International Business Strategy With stagnated demand in many home economies, the need to internationalize and exploit foreign market opportunities has never been more paramount for businesses to succeed at a global level However, this process raises a number of questions, such as: Can firms use their knowledge of one market in the next? Can firms pursue internationalization on several fronts at the same time? How should firms handle cultural and institutional differences between markets? This textbook provides students with the core research in international business strategy, including organization, efficiency, external relationships and the challenges found in an increasingly multicultural world Each part begins with a presentation of the issues and controversies faced in that particular area, followed by a synthesis of the research, which provides avenues for future research To facilitate and encourage further debate and learning, each part also includes at least one original case study Compiled by two world-leading scholars of international business, and supplemented with critical commentaries and a range of integrative case studies, this comprehensive textbook provides advanced students of international business strategy with a resource that will be invaluable in their studies and beyond Peter J Buckley is Professor of International Business at the University of Leeds, UK Pervez N Ghauri is Professor of International Business at Kings College London, UK International Business Strategy Theory and practice Edited by Peter J Buckley and Pervez N Ghauri First published 2015 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 711 Third Avenue, New York, NY 10017 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2015 Peter J Buckley and Pervez N Ghauri The right of the editors to be identified as the authors of the editorial material, and of the contributors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988 All rights reserved No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers Every effort has been made to contact copyright holders for their permission to reprint material in this book The publisher would be grateful to hear from any copyright holder who is not here acknowledged and will undertake to rectify any errors or omissions in future editions of this book Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data International business strategy: theory and practice/edited by Peter J Buckley and Pervez Ghauri pages cm International business enterprises–Management–Cross-cultural studies–Case studies International trade–Case studies I Buckley, Peter J., II Ghauri, Pervez N., HD62.4.I5496 2014 658’.049–dc23 2014024753 ISBN: 978-0-415-62469-5 (hbk) ISBN: 978-0-415-62470-1 (pbk) ISBN: 978-1-315-84836-5 (ebk) Typeset in Times New Roman by Sunrise Setting Ltd, Paignton, UK Contents List of figures List of tables List of contributors PART I Basic concepts of international business Introduction The foreign investment decision process YAIR AHARONI International investment and international trade in the product cycle RAYMOND VERNON The Uppsala internationalization process model revisited: from liability of foreignness to liability of outsidership JAN JOHANSON AND JAN-ERIK VAHLNE The eclectic paradigm as an envelope for economic and business theories of MNE activity JOHN H DUNNING The internalisation theory of the multinational enterprise: a review of the progress of a research agenda after 30 years PETER J BUCKLEY AND MARK C CASSON Case study I: Internationalization of brewery companies: the case of Carlsberg JENS GAMMELGAARD PART II Global strategy Introduction Globalisation, economic geography and the strategy of multinational enterprises PETER J BUCKLEY AND PERVEZ N GHAURI Semiglobalization and international business strategy PANKAJ GHEMAWAT 10 Do regions matter? An integrated institutional and semiglobalization perspective on the internationalization of MNEs JEAN-LUC ARREGLE, TOYAH L MILLER, MICHAEL A HITT, AND PAUL W BEAMISH 11 Do managers behave the way theory suggests? A choice-theoretic examination of foreign direct investment location decision-making PETER J BUCKLEY, TIMOTHY M DEVINNEY AND JORDAN J LOUVIERE 12 Towards more realistic conceptualisations of foreign operation modes GABRIEL R G BENITO, BENT PETERSEN AND LAWRENCE S WELCH Case study II: Danone: a French multinational expanding into the global market SYLVIE HERTRICH, MICHEL KALIKA AND ULRIKE MAYRHOFER PART III Organizing the multinational enterprise 13 Introduction 14 Organizing for worldwide effectiveness: the transnational solution CHRISTOPHER A BARTLETT AND SUMANTRA GHOSHAL 15 Firm resources and sustained competitive advantage JAY BARNEY 16 Knowledge, bargaining power, and the instability of international joint ventures ANDREW C INKPEN AND PAUL W BEAMISH 17 Mimetic and experiential effects in international marketing alliance formations of US pharmaceuticals firms: an event history analysis SENGUN YENIYURT, JANELL D TOWNSEND, S TAMER CAVUSGIL AND PERVEZ N GHAURI Case study III: Renault–Nissan–Daimlar: a global strategic alliance CHRISTOPH BARMEYER AND ULRIKE MAYRHOFER PART IV External relationships 18 Introduction 19 Overcoming the liability of foreignness SRILATA ZAHEER 20 Down with MNE-centric theories: market entry and expansion as the bundling of MNE and local assets JEAN-FRANÇOIS HENNART 21 Network view of MNCs’ socio-political behavior AMJAD HADJIKHANI, JOONG-WOO