreign affiliate sales among two identical economies completely displace their international trade. Intra-industry trade and intra-industry FDI (and FAS) can coexist for national and multinational firms (with identical productivities) in identical countries. Second, the introduction also of a third country to the model suggests a formal N-country theoretical rationale for estimating gravity equations of bilateral FDI flows and FAS, in a manner consistent with estimating gravity equations for bilateral trade flows.     

The impact of MNE cultural diversity on the internationalization-performance relationship: Theory and evidence from European multinational enterprises

Prior work has established the importance of degree of internationalization for understanding the performance of multinational enterprises. Despite all efforts, however, the relationship between degree of internationalization and firm performance (I-P) is still the subject of ongoing debate following inconclusive findings. We suggest that the international business literature has largely overlooked MNE cultural diversity as an essential determinant of the I-P relationship. We argue that the impact of the degree of internationalization on MNE performance is contingent on MNE cultural diversity. The impact of the degree of internationalization on performance is positive for MNEs that operate in culturally similar countries and negative for MNEs that operate in culturally diverse countries. Our study is among the first to examine the impact of MNE cultural diversity on the I-P relationship with a unique panel dataset from European multinationals. The results provide convincing support for our approach to the study of the degree of internationalization and MNE performance.