Capability-Based Theories of Multinational Enterprise Growth

In this chapter we argue that traditional approaches to modeling the growth of the multinational enterprise (MNE) that focus on costs and efficiencies are too narrow to adequately and comprehensively address the foundations of MNE growth trajectories. Today’s global realities and the changing view of the MNE require a more focused and explicit capability-based perspective. In particular, we posit that contemporary theories of the MNE require frameworks and explanations that should simultaneously account for the uncertainties that firms face in their external environment and the complexities of often competing internal, organizational alternatives. To develop our reasoning in support of capability-based thinking, we discuss the changing nature on the international business (IB) landscape, the evolving views on the nature of the MNE, and present the core building blocks of capability-based thinking in managing MNE growth. We conclude the chapter by offering some thoughts on how capability-based thinking could be applied in future scholarly efforts.

Strategic Knowledge Creation in Multinational Enterprises

Unique knowledge and proprietary innovations are key to the competitive advantages on which most multinational enterprises (MNEs) are expected to base their initial international expansion. Moreover, their subsequent fortunes and survival typically depend on MNEs’ continued ability to upgrade and renew these advantages, as competition, imitation, and environmental change erode the value of existing ones. This chapter reviews key literatures around the nature, management, and effects of knowledge creation in MNEs. The chapter centers on the processes through which geographical patterns of international R&D have evolved, along with the structures, systems, and procedures through which MNEs have sought to govern and coordinate these activities. Finally, the chapter offers a summary and critique of the way that much of the inherited literature has portrayed and interpreted the strategic knowledge creation process in MNEs.

Internationalization of Emerging-Market Multinationals

This chapter analyzes the internationalization of emerging-market multinational enterprises (EMNEs) to clarify past contributions and outline suggestions for future research. We critically review the novelty of the phenomenon associated with the foreign expansion of firms from emerging markets, the new theoretical concepts introduced from analyzing these firms, and the new explanations related to their internationalization. We propose that future research can advance our understanding of these firms by studying how the underdevelopment of the home country’s economy and institutions influences firm internationalization. We specifically discuss four areas that can yield promising insights for internationalization research: frugal innovation, contractual innovation, upgrading escape, and institutional escape.

Global value Chain Governance

The drivers of economic globalization are leading many firms to disaggregate and redistribute their operations by outsourcing and offshoring. The result of the process is to create global value chains (GVCs) that are a collection of loosely affiliated, spatially distributed firms engaged in bringing products from raw materials to end use. A key insight from previous research is that GVCs are typically orchestrated by multinational enterprises (MNEs) given their control over key markets or critical technologies. Yet, very little is known about the emerging phenomenon in which MNEs appear to control production along the GVC without ownership of those assets. This is an important issue as consumers, regulators, and civil society are holding flagship MNEs increasingly responsible for behavior and performance along their entire GVC. This chapter analyzes GVC governance to highlight the fact that MNEs often require specific types of capabilities that relate to the context of their industry and the GVC in which they are embedded. The dynamic capabilities approach is extended to explore the ways and means of GVC governance by lead MNEs to shed new light on the contextual differences that influence the resources and capabilities required to improve GVC performance.

Internationalization Process Perspective

To manage the increasing competition in their home markets, firms need to go international and seek new markets, improve their efficiency, acquire natural resources, and (or) gain access to strategic assets. Irrespective of the motivations driving the decision to cross national boundaries, firms face the challenge to plan their internationalization process (IP) effectively. This chapter offers an overview of the IP perspective starting from the original formulation of the IP—or Uppsala— model (Johanson & Vahlne, 1977) to its latest revision (Vahlne & Johanson, 2017) and the open-ended debate that this revision continues to stimulate. It then discusses how firms acquire market knowledge for the first-time versus subsequent internationalization, and why they may change their market commitment after the initial foreign market entry.

