Which Firms Expand to the Middle East: The Experience of U.S. Multinationals

Abstract

We examine the characteristics of U.S. multinationals that control operations in the Middle East, a geographic region in which the foreign investment climate has been unfavorable. By comparing U.S. multinationals in the Middle East to a random sample of U.S. multinationals absent from the region, we find that the former have significantly greater R&D intensity and sales than the latter. Dividing multinationals with a presence in the Middle East between those in Israel and those in other countries, we find that the former are more R&D intensive, have a greater proportion of overseas sales, but are smaller in terms of total sales. We discuss the strategic implications of these findings and highlight avenues for future research. © 1997 by John Wiley & Sons, Ltd.

How Firm Performance Affects Internationalization

“…Prior studies that explored the effect of firm performance on its internationalization argued that higher performance proxies a firm's resource affluence (Fiegenbaum et al 1997, Tihanyi et al 2000. We controlled for these explanations using three different measures of slack resources.…”

“…Scholars who have explored the effect of performance on internationalization often argue that firm performance represents its resource affluence (Fiegenbaum et al 1997, Tihanyi et al 2000. In this study, we separated the performance effect from the resource affluence effect, and included slack resource variables.…”

“…Those that have explored this latter relationship apply a resource-based argument proposing that firms with good performance have the tangible and intangible resources which permit internationalization (Fiegenbaum et al 1997, Grant et al 1988). However, the empirical tests have shown that this relationship is not significant (Fiegenbaum et al 1997, Tihanyi et al 2000.…”

Home-region orientation in international expansion strategies

“…First, greater firm profitability suggests that the firm has access to increased wealth or slack resources that can help the firm grow and allow it to penetrate new, less familiar markets (Fiegenbaum, Shaver, & Yeung, 1997;Nohria & Gulati, 1996;Penrose, 1959). Organizational theorists have suggested that such residual resources are necessary for flexibility and growth, as they provide a cushion to absorb unexpected shocks, and allow firms to take risks in market expansion (Bromiley, 1991;Nohria & Gulati, 1996).…”

Strategic options of home country firms faced with MNC entry

“…Research has identified that MNCs with operations in Israel during the period of the Arab boycott were more R&D intensive compared with firms that had operations in the Middle East outside of Israel. 2 Furthermore, most MNC entries into Israel during that period involved the establishment of fully-owned R&D subsidiaries rather than by marketing in the domestic market, and thus, prior to 1993, the impact of MNCs operating in Israel on domestic competition was negligible. After Oslo the Arab boycott was effectively nullified, and trade relations expanded between Israel and Arab countries such as Egypt, Jordan, Morocco and the Emirates.…”