LEE AND PERVEZ N GHAURI 22 Weight versus voice: how foreign subsidiaries gain attention from corporate headquarters CYRIL BOUQUET AND JULIAN BIRKINSHAW Case study IV: Axis communications: building the global market for network surveillance cameras ULF ELG AND JANINA SCHAUMANN PART V Culture and international business 23 Introduction 24 Cultural distance revisited: towards a more rigorous conceptualization and measurement of cultural differences ODED SHENKAR 25 Transforming disadvantages into advantages: developing-country MNEs in the least developed countries ALVARO CUERVO-CAZURRA AND MEHMET GENC 26 Merging without alienating: interventions promoting cross-cultural organizational integration and their limitations MARY YOKO BRANNEN AND MARK F PETERSON 27 Psychic distance and buyer–seller interaction LARS HALLÉN AND FINN WIEDERSHEIM-PAUL Case study V: UniCredit Group: a bank goes East STEFAN SCHMID, DENNIS J WURSTER AND THOMAS KOTULLA PART VI Emerging markets 28 Introduction 29 The determinants of Chinese outward foreign direct investment PETER J BUCKLEY, L JEREMY CLEGG, ADAM R CROSS, XIN LIU HINRICH VOSS AND PING ZHENG 30 Market driving multinationals and their global sourcing network PERVEZ N GHAURI, VERONIKA TARNOVSKAYA AND ULF ELG 31 Strategies that fit emerging markets TARUN KHANNA, KRISHNA G PALEPU AND JAYANT SINHA 32 The hidden risks in emerging markets WITOLD J HENISZ AND BENNET A ZELNER Case study VI: Internationalization of Indian pharmaceutical multinationals SURENDER MUNJAL Index Figures 3.1 4.1 4.2 7.1 7.2 7.3 8.1 8.2 8.3 9.1 9.2 9.3 9.4 9.5 10.1 11.1 11.2 11.3 12.1 12.2 II.1 13.1 13.2 13.3 13.4 15.1 15.2 16.1 16.2 16.3 17.1 17.2 17.3 III.1 III.2 18.1 18.2 20.1 20.2 20.3 Development of production units The basic mechanism of internationalization: state and change aspects (Johanson & Vahlne, 1977: 26) The business network internationalization process model (the 2009 version) The firm and its external relationships Porter’s competition framework Different strategic choices Internationalisation of firms: conflict of markets ‘Hub and spoke’ strategies: an example The global factory Exports divided by GDP Actual vs perfect product market integration through trade Actual vs perfect product market integration through FDI Standard deviation of nominal return differentials Convergence? GDP per capita across economic groups, 1950–1997 (PPP-adjusted) Propensity scores to internationalize into a country computed on the four institutional variables Example of an investment choice option Example of the best–worst experiment Aggregate best–worst experiment results Mode comparisons? Mode choice and change The organizational structure of Danone Structures based on functions Structure based on products in an international company A matrix structure Integrated network The relationship between traditional “strengths-weaknesses-opportunities-threats” analysis, the resource based model, and models of industry attractiveness The relationship between resource heterogeneity and immobility, value, rareness, imperfect imitability, and substitutability, and sustained competitive advantage Boundaries of the article: partner knowledge, bargaining power, and the instability of International Joint Ventures (IJVs) Instability of the International Joint Ventures (IJV) and the foreign partner’s bargaining power Knowledge acquisition and instability Conceptual framework Smoothed hazard rate estimates Covariate effects on pooled hazard rate Minority equity stakes of the Renault–Nissan–Daimler alliance Presentation of the Alliance Board of Renault–Nissan (in 2013) Interaction between MNEs and socio-political actors The firm and its external relationships Hennart’s (1988) model of equity joint ventures Optimal mode of foreign market entry Greenfields, acquisitions and joint ventures 20.4 21.1 21.2 21.3 21.4 21.5 22.1 22.2 22.3 IV.1 IV.2 26.1 26.2 27.1 27.2 V.1 V.2 30.1 30.2 Two types of equity joint ventures: (a) greenfield equity joint ventures; (b) partial acquisition equity joint ventures A conceptual view of socio-political behaviour of MNCs Socio-political behavior – gaining legitimacy DMC in its socio-political network Vattenfall in its EU, socio-political network Mutual interdependence between business and socio-political actors Conceptual framework Moderating effect of geographic distance Moderating effect of downstream competence The indirect business model used by Axis communications Axis logo Qualitative/quantitative data collection method Between-methods triangulation: tensions, contradictions and synergies Illustration of gaps between perceptions Interaction and psychic distance First-time market entries of UniCredit Group, HVB Group and their predecessor institutions in CEE Market shares of UniCredit Group in major CEE countries after the merger A model based upon market driving and networking factors A conceptual model of market driving firm and its relationship with suppliers 444; voice 432, 436, 437, 440, 452–3, 454; weight 432, 435, 436–7, 454 foreignness, liability of 34, 38, 359, 362–77, 514, 570; bureaucratic controls 366–7, 370; costs 363; firm-specific advantages (FSAs) 364–5, 367, 369–70, 373–6, 374, 376–7; future research 377; literature 363; local isomorphism 364–5, 367, 369, 373–6, 374, 376, 377; market controls 366, 370, 375–6; overcoming 364–5; sources 362, 363, 364; study 367–77, 372, 373, 374; theory 363–4 Forsgren, M 40 forward integration 89 Foss, N J 76 Foster’s 234, 239 France 112–3, 154, 154 franchising 6, 98, 160, 232 Frankel, J A 152 Franko, L 306 Frobel, F 136 Fundtech 234–5 fungibility 173 Gabrielsson, M 239 Gadde, L.