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Firm rivalry, knowledge accumulation, and MNE location choices

Author

Listed:
  • Juan Alcácer

    (Harvard Business School, Boston, USA)

  • Cristian L Dezső

    (Robert H. Smith School of Business, University of Maryland, College Park, USA)

  • Minyuan Zhao

    (Stephen M. Ross School of Business, University of Michigan, Ann Arbor, USA)

Abstract

The international business (IB) literature has mostly emphasized the impact of location and firm characteristics on location choices. However, industries with a significant presence of multinational enterprises (MNEs) are oligopolistic in nature, which suggests that rivalry among firms plays an important role in firms’ dynamic decision-making processes. This paper explores how rivalry and differential knowledge accumulation among competitors affect MNEs’ geographic expansion across time and markets. Specifically, we build a model in which two competing firms with different capabilities simultaneously decide a sequence of market entries. Following previous research, we allow the possibility that certain markets are closer (a better fit) to one firm than to the other, and that certain knowledge is more transferable across markets (less market specific). We then solve the model computationally, and identify three equilibrium strategies – avoid, collocate, and stronger-chases-weaker – depending on the initial relative firm capabilities, market attractiveness, market–firm fit, and knowledge transferability. By explicitly incorporating firm rivalry across multiple markets, our model offers a comprehensive approach to understanding the drivers behind MNEs’ sequential location choices, and offers alternative explanations for some important empirical observations in IB, such as bunching and second-mover advantage in market entries.

Suggested Citation

  • Juan Alcácer & Cristian L Dezső & Minyuan Zhao, 2013. "Firm rivalry, knowledge accumulation, and MNE location choices," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(5), pages 504-520, June.
    • Handle: RePEc:pal:jintbs:v:44:y:2013:i:5:p:504-520
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    Citations

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    Cited by:

    1. Allison F Kingsley & Benjamin A T Graham, 2017. "The effects of information voids on capital flows in emerging markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(3), pages 324-343, April.
    2. Claver-Cortés, Enrique & Marco-Lajara, Bartolome & Manresa-Marhuenda, Encarnación & García-Lillo, F. & Seva-Larrosa, Pedro, 2017. "Location Decisions and Agglomeration Economies: Domestic and Foreign Companies," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 39, pages 99-135.
    3. Colombo, Luca & Dawid, Herbert, 2014. "Strategic location choice under dynamic oligopolistic competition and spillovers," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 288-307.
    4. Minyoung Kim & Chang Hoon Oh & Jukyeong Han, 2024. "Colocation as network: Types and performance implications of structural positions in colocation network," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 55(1), pages 71-90, February.
    5. Andrea Bacchiocchi & Gian Italo Bischi, 2022. "An Evolutionary Game to Model Offshoring and Reshoring of Production Between Developed and Developing Countries," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 11(1), pages 1-29, January.
    6. Ilgaz Arikan & Asli M. Arikan & Oded Shenkar, 2022. "Revisiting emerging market multinational enterprise views: The Goldilocks story restated," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(4), pages 781-802, June.
    7. Mengheng Liu & Xingwang Qian, 2021. "Provincial Interdependence and China’s “Irrational” Outward Foreign Direct Investment," Open Economies Review, Springer, vol. 32(1), pages 153-181, February.
    8. Karin Beukel & Minyuan Zhao, 2018. "IP litigation is local, but those who litigate are global," Journal of International Business Policy, Palgrave Macmillan, vol. 1(1), pages 53-70, June.
    9. Alvaro Cuervo-Cazurra & Bernardo Silva-Rêgo & Ariane Figueira, 2022. "Financial and fiscal incentives and inward foreign direct investment: When quality institutions substitute incentives," Journal of International Business Policy, Palgrave Macmillan, vol. 5(4), pages 417-443, December.
    10. Haruo H. Horaguchi & Toichiro Susumago, 2022. "Global R&D Location Strategy of Multinational Enterprises: an Agent-Based Simulation Modeling Approach," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 457-479, December.
    11. Cano-Kollmann Marcelo & Mudambi Ram & Tavares-Lehmann Ana Teresa, 2022. "The geographical dispersion of inventor networks in peripheral economies," ZFW – Advances in Economic Geography, De Gruyter, vol. 66(1), pages 49-63, May.
    12. Hejun Zhuang, 2018. "Modeling Strategic Location Choices for Disadvantaged Firms," International Business Research, Canadian Center of Science and Education, vol. 11(10), pages 59-78, October.
    13. Estrin, Saul & Meyer, Klaus E. & Pelletier, Adeline, 2018. "Emerging Economy MNEs: How does home country munificence matter?," Journal of World Business, Elsevier, vol. 53(4), pages 514-528.
    14. Schotter, Andreas P.J. & Buchel, Olha & Vashchilko (Lukoianova), Tatiana, 2018. "Interactive visualization for research contextualization in international business," Journal of World Business, Elsevier, vol. 53(3), pages 356-372.
    15. Radi, Davide & Lamantia, Fabio & Italo Bischi, Gian, 2021. "Offshoring, Reshoring, Unemployment, And Wage Dynamics In A Two-Country Evolutionary Model," Macroeconomic Dynamics, Cambridge University Press, vol. 25(3), pages 705-732, April.

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