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Book part
Publication date: 25 October 2014

Gilmar Masiero, Francisco Urdinez and Mario Henrique Ogasavara

The purpose of this chapter is to demonstrate that, despite the extensive literature on firm-specific advantages (FSAs) and country-specific advantages (CSAs) produced…

Abstract

Purpose

The purpose of this chapter is to demonstrate that, despite the extensive literature on firm-specific advantages (FSAs) and country-specific advantages (CSAs) produced since Rugman’s classic matrix (1981), little progress has been made in empirically operationalizing the second concept.

Design/methodology/approach

Through a review of the international business (IB) literature that refers to the CSA concept, we identify the “vagueness” in the usage of this concept. First, we present a concise literature review of the CSA construct, with a link to the “double diamond” theoretical model of Rugman and D’Cruz (1993) and Rugman and Verbeke (1993). Second, we present the results of the bibliographic analysis on the use of the construct by a variety of authors.

Findings

We demonstrate the weak conceptual grounding of the CSA concept by reviewing the literature on host-CSAs attracting Chinese overseas foreign direct investment (OFDI). Apart from the fact that various authors use different sources of data, an important reason for contradictory results is the fact that each author tests host-CSA through different indicators. Here, we propose a list of variables and indicators based on the “double diamond” model and test these empirically.

Originality/value

IB researchers should start conducting serious studies on home-CSAs and host-CSAs instrumental to attracting investments, defining clear indicators and using replicable data based on publicly available information. This chapter is the first to show that the concepts developed by Rugman (1981) and expanded by Rugman, A. M. and Verbeke, A. (2008) (Internalization theory and its impact on the field of international business. Research in Global Strategic Management, 14, 155–174) are relevant to advance in the quantitative operationalization of concepts within IB theory.

Details

Multinational Enterprises, Markets and Institutional Diversity
Type: Book
ISBN: 978-1-78441-421-4

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Article
Publication date: 10 January 2020

Murat Akpinar

This paper aims to clarify the fit of competitive strategies and firm-specific advantages (FSAs) with country-specific advantages (CSAs) in explaining manufacturing…

Abstract

Purpose

This paper aims to clarify the fit of competitive strategies and firm-specific advantages (FSAs) with country-specific advantages (CSAs) in explaining manufacturing location choices at product category level in the European automotive industry.

Design/methodology/approach

Seven hypotheses are formulated and tested using binomial logistic regression with data from 148 passenger car models (i.e. product category level) that are sold in Europe and manufactured in countries that offer CSAs of either cost advantages or differentiation advantages. The first four hypotheses test manufacturing location choices of product categories pursuing cost leadership strategy, differentiation strategy, focus strategy and hybrid strategy. The other three hypotheses test whether FSAs of R&D capability, marketing capability and operations capability will impact on the manufacturing location choice. The tests control for the type of passenger cars as well as the manufacturer’s region of origin.

Findings

While pursuing cost leadership strategy leads to manufacturing in countries that offer cost advantages, pursuing differentiation strategy as well as strong R&D capability and marketing capability result in manufacturing in countries that offer differentiation advantages. Focus strategy, hybrid strategy and operations capability do not have an impact on the manufacturing location choice at product category level.

Research limitations/implications

Conducting empirical research at product category level is subject to limitations in the choices of FSAs due to lack of availability of data.

Practical implications

Managers should assess the competitive strategies and FSAs of their product categories and then decide about manufacturing locations based on their fit with host country CSAs. Policymakers should understand the CSAs of their countries and target to attract manufacturing FDI from product categories with matching competitive strategies and FSAs.

Originality/value

The research contributes to discussions in explaining manufacturing location choices. Its originality lies in being the first study to test the fit of competitive strategies and FSAs of product categories with CSAs.

Details

Competitiveness Review: An International Business Journal , vol. 30 no. 3
Type: Research Article
ISSN: 1059-5422

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Article
Publication date: 11 March 2011

Lei Li, Dan Li and Weilei (Stone) Shi

The purpose of this study is to investigate the multinationality‐performance (M‐P) relationship in the context of US biopharmaceutical small‐ and medium‐sized enterprises (SMEs).

Abstract

Purpose

The purpose of this study is to investigate the multinationality‐performance (M‐P) relationship in the context of US biopharmaceutical small‐ and medium‐sized enterprises (SMEs).

Design/methodology/approach

The study examines the M‐P relationship of SMEs from a single home country and in a specific industry.

Findings

The paper finds that geographic dispersion of both foreign subsidiaries and alliances affects SME performance negatively, albeit to a varying extent. Firm‐specific technological advantages alleviate the negative impact of geographic dispersion of both foreign subsidiaries and alliances, whilst firm‐specific marketing advantages mitigate the negative effect of only geographic dispersion of foreign alliances. The paper also addresses the direct and joint effects of firm‐specific advantages, country‐specific advantages, and the degree of internalization on SME performance systematically. Further, the results reveal some interesting differences between the venturing and the development stage of SME internationalization.

