The Expansion of Emerging Economy Firms into Advanced Markets: The Influence of Intentional Path‐Breaking Change

Research Summary We examine the internationalization decisions made by one of Africa's most successful companies, South African Breweries, as it underwent a period of aggressive expansion. We see processes of both institutional complementarity and substitution at different phases and with different motives. At first it sought countries that played to its strength, namely the knowledge of doing business in environments of institutional uncertainty, but later it pursued an institutional diversification strategy whereby it attempted to minimize its institutional risk exposure. As it became larger, its aspirations increased too, and its over‐exposure to emerging market institutional risk saw it engage in institutional substitution into advanced countries. Through this phased international process, it was able to develop its internal assets, and this enabled the moves into developed markets. Managerial summary We demonstrate that firms can exploit their knowledge of ‘weak’ institutional settings and turn it into a source of advantage as they internationalize into locations with similar institutional ‘weaknesses.’ Using the case of one of Africa's most successful multinational enterprises, we illustrate the value gained from initially capitalizing upon institutional complementarity (utilizing the comparative advantage linked to institutional know‐how) by exploiting the experience of the home country's environment into similar settings. Over time and through learning‐by‐doing, pressure arose to diversify the risk linked with over‐exposure to institutional uncertainty and country risk, and this was associated with the process of institutional substitution into more advanced countries. We see emerging multinational learning and building its capabilities by leveraging its understanding of its home country institutional environment. Copyright © 2016 John Wiley & Sons, Ltd.

Section: Literature Reviewmentioning

confidence: 99%

Institutional Complementarity and Substitution as an Internationalization Strategy: The Emergence of an African Multinational Giant

Luiz

Stringfellow

Jefthas

2017

“…According to the World Investment Report (WIR, ), most emerging economy governments (e.g., China and Brazil) now actively encourage local enterprises to go global. While most studies have focused on MNCs from developed economies, a growing body of studies (e.g., Ang, Benischke, & Doh, ; Contractor, Kumar, & Kundu, ; Kalasin, Dussauge, & Rivera‐Santos, ; Peng, ; Sun, Peng, Ren, & Yan, ; Yaprak & Karademir, ) have examined the expansion behavior and international entry strategies of emerging market firms into other foreign markets.…”

Section: Introductionmentioning

confidence: 99%

Performance and business relatedness as drivers of exit decision: A study of MNCs from an emerging country

Tan

Sousa

2017

Research Summary This study examines the exit behavior of emerging market MNCs in the context of the parent company (PC)‐foreign affiliate (FA) relationship. Specifically, we consider business relatedness as a moderating variable and examine its impact on the relationship between an FA’s international performance and its exit decision from a foreign market. Our results, based on data collected from multiple informants in 180 Chinese firms, indicate that product relatedness and intangible resource relatedness have different moderating impacts on the FA performance‐FA exit decision relationship. Implications of these findings, along with the limitations of the study, are discussed. Managerial Summary Although the research on international entry and expansion is particularly important, an aspect that has been largely ignored in the literature is the exit behavior of firms. This study examines whether the extent to which a foreign subsidiary is similar to its parent's core business may influence the firm's exit decision. The findings indicate that managers are more likely to exit a poorly performing FA if there is a high (vs. low) level of product relatedness between the FA and its PC's core business. The results also suggest that intangible resource relatedness exerts a different contingent effect on the FA performance‐FA exit relationship than does product relatedness.

“…Market efficiencies for accessing complementary resources in a host region, used to test Hypothesis 4, was calculated based on the Index of Economic Freedom, which is published annually by the Heritage Foundation since 1995. This index has been used widely in prior global strategy research (Chan, Isobe, & Makino, ; Gubbi, Aulakh, Ray, Sarkar, & Chittoor, ; Kalasin, Dussauge, & Rivera‐Santos, ; Marano, Arregle, Hitt, Spadafora, & van Essen, ; Meyer & Sinani, ) and represents a broad indicator of a country's institutional environment and market freedom. More specifically, the economic freedom for a host region was calculated as:

italicEF = \sum_{{Region K}_{t}} {Emp}_{k, t} {Heritage}_{k, t,}

…”

Section: Methodsmentioning

confidence: 99%

Determinants of Corporate International Expansion Beyond the Home Region: An Empirical Examination of U.S. Multinational Enterprises Expansion to Europe and Asia‐Pacific

Mauri

Song

Figueiredo

2017

Research Summary This study extends Rugman and Verbeke (2001)'s model by examining how firm‐specific advantages (FSAs) and host region conditions affect multinational enterprise expansion at the inter‐regional level. We examine the impact of their three constructs (non‐location‐bound FSAs, location‐bound FSAs, and complementary resources in the host regions) on U.S. MNEs’ sales in Europe and Asia/Pacific. We also suggest and examine the impact of two additional factors (host market efficiency and FSA fragmentation). For empirical testing, we use U.S. industry‐ and firm‐level panel data and compare results from both datasets. We find that location‐bound FSAs and fragmented FSAs hinder expansion to other regions, while non‐location‐bound FSAs, host region complementary resources, and host market efficiencies facilitate expansion to other regions. Results from the two datasets are highly consistent. Managerial summary This study aims to provide guidelines for multinational enterprise (MNE) managers seeking to expand to areas beyond their home region. Some firm capabilities “travel” well to distant countries, to different cultures, and across economic levels, i.e., they are transferable. Others are not, i.e., they are more embedded in the firm's home‐country environment. Expansion of U.S. MNEs to Europe and Asia/Pacific is facilitated by (a) higher levels of intrafirm transfers, (b) access to complementary resources abroad, and (c) relative host market efficiencies. In contrast, such expansion is hindered by (a) higher productivity of labor at home relative to that abroad and (b) fragmentation of its product portfolio. This analysis is helpful for managers interested in building the systems, conditions, and mechanisms that increase the MNE's geographic reach. Copyright © 2017 Strategic Management Society.