Foreignness research in international business: Major streams and future directions

Foreignness has long been a central construct in international business research, with research streams examining its conceptualizations, manifestations, and consequences. Researchers started by taking foreignness to be a liability, then later considered the possibility of its being an asset. A still more recent view is that foreignness is an organizational identity that a firm can purposefully manage. Broadly conceived, foreignness is an umbrella construct that directly or tangentially covers research on country of origin, institutional distance, firm-specific advantages, and the ownership–location–internalization eclectic paradigm. We review the body of research on foreignness and track the evolution of its four streams, liability of foreignness, asset of foreignness, drivers of foreignness, and firm responses to foreignness. We call for a clearer conceptualization and a sounder theoretical grounding of the foreignness construct, more integration of the liability of foreignness and the asset of foreignness research streams, greater attention to the multiple strategies firms use to manage foreignness, and the extension of the field to less-explored contexts such as emerging economies, digitalization, and de-globalization.

Using the Resource-Based View in Multinational Enterprise Research

The resource-based view (RBV) has evolved into a preeminent theory of strategic management. It is widely used by international business (IB) scholars since there is considerable synergy in core research questions pursued by IB and strategy researchers. However, in research on multinational enterprise (MNE) behavior, the use of RBV remains limited relative to other influential perspectives, such as the eclectic paradigm, the Uppsala model, and institutional theory. This is not surprising since the RBV was developed to explain performance differentials between country-centric firms with dominant product businesses rather than large MNEs with an expansive product-geographic scope. We describe how these limitations arise from the wider range of outcomes and explanatory variables, multiple levels of analysis, and the spatial, economic, and institutional barriers that are relevant to MNEs. We discuss the application of RBV to MNE research by the first author and other IB scholars. We then provide directions on how future research could use RBV more fruitfully to examine MNE performance and sources of competitive advantage in several areas. These include diversified corporations, subsidiary agglomeration, emerging market MNE internationalization, subsidiary autonomy, international joint ventures and alliances, and corporate social responsibility. Drawing upon teaching case examples from the first author’s work, we also point to the effectiveness of RBV in teaching with business cases, given its focus on firm performance (strategy).

Geopolitical disruptions and the manufacturing location decision in multinational company supply chains: a Delphi study on Brexit

PurposeThis study investigates the impact of geopolitical disruptions on the manufacturing supply chain (SC) location decision of managers in UK multinational firms. The context of study is the UK manufacturing sector and its response to the UK's decision to leave the European Union (EU), or Brexit.Design/methodology/approachThe study adopts an abductive, theory elaboration approach and expands on Dunning's eclectic paradigm of international production. A Delphi study over four iterative rounds is conducted to gather and assess insights into manufacturing SC location issues related to Brexit. The panel consisted of 30 experts and managers from a range of key industries, consultancies, governmental organisations, and academia. The Delphi findings are triangulated using a focus group with 38 participants.FindingsThe findings indicate that the majority of companies planned or have relocated production facilities from the UK to the EU, and distribution centres (DCs) from the EU to the UK. This was because of market-seeking advantages (being close to major centres of demand, ease of access to local and international markets) and efficiency-seeking advantages (costs related to expected delays at ports, tariff and non-tariff barriers). Ownership and internalisation advantages, also suggested by the eclectic paradigm, did not play a role in the location decision.Originality/valueThe study elaborates on the OLI framework by showing that policy-related uncertainty is a primary influencing factor in the manufacturing location decision, outweighing the importance of uncertainty as an influencer of governance mode choices. The authors find that during geopolitical disruptions managers make location decisions in tight time-frames with incomplete and imperfect information, in situations of high perceived uncertainty. The study elaborates on the eclectic paradigm by explaining how managerial cognition and bounded rationality influence the manufacturing location decision-making process.

Research on Foreign Direct Investment in Service Industry

Under the national policy goal of increasing labor income and increasing employment rate, the service industry is expected to be a powerful engine for stimulating economic growth, optimizing industrial structure and absorbing employment, while foreign direct investment is playing an important role in promoting industrial upgrading and improving efficiency. This article first analyzes the trade effects of multinational companies in the service industry based on monopolistic advantage theory, product life cycle theory, internalization theory and the eclectic paradigm of international production, and then introduces the development status of foreign direct investment in China’s service industry. The study found that under the premise of ensuring the national economy and social security, corresponding policies should be adopted in the introduction of investment in specific industries to correctly guide the flow of foreign capital so that it can serve to optimize the industrial structure of the service industry.

Integrated Islamic Social Finance Approach

This chapter assesses the Islamic social financial approach by reviewing the concepts of nature, society, and environment of the current social reporting models such as triple bottom line and environmental, social, and governance (ESG) and integrated (corporate) value reporting. These are examined to analyse the limitations of the capital centric and profit motive focus of shareholder wealth approach. Based on the current ‘responsible investor' and ‘social responsibility investment' principles, the view of environment as ‘externality' has impeded the potential realization of social good from an ‘eclectic paradigm' of integrated reporting. An eclectic paradigm is adopted for the integrated Islamic social financial reporting approach by the internalization of environment as part of socio-economic goals to attain social harmony. It offers an opportunity for higher commitment to a more sustainable Islamic social finance development using the principles derived from Infaq, Sadaqah, Hiba, and Waqf. COVID-19 pandemic is particularly unique and to a certain extent has stalled profit motive commercial efforts to activate social funding responses. A more sustainable response is attainable from social market community-based system rather than market-based system. With Islamic social finance approach to COVID-19 pandemic, a more integrated, inclusive, and sustainable reporting is proposed.

