Localized advantage in a global economy: The case of Bangalore

This article examines how and why firms in Bangalore, a city in southern India, have achieved success in the global software industry. We use Porter's “diamond framework” to analyze information obtained from secondary sources and interviews with engineers, managers, and top executives from software firms and officials involved in Bangalore's development. While we found some aspects of the case conform to Porter's framework, many other elements tend to diverge from the model. Thus, the article contributes to the Porter's diamond model literature by extending its application to assessing the development of successful regions in knowledge‐based industries in developing economies. The discussion in the article would be of value to officials interested in creating such successful regions, as well as international business executives interested in the opportunities afforded by locating in these regions. © 2007 Wiley Periodicals, Inc.     

Strategic capabilities and the emergence of the global factory: Omron in China

Omron Shanghai provides a detailed case study of a multinational subsidiary's long-term evolution. The study assesses three streams of international business literature that emphasize the seemingly competing roles of parent firm strategy, national institutions or local management in the development of subsidiaries. It looks at each business function separately to reveal which capabilities were effectively transferred from Japan to China. In tracing Omron Shanghai's development from international joint venture into wholly owned enterprise and then global factory, it is the strategic intent of the parent multinational corporations that emerges as the consistent formative influence on management practices and capabilities.     

International competitiveness: A review article

Michael E. Porter's book, The Competitive Advantage of Nations (Porter, 1990), throws interesting new light on the international competitiveness of national firms. It deserves wide readership but this is likely to be handicapped by its length (855’ pages) and discursive style. Section I of this review article describes the approach of the book, Section II presents a short version of the main thesis, Section III offers a critical review of the argument, and, finally, Section IV examines the implications of the volume for the theory of international trade.     

Economic performance over time: Does porter's diamond hold at the national level?

This research examines the conditions that contribute to the performance of countries and their industries in international markets. Building on Porter's dynamic diamond, 1960 and 1985 data on 49 countries are used to develop country-level factors related to national economic performance. Three factors were identified: infrastructure/demand, competitive investment, and education. The analysis considers how these factors are related to gross domestic product, net exports, and foreign direct investment. It also assesses changes over time and differences between industrialized and developing countries. The relationships between the three factors and GDP were substantially the same for both industrialized and developing countries, but not for net exports and foreign direct investment. These findings suggest that the relationships between the factors and national performance have changed over time and that there are important differences between developing and industrialized countries.     

On the choice of in-house production versus outsourcing by multinationals

Abstract

The global economy is becoming more integrated with the increase in international fragmentation. This paper examines two forms of global production networks in a general equilibrium framework by building on the ‘knowledge-capital model.’ The focus is the relationship between country characteristics and the multinational firm's choice either to allocate the labor-intensive processing stage in-house to its foreign affiliates or to outsource the activity to outside contractors at arm's-length. Chinese data on the export processing trade are used to test the theory. The findings show that multinational firms with their headquarters in highly skilled-labor-abundant countries of intermediate size have a preference for outsourcing. By contrast, skilled-labor-abundant countries of small size are homes to multinational firms with subsidiary production in the host country where unskilled labor is cheap.     

Foreign direct investment in the banking sector: the case of Italian banks in the '90s

The present paper addresses the issue of the determinants of the growth of multinational banks upon foreign markets at a micro individual level. Theories and approaches suggested so far about globalisation of the banking sector basically relate banks' international growth to the theory of the multinational enterprise. Accordingly, this paper relies on the eclectic paradigm, which views the foreign direct investment decision to be a combination of ownership, internalisation and location advantages. Empirical evidence is provided through an econometric model based on count data techniques, with reference to the Italian case in the decade 1989–1999. Results show that the availability of resources and international experience already gathered by the parent banks have positive effects on their decision to undertake direct investments abroad. Multinational banks are also proved to grow internationally in order to internalise their pre-existing bank–client relationships, and to locate their foreign units where they can exploit positive externalities related to the presence of important international financial centres.     

Ireland's Foreign Direct Investment Competitive Advantage and Japanese Outward Foreign Direct Investment

This article addresses Ireland's record in attracting foreign direct investment (FDI). FDI has been identified as one of the key factors that has spurred the growth of the Celtic Tiger. An adaptation of Porter's Diamond is offered to explain the determinants of Ireland's competitive advantage in attracting FDI. The overall trends in FDI inflows to Ireland are considered. The study then focuses on Japanese FDI into Europe and Ireland in particular. The pattern of Japanese FDI flows into Ireland is analysed in the context of Ireland's determinants of FDI competitive advantage. Future considerations around Ireland's model of competitive advantage are addressed.     