Political Strategies of subsidiaries of multinational Enterprises

This chapter analyzes the political strategies of subsidiaries of multinational enterprises (MNEs). In doing so, I review the literature at the crossroads of corporate political strategy and international business (IB) strategy and identify four relevant themes. First, the types of political strategies deployed by subsidiaries dichotomize into engaged and non-engaged; and into legal and illegal. Second, the responses of subsidiaries to host political contexts, involve exercising voice, exit, or loyalty through different types of political strategies. Third, the determinants that explain the choice, approach (transactional or relational), level of participation (individual or collective), intensity, or dissimilarity of the political strategies of subsidiaries, can be clustered into five levels of analysis: home country, host country, multinational, subsidiary, and managerial. Fourth, the main outcomes of subsidiary political strategies are legitimacy in the host country and performance. The chapter concludes with promising opportunities for future research on political strategies from a subsidiary perspective, a growing area of study in IB strategy.

Location and International Strategy Formation

By now, it is generally accepted that the two key dimensions of international business (IB) strategy are location and control. Multinational enterprises (MNEs) must therefore decide where to locate their international operations and how to control their activities there. Virtually every research question associated with IB strategy is related to one or both of these dimensions. This chapter will focus on the location dimension, while recognizing that the control dimension is its ever-present complement. Historically, MNEs expanded into international locations in order to seek local, natural resources unavailable in their home countries. However, at present, it is the MNEs’ search for knowledge resources that dominates their location strategies. Over the last decade, the rise of global value chains (GVCs) has become one of the primary factors motivating scholars to integrate insights from IB and economic geography to develop a more holistic view of the location dimension of MNE strategy. We discuss the evolution of key intellectual ideas in the area of IB location strategies to then propose a future research agenda.

Introduction

International business strategy is a field where theory continuously seeks to meet business practice. Increasingly, scholars of international business strategy are concerned with the uncertainties and complexities of international operations, especially when firms commit significant resources to foreign markets. Over time, multinational enterprises have evolved in order to manage the challenges in their environments. The contributions in this volume address key remaining challenges and opportunities for the modern multinational enterprise. These contributions include refinements of traditional ideas about the role of firm-specific and country-specific advantages as well as new knowledge around how the heterogeneity observed in international business strategic behavior stems from the size, origin, governance and other characteristics of the firm. Further, we invite the reader to explore new dimensions of international business strategy, in order to understand the strategic implications of digitalization or the increased social pressure placed on MNEs to “do the right thing” and manage international operations responsibly, in ever changing social, economic and institutional environments. Each chapter provides insightful future research directions and implications for management and policy. This collection is a complete Handbook of International Business Strategy that should serve as a knowledge repository for scholars and managers alike.

It’s Not (Only) the International New Venture But (Also) the Micromultinational, Daftie!

This chapter advances the argument that, together with the international new venture (INV; or, born global (BG) firm), the unit of analysis in international business (IB) strategy should also be the micromultinational enterprise (mMNE). Based on the IB strategy and international entrepreneurship (IE) literatures, the chapter posits that the mMNE is a salient international entrepreneurial firm that has been neglected from most empirical work. The argument is built on an IE literature search and subsequent conceptualization around the dimensions of international entrepreneurial orientation (IEO). It is posited that risk attitude manifested in hefty resource mode commitments (contractual joint ventures and wholly owned subsidiaries) forms a key entrepreneurial dimension that should be a major focus of empirical analysis beyond innovativeness and proactiveness. The main contribution of this chapter is that it delineates the dimensions and manifestations of IEO and advances research in this area. The aim is to persuade the reader that the mMNE should be a focal firm of interest in the IB strategy and entrepreneurship arenas.

The Theory of International Business Strategy

Is there a unifying theory of international business (IB) strategy? If so, what might it look like? This chapter describes the key ingredients of such theory. These ingredients, we propose, constitute the foundation for further analysis of IB strategy. We incorporate both the traditional ingredients of IB strategy perspectives and significant extensions to theory developed in the past two decades. The chapter highlights the importance of multinational enterprises (MNEs) engaging in resource recombination—as opposed to simply utilizing extant reservoirs of resource bundles and capabilities, also called firm-specific advantages (FSAs)—to manage their operations in complex and often highly dynamic home and host environments. The chapter zooms in on the role played by generic behavioral drivers, such as bounded rationality and bounded reliability. Generic behavioral challenges are present in most, if not all, IB strategy decisions. Finally, the significance of a unifying conceptual framework for better understanding MNE strategy is discussed.