The Strategic Effects of Firm Sizes and Dynamic Capabilities on Overseas Operations: A Case-based Comparison of Toyota and Mitsubishi in Thailand and Australia

In international business, much attention has been directed to the international expansion of firms based on their use of resources and competitive capabilities that have been built up in a home country to create a competitive advantage over host-country firms. More recently, the organizational capabilities and competitive advantages of Japanese manufacturing firms in general (in autos, electronics, etc.) have been analyzed as important factors in the establishment of overseas transplants. The theoretical framework of the overseas application of home-country management resources has been effective as a basic tool in analyzing the fundamental issue of international operations of the firm. However, the existing models, which tend to emphasize application of country-specific resources, does not sufficiently explain the frequently encountered question of why multinational enterprises (following, MNEs) from the same home country pursue different strategic paths and actions when managing overseas operations. The present paper attempts to incorporate a dynamic and firm-specific perspective and empirically analyze how differences in the financial resources and organizational capabilities of MNEs from the same home country affect the strategy and competitive behavior of their operations in the same local country. The analysis will center on the two Japanese auto assemblers, specifically Toyota Motor Corporation and Mitsubishi Motors Corporation, which have local production facilities in both Australia and Thailand. These two countries provide interesting case studies because in both the local operations experienced a serious crisis in recent years. The crisis for local auto producers in Australia began in the 1980s with the removal of protectionist policies and the rapid liberalization of the auto market. In Thailand, exceedingly severe conditions for local auto assemblers were caused by the 1997 Asian economic crisis. The present paper will focus its attention on the differences in the responses by Toyota and Mitsubishi to these crises, which we characterize as "larger competent firm" and "smaller competent firm" respectively. The two firms in question have both maintained international competitiveness in production in their common home country of Japan, in addition to building top-level local competitiveness in their Australian and Thai operations. However, when faced with a growth opportunity and a subsequent crisis, the responses of the local operations of the firms were markedly different. It is anticipated that behind these differences in firm conduct lie interfirm differences in firm scale (i.e. financial power) and dynamic organizational capabilities (e.g., capability-building capability) in their home country. The present paper will attempt to delineate these interfirm differences and their effects on firm conduct to explain why two firms from the same home country would show such different patterns of conduct even though they face the same local opportunities and crises.