-E 610 Galunic, D C 438 Gardberg, N A 524–5 Gatignon, H 234, 381, 382, 383, 390, 398, 401, 478 GE Healthcare 631 Gelbuda, M 241 General Electric 317–8, 325 General Motors 311 general relationship knowledge 39 geographic distance 550, 576, 584, 586, 590 geographic diversification 252–3, 253 geographic proximity 482, 503–4, 509 geographical comparison geolocational services 135–6 Gereffi, G 136 Germany 23, 154 Gersbach, H 127 Ghauri, P 410, 414, 609, 610, 611 Ghizzoni, Frederico 565 Ghoshal, S 40, 45, 64, 68, 75, 132, 262, 404n3 GlaxoSmithKline (GSK) 647 Global Commodity Chains (GCCs) 136 Global Development Finance Report, World Bank 494 global factory, the 8, 134, 134–5 global market building 463–8 global sourcing networks 571, 601–11, 610; IKEA case study 602, 604–11; inter-firm relationships 602; market driving effects 603; market orientation approach 601, 602–4, 610–1; network approach 601, 603, 603–4, 610; network relationships 606–7, 608, 609; supplier base development 604–6; supplier relationships 601; suppliers’ perspective 611 global strategy 120–1, 121, 122, 571–2, 615–31; analyses 3; dynamics 5; inappropriate targets 616–8, 617; institutional context mapping 618–28; institutional voids 615, 625–7 global systems view 87, 97–9 global value chains 8, 571 globalization 3, 47, 97, 172, 267; and alienation 536; benefits 139–40, 140; challenges of 138–41, 140, 615; and conflict 125–8, 126; of consumption 127; and convergence 482; and corporate governance 128–9; definition 127; and economic geography 125–42, 135–41; extent of 122–3; geographical analyses 137–8; pace of 122; process 125–6; research agenda 141–2; and the spatial division of labour 136–7; transmission mechanisms 127 GLOBE 186 Golder, P N 203 Gomes-Casseres, B 383 Gomez-Mejia, L R 484 Goodnow, J D 480 goodwill 635 Gounaris, S P 41–2 Graham, E M 62 Granovetter, M 40, 45 Gray, B 303, 305–6, 308, 310 green alliances 358 greenfield ventures 6, 392, 392–8, 403, 582 Greenpeace 357, 638 Gripsrud, G 482 Guisinger, S 478 Gulamhussen, M A 100 Hadjikhani, A 410, 414 Hage, J 524 Håkansson, H 554, 609, 610 Hallén, L 554 Hamel, G 308, 311 Hannen Brauerei GmbH 110 Hansz, J E 477, 480 Harms P, 176 Harrigan, K R 307 Harris, L C 602, 610 Harzing, A 397 Hashai, N 88, 241 headquarters attention 360, 431–55, 447–8; allocating 436–7; conceptual framework 435, 435–40; and control 451; definition 433, 455n2; and downstream competence 436, 439–40, 444, 446, 447, 448, 449, 451; flows 454; and geographic distance 436, 438–9, 444, 447, 448, 449; key factors 432; measurement 441–2, 443; objectives 452; positive 432, 433–4, 451, 451–3; practice 453; preselling 456n6, 456n8; relational perspective 435–6, 437–40, 452; relative attention 433–4, 441–2, 443; scarcity 431; and strategic role 434, 453; strategies 431, 452; structural perspective 435, 436–7, 452; supportive attention 434, 441–2, 443; timing 456n8; too much 452; visible attention 434, 441–2, 443, 450 Heckscher-Ohlin trade theory 28, 94–5 Hedlund, G 47, 311 Heineken 108, 109 Helliwell, J F 438–9 Henisz, W J 203, 329–30 Hennart, J.-F 234, 382, 383, 384, 384–5, 386, 391, 402 Herodotus 473 Higgins E R E 413 Hill, C W L 234 Hitt M A 179 Hoffman M E S 412 Hofstede, G 473, 474, 481 Holmes R M 179 Holstius K 410 home bias 439 Home Depot 630–1 Hong Kong 576 Hong Kong Disneyland 239 Horioka, C 157 Hsu, C.-C 51–2 hub and spoke strategies 132, 132–3, 133 Huber, G P 308 human capital 158, 285, 289 human resource management (HRM) Human Rights Watch 357 Hunt, S D 41 Hwang, P 478 Hymer, Stephen 62, 95–6, 136, 201, 373 idiosyncratic investments 242 IKEA 602, 604–11 IMP Project 36, 554–5 imperfectly imitable resources 290–3, 298 imports 5, 27, 512–3, 584, 590, 593 incentive loss 396–8 incentives, government induced 71 incrementalism 242–3 India 13, 384, 466–8, 569, 571, 629–30, 632; composite indices 617, 618; diaspora network 627; institutional context mapping 621–7; openness 619; Pharma Vision 2020 642, 647; pharmaceutical industry 569, 641–8, 643, 649; rise of indirect business model 463–4, 464 industrial districts 130 industrial economists 95–7 industrial organization theories 65 information flows information processing systems, and competitive advantages 295–6 information storage 135 innovation 73, 135, 385–6 innovation dynamics 100, 103–4 innovation theories 88, 92 insidership 33, 35 institutional environments 186; China 578–80; developing-country multinational enterprises (MNEs) 493; and internationalization 171, 174–7, 179–80, 186–7; least developed countries (LDCs) 496–500, 501, 502, 503, 505, 515; mapping 618–28; regions 199; structures 171–2 institutional theory 362 institutional voids 615, 625–7 integrated networks 262, 262 Integrated Resource Planning 421 integration mechanisms 274 integration strategy 111 interaction approach 35–6 Interbrew 108 inter-country distances 552, 553–4 inter-cultural experience 329–30 interdependence 11, 264 interest groups 412 interest rates 29–30 inter-firm distances 552, 553, 554–7 inter-locking joint ventures 130 intermediate inputs 89 intermediate outputs 89 internal markets 86–7 internalization 88–91, 94, 97–8, 259 internalization strategies 85–6 internalization theory 3, 35, 51, 60, 65, 73, 74, 85–105, 241; Coasian heritage 93–7; division of