The limits of firm-level globalization: Revisiting the FSA/CSA matrix |
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| Affiliation: | 1. Vrije Universiteit Brussel, Brussels, Belgium;2. OECD Investment Division, Paris, France;1. Universidad Rey Juan Carlos, Facultad de Ciencias Jurídicas y Sociales, Departamento de Economía de la Empresa (Adm., Dir., y Org.), Economía Aplicada II y Fundamentos del Análisis Económico, Paseo de los Artilleros, s/n, 28032 Madrid, Spain;2. Universidad Pontificia Comillas de Madrid, Facultad de Ciencias Económicas y Empresariales, Departamento de Economía, Calle Alberto Aguilera, 23, 28015 Madrid, Spain;1. Department of Business Administration, National Chung Cheng University, No. 168, University Road, Minhsiung Township, Chia-Yi, Taiwan;2. Department of International Business, National Taiwan University, No. 85, Sec. 4, Roosevelt Road, Taipei 106, Taiwan;3. Department of Marketing, Feng Chia University, No. 100, Wenhwa Rd., Seatwen, Taichung 407, Taiwan;1. University of Calgary, McCaig Chair in Management, Haskayne School of Business, 2500 University Drive NW, Calgary, AB T2N 1N4, Canada;2. Assistant Professor of Strategy and International Business Haskayne School of Business, University of Calgary, Calgary, Alberta T2N 1N4, Canada;3. Associate Professor Stu Clark Chair in Entrepreneurship and Innovation Asper School of Business, University of Manitoba, Winnipeg, Manitoba R3T 5V4, Canada;1. Professor and Beedie Research Fellow, Beedie School of Business, Simon Fraser University, Canada;2. Associate Professor and Canada Research Chair in Global Investment Strategy, Beedie School of Business, Simon Fraser University, Canada |
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| Abstract: | Multinational enterprises (MNEs) engaging in foreign direct investment (FDI) need advantages allowing them to offset the liability of foreignness in host countries. This liability of foreignness gives rise to additional operational costs related to economic, institutional, and cultural differences between home and host countries. MNEs therefore need to own or control firm-specific advantages (FSAs) that, along with country-specific advantages (CSAs) and internalization advantages, affect international business transactions. In this paper, we revise Rugman’s classic FSA/CSA matrix to better reflect how firms bundle their assets with CSAs. We further contribute to the prior debate on the linkages between the global factory paradigm and internalization theory by empirically evaluating the validity of a key proposition associated with the global factory, namely that FDI becomes relatively less important as a building block of the modern MNE. We do so using data on FDI and cross-border mergers and acquisitions, a major component of FDI. |
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| Keywords: | Firm-specific advantages Country-specific advantages Global factory Foreign direct investment Ownership Control |
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