| Toward a contingency model of incremental international expansion: the impact of firm, industry and host country characteristics |
| | Rhee, Jay H. | San Jose State U. | rhee_j@cob.sjsu.edu | (408)-924-3574 |
| | Cheng, Joseph L. C. | U. of Illinois, Urbana-Champaign | jlcheng@uiuc.edu | (217)-333-2963 |
| | This paper examines the incremental model of international expansion, a model often recommended as a strategy for firm internationalization. Previous studies, which have regarded the model as axiomatic because of its intuitive logic and theoretical parsimony, have yielded mixed results when they have subjected it to empirical tests. The overall inconsistency in the findings of previous studies and the general absence of a unifying framework make it necessary to search for a contingency model of incremental expansion, one that facilitates our understanding of firm internationalization.
We focus on the question of the extent to which firms follow the incremental expansion model. We investigate the direct relationship between foreign market uncertainty and international expansion. Taking a contingency approach toward international expansion, we also investigate whether the relationship can be moderated by other variables at the firm, industry and host country level.
Unlike the previous studies, which assumed a relationship, our study provides the first empirical evidence for the argument that foreign market uncertainty has a positive effect on incremental expansion. Our study also finds that the positive effect of foreign market uncertainty on incremental expansion weakens for firms 1) that are operating in industries in which invested resources are more recoverable, or 2) that are operating in foreign countries that offer greater labor-cost advantages.
Taken together, the paper provides theory and empirical evidence that help us understand how foreign market uncertainty affects incremental expansion, and when foreign market uncertainty is more or less likely to influence the pattern of incremental expansion.
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| | Keywords: International expansion; Contingency approach; Resource-based view of firm |
| Flows of Local Market Knowledge within the Firm: An Expanded View of Entry into New International Markets |
| | Lord, Michael David | Wake Forest U. | michael.lord@mba.wfu.edu | 336-758-5031 |
| | Ranft, Annette L. | West Virginia U. | aranft@wvu.edu | (304) 594-3072 |
| | A growing body of management research describes and analyzes international expansion as an incremental process of organizational learning. According to these views, through their accumulated experience, firms gradually acquire the essential in-depth local market knowledge they need to operate successfully in new and unfamiliar foreign contexts. However, this organizational learning process is almost always simply inferred rather than explicitly examined. Moreover, the organizational complexities of effectively managing knowledge, particularly within larger and more diversified firms, rarely are considered. To develop a richer view of new market entry, this paper integrates and extends complementary perspectives from knowledge-based views of the firm and from the corporate strategy literature. After reviewing the existing literature on the process of new market entry, we develop a model and propositions that consider both the determinants and consequences of flows of local market knowledge within the multibusiness corporation. First, we discuss internal impediments to knowledge flows that are likely to make organization-wide learning about new markets an uneven and uncertain process. Second, variations in flows of local market knowledge are proposed to influence key aspects of entry strategy (entry timing, level of investment, entry mode) and entry implementation as the corporation's various businesses expand into new markets. Finally, performance implications and recommendations for future research are discussed. |
| | Keywords: international; knowledge; entry |
| Growing in a Foreign Soil: A Review of Subsidiary Evolution |
| | Bouquet, Cyril Daniel | U. of Western Ontario | cbouquet@ivey.uwo.ca | (519) 673-1776 |
| | Foreign subsidiaries are not static units. Instead, they evolve over time, through the accumulation/depletion of resources, capabilities and value-adding activities, thereby increasing or diminishing their strategic contribution to their corporate networks. Like natural species, all subsidiaries have a birth, life and death, but few (the strongest) manage to survive in an increasingly complex and competitive environment. In this paper, we organize and extend the literature on subsidiary evolution by offering a conceptual framework that describes the determinants and dynamics of the evolutionary trajectories followed by foreign subsidiaries. A parsimonious and complementary model for conceptualizing subsidiary evolution is also suggested along with some directions for future research. This review will allow corporate and subsidiary managers, as well as policy makers, to recognize how they can foster subsidiary growth and consequently benefit from it. |
| | Keywords: Foreign Subsidiaries; Subsidiary Evolution; Literature Review |
| Capabilities, Survival and the Profitability of Foreign Subsidiaries |
| | Delios, Andrew | Hong Kong U. of Science and Technology | mndelios@ust.hk | (852)-2358-7743 |
| | Beamish, Paul W. | U. of Western Ontario | pbeamish@ivey.uwo.ca | (519)-661-3237 |
| | This study examines how a firm's international and industry experience, its inter-firm partnerships and its proprietary capabilities
contribute to its advantages and to its ability to overcome capability deficiencies in foreign markets. To conduct this examination,
we formulate and test hypotheses about the relationships between two subsidiary performance outcomes - survival and profitability -
and three groups of independent variables - experience, inter-firm partnerships and proprietary capabilities. Cox regression and ordered
logit analyses on 8,791 Japanese foreign subsidiaries show that each group of independent variables was an effective means of
counterbalancing capability deficiencies encountered when undertaking foreign investment. As well, consistent with the resource-based
view, we found that unique capabilities were the sole contributor to subsidiary profitability, while general capabilities were not. |
| | Keywords: performance; foreign investment; Japan |