labour 87, 97–9; emergence of 88, 94–7; internalisation concept 88–91; rational action modelling 89, 91–3; research agenda progress 100–1, 101–5; systems view 97–9; testing 101–2; welfare implications 90–1 international, definition 3–4 international business, definition international diversifiers 167n11 international equilibrating mechanism 21 international financial crises 157 international investors, role of 30 international joint ventures (IJVs) 88, 100, 102–3, 132, 234, 348–51, 349, 350, 351; attachment 315–7; balance of power 307, 310, 311–2, 317, 318; bargaining power 315; bargaining power perspective 307–8; boundaries 303, 304; contracts 303; cooperative 307; and cultural distance 478–9, 483–4; definitions 305–7; dependence 307, 310, 312; dormant instability 317; equity-based 302; evolution 242; fade-out provisions 319n3; failure rates 265; the foreign partner 302, 303, 305, 308, 310, 311, 312–4, 314–5, 317–8, 319; instability framework 308, 309, 310; instability 265, 302–19; knowledge contributions 303, 305, 305–6, 308, 310–4, 312, 315, 317, 318–9; Kone case study 235–7; lifespan 306; literature 303; the local partner 302, 303, 305, 310–2, 314–5, 318, 319; management 317–8; motivation 302–3; personal bonds 316, 318; resource contributions 314–5; silent partners 319n1; stability 306–7; termination 316; types 325; unplanned equity changes 306; see also alliance formation international marketing alliances 325, 326 international organization theory 362, 365 international strategy 120, 122 international trade 4, 5, 77 internationalization 3, 6, 6–8; attractions 170–1; breadth 179; case study 108–14; definition 234; developing-country multinational enterprises (MNEs) 494; and institutional environments 186–7; institutional environments and 170, 174–7, 179–80; Japanese MNEs 171, 178–81, 182–4, 185–7, 188, 189–90; measurement 178–9; models, other definitions of regions 199–200; obstacles 259; positive role 186; prior 174, 179, 180, 185; semiglobalization mechanisms 173–4; semiglobalization strategy 170–90; Uppsala model 7–8 internationalization process model 202, 204–5, 207–8 internationalization process theory 241 internationalization theory internet, the 135–6 inter-organizational relationships 35 interpersonal relations 279–80 interunit interdependency and integration 278, 279–80 intra-firm distances 555–7 investment decisions 15–9 Irwin, D A 152 ITT 277–8 James, William 455n2 Japan 23, 47, 136, 264, 398–9; cultural distance 477; ethnographic setting 525–7; exports 29; FDI 154, 521, 523, 525–7, 530, 530–45; foreign operation modes case study 235–7; IJVs 303, 317–8, 319n5, 319n7; institutional environment 190; Kone case study 241; lifetime employment principles 528; managers 267; MNE internationalization 171, 189–90; organizational culture 528–30; partial acquisitions 397; success 267 Japanese management system 395 Jensen N M 176 Johanson, J 37, 38, 42, 46, 190n3, 234, 398, 401, 477, 480, 483, 609 Johnson, J L 479 joint ventures 44, 130, 232, 238, 240–1, 244, 245, 254, 260, 382; see also international joint ventures (IJVs) Journal of International Business Studies (JIBS) 33, 52 Kaigai Shinshutsu Kiyou Souran [Japanese Overseas Investments] 178 Kalleberg, A L 532 Katsikeas, C S 328 Kazakhstan 636 Kentucky Fried Chicken 305, 313 Kim, W C 478 Kindleberger, C P 95–6, 570 Kirzner, I M 42, 43 Knickerbocker, F T 62, 69 Knight, Frank H 12 knowledge 264, 308, 312; access to 22, 48; asymmetric information 89; and attachment 317; cognitive 311; and decision-making 22; deployment 68; development 43, 94; embodied 311; experiential 328–9, 341; flows 7, 86–7, 89–90, 160; general relationship 39; global diffusion 130–1; grafting 308; increasing 7, 36; interdependency 413; internalization 89, 93, 97; internationalization 39; lack of 17; and learning 38–40; local 303, 305, 305–6, 310, 312–4, 315, 317, 318–9; market-specific 38–9, 328; and opportunity development 42–3; and opportunity recognition 49; organizational 313–4; organizational learning 173–4; relationship-specific 39, 357; sharing 41, 75; skills 311; spatial issues 130–1; tacit 48; transfer 39, 160, 387–8; transmission 174; and trust 40–1 knowledge acquisition and sharing theories 74 knowledge based global economy 69 knowledge connections 314 knowledge enhancing theories 71 knowledge management 131, 308 knowledge market integration 159–60 knowledge-creation 7, 37, 131 Kogut, B 260, 306, 383, 398, 477, 478, 479, 481–2, 484 Kone 235, 235–7, 238, 241, 245 Konecranes 243 Kostova, T 223 Kronenbourg 112–3 Kuemmerle, W 203–4 Kuhn, T S 76 Kumar, N 602 Kverneland, Å 47 La Porta R, 186 labour, division of 87, 97–9, 122, 136–7 labour market integration 122–3, 126, 127, 157–9, 159 Lagerlöf J 412 land ownership 393 land services 388–9 language 220, 220 Larsson, R 529–30 Laurent, A 484 law, rule of 499–500, 506–8, 514 law of one price (LOP) 155 Lawrence, R Z 127–8 learning 34–5, 38–40, 45, 48 least developed countries (LDCs) 491, 494, 495–6; cultural environment 504, 506–8; developing-country multinational enterprises (MNEs) in 501–15, 502, 514–5; economic environment 503, 506–8, 509; foreign direct investment (FDI) 510, 511–2, 512–3; geographic environment 503–4; imports 512–3; influence of natural resource industries 509; influence of the former colonial power 509–10; institutional environment 496–500, 501, 502, 503, 505, 506–8, 515 legitimacy 358, 411, 413, 413–4, 415, 423–5, 426–7, 524–5 Lenway, S A 128 Leontief