The Determinants and Consequences of Multinational Advertising Agencies

This article examines the determinants of multinational advertising agencies (MNAs) within the framework of foreign direct investment theory (FDI). The essence of FDI theory is that in deciding to go international, a company must have an advantage. Key advantages discussed here include the huge size of MNAs, their access to capital, the loyalty given to them by multinational advertisers, their knowledge and skill, and their ability to use their foreign locations to service regional markets. Internalization, the advantage of being able to coordinate markets better, provides another relevant strand to FDI theory. The key factors for MNAs involve protecting the home market as well as reacting to competition abroad, escaping contracts which forbid competitive accounts and constrain growth, maintaining quality control over international advertising, and raising profits and efficiency by controlling all or a significant part of the business of a multinational advertiser. A discussion of the consequences of MNAs is also provided.     

Reflections on the Hymer thesis and the multinational enterprise

Understanding the economic function of the multinational enterprise remains a seminal issue. Almost half a century ago, Stephen Hymer initiated serious scholarly inquiry into the theory of multinational enterprise by positing that domestic firms needed special advantages to go global and succeed. However, he failed to fully unlock the foundations of the posited special advantages. Moreover, he sensed that multinational firms could not exist in a (theoretical) world of perfect competition, and wrongfully concluded that pernicious market power must be associated with the overseas activities of the multinational enterprise. This article examines Hymer's contributions and hints at the need for an (intangible) assets/capabilities based analysis of the multinational enterprise.     

The bargaining relationship between foreign mnes and host governments in latin america

The relationship between international firms and national governments can usefully be understood in terms of bargaining theory. This article develops an explicit model of the bargaining relationship, using the level of regulation as a measure of bargaining power. The model is tested with data from a survey of multinational enterprise subsidiaries in seven Latin American countries. The evidence supports hypotheses that (1) firms are less regulated when they are technology-intensive, when they operate larger scale affiliates, and when they export more from the local affiliate; and (2) firms are more regulated when they operate in larger countries and when they have a larger local market share. These findings demonstrate the importance of the government—business relationship as a multidimensional process and offer support for the explicit framework employed here.     

Cross-border private equity syndication: Institutional context and learning

Private equity (PE) has become an increasingly international phenomenon but there is a lack of research that looks at the process by which PE firms invest across borders. We aim to fill this gap in the literature by examining the role of institutional context and organizational learning as determinants of cross-border PE syndication. We examine these issues by studying the international expansion by later-stage UK PE investors into continental Europe over the period 1990 to 2006. Our results indicate that institutional context (in terms of the number of PE firms in the local environment and the presence of investment bankers in the local market) and organizational learning (in terms of the PE firm's experience in the host country; the PE firm's multinational experience; and the number of investment managers per portfolio company; but not the presence of local offices) are significantly related to the use of cross-border syndicates. Implications for theory and practice are suggested.     

从创业导向到跨国创业导向:一个文献综述

中国企业的国际化战略,已逐渐聚焦于"在全球范围创造新的价值",其实质正是一种跨国创业行为,传统的围绕动机、阶段、模式展开的国际化理论已不足以解释及指导中国企业的国际化实践。本文从"创业导向的定义和维度"、创业导向维度和组织绩效的测度方法,创业导向与组织绩效的关系、"跨国创业导向"等四方面对国内外相关研究进行了综述。并指出现有跨国创业导向研究存在"套用封闭环境下的创业导向研究框架"、"未区分不同规模、不同发展阶段国际化企业的跨国创业导向差异"、"对时滞因素和前因变量等缺乏关注"等不足之处。     

‘How do firms reach out to foreign universities? Inventors’ personal characteristics and the multinational structure of firms’

We analyze the determinants of firm-based inventors’ collaborations with universities abroad, comparing them with collaborations with national universities. We propose a micro-founded theoretical framework that introduces the role of personal linkages and global organizational pipelines as drivers of international academic collaborations, and we empirically investigate collaborations with national and international universities in a sample of inventors in Italy. We find that in general international collaborations depend positively on inventors working for multinational enterprises (MNEs). Instead for collaborations with national universities, the personal local linkages of the inventors play a large role. However, we also find that for collaborations with very distant universities abroad, such as US ones, working for an MNE is less crucial and the personal linkages of inventors become more important. In this case being an inventor with a network of foreign colleagues and with greater acquaintance with the norms of open science facilitates the interaction. This applies also to inventors who work for MNEs. The results point to a hybrid model of global linkages in the case of collaborations between firms and universities, in which both the personal international linkages of the inventors and the global organizational pipelines of MNEs play an important role.     

