Dissecting home regionalization: how large does the region loom? (original) (raw)
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Home-region orientation in international expansion strategies
2013
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.
2010
This paper examines the impact of location−bound advantage on the internationalization strategy of multinational enterprises (MNEs). The extant research literature suggests that an advantage's location boundedness may be driven by: the nature of the firm advantage; organiza− tional embeddedness, and environmental embeddedness. We posit that these different drivers of location boundedness exert different impacts on internationalization strategies. Our empirical results reveal that organizational embeddedness lowers the breadth of internationalization of MNEs, and increases the tendency of these firms to employ a global strategy. We also find that MNEs whose advantages are tacit and complex have a lower depth of internationalization and are more likely to expand into culturally similar countries. Finally, our results show that MNEs whose advantages are highly embedded in the home environment tend to adopt a multi−domestic strategy and decentralized organizational structures.
Exploring trends in regionalisation
Regional Aspects of …, 2007
In this chapter we revisit the empirical findings of Rugman and coauthors concerning overwhelming home-regionalisation among the world’s largest firms. Using a longitudinal research design and continuous measures of internationalisation we discover a number of secular trends. We find that sales growth beyond the home region is considerably faster than sales growth in the home region. We use our empirical results to critique and augment existing regionalisation theory. In particular, we raise doubts about the sharp distinction in the literature between expansion in the home region and expansion in host regions. It would seem that firms expand simultaneously within and outside their home region, targeting individual countries rather than entire regions.
Reassessing (home-) regionalisation
Journal of International …, 2008
Alan Rugman and co-authors argue that globalisation, and with it global strategy, is a myth. This contention rests on a taxonomy of the world’s largest firms based on their sales, showing an overwhelming share of home-regional firms. We question the rationales underpinning their classification scheme. When retesting the data using different schema we find that the original results are far from robust, with a significant share of firms attaining bi-regional or global status. Further longitudinal analysis shows that large firms increasingly are extending their sales beyond the home region. Our results defy regionalisation theory in its current form and we call for refinements through further research.
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Academy of Management Proceedings, 2012
This paper examines the factors that drive the success of multinational corporations (MNCs) in their pursuit of regional strategies. We develop a comprehensive regional success factor model to investigate the effects of regional management autonomy and regional product/service adaptation on the regional success of MNCs. Using structural equation modeling, we also analyze the interaction effects of regional orientation and interregional distance. We evaluate our model by means of both primary and secondary data for Fortune Global 500 firms. Our findings show that appropriate degrees of regional management autonomy and regional product/service adaptation are highly contingent upon contextual influences on MNCs. Asterisks denote significance lev els of two-sided t-test: * indicates significance at the 10% lev el, ** at the 5% level, and *** at the 1% level.
An internalization theory rationale for MNE regional strategy
Multinational Business Review, 2012
Purpose -This paper seeks to demonstrate that internalization theory, as a "complete" theory of the firm, is particularly well equipped to analyze multinational enterprise (MNE) regional strategies, thanks to its joint transaction cost economics and resource-based foundations. Design/methodology/approach -This paper builds on recent work by Wolf, Egelhoff, and Dunemann to show that internalization theory's predictions on MNE regional strategy are superior to those suggested by several other conceptual frameworks. For each of the 11 hypotheses formulated by Wolf and his co-authors, an alternative is proposed here that is consistent with internalization theory predictions. Findings -MNE regional strategy is an important empirical phenomenon. Internalization theory, as a powerful conceptual framework with general applicability, simplicity and accuracy, allows in-depth analysis of MNE regional strategies. Research limitations/implications -Internalization theory scholars need to find new ways of operationalizing MNE firm-specific advantages (FSAs), as well as MNE resource recombination trajectories, to predict accurately when and how MNEs will pursue regional versus global strategies. Practical implications -MNE senior management should rethink international expansion strategies and realize that most large MNEs actually pursue regional, not global strategies. Social implications -Even the world's largest MNEs have great difficulty engaging in novel resource recombination across the globe, and their alleged market power should therefore not be overestimated. Originality/value -International business scholars should embrace internalization theory as the general theory of the MNE, rather than looking for insight from theories not intended -nor properly equipped -to study strategies of the world's most complex entrepreneurial organizations.
THE BORN GLOBAL ILLUSION AND THE REGIONAL NATURE OF INTERNATIONAL BUSINESS INTRODUCTION
The regional nature of MNEs has become a key aspect of international business thinking, since Rugman demonstrated empirically that MNEs are mainly home-region oriented and studied the impact that the regional phenomenon has on firm performance. The extant international business literature on small-and medium-sized firms of interest to Aharoni is also evolving with the consideration of new aspects such as the ''born global illusion,'' and the necessary balance between firm-specific advantages (FSAs) and the liability of foreignness (LOF) when going abroad. This chapter presents new insights on these topics by examining the regionalization of Spanish manufacturing firms, their export sales orientation and their FDI orientation. Finally, we study the impact of FSAs on the intraregional and foreign sales of Spanish companies.
Is it all a matter of grouping? Examining the regional effect in global strategy research
2007
Over the past decades terms such as regionalism, regionalization, 'regional multinationals', and 'liability of regional foreignness' have populated International Business and Global Strategy research. Notwithstanding their popularity, the definition of the term 'region' is ambiguous, which results in a lack of systematic use in research as well as in the insights generated from this construct. How can one define 'region'? Can the same regional category be used for research projects with completely different goals? Will drawing on different definitions of regional categories lead to different results and conclusions? We tackle these issues by first reviewing how social science research has defined region as well as how the construct has been used in global strategy research. Then we discuss, as an exemplification of the multiple definitions of region, how different regional categorizations paint different pictures of the degree to which US multinational firms have become more global or regional in the last two decades.
A perspective on regional and global strategies of multinational enterprises
Journal of International Business Studies, 2004
Multinational enterprises (MNEs) are the key drivers of globalization, as they foster increased economic interdependence among national markets. The ultimate test to assess whether these MNEs are global themselves is their actual penetration level of markets across the globe, especially in the broad 'triad' markets of NAFTA, the European Union and Asia. Yet, data on the activities of the 500 largest MNEs reveal that very few are successful globally. For 320 of the 380 firms for which geographic sales data are available, an average of 80.3% of total sales are in their home region of the triad. This means that many of the world's largest firms are not global but regionally based, in terms of breadth and depth of market coverage. Globalization, in terms of a balanced geographic distribution of sales across the triad, thus reflects a special, and rather unusual, outcome of doing international business (IB). The regional concentration of sales has important implications for various strands of mainstream IB research, as well as for the broader managerial debate on the design of optimal strategies and governance structures for MNEs.