paradox, the 21, 27, 29 Lessard, D R 78n20 Levine R, 177 Levinthal, D A 40 Li, J T 478 Li Q, 187 liability 190n3 licensing 5, 6, 8, 73, 89–90, 96, 98, 113, 232, 235–6, 237, 238, 239, 240, 243, 245, 319n2, 384, 387–8, 390, 398 Lieb-Dóczy, E 243 Lincoln, J R 532 Lippman, S 286, 290 L M Ericsson 275–80 lobbying 356, 412, 413–4, 420–1, 421 local assets: access costs 394; asset-bundling literature 383–6; bundling 381–404; complementary 388–9, 401–2; emerging markets 400–1; equity levels 390–2; firm-embedded 393–4; innovation framework 385–6; knowledge transfer 387–8; and market entry 381–404; and market entry optimal mode 386, 386–92; markets 387, 387–9; MNE-centric theories and 382–3, 398–400, 402; residual claimancy 386, 387; and transaction cost theory 384–5; transaction costs 386–7 local culture 100, 127–8, 466–7 local isomorphism 364–5, 367, 369, 374, 376, 377 local learning 244 local responsiveness 261 localization 131–2, 132, 133, 163, 167n7, 172, 178, 264, 267, 272–5, 281, 305, 524–5 location advantage 401 location choice 201–24; see also foreign direct investment location decisions location strategy 122; disintegration 129; e-commerce 129–30; and economic geography 125–42; global knowledge diffusion 130–1; localisation 131–2, 132, 133; and logistics 133–4; and networks 129–30; outsourcing 131, 133–4; reintermediation 129 location theory 86 location tourism 128–9 locational attractions 60, 68–9, 70–1, 72, 85 locational forces, product cycle hypothesis 24–5, 26, 28 locational spread location-specificity 122, 149, 150, 161, 165–6, 166n2, 173 logistics 133–4 Louviere, J 211 Lubatkin, M 529–30 Luostarinen, R K 234 Lupin 642, 643 McDougall, P P 45, 46 McGee, J 288 MacMillan, I C 442 Madhok, A 41, 42 Makino, S 176, 303 Malaysia 619 management advantages 63–4 management knowledge 131 management paradigms 76 management teams 39 managerial resources 393–4 managerial talent 289 managers: alienation 534–5, 535, 539–40; autonomy 275; competition assessment 260; competitive advantages and 289, 298; decisionmaking 3, 123; developing-country multinational enterprises (MNEs) 491, 514–5; entrepreneurial expatriates 272–3; FDI decisionmaking 201–24; FDI experience 212, 214–6, 215, 217, 219, 219; foreign operation mode choice 243–4, 246; Japanese 267; local 274, 280; operation modes 124; and organizational capability 281; personal bonds 316; personnel flows 271–2; perspective 280; sociopolitical behaviour 416–7 March, J G 15, 34, 35, 233 market capitalism 138–9 market driving firms 601, 602–3, 610, 610–1 market entry 5, 38, 91, 100, 102, 109, 246, 259, 287–8, 323, 348–9, 359, 562–3, 563; acquisitions 392, 392–8, 403; asset-bundling literature 383–6; brownfield 395; and complementary local assets 388–9; costs 390–2; and cultural distance 477–8; developing-country multinational enterprises (MNEs) 491; dynamics of 398–401; emerging markets 622, 629–30, 635–6; EMNEs 571; equity levels 390–2; and firm-embedded assets 393–4; greenfield 392, 392–8, 403, 582; inappropriate targets 616–8, 617; and incentive loss 396–8; innovation framework 385–6; and knowledge transfer 387–8; and local assets 381–404; MNE-centric theories of 382–3, 398–9, 402; optimal mode 381, 386, 386–92, 402–3; speed of 392; and transaction cost theory 384–5 market integration 149, 165, 172; capital 156, 156–7, 158; dimensions of 150, 150; foreign direct investment (FDI) 153–5, 154, 154; knowledge 159–60; labour 157–9, 159; prices 155, 157; trade flows 151, 151–3, 152, 153 market intelligence 311 Market Liquidity 180–1 market mechanisms 270–1 market opportunity assessment 259–60 market orientation approach 601 market penetration 236–7 market power theories 74 market research 259–60, 348–9 market segmentation 149, 211, 234 market sensing 269–70 market servicing strategy 131 market share 27 market stability 216, 217 market structure theory 95 marketing 5, 86, 239, 559–60 marketing gap 552 markets: and conflict 125–9, 126; cross-border integration 149, 150, 150; domestic conditions 128; levels of 126, 126 market-seeking 52, 61, 576, 580 Marley, A 211 Marshall, Alfred 138 Martin, X 35 Marx, Karl 523–4, 542 Mathew, A M 234 Mathieu, J E 41 matrix structures 261, 262 Matsushita Electric Company 269–72, 272, 273, 274, 275–6, 281 Mattsson, L.-G 37 media, the 356, 414 Mellinger, A D 137 mergers and acquisitions (M&A) 6, 97, 245, 392, 392–8, 396, 402, 403, 571; and alienation 521–45; and culture 474–5, 484; failure rates 522; integration 522, 525; UniCredit Group case study 562–5, 563, 564, 565 Metro Group 630 Meyer, K E 241, 242–3, 243, 393, 395 migration 122–3, 138, 157–8 Miller Brewing 108, 239 Millington, A 383 mimetic effects 326–7, 340 mimetic isomorphism 327 mineral deposits 389 Mirus, R 384, 403 Mitra, D 203 Mitubishi Motors 306 mobility barriers 287–8 Mobus J L 413 modular assets 394–6 modularity 394–6 Moen, Ø 242 Møller, I 393 Molson Coors 239 monopolistic advantage 95 monopoly power 63, 95, 97 monopoly rents 297 Moon C W 412 Moray, N 455n2 Morgan, R M 41, 413 Mosakowski E 176 Mudambi, R 201, 203, 217 multidomestic industries 378n1 multi-domestic strategy 120–1, 122 multinational enterprises (MNEs) 3, 85; context 4; definition 85; features 431; growth of 90; importance of economic geography 122, 125–42 multinationality, organizational and risk diversification theories 65 Munro, H 35 Murtha, T P 128, 131 Nachum, L 203 Nahapiet, J 40, 45 national cultures 3, 473, 481 natural resource industries, developing-country