An Application of Porter's Strategic Management Framework to Fast Food Retailing Performance

This study critically examines the link between strategy and performance of several major companies in foodservice retailing. Porter's framework for gaining sustainable competitive advantage is applied to assess the firms' strategic behavior. Our findings indicate that success in this industry typically hinges on five strategic factors: concept, personnel, adaptation, growth, and location.     

Foreign subsidiaries' status: Distinctive determinants and implications for subsidiary performance

The purpose of this article is to develop a theoretical framework for understanding what determines foreign subsidiaries' status, and how status affects their performance. The basic argument is that foreign subsidiaries have several unique characteristics that distinguish them from local firms in terms of the factors determining organizational status and the implications status has for subsidiaries' performance. This conceptual article first reviews the three existing determinants of organizational status as theorized by existing status research and makes the case for an extension of the three determinants to account for the special situation of foreign subsidiaries. Having examined the determinants of subsidiary status, this study explores the effect of organizational status on firm performance, and finds that it reduces the liability of foreignness (LoF) that foreign subsidiaries encounter. The study contributes to multiple research streams, including organizational status, LoF, country of origin (CoO), and the international business literature in general. Practically, this study highlights the importance of obtaining high organizational status and provides valuable suggestions for multinational managers in general and subsidiary managers in particular.     

Internationalization of Chinese and Korean firms

This article compares and contrasts the growth of Chinese and Korean multinational enterprises (MNEs). The article identifies the similarities and differences between Chinese and Korean MNEs in terms of motivations for internationalization, expansion strategies, and paths. The goal of this article is to contribute to the literature by shifting focus on host‐country conditions to home‐country conditions in explaining the drivers for firms' internationalization. We conclude that firms are motivated to expand abroad when faced with domestic competitive disadvantages resulting from absence or deficiency of one or more of Porter's Diamond attributes in their domestic market. Implications for further studies are also explored. © 2009 Wiley Periodicals, Inc.     

A revised framework of global strategy: Extending the coordination-configuration framework

Although there have been significant efforts in conceptualizing global strategies, few frameworks have been developed to measure the relative globalness of firms. Porter proposed a specific framework of coordination and configuration for this purpose. This article proposes a new framework of global strategy by extending Porter's original framework. The conceptual clarification of this article will be useful in understanding different types of firms that are pursuing a global strategy. © 1995 John Wiley & Sons, Inc.     

How Relationality Shapes Business and Its Ethics

Just as Michael Porter's “five forces” provided a practical analytical tool for describing the forces that shape competitive strategy, so business ethicists ought to provide business leaders with a workable framework for understanding the sources of ethical obligations. The forces that shape competitive strategy vary according to time and industry, but are anchored in an ultimate criteria of profitability. Similarily, ethics can use a set of analytical categories that identify the relevant forces to business ethics on the basis of relationality. This paper first argues that relationality based on naturalism is the primary, plausible value for ethics. Second, it adapts a tripartite dialectic from scholars William Frederick and Michael Novak to describe the relational categories with which business must contend. Third, it uses these forces in a way similar to Porter's competitive forces to offer an analytical language familiar to managers in order to characterize business ethics.     

Strategy profiles of indigenous MNEs from the NIEs: The case of South Korea and Taiwan

Despite the argument for stateless firms and global strategy, few deny the existing heterogeneities between nations. However, the linkages between national context, corporate strategy, and market performance have not been adequately studied. This study integrates the fragmented, discipline-based literature of international business, cross-cultural management, organization theory, and strategic management to construct a framework for strategic management of multinational enterprises (MNEs), and explores the linkages between national context, corporate strategy, and market performance among the leading computer MNEs from South Korea and Taiwan. © 1995 John Wiley & Sons, Inc.     

跨国公司进入与中国产业组织结构之动态相互作用

国内产业组织结构是跨国公司、中国政府和企业三者之间的长期相互作用的初始条件,也是其相互作用的结果。本文采用"新产业经济学"的理论范式,并引用多个产业跨国公司进入的实例进行分析,从而表明中国的市场集中度将向着国际化产业集中度的方向收敛,并以市场集中度提高为主;跨国公司之间,以及跨国公司与本土企业之间竞争的气氛将更加浓厚;产业效率将得到提高,但国内产业可能受到压制。本国企业自身的发展以及国家竞争力的提高还需本国政府和企业的共同努力。