Home-region orientation in international expansion strategies

Abstract

Despite the emerging consensus that most multinational enterprises (MNEs) are regional, systematic theory explaining regionalization is conspicuously absent, and empirical findings on its implications for MNE performance remain mixed. Drawing on internalization theory, we suggest that technological advantage and institutional diversity determine firms' home-region orientation (HRO), and we posit a simultaneous relationship between HRO and performance. We apply insights from the firm heterogeneity literature of international trade to explain the influence of technology on HRO. We predict a negative and nonlinear impact of technological advantage on HRO driven by increasing returns logic, and a negative impact of institutional diversity on HRO driven by search and deliberation costs. We find empirical support for our model using simultaneous equations methodology on longitudinal data on Triad-based MNEs. Performance significantly reduces HRO, but HRO does not have a significant effect on performance.

Internationalization of State-Owned Enterprises Through Foreign Direct Investment

“…This allowed the company to reap the benefits of internationalization and expand market share, however, at a lower cost than if it were to expand globally (Banalieva & Dhanaraj, 2013). We also proposed that SOEs shifted their behavior towards more risky, international, geographically distant projects on Phase III, i.e., during their strategic OFDI.…”

“…Thus, we encourage future research to expand ours by analyzing in greater detail the regional and global geographic scope and implications for performance (Banalieva & Dhanaraj, 2013) said Sérgio Lazzarini, who has written widely on Brazil's state capitalism (Romero, 2014). Secondary data on media investigation would be more appropriate for this kind of research, because SOEs' managers would not be willing to talk about these entrusted purposes of SOE internationalization.…”

Explaining the effect of rapid internationalization on horizontal foreign divestment in the retail sector: An extended Penrosean perspective

“…Because expansion into similar markets puts less strain on managerial resources than expansion into dissimilar markets (Banalieva & Dhanaraj, 2013, Hutzschenreuter, Voll, & Verbeke, 2011, rapid expansion into similar markets is associated with less strain on firms' managerial resources. Greater dissimilarity of conditions outside a firm's home region also results in ''lower value attributed by consumers … to the MNE's proprietary -and internationally transferableknowledge'' and to greater difficulties in ''transferring this proprietary knowledge if it is tacit'' (Pitelis & Verbeke, 2007, p. 143).…”

Success Factors of Regional Strategies for Multinational Corporations: Exploring the Appropriate Degree of Regional Management Autonomy and Regional Product/Service Adaptation

“…This is largely attributed to the liability of foreignness, which is typically lower within a certain region than the liability of foreignness between regions. The relevance of regional strategies is also supported by observations of an incomplete cross-border integration for different types of markets (i.e., for products, capital, labor, and knowledge), referred to as semiglobalisation, where both the barriers and the links among these markets explain the regional expansion of MNCs (Banalieva and Dhanaraj 2013;Ghemawat 2003Ghemawat , 2005Ghemawat , 2007. This trend is reflected in regional sales data for Fortune Global 500 firms, which shows that most MNCs fail to achieve a truly global sales dispersion because they are regionally oriented, mainly towards their home region (Rugman 2003a, b;Oh 2010, 2013;Rugman and Verbeke 2004).…”

“…The recent work of Rugman and others on regional strategies indicates that managers should have a differentiated picture of geographical space when defining corporate strategies (Rugman and Oh 2013). When looking at a world map, in contrast to prior recommendations, managers should devote special attention to regional, rather than only to global or national contours (Banalieva and Dhanaraj 2013;Rugman 2005Rugman , 2009Rugman and Oh 2013).…”