multinational enterprises (MNEs) 509 Navarra, 201, 217 NEC 277–8, 279–80 needs, and direction 270–1 negotiated culture 541–2 Nelson, R R 40, 375 neoclassical economic theories 92 Netherlands, the 152, 153 network cameras 463–8 networks 7, 33, 50, 99, 355, 357; boundaries 425, 425; business model 47–51, 48; Chinese diaspora 578, 582–3, 591, 593–4; coordination 52; evolution 35; global sourcing 601–11, 603; integrated 262, 262; joint ventures 130; and location strategy 129–30; multiple linkages 269–70; regional 136; regional dimension 174; socio-political actors 357–9, 413–4; socio-political behaviour and 410–27; and sociopolitical interactions 414–5, 415; socio-political relationship-building 359–60; structures 262; supply 52; Uppsala internationalization process model 35–8 New International Division of Labour (NIDL) 136 New United Motor Manufacturing Inc (NUMMI) 311 New York Metropolitan Region Study 23 Newman, W H 307 NMV 554–6 Nohria, N 1994 365 Nomden K 412 Nonaka, I 314 non-business actors 355, 356 non-equity collaborative ventures 325 non-government organizations (NGOs) 356, 357–8 Norsk Hydro 234 North DC 171 obsolescing bargain, the 389 Obstfeld, M 156 offshoring 5, 8, 569 Oik, P 307 Okocim 111–2 Oman, C 385, 404n2 openness 619, 622, 625–6 operation modes 123–4 operational internalisation 89 opportunity assessment 259–60 opportunity creation 44 opportunity development 42–4 opportunity recognition 42–4, 48, 49, 50, 93, 348–9 organization theory 297–8 organizational (management related) theories 67, 68 organizational behaviour 297–8 organizational capability 280–1, 326 organizational capital resources 289 organizational culture 644 organizational knowledge 313–4 organizational learning 39–40, 173–4, 243, 328–9 organizational memory 328 organizational paradigms 76–7 organizational structure 260, 260–3, 261, 351–2; administrative heritage 268; control systems 351–2, 352; dispersed responsibility 274–5; environment-resource mismatches 275–80; functional 349, 349; integrated network 351; interunit interdependency and integration 278, 279–80; market mechanisms 270–1; matrix structures 349–51, 350; Matsushita case study 269–72; multiple linkages 269–70; Philips case study 272–5; product based 349, 350; responsibility transfer 271–2; three-headed management 274 Otis Elevator’s 25 Ouchi, W G 366, 378n1 outsidership, liability of 7, 33, 37–8, 38, 46 outsourcing 131, 133–4 outward foreign direct investment, China 569, 571, 574–5, 588, 589; approval process 578–9; approved outflows 580, 581; asset-seeking 582, 587, 589–90; budget constraints 577; changes over time 590–1, 592; cultural proximity 582–3, 587, 591, 593–4; determinants 585; and exchange rates 583–4, 590; and exports 590, 591; and geographic distance 584, 586, 590; host country level of development 591, 592, 593; and host inflation rate 584, 590, 593; host market size 587; host openness to FDI 586; and imports 584, 590, 593; institutional factors 578–80; liberalisation 575, 583, 587; market seeking 580, 590; ownership advantages 577–8; policy development stages 579; political risk 582, 587, 589, 593, 594; resource seeking 581; resource-seeking 581, 587, 593; rise of 574–5; theory of 576–80; value 590 Oviatt, B M 45, 46 ownership 6; advantages 570, 577–8, 594; asset transfer 8; eclectic paradigm and 60, 63–4, 65–7, 68, 72, 75; foreign direct investment (FDI) 201; strategies 129–35, 142 ownership-location-internalisation (OLI) framework 232 Ozawa, Terutomo 477 Padmanabhan, P 382 Pakistan 29 Palich, L 484 Pan, Y 478 Park, S H 479 Parkhe, A 303, 315, 480 partial acquisitions 396, 396–8 Paulhus, D 209 Pearl River Piano 388 Pedersen, T 52, 203 Penrose, E T 34, 37, 51 Pereira, A 51–2 performance control 262 personnel flows 271–2 Petersen, B 38, 39, 40, 203, 234, 235 Pfeffer, J 307 Pharma Vision 2020 642 pharmaceutical industry: India 569, 641–8, 643, 649; South Africa 645; United States of America 330–41, 333, 335, 336, 337, 338, 339 Pharmacia Philips 269, 272–5, 276, 280–1 physical capital resources 285, 289 Pla-Barber, J 382 pledges 242 Poland 111–2, 416–9, 424–5, 564, 604, 606 policy risk 632–3, 634–5 political actors 356, 357–9 political democracy 172, 176–7, 180, 185, 187 political environment 14, 176–7, 187, 357–9, 618–9, 621, 625 political market 357–9 political pressure points 636 political risk 12, 410, 582, 587, 589, 593, 594, 633 political stability 208, 208, 498, 506–8 political strategy 412, 422 political units 418 Porter, M E 72, 118, 130, 137–8, 283, 288, 298n1, 302 portfolio investment 5, 156–7 positive reputations 296–7 Prahalad, C K 64, 68, 75 price: elasticity 22, 23–4, 28, 155, 157 price theory markets 93 problem-solving 11, 105 Procter & Gamble 275 product cycle hypothesis 3, 6–7, 21–31; capital costs 30; communication 24; costs 24, 24–5, 29; and industrial innovation 23; locational forces 24–5, 26, 28; new product identification 21–4; product maturation 24–7, 26; standardized products 24, 27, 28–31; threat response 25–7 product cycle theory 62, 65, 69, 71, 96 production costs 24–5, 86 production subsidiary profit maximisation 91, 149 profitability 85, 86, 118, 119, 240, 385–6 property rights theory 387 psychic distance 34, 45–6, 50, 174, 259, 329, 342, 348, 475, 477, 480, 576; and buyer–seller interaction 550–60; definition 550–2; intercountry differences 559; inter-country distances 553–4; inter-firm distances 552, 553, 554–7; intra-firm distances 555–7; and marketing 552, 