IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Strategic complexity and global expansion: An empirical study of newcomer Multinational Corporations from small economies

  • Oladottir, Asta Dis
  • Hobdari, Bersant
  • Papanastassiou, Marina
  