Internacionalização no segmento de mídia out of home: o caso da JCDecaux no mercado brasileiro

Purpose - This case study aims to understand the motivations for the expansion of the French multinational JCDecaux to Brazil, in the light of relevant theories about the internationalization of companies. JCDecaux is the world's largest outdoor media company (out of home), a fast-growing industry of the advertising market in Brazil.Design/methodology - This study explain the case based on the internationalization of companies theories, in the economic (Eclectic Paradigm of International Production) and behavioral (Uppsala School and Business Networks Model) strands. In addition to secondary sources, the research was supported by interviews with experts and executives from the outdoor media industry in Brazil.Findings - The main determining drivers for the entry of JCDecaux in the Brazilian market were identified. The analysis based on the theoretical models of internationalization concluded that the economic approach determined in a more significant way the company's entry into the Brazilian media out of home market. Economic advantages outweighed the costs and risks of Brazil's business environment, making the country attractive to the company's foreign investment.Research limitations - The scarcity of data about the media outdoor was reported by a professional interviewed as a negative feature. Another important limitation is the lack of scientific production about the out-of-home media in Brazil.Originality - This paper contributed to generate important information about the Brazilian outdoor media industry, especially on the phenomenon of internationalization of companies in this industry.

Identifying New Approaches for U.S. Drug Policy using Ownership, Location, and Internalization Factors

Dunning’s Eclectic Paradigm is used to assess the effectiveness and impact of U.S. drug prohibition policy on economic growth and political stability in Latin American countries as well as the decision making of Latin American Transnational Criminal Enterprises (TCE) in the cocaine-coca market. Results showed U.S. drug prohibition policy reduces the on-site supply but does not significantly reduce the transportation of cocaine and coca. U.S. drug prohibition policy also generated political instability for the region, and revealed policy externalities that facilitated TCE expansion. Tougher U.S. drug prohibition policy advances TCE by amplifying the impact that unemployment and local wages have on increases in cocaine-coca production, and by limiting the impact of control of corruption and economic freedom on coca eradication. Our results signal that a site-specific approach accompanied with policies that improve the farmers’ economic freedom, such as land formalization rights, and policies that lower unemployment rate facilitate effective U.S. drug prohibition policy.

The OLI Paradigm as a comprehensive model of FDI determinants: a sub-national approach

PurposeThis study aims to advance a sub-national perspective within the OLI Paradigm by analyzing how and to what extent the Eclectic Paradigm can serve as a general model to capture region-specific aspects of the location determinants of FDI, encompassing institutional effects that extend beyond the quality of institutions.Design/methodology/approachThe authors conducted a systematic literature review of 41 selected papers published between 1990 and 2019. Using inductive content analysis, they investigated the theoretical choices used to support analyses of the effects of institutional factors on MNEs' location decisions at the sub-national level.FindingsIt was found that, when changing from the national to the sub-national level of analysis, there is no need to change the main assumptions used in the literature, although a different perspective must be adopted. The Eclectic Paradigm permeates most of the studies revised and can serve as a general model to capture the sub-national perspective. It offers a foundation for new perspectives on the dynamics of institutional and political factors and their effects on location strategies and determinants at the sub-national level. Adopting the OLI Paradigm with a sub-national approach could widen the IB literature's prevailing focus on traditional economic factors and institutional quality.Research limitations/implicationsThe authors contribute to extant International Business literature Their paper enhances the literature on FDI location determinants by providing a more specific approach to development of a sub-national perspective within the OLI Paradigm, extending the institutional effects to capture more region-specific factors influencing the location of FDI. Study limitations are related to our analytical focus on the location dimension, excluding motives for FDI or firm-level location strategies. Rather than limiting analysis to quantitative studies, future research that includes qualitative studies and also covers the other dimensions of the OLI Paradigm could open additional new research avenues for advancing the sub-national perspective within the field of IB.Practical implicationsThe authors’ main findings suggest that MNEs' location strategies should include a sub-national perspective, which means that firms need to assess different levels of the location and understand their interaction with nationwide constraints and limitations, as it may affect firms' ability to effectively conduct their value-adding activities. They also contribute elements that can support sub-national governments' actions and policies aiming to enhance locational advantages to attract and retain FDI.Originality/valueThis review specifically analyzes the location determinants of FDI at the sub-national level, in studies published in a broad set of journals, from a variety of fields, prioritizing articles that investigate sub-national institutional determinants. The authors derive implications for the International Business literature and propose that the sub-national dimension should be incorporated into the Eclectic paradigm in order to better understand the influence of institutional sub-national determinants.

Cross-border mergers and acquisitions: links between acquiring firm capabilities and resources and target country location

Purpose Drawing upon the eclectic paradigm and the regulative dimension of institutional distance theory, it is posited that to understand a firms’ cross-border merger and acquisition (CBMA) location choices, it is critical to examine the acquirers’ ownership advantages. Design/methodology/approach Using a sample of CBMAs undertaken by US firms from 1999 to 2015, the paper explores the extent to which acquiring firm ownership advantages – financial and innovation capabilities – influence target firm country selection in relation to regulative distance. Findings It is shown that acquiring firms with greater innovative capabilities are likely to choose target firms in nations with less regulative distance from their home market; whereas firms with greater financial capabilities target firms in more distant nations. Originality/value This paper builds on the important research on CBMA activity, focusing on the largely neglected pre-acquisition resources in relation to the regulative distance between target firms and the acquirer.