559–60; measurement 554–5; model 557–9, 558; and perception 551, 551–2; and relationship atmosphere 555; stages 557–9; and trade 550–1 Pyndt, J 52–3 Ralston Purina 310 Rangan, S 492 Rao, C 392 rational action modelling 89, 91–3 rational internationalization 35 RBV perspective 51 real options 103–4 Redding, G 475 regional coordination 170 regional economic integration (REI) 126–7 regional industrial clusters 130 regional integration 137, 189 regional networks 136–7 region-bound firm-specific advantages 173 regions: composition 198; definition 178, 186; institutional variables 199; models, other definitions 199–200 regulatory control 172, 175–6, 179–80, 185, 356–7 regulatory environment 171–2, 175–6, 187, 366–7, 499, 506–8 reintermediation 129 relationship assets 316, 318 relationship building 45, 49–50, 359–60, 410–27 relationship commitment 41 relationship-specific knowledge 39, 357 rental contracts 388–9 research and development (R&D) 5, 86, 254; costs 92; expenditure 85; forward integration 89; intensity of 180; internal market mechanisms 270–1; pharmaceutical industry 641–2, 644, 645–6, 647n1, 649; project competition 271 residual claimancy 386, 387, 402 Resnick A 187 resource advantages 63 resource allocation 22 resource based theory 67, 68 resource commitment 240 resource heterogeneity 283, 286–8 resources 264, 275; environment mismatches 275–80; firm 284–5, 288–94; firm endowments 298; imperfectly imitable 290–3; mobility 286–8; rare 289; social complexity 292–3; valuable 288–9 resource-seeking 52, 61, 88, 576, 581, 593 responsibility 274–9 responsibility transfer 271–2 Reuer, J J 242 Richman, B M 480 Ring, P S 45, 316 Rio-convention 421 risk 348; avoidance 11, 42, 46, 214; data mining 638, 638, 638–9; definition 12; emerging markets 632–40, 633, 638; evaluation 13–4; expropriation 632, 633; foreign exchange trading 370; insurance 634–5; management 635–6, 638; measurement 12, 370; policy 632–3, 634–5; political 12, 410, 582, 587, 589, 593, 594, 633; thresholds 13–4; and uncertainty 11–4 risk assessment 17, 636–40, 638 risk diversification theory 69, 71 risk ratings 637 Rivkin, J 620 Robinson, J V 95 Robson, M J 328 Rocla 244 Rolfe, R J 203 Ronen, S 186, 484 Root, F R 234 Rosenzweig, P M 364–5, 365 Roth, K 223 Royal Dutch Shell 638 Rugman, A M 69, 88, 130, 383, 390, 404n1, 405n8 rule-driven behaviour 102 Rumelt, R 286, 290 Russia 3, 569, 629, 630; brewery industry 113; composite indices 617, 618; institutional context mapping 621–7 SAB 108 Salancik, G R 307 Sanchez-Peinado, E 382 Sandén, P 51 Sandvik 45, 46 Sarasvathy, S D 48 scandal avoidance 358 Schneider, S C 481 Schumpeterian Shock 264, 286 Schwartz, S H 484 Scottish & Newcastle 108, 113, 238 Seabright, M A 316, 316–7 Seeman, M 524 semiglobalization 122–3, 149–66, 170–90, 185, 187, 189; cross-border integration 149, 150; definition 149; drivers 178; firm-level issues 163–5; institutional effects 174–7, 189–90; and market integration 149, 150, 150, 151, 151–60, 152, 153, 154, 155, 156, 157, 158; market/factor-level issues 162–3; mechanisms 173–4; regional role 172–3; research program 160–5, 161; role of 161; and strategy 160–1, 161; value 160 shadow management 538 Shane, S 42, 43–4 shareholders 128 Shenkar, O 186, 473, 474, 480, 483, 484 Sideri, S 125–6 Siecor 302 Singer 25 Singh, J V 364–5, 383, 398, 477, 478, 479, 481–2, 484 Sinochem Group 577 Smith, Adam 87, 93 social actors 356, 357–9 social alliances 358 social complexity 292–3 social control, and alienation 529–30 social presence 543 social responsibility 414, 419 social systems 618–9 social welfare 297 socio-political actors 414–5, 415; European Union 420–1; interdependence with 425, 425–6; networks 357–9; relationship with 412, 413–4, 422, 424–5; trade unions 417 socio-political behaviour 465–6; actors 412, 413–4; and commitment 411, 413, 413–4, 425; Daewoo Motor Company case study 415–6, 416–9, 419, 422, 423; heterogeneity in 422, 426; importance of 424; and legitimacy 411, 413, 413–4, 415, 423–5, 426–7; literature 411–2; managerial implications 426–7; managers 416–7; networks and 410–27, 415; political units 418; relationship building 410–27; relationship with trade unions 417; resource investment 423–5; social activities 419–20; theoretical view 412–5; and trust 411, 412, 413, 413–4, 423–5, 426; Vattenfall case study 415–6, 419–21, 421, 422, 423, 423, 425 socio-political market 410–1, 412 socio-political networks, relationship-building 359–60, 410–27 sourcing strategy 131 South Africa 569, 618–9, 645 sovereignty 127 spatial issues specialisation 134 Spreitzer, G M 528 stakeholders 117–8 standard setting 356–7 stockholders 117 strategic alliances 44, 51 strategic asset seeking 61 strategic isolation 432 strategic partnerships 75 strategic planning: and competitive advantages 294–5; evaluation 294; formal 294–5; informal 295 strategic role 434, 453, 455n3 strategy 117–24; adapting 628–9; avoidance 630–1; choices 120–1, 121, 122; context change 629–30; cost advantage 119; differentiation 119; factors affecting 117, 117–9, 118, 119; five forces model 118, 119; formulation 117, 119–20; geographical analyses 137; global 120–1, 121, 122, 571–2, 615–31; hub and spoke 132, 132–3, 133; implementation 117, 120; institutional voids 615; institution-based view 594; international 120, 122; location 122, 125–42, 129–35; market servicing 131; market-driven 120; marketdriving 120; multi-domestic 120–1, 122; and organizational structure 263, 263; ownership 129–35, 142; purpose of 120; and regional economic integration 126–7; resource-based 362; semiglobalization and 160–1, 161; sourcing 131; transnational 121, 122; worldwide effectiveness 264, 267–81 structure-conduct performance paradigm 297 subcontracting 98, 129 Subramanian, R 127–8 subsidiary input 269–70 Sullivan, D 223 suppliers 355 supply chains 127, 133–4 supply networks 52 supply–demand analysis 167n8 sustained competitive advantages 283, 284; causal ambiguity 291–2; definition 285–6; firm endowments and 298; firm resources and 288–94; and information processing systems 295–6; organizational behaviour 297–8; positive reputations 296–7; resource mobility and 286–7; and social welfare 297; and strategic planning 294–5; substitutability 293–4 Suzuki 629–30 Sweden 33–4, 36, 47, 234, 242, 554–6, 560 systems integration 99 tacit learning 543 Taiwan 29 Takeuchi, H 314 Tallman, S B 480, 492 tariffs 98, 99, 130 Taylor, A 156 Taylor C R 412 technology gap 95 technology transfer 90, 95, 279–80, 384, 609 Teece, D J 160, 244, 382, 384, 385–6, 402 Teng, B S 391 Thilenius P 410 Thomas, H 288 three-headed management 274 time dimensions 6, 10, 11 Toppan Moore 318 Toshiba 235, 235–7, 238, 245 Toshiba Elevator and Building Systems Corporation (TELC) 236 Toyota 311 Toyota city 130 trade barriers 264, 267 trade flows 151, 151–3, 152, 153 trade intensity 151, 152 trade theory 88, 92, 94–5, 96, 201 trade unions 417 trading blocks 186 trading companies 53 Tran, Y T T 242–3 transaction cost theory 35, 382, 384–5 transaction costs 102, 386–7, 478, 482 transfer prices 136 transnational capabilities, building 275–80 transnational strategy 121, 122 Transparency International 357 transport cost 24–5, 29 trust 554; and knowledge 40–1; socio-political 411, 412, 413, 413, 423–5, 426; and uncertainty 41 trust-building 7, 36, 40–1, 42, 45, 49, 103 Tuborg 110 Tuominen, M 602, 610 Turkey 490 turn-key operations uncertainty 51; and anxiety 11; and decision-making 13; factors affecting 12; and foreign investment decision process 10, 11–4; reducing 7; and risk 11–4; and trust 41 Ungson, G.R 479 UniCredit Group 562–5, 563, 564, 565 United Kingdom: brewery industry 108, 110, 112, 113; FDI 154, 154 United Nations Conference on Trade and Development (UNCTAD) 186, 492, 501 United States of America: average incomes 22; brewery industry 108; Bureau of Economic Analysis 615; corporate assets 615; ethnographic setting 525–7; exports 27; FDI 154, 154, 522; foreign investment decision process 15; gross world product contribution 152; immigration 158; imports 27; Japanese FDI 521, 523, 525–7, 530, 530–45; labour costs 22; market opportunities 22–4; merchandise trade 152, 152; patents 160; pharmaceutical industry 325, 330–41, 333, 335, 336, 337, 338, 339; portfolio investment 157; product maturation 24–5; technology gap 95; transport cost 29 unpriced externalities 128 Uppsala internationalization process model 7–8, 33–53, 201, 242, 359, 381, 382–3, 398, 401, 477; 1977 Model 33–5, 34, 35, 38, 40, 48; business network internationalization process 47–51, 48, 52–3; and commitment 34–5, 36, 41–2, 48; establishment chains 34, 44–7; and firm size 50–1; and knowledge 38–40; and learning 38–40, 48; liability of foreignness 34, 38; liability of outsidership 33, 37–8, 38, 46; networks 33, 35–8; opportunity development 42–4; psychic distance 34, 45–6, 50; and trust-building 36, 40–1, 42, 49 Uppsala University, Department of Business Studies 33 Ursprung H W 176 Vahlne, J.-E 42, 46, 51, 190n3, 398, 401, 477, 480, 483, 550, 553, 554 value adding activities 72 value chains 239, 288, 601, 602 value-creating strategies 285 Van de Ven, A 45, 316 Vattenfall 360, 415–6, 420–1, 421, 422, 423, 423, 425 Veiga, J 485 Verbeke, A 88, 383 Vermeulen, F 383, 397, 481 Vernon, Raymond 62, 69, 96, 137, 389 Very, P 525 Volvo 50 Wal-Mart 389, 403, 405n10 Warren R.C 413 Weber, Y 481, 484, 525 Wei, Y 382 Weitz, B 242 Welch, C 410 Welch, L S 234 welfare 90–1 Westney, D E 376 wholly owned subsidiaries (WOS) 359, 381–2, 382, 390, 398, 402, 478 Wiedersheim-Paul, F 234, 550, 553, 554 Wilkinson I 410 Williams, J H 21 Williamson, O E 75, 96, 388, 391, 392, 483 Winter, S G 40, 375 Witt, M A 475 Woodward, D P 203 Wootz B 554 working relationships 36–7 World Bank 633; Global Development Finance Report 494 World Competitiveness Yearbook 482 World Investment Reports 154 World Migration Report 158 World Trade Organisation 139 World Wildlife Fund 357 worldwide effectiveness: and company heritage 268; coordination 268–72; L M Ericsson case study 275–80; Matsushita case study 269–72; organizational capability 280–1; organizing for 264, 267–81; Philips case study 272–5 Yan, A 303, 305–6, 308, 310 Yeung, B 384, 403 Yiu D, 176 Yoshino, Michael Y 477 Young, C., 307 Zaheer, S 176, 203 Zajac, D M 41 Zander, U 311 Zeng, M 388 Zervos, S 177 Zhou, C 203 ... Data International business strategy: theory and practice/ edited by Peter J Buckley and Pervez Ghauri pages cm International business enterprises–Management–Cross-cultural studies–Case studies International. .. Part I Basic concepts of international business Introduction What is international business? At its simplest, international business is easily defined: doing business across international frontiers... International Business Strategy Theory and practice Edited by Peter J Buckley and Pervez N Ghauri First published 2015 by Routledge Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge