How the country context shapes firms' competitive repertoire complexity

Abstract

Research SummaryRecent research has shown that firms' ability to employ complex competitive repertoires can create long‐term competitive advantages. Since research on its determinants has focused on the firm level, we lack an understanding of how country‐level factors impact firms' implementation of complex competitive repertoires. Our cross‐country study addresses this gap by integrating a model of country‐level competitiveness factors with insights from the literature on competitive dynamics and portable governance. We argue that a country context with high‐quality competitiveness factors enables firms to implement complex competitive repertoires. In addition, we hypothesize that firms with foreign investors from countries with high‐quality competitiveness factors can partially compensate for low‐quality factors in firms' domestic context. We found support for our hypotheses in an unbalanced sample containing 1,340 firms from 32 countries.Managerial SummaryEmploying complex competitive repertoires (i.e., diverse and dynamic arrays of competitive actions), such as price reductions or new product introductions, can help firms outcompete their competition. We argue and empirically show that firms' domestic country context, specifically high‐quality governance, factor and demand conditions, related and supporting industries, and strong context for rivalry drive their ability to implement complex repertoires. Moreover, we find that ownership by foreign investors from favorable country backgrounds can partly compensate for firms' weak conditions at home by serving as enabling bridges. Managers who aim to improve their firms' repertoire complexity but are restricted by their domestic country context may consider attracting foreign investors from countries that have what their countries lack.

Complexity and multinationals

“…Of course, MNCs develop capabilities to cope with the added challenges and explore strategies that suitably match their resources and distinct advantages. The studies by Steinberg et al (2022), Jonsson and Vahlne (2021), Ma et al (2022), and Vallone et al (2022) examine how MNCs reactively and proactively deal with various aspects of capability and strategy development processes. Well‐thought‐out global strategies help, but their implementation is rarely perfect, trade‐offs are unavoidable, and coordination issues remain ever‐present.…”

“…The better we are at describing and analyzing internal and external environments, the more likely our solutions to handle complexity will be effective. The studies of Steinberg et al (2022) and Vallone et al (2022) provide exemplary uses of existing frameworks, but our knowledge inventory should be refined and expanded. For example, a key question in global strategy research is how MNCs can successfully adapt to different cultural and institutional environments.…”

“…And finally, external structural complexity includes the non‐simple requirements stemming from the interactions and interdependencies with external actors such as customers, suppliers, competitors, technologies, and the socio‐political context. For instance, Steinberg et al (2022) ask how the country context shapes firms' competitive repertoire complexity (diverse and dynamic arrays of competitive actions). Using longitudinal data across several countries, the authors argue that contexts defined by high‐quality competitiveness factors are related to firms' ability to implement a more comprehensive range of global strategic decisions.…”

Offshore FDI, tax havens, and productivity: A network analysis

“…While this tax planning also involves planning and execution costs of moving capital across borders, there are benefits to be realized from the connectivity to central tax havens or countries with low tax rates but high quality of governance. MNEs can learn from the expertise of central tax havens in financial planning and capital allocation (Steinberg, Hennig, Oehmichen, & Heigermoser, 2022) and avoid the high capital costs because of the capital market inefficiencies in the host countries (Rugman, 1980). Unsurprisingly, emerging economies like China receive higher‐than‐normal investments from tax haven locations like Hong Kong and US Virgin Islands (Chang & Park, 2005; Peng, 2012).…”