Repeat market entries in the internationalization process: The impact of investment motives and corporate capabilities

Abstract

Research Summary: This study examines strategic and resource contingencies that shape MNEs’ country location choices. Our analysis of overseas production investments by Japanese firms (1971–2006) finds that differences in investment motives (i.e., horizontal and vertical investment) and corporate capabilities (i.e., marketing and production capabilities) moderate how prior entries into a host country affect subsequent entry decisions. In general, the positive impact of prior entries on investment in a country is weaker for horizontal investments and stronger for vertical investments. A more nuanced relationship emerges when entry decisions are analyzed in conjunction with heterogeneous corporate marketing and production capabilities. The study illustrates the novel insights to be gained from analyzing the joint impact of path dependence, managerial intentions, and corporate capabilities on country location decisions. Managerial Summary: Multinational firms often make multiple investments over time in a concentrated set of countries, accumulating superior knowledge and capabilities in these environments. Researchers have nonetheless uncovered factors that can lead firms to deviate from strategic trajectories defined by their prior investments. In a statistical analysis of country entry decisions by Japanese manufacturing firms over a 35‐year period, we found that firms’ tendencies to reinvest in the same host countries were smaller for horizontal (i.e., market‐seeking) investments but greater for vertical (i.e., efficiency‐seeking) investments. We also found that organizational capabilities influence the geographic trajectory of international expansion: firms with stronger marketing and production capabilities were less likely to be influenced by the locations of prior entries and were more likely to invest in new countries.

When does high institutional quality explain the presence of multinational enterprises in a foreign country? Experiential and vicarious learning as boundary conditions

“…We used a mixed logistic model to capture these alternatives in a hierarchical data structure. This model is a generalised version of the conditional logit model that has been used in recent studies on international expansion (see, for recent examples, Albino-Pimentel et al, 2018;Hernández et al, 2018;Jiang et al, 2020). An important characteristic of mixed logistic models is that the coefficients do not represent marginal effects and therefore cannot be used to infer the true relationship between variables (Wiersema and Bowen, 2009).…”

“…We measured the presence of the MNE in a host country by using a dummy variable, presenceijt, which took the value 1 if the MNE (i) was present in the host country j in year t, and 0 otherwise (Albino-Pimentel et al, 2018;Jiang et al, 2020). We considered the MNE to be present in a given country if it owned at least 10 percent of a mobile operator in that country.…”

The impact of initial public offerings on SMEs’ foreign investment decisions

“…A firm's international strategy is reflected not only in its overall propensity to invest overseas, but also in the direction of its investment (Buckley, 1989;Jiang, Holburn, & Beamish, 2020) and in the levels of resource commitment and control in foreign operations (Brouthers & Nakos, 2004;Gao & Pan, 2010). Though the notion of establishment chain from the Uppsala model provides empirical predictions regarding the location and resource commitment patterns, H&K only found limited effects of psychic distance on location decisions in their re-interpretation of the data from the seminal Uppsala studies, and their Casino model is primarily focused on the intertemporal variation of the overall propensity to invest overseas.…”

National Income Inequality and International Business Expansion

“…Understanding how national income inequality impacts international expansion decisions is essential to further examining the extent to which MNEs, the state, CSOs, and domestic competitors directly or indirectly influence income inequality (Audebrand & Barros, 2018; Marens, 2018). International business scholars have also emphasized that MNEs exercise strategic discretion when expanding overseas (Hutzschenreuter, Pedersen, & Volberda, 2007; Jiang, Holburn, & Beamish, 2020). Although income inequality is a relevant location attribute, the current literature offers limited guidance on how to address the case of the MNE that, by definition, operates in more than one society.…”