When Distance is Good: An Upper-Echelons Perspective on the Role of Distance in Internationalization

Abstract

Prior research has tended to view crosscountry distance as an obstacle. Yet, differences across countries are a key reason for firms to internationalize. To address this discrepancy, this paper puts forward a unifying framework which (1) synthesizes and delineates the different types of crosscountry distance, (2) provides a logic for analyzing cross-level influences of distance on internationalization decisions, and (3) highlights the opportunities brought about by distance. The paper argues that firms are more likely to be able to realize these opportunities when they have internationally experienced managers and diverse, wellfunctioning top management teams at the helm. The paper also highlights the complex influences of distance, calling for the use of cognitive and behavioral research methodologies to further our understanding of the role of distance in internationalization. An illustrative example of Vodafone Group PLC is included.

Subsidiary country managers and subsidiary development: Upper echelons and resource-based perspectives

“…subsidiary managers having local/international experience of organizations other than the focal subsidiary) is associated with higher levels of autonomy, contributory role, initiatives, strategic entrepreneurship (MNE supports entrepreneurial culture in the subsidiary), better perceptions about the subsidiary growth opportunities in the host location, and low internal isolation. Piaskowska (2017) proposes that subsidiary isolation (or distance) can be positive if the subsidiary country manager has international experience. Our results align with her proposition and suggest that such cases are particularly likely when the subsidiary country manager has international experience, but within the same corporation.…”

“…Studies have also highlighted the subsidiary country manager's international experience as a significant predictor of subsidiary development. For example, Piaskowska (2017) argues that the negative influences of subsidiary internal isolation on a subsidiary capability and performance can be mitigated, or even made positive, by their manager's international experience; such managers have broader visions, and they are better able to come up with an appropriate strategy with regard to the situation at hand (Levy et al, 2007). These arguments suggest that subsidiary development varies with characteristics of the subsidiary country manager such as location (host or foreign) and prior managerial experience.…”

“…Drawing on this perspective, studies have examined top management characteristics such as age, educational level, prior managerial experience, nationality (e.g. expat/local), as well as compensation and location effects vis-à-vis firm performance and outcomes (Hambrick, 2007; Hsu et al, 2013; Piaskowska, 2017; Sekiguchi et al, 2011; Storey, 1994). With regard to MNE–subsidiary relationships, previous studies have also examined characteristics of subsidiary managers such as their ability to build internal networks and relationships within the MNE, negotiate with the MNE with regard to subsidiary initiatives, as well as lobbying and issue-selling to the MNE (see, for example, Birkinshaw and Ridderstråle, 1999; Dörrenbächer and Gammelgaard, 2016; Monteiro, 2015).…”

The roles of external embeddedness and institutional distance in the subsidiary product/process innovation and R&D capacity

“…In the case of emerging markets such as Brazil, external embeddedness can arguably enhance subsidiary innovation despite greater institutional distance from developed countries. This is especially possible when subsidiaries develop knowledge-exchange relationships with local partners (Luo et al, 2019;Ferraris et al, 2018;Ferreira et al, 2017;Piaskowska, 2017): such relationships lead to subsidiary product and process innovation. External embeddedness can help foreign subsidiaries to develop their technological capabilities, enhance their innovative performance (Williams and Du, 2014;Figueiredo, 2013;Figueiredo, 2011) and increase access to knowledge (Ho et al, 2018).…”

“…Differences in institutional environments lead to institutional distance, which can be seen as an obstacle to developing capacity for subsidiary innovation. Institutional distance indicates differences between the institutional profiles of two countries in regulatory, normative and cognitive terms , and it significantly affects the arbitrage for MNE international businesses Piaskowska, 2017;Verbeke et al, 2017).…”