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Are Firm-Specific Advantages Location-Specific Too?

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  • M Krishna Erramilli

    (Nanyang Technological University)

  • Sanjeev Agarwal

    (Iowa State University)

  • Seong-Soo Kim

    (Samsung Corporation)

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    Abstract

    Much of the research on the role of firm-specific advantages on firms' subsidiary ownership preferences has been undertaken in the context of advanced-country multinationals, specifically U.S. MNCs. Research has found that U.S. firms derive ownership advantages from their size, experience, and technological and marketing superiority. Perhaps having operated in the most-developed and sophisticated home market, many U.S. firms generate unique skills that give them absolute advantages over firms in almost all foreign host locations. Developing-country MNCs do not have absolute ownership advantages similar to those of the U.S. firms. The relevance of a particular firm-specific characteristic for a developing-country MNC may be contingent not only upon the home-country characteristics, as in the case of U.S. MNCs, but also upon host-country characteristics. This study investigates the subsidiary ownership preferences among Korean MNCS and finds that the influence of three firm-specific advantages—technological intensity, product differentiation and capital intensity—on subsidiary ownership levels is contingent upon whether the subsidiary is located in a relatively less-developed or a more-developed country as compared to the home country. Although some authors have suggested that the influence of firm-specific advantages may be contingent upon the characteristics of both home- and host-country locations, empirical investigations to this effect have been nonexistent.© 1997 JIBS. Journal of International Business Studies (1997) 28, 735–757

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    Article provided by Palgrave Macmillan in its journal Journal of International Business Studies.

    Volume (Year): 28 (1997)
    Issue (Month): 4 (December)
    Pages: 735-757

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    Handle: RePEc:pal:jintbs:v:28:y:1997:i:4:p:735-757

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