A comparison of multinational and domestic firms in an emerging market: A strategic choice perspective
AbstractBuilding upon the MNE theory and strategy literature, this study compares the strategic choice in response to environment between multinational and domestic firms operating in an emerging market. We theorize that the strategic choice of multinational firms in response to a changing environment is not necessarily isomotphic with that of local firms because they have different organizational capabilities and perceptions of environmental dimensions. Canonical analysis is conducted based on data collected from foreign businesses and state firms in China. We observe that among foreign firms, managerial perceptions of increased environmental complexity, dynamism, and hostility are positively associated with an analyzer strategy. In contrast, a defender strategy is preferred by local state firms during economic transition. Multiple regression analysis also demonstrates that the analyzer strategy drives up profitability and competitive position for MNEs. When operating in an emerging economy, it is important for MNEs to formulate and implement right strategies that align with environmental dynamics and lead to superior performance. The complex and uncertain environment in emerging economies generally has a strong and sustainable influence over the strategic choices for both foreign and local businesses there. As MNEs and local firms are heterogenous in organizational capabilities, market orientations, strategic objectives, and institutional support, such strategic choices will not, and should not, be the same between them. MNEs need to be more innovative and adaptive than local companies in order to offset their liabilities of foreignness and compensate for their disadvantages in the lack of governmental supports that are important to business success in emerging economies. Nevertheless, MNEs should not become enormously proactive and aggressive in order to mitigate unnecessary instabilities in a volatile environment. This hybrid (or Analyzer) orientation can lead to superior performance in both sales and profitability for MNEs because it fits well with the objective to exploit emerging market potentials as well as daunting challenges they face. The defensive orientation is advisable for such local state firms that intend to pursue profitability when they are institutionally protected by the government. Although many state firms are now restructuring and reorganizing to keep pace with economic transformation, they are inherently less innovative because their industrial property rights are owned and controlled by the central government.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Management.
Volume (Year): 4 (1998)
Issue (Month): 1 (July)
Contact details of provider:
Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/description#description
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
- Noel Capon & Chris Christodoulou & John U Farley & James M Hulbert, 1987. "A Comparative Analysis of the Strategy and Structure of United States and Australian Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 18(1), pages 51-74, March.
- Thomas L Brewer, 1993. "Government Policies, Market Imperfections, and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan, vol. 24(1), pages 101-120, March.
- N. Venkatraman, 1989. "Strategic Orientation of Business Enterprises: The Construct, Dimensionality, and Measurement," Management Science, INFORMS, vol. 35(8), pages 942-962, August.
- Dunning, John H, 1979. "Explaining Changing Patterns of International Production: In Defence of the Eclectic Theory," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 41(4), pages 269-95, November.
- repec:fth:michin:282 is not listed on IDEAS
- Jefferson, Gary H & Rawski, Thomas G & Yuxin, Zheng, 1992. "Growth, Efficiency, and Convergence in China's State and Collective Industry," Economic Development and Cultural Change, University of Chicago Press, vol. 40(2), pages 239-66, January.
- Wright, Peter & Kroll, Mark & Pray, Bevalee & Lado, Augustine, 1995. "Strategic orientations, competitive advantage, and business performance," Journal of Business Research, Elsevier, vol. 33(2), pages 143-151, June.
- William H Davidson, 1980. "The Location of Foreign Direct Investment Activity: Country Characteristics and Experience Effects," Journal of International Business Studies, Palgrave Macmillan, vol. 11(2), pages 9-22, June.
- Morck, Randall & Yeung, Bernard, 1991.
"Why Investors Value Multinationality,"
The Journal of Business,
University of Chicago Press, vol. 64(2), pages 165-87, April.
- Nancy J Adler, 1983. "A Typology of Management Studies Involving Culture," Journal of International Business Studies, Palgrave Macmillan, vol. 14(2), pages 29-47, June.
- Phillip M Rosenzweig & Nitin Nohria, 1994. "Influences on Human Resource Management Practices in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan, vol. 25(2), pages 229-251, June.
- Kent D Miller, 1992. "A Framework for Integrated Risk Management in International Business," Journal of International Business Studies, Palgrave Macmillan, vol. 23(2), pages 311-331, June.
- Yadong Luo, 1998. "Timing of Investment and International Expansion Performance in China," Journal of International Business Studies, Palgrave Macmillan, vol. 29(2), pages 391-407, June.
- Rawski, Thomas G, 1994. "Chinese Industrial Reform: Accomplishments, Prospects, and Implications," American Economic Review, American Economic Association, vol. 84(2), pages 271-75, May.
- Kogut, Bruce & Chang, Sea Jin, 1991. "Technological Capabilities and Japanese Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 401-13, August.
- Claudio Carpano & James J Chrisman & Kendall Roth, 1994. "International Strategy and Environment: An Assessment of the Performance Relationship," Journal of International Business Studies, Palgrave Macmillan, vol. 25(3), pages 639-656, September.
- Weijian Shan, 1991. "Environmental Risks and Joint Venture Sharing Arrangements," Journal of International Business Studies, Palgrave Macmillan, vol. 22(4), pages 555-578, December.
- Jean J Boddewyn, 1988. "Political Aspects of MNE Theory," Journal of International Business Studies, Palgrave Macmillan, vol. 19(3), pages 341-363, September.
- Arvind Parkhe, 1991. "Interfirm Diversity, Organizational Learning, and Longevity in Global Strategic Alliances," Journal of International Business Studies, Palgrave Macmillan, vol. 22(4), pages 579-601, December.
- Benjamin Gomes-Casseres, 1990. "Firm Ownership Preferences and Host Government Restrictions: An Integrated Approach," Journal of International Business Studies, Palgrave Macmillan, vol. 21(1), pages 1-22, March.
- Joseph Cherian & Karen J. Crooker & Peter Knight & James B. McPhaul & Michael T. Manion, 2010. "Which Market Entry And Product Line Strategies Ought Organisations To Adopt For Emerging Economies?," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 1(1).
- Zhang, Yin-Fang & Parker, David, 2002. "Labour and Total Factor Productivity in the Chinese Electronics Industry in the 1990s," Centre on Regulation and Competition (CRC) Working papers 30628, University of Manchester, Institute for Development Policy and Management (IDPM).
- Tan, Justin & Li, Shaomin & Xia, Jun, 2007. "When iron fist, visible hand, and invisible hand meet: Firm-level effects of varying institutional environments in China," Journal of Business Research, Elsevier, vol. 60(7), pages 786-794, July.
- Elango, B., 2009. "Minimizing effects of 'liability of foreignness': Response strategies of foreign firms in the United States," Journal of World Business, Elsevier, vol. 44(1), pages 51-62, January.
- Zhou, Dongsheng & Li, Shaomin & Tse, David K., 2002. "The impact of FDI on the productivity of domestic firms: the case of China," International Business Review, Elsevier, vol. 11(4), pages 465-484, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.