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This study examines the impact of MNC parents on the cost of doing business abroad (CDBA) of their foreign subsidiaries in emerging markets. Based on a case research, we found that MNC HQs can influence the activity‐based CDBA of their foreign subsidiaries through policies on technology royalties, expatriate expenses, and through helping the export business of their subsidiaries. Theoretical implications of these findings are discussed.

1. Understand how the corporate lifecycle could trigger a necessity of making a tough decision to develop new business ventures based on the corporate lifecycle theory; and how changes in the external environment could hasten such a decision.

2. Analyze how a company can leverage its internal organizational structure to share and utilize cross-departmental resources and capabilities to support new venture businesses according to the synergy effect perspective.

3. Undertake a resource-based view analysis to evaluate the external and internal resources needed for corporate new venture development.

4. Identify the best course of action for the decision-maker by comparing, contrasting, applying and evaluating the two different models of corporate new venture development in the e-commerce business: the centralized organizational model and the decentralized organizational model and evaluate the pros and cons associated with each mode in the context of Dahan’s external and internal environments.

Since its inception in 2003, Dahan’s traditional business in SMS (Short Message Services) and data had gained thousands of customers across China and won top rankings in the industry. Despite its achievements, Dahan encountered difficulties when it entered the new e-commerce market, as the domain knowledge about the new business was very different from the domain knowledge in its traditional business. Furthermore, the emerging B2B e-commerce industry was very different from the traditional business in that the former mainly targeted corporate clients and the latter targeted individual customers in the B2C industry. This case examined the critical decisions that Xiaofen Huang, the CEO of Dahan E-Commerce Corporation and Co-Founder of Dahan Tricom Group, had to make and external, especially Internal, resources the Dahan Group needed in developing its new venture.

Specifically, this case explored how Huang would go through the mental process to make the best possible decision to help the company not only to survive, but also thrive in the rapidly-changing and competitive digital environment: it urgently needed to finalize an organizational incubation model to support the further development of its e-commerce and future new venture activities with two options to choose from: the centralized organizational model or the decentralized organizational model. A key challenge facing Huang was to decide which option was best suited to motivate salespeople in different departments to help one another, especially in the new B2B e-commerce business and to grow that new business.

In the case, Dahan’s growth aspirations and its motivation to transform its traditional business into a new e-commerce business were discussed. Second, when external challenges were examined, how Dahan explored the B2B e-commerce business using a trial-and-error learning process was explained. Third, when internal challenges were examined, how Dahan incubated its new B2B e-commerce business and its practices for leveraging and sharing resources/capabilities, as well as cross-departmental and cross-divisional collaboration through a resource-based lens, were illustrated. Last, the most critical learning in the case presented an immediate decision-making dilemma on which organizational incubation models to choose from for further new business development, where students learn to analyze both external and internal factors and consider Dahan’s available resource and founder’s aspiration, available strategic options to derive a best possible decision to suit the stage of the company’s lifecycle and founders’ vision.

This case was designed for use in undergraduate courses on corporate innovation, new venture development, corporate innovation, corporate entrepreneurship, e-commerce and growth.

Teaching notes are available for educators only.

CSS 11: Strategy.

As entrepreneurial top management teams in multidivisional forms are typically treated in pertinent literature as the default organizational solutions for developing dynamic capabilities, the emerging innovative organizational forms tend to be overlooked, even though they could be a viable means of transforming established enterprises. The present case study examines how Haier's microenterprise and platforms influenced the firm's dynamic capabilities development.

The paper presents a qualitative case study of Haier Group Corporation in China.

The findings indicate that Haier employed a loosely coupled relationship between its headquarters and the microenterprises, developed quasi market-based exchange relationships and established peer-to-peer learning opportunities and coordination among its microenterprises. Data analyses further revealed that Haier has adopted three-step routines to capture market opportunities and enhance operational efficiency. This research extends the sensing-seizing-reconfiguration model typically recommended in the existing literature. It also demonstrates that organizational configuration is an important aspect of dynamic innovation. In summary, the study results showcase microdivisionalization as a new way for developing dynamic capabilities to better adapt to the ever-changing market environments.

In summary, our study showcased microdivisionalization as a new way for firms to change the organization structure and business strategies to better adapt to the ever-changing market environments.

This article examines weaknesses of multinational corporations in China. Many multinationals target high price and high‐end segments when entering the country. This creates several problems. First, this market position makes them less sensitive to the growth opportunities in mid to low‐end segments. Second, the high price strategy provides local firms with opportunities to grow their businesses and to consolidate and increase market size in mid‐ to low‐end segments. Furthermore, the low cost strategy also helps local Chinese firms increase exports. After gaining competitive strengths, many local competitors upgrade their products and technologies to attack upper‐middle to high‐end segments, the core markets of many multinationals. This competitive dynamic suggests that multinationals should be aggressive and preemptive in monitoring local competitors in mid‐ to low‐end segments. When local firms are weak, using competitive prices is more urgent than bringing cutting edge products to the Chinese market. However, when local firms become strong competitors, though competitive prices remain important, multinationals should leverage their advanced products and technologies to compete in China. We discuss several factors contributing to the high costs of doing business in China and other factors contributing to success or failure of multinationals, such as establishing distribution channels, not ignoring the less affluent non‐central city markets, and educating the Chinese customers to create differentiated products and services.

This research analyzes two issues: (1) MNCs' foreign entry process, and (2) the relationship between foreign entry strategy and international technology transfer. The study is based on a comparative case analysis of ten U.S. high-tech manufacturers operating in the Asian Pacific Rim.We analyzed firms' foreign entry processes and compared them with the predictions of internationalization theory. We also studied the causal relationship between a firm's international technology transfer policy and its foreign entry strategy.We found support for companies' incremental Asian commitment in terms of operating mode; however, their reasons were different from those professed in internationalization theory. We also found that foreign entry process varies with the purpose and nature of foreign business activities. The stage theory is less applicable to firms that follow customers into foreign markets, firms whose foreign expansion is to improve customer service, and firms that must produce abroad to sell abroad. Finally, host government policies also tend to limit the applicability of the stage process model.In addition, we found that companies' desire to sell abroad was the overriding consideration to enter foreign markets. As such, they accepted operating modes to maximize their sales, even at the risk that collaborative partners could more easily appropriate the technologies they transferred. However, the danger of technology loss was mitigated by a belief that their core competency was the ability to develop ever-newer technologies rather than the product and process technologies they transferred.