Originality/value

To the best of the authors' knowledge, there have been virtually no studies on the M‐P relationship which attempt to distinguish between subsidiary‐ and alliance‐based internationalization.

Details

Multinational Business Review, vol. 19 no. 1
Type: Research Article
ISSN: 1525-383X

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Book part
Publication date: 24 June 2015

Sumon Kumar Bhaumik, Nigel Driffield and Ying Zhou

The extant literature on emerging market multinationals (EMNEs) suggest that they derive their advantages from factors such as economies of scale, and that they…

Abstract

The extant literature on emerging market multinationals (EMNEs) suggest that they derive their advantages from factors such as economies of scale, and that they internationalise, in large measure, to access technology. However, support for this framework typically comes from analysis of static data, comparing EMNEs and OECD MNEs at a point in time. Little attention is paid to their development paths in a dynamic setting. We examine these propositions directly using an approach that enables us to decompose productivity growth of firms into its components, namely, changes in scale economies, technological progress and technical efficiency. We compare Chinese MNEs with their non-MNE domestic counterparts and developed country MNEs that have operations in China. We demonstrate that Chinese MNEs continue to derive much of their productivity growth from changes in scale economies, while developed country MNEs continue to have an advantage with respect to technical progress. Both these types of MNEs have a significant advantage over Chinese non-MNE domestic firms.

Details

Emerging Economies and Multinational Enterprises
Type: Book
ISBN: 978-1-78441-740-6

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Book part
Publication date: 22 June 2011

Svetla Marinova, John Child and Marin Marinov

This chapter provides a logical extension to the understanding of firm-specific advantages and disadvantages and the enabling role of existing and emerging country-specific

Abstract

This chapter provides a logical extension to the understanding of firm-specific advantages and disadvantages and the enabling role of existing and emerging country-specific advantages relevant to the process of Chinese firm internationalization. Its longitudinal perspective considers the changing objectives and actions of firms that enable them to compensate for disadvantages and create new or strengthen existing competitive advantages. The case study evaluation reveals that the evolution of strategic resources is the key motivator behind the internationalization of Chinese firms. Decisively encouraged by the Chinese government firms with corporate entrepreneurship aspire to alter themselves from home market leaders and regional players into globally competing multi-nationals. This process is made possible via the development of firm-specific advantages and continuous compensation for firm-specific disadvantages. The aspiration for strategic asset acquisition from developed countries combined with cost leadership and independent customer-centred innovation brought about strong firm-specific advantages stimulating the internationalization process of firms. The chapter focuses on the interdependence of country- and firm-specific advantages and disadvantages, thus recognizing the significance of the home country institutional context in Chinese outward foreign direct investment. It has been identified that corporate entrepreneurship is a significant firm-specific advantage for firm internationalization being a major force in gaining, accumulating, utilizing and leveraging resources for transforming firm-specific disadvantages into advantages. We argue that if the relational framework between governmental institutions and firms is more developed, the impact of country-specific advantages on firm-specific advantages is more favourable. This assumes that the government espouses an ideology that is favourable to corporate entrepreneurship.

Details

Dynamics of Globalization: Location-Specific Advantages or Liabilities of Foreignness?
Type: Book
ISBN: 978-0-85724-991-3

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Article
Publication date: 15 May 2017

Philippe Gugler

A significant stream of literature focuses on host countries’ locations when explaining why firms internalize some of their activities in specific countries. At first…

Abstract

Purpose

A significant stream of literature focuses on host countries’ locations when explaining why firms internalize some of their activities in specific countries. At first glance, home location schemes and specificities seem to have attracted less attention in the scientific community. The purpose of this contribution is to provide a literature review linked to the specific issue of emerging countries’ country-specific advantages and the competitiveness of emerging market multinational enterprises.

Design/methodology/approach

The approach is to present the main theoretical developments related to the role of home countries in the internationalization process of domestic firms in general and as far as the home context of emerging countries is concerned.

Findings

A rigorous analysis of the literature shows that theoretical developments and empirical studies on international business do refer explicitly or at least implicitly to the role of home countries in the international expansion of firms.

Originality/value

The value of this review is to develop the main streams of the literature and to serve as a basis for the other contributions published in this area.

Details

Competitiveness Review: An International Business Journal, vol. 27 no. 3
Type: Research Article
ISSN: 1059-5422

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Article
Publication date: 20 July 2015

Francesca Spigarelli, Ilan Alon and Attilio Mucelli

This paper aims to examine the global competitiveness of an emerging market multinational (EMM) from China through the case of a major European acquisition, in Italy, in…

Abstract

Purpose

This paper aims to examine the global competitiveness of an emerging market multinational (EMM) from China through the case of a major European acquisition, in Italy, in the heavy construction industry. Country- and firm-specific factors are considered. Horizontal integration in this oligopolistic industry changes the industry dynamics, with significant implications for its players.

Design/methodology/approach

The paper follows case study methodology and triangulates data through a literature review, an examination of available company data and interviews of key personnel. Firm- and country-specific factors, both advantages and disadvantages, including the business environment in the construction industry, globally and regionally, are analyzed.

Findings

The paper identifies several key success factors at the firm level, including the integration of research and development, marketing and sales; the development of extensive communication and trust among the managers of both companies; the exploitation of the Chinese market as a source of demand; and the shifting of selected production lines to the Chinese market.

Research limitations/implications

The traditional models of country-specific advantages/disadvantages and firm-specific advantages/disadvantages are augmented by examining the host market and industry task environments. Host country-specific factors for successful integration include favorable local conditions, both in terms of endowments and institutions, and an industrial cluster with supporting firms and services.

Practical implications

Following the case study, managers can refer to the key success factors to emulate “best practices”. The paper concludes with a heuristic developed by the Chairman of Zoomlinon, Chunxin Zhan, underlining five principles for a successful EEM acquisition: understanding, sharing, responsibility, compliance and coordination.

Originality/value

This paper develops a deep case study analysis and provides useful theoretical and practical implications with reference to Chinese acquisition in the Western markets.

Content available
Article
Publication date: 24 January 2019

Shaowei He, Zaheer Khan, Yong Kyu Lew and Grahame Fallon

The purpose of this paper is to examine how innovation-related firm-specific ownership advantage (FSA) plays a role in developing the competitive advantage of Chinese…

Abstract

Purpose

The purpose of this paper is to examine how innovation-related firm-specific ownership advantage (FSA) plays a role in developing the competitive advantage of Chinese multinationals when they internationalize.

Design/methodology/approach

Based on a review of the existing literature concerning foreign direct investment by emerging economy multinational enterprises (EMNEs), the authors identify that numerous studies explain this phenomenon on the basis of their location-bound country-specific advantages. However, such views do not fully explain the key underlying factors behind the rapid rise and success of many EMNEs as these firms rapidly internationalize and develop global competitiveness in developed markets. The current research explores three leading innovative Chinese EMNEs from the engineering sector: BYD, Sany Heavy Industry and CSR China.

Findings

The authors find that EMNEs’ knowledge, and particularly their innovation-creating technological knowledge, has contributed greatly to their successful internationalization. The illustrative cases show that the three firms have now moved beyond the infant to the mature stage of EMNE development through developing their technological knowledge in order to realize FSA through internationalization. This study helps in contributing fresh reflections to the continuing debate concerning the causes of internationalization and global competitive development by EMNEs and the role of their FSAs in these processes.

Originality/value

This is one of the few studies which have demonstrated that some of the EMNEs do possess firms’ specific advantage which helps explain their innovative capabilities, competitive advantages and subsequent internationalization patterns.

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Article
Publication date: 17 June 2010

Alan M. Rugman

The eclectic paradigm of Dunning (1980) (with its OLI and four motives for FDI framework) can be reconciled with the firm and country matrix of Rugman (1981). However, the…

Abstract

The eclectic paradigm of Dunning (1980) (with its OLI and four motives for FDI framework) can be reconciled with the firm and country matrix of Rugman (1981). However, the fit is not perfect. The main reason for misalignment is that Dunning is focused upon outward FDI into host economies, whereas Rugman’s matrix is for firm‐level strategy covering MNE activity in both home and host countries

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Article
Publication date: 15 June 2012

Anna Gerke and Maureen Benson‐Rea

This article aims to investigate how country location, as a source of country‐specific advantage (CSA), and product innovation, as a source of firm‐specific advantage

Abstract

Purpose

This article aims to investigate how country location, as a source of country‐specific advantage (CSA), and product innovation, as a source of firm‐specific advantage (FSA), influence the international expansion of small and medium‐sized enterprises (SMEs) and their growth to become multinational enterprises (MNEs). It also aims to confirm internalization theory by testing the applicability of an extant concept, the FSA/CSA framework for the international expansion of SMEs. Developed and empirically validated largely in the context of the MNE, this paper seeks to show how the framework can be applied in the context of SMEs that develop into MNEs.

Design/methodology/approach

A qualitative approach is employed within a single industry setting using multiple cases. Propositions are formulated to explain the theorized relationships between innovation and the growth of SMEs in a sector which depends heavily on specific CSAs. Data were collected through semi‐structured interviews and archival data, and are analyzed in data displays, tables and matrices.

Findings

The article finds that location of the industry cases as a source of CSAs, and product innovation as a source of FSAs, are highly relevant for growing New Zealand SMEs into MNEs. The study applies internalization theory to the growth strategies of SMEs.

Originality/value

This research combines extant theory and a specific context in order to analyze phenomena through a distinct conceptual lens. It confirms the CSA/FSA framework by applying it in a new empirical context. It can inform decision‐makers in growing SMEs on the strategic and international implications of firm and location advantages.

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