The global value chain and internalization theory Benito, Gabriel R G; Petersen, Bent; Welch, Lawrence S
Journal of international business studies,
10/2019, Letnik:
50, Številka:
8
Journal Article
Recenzirano
Odprti dostop
In a research note in this issue, Strange and Humphrey discuss how a global value chain (GVC) approach serves to usefully move internalization theory towards a better understanding of the ...increasingly important ‘middle ground’ between markets and hierarchies in the contemporary highly globalized international business scene. After a brief recount of their main arguments, we argue that their discussion needs to the extended, as it does not adequately recognize important differences between internalization theory and the GVC approach. Specifically, the approaches differ on the notions of efficiency, opportunism, and level of analysis. We then argue that internalization theory can benefit from the systemic view implied in the GVC approach, and discuss the role of trust as a coordinating mechanism in international business. This leads to a more general discussion of internalization theory and the difficulty of encompassing dynamic considerations such as learning and foreign operation mode combinations and flexibility within value chain interdependencies. We conclude with a research agenda that flows from our discussion.
We address a long-standing discrepancy between theory and practice regarding how firms choose, use, and modify their modes of operation in foreign markets. Theory typically treats foreign operation ...modes as choices between well-specified, discrete alternatives. Observation of business practice reveals a "messier" reality. We commonly observe mode packages, within-mode adjustments and mode role changes, yet by and large these aspects of international business development have been relatively ignored in the literature, and in theoretical and empirical research. We propose richer and more realistic conceptualisations of foreign operation modes, and look at their implications for theory and practice.
International business (IB) scholars’ over-reliance on a select few theories leaves our understanding of firm internationalization incomplete. The behavioral theory of the firm (BTF) can offer new ...insights and can be used to model a broad range of firm actions. We focus on the three basic BTF components: problemistic search, learning by doing, and vicarious learning. These components help us understand why firm behaviors are more dynamic and heterogeneous than other theories allow. BTF, with its emphasis on how firms assess performance according to aspiration levels, selectively learn and update routines, and selectively incorporate the learning of others, is better suited to examine the diversity and change increasingly observed in internationalization decisions. We explain why scholars should move beyond “dynamizing” static theories and show BTF’s applicability to behaviors involving change such as multi-mode market entries and market re-entries. BTF also helps examine the decision to internationalize in the first place, nascent firm internationalization, location choices, international market adaptation, and headquarter–subsidiary relationships. We encourage IB scholars to use theories that can handle the complexity increasingly associated with modern firm growth, and propose BTF as a promising starting point.
Using the Antecedents, Decisions and Outcomes (ADO) format as an organizing framework, this article gives an overview of the literature on different dimensions and characteristics of outward foreign ...direct investment (OFDI) by firms from emerging countries. Based on an extensive coverage of studies published over a period of nearly 25 years between 1993 and 2017, we review extant research on this phenomenon from mainly China, as well as other emerging countries. We identify advances and analytical areas of OFDI research and pinpoint the key theories, methodologies, observed characteristics and the variables that have been examined in this growing research literature. Many areas of the above research themes remain underexplored, despite recent significant advancements, and may provide directions for future research.
We use internalization theory to analyze the establishment and entry mode decisions of state-owned (SOE) and privately owned (POE) enterprises. We enrich internalization theory by building on ...insights from economic theory of corporate governance and taking into account particular characteristics of SOEs such as non-economic motivations, long-term orientation, and different risk preferences. We examine foreign entries over a 10-year period in the Canadian oil and gas industry. This single-country and single-industry context features foreign SOEs and POEs from a wide range of home countries, allowing a focused study of the combined influence of state ownership and home-country factors. Compared to POEs, SOEs tend to prefer acquiring stand-alone assets rather than firms, and to take lower ownership shares. We also find that differences between SOEs and POEs diminish when home countries are characterized by high government quality and market orientation and identify differences between types of SOEs, with partially owned SOEs exhibiting behaviors more similar to POEs than fully owned SOEs. We demonstrate how our enrichment of internalization theory strengthens its predictive and explanatory capacity. Our results also show that SOEs from strong and market-oriented institutional environments are similar to POEs and can be studied using the traditional internalization theory.
We investigate the role of domestic interfirm networks for the foreign divestment decisions of firms. We argue that firms’ foreign operations risk being divested when a firm becomes more central in ...its domestic network. Positive changes in firm centrality at home facilitate access to information about new business opportunities, but they may also lead firms to consider reconfiguring their value chain activities and resources across locations. The resulting opportunity costs of maintaining foreign operations could subsequently lead to their divestment. Moreover, we argue that the positive association between an increase in firm centrality in the domestic network and foreign divestment is stronger under higher uncertainty, as pursuing new business opportunities at home becomes more appealing. We distinguish between firm-specific uncertainty and domestic market uncertainty. We test and get support for our hypotheses using foreign subsidiary data from U.S. firms in the ICT industry.
We draw on a social network perspective to explain multinational enterprises’ (MNEs) propensity to distribute their operations unevenly across various regions of the world. We focus on how the ...positioning of MNEs in their domestic network of strategic alliances affects their geographic scope, i.e., whether they concentrate on their home region or expand beyond it. We theorize that embeddedness in alliance networks constitutes a double-edged sword to the geographic scope of MNEs. Strong embeddedness in domestic alliance networks drives the development of location-bound firm-specific advantages (FSAs), which may narrow down MNEs’ geographic scope. In contrast, moderate embeddedness leads to more non-location-bound FSAs, which reduce liability of foreignness, and hence motivate MNEs to widen their geographical scope. We thus predict a non-linear relationship between domestic alliance network embeddedness and MNE geographic scope. Furthermore, the impact of the domestic alliance network on MNE geographic scope hinges on the organizational ability to efficiently and effectively absorb resources stemming from the network. We test our hypotheses using FDI data from 302 US MNEs in the information and communication technology industry for the period of 2001–2008, and generally find robust support for the hypothesized relationships.
Globalization has motivated firms to expand into foreign markets, but internationalization is inherently dynamic. Many firms have exited foreign markets for various reasons, but some later decide to ...re‐enter those same markets. Based on a case study of a Brazilian multinational's activities in Mexico, this study contributes to the literature on re‐entry decisions of multinational enterprises and their outcomes, focusing on the roles of institutional voids and the experiences of decision‐makers during such processes. The findings suggest that companies learn from their mistakes and reconsider how they approach re‐entry and the resources that may need to be mobilized. However, the learning process is not straightforward as it is clouded by international knowledge myopia. This study highlights how multiple actors and considerations influence re‐entry events.
State owned multinational enterprises (SOMNEs) have received extensive attention in recent research in international business and corporate governance, which demonstrates effects of state ownership ...on a range of international strategic decisions such as the degree of internationalization, foreign entry modes, and host country location choices. Such effects are explained by factors such as SOMNEs’ non-financial goals, corporate governance, and institutional pressures. However, results are mixed and context-dependent, and overall we still have an incomplete understanding of what governments aim to achieve through SOMNEs, and how these goals in turn lead to different international strategies. This conceptual article aims to explore how specific government goals may affect international strategies. We provide a more fine-grained view on SOMNE financial and non-financial goals and link them to key international strategic decisions such as the degree of internationalization, entry and establishment modes, and host country location choice. We review and extend previous literature and identify novel theoretical arguments, leading to an extensive set of propositions. We also sketch ideas for empirical studies of SOMNE objectives.
This article examines differences in performance between private companies (POEs) and state owned enterprises (SOEs), with an emphasis on the effects of market structure. The study uses a ...comprehensive panel covering in principle all registered companies during the 1990s in Norway, a country where SOEs play an important role in regular markets. Return on assets as well as costs relative to sales revenue are used as measures of performance in markets where SOEs and POEs compete with each other. Overall, POEs perform significantly better than SOEs. The study tests the hypothesis that SOE managers may learn from POE managers in environments with stronger competition, but finds only weak empirical support for such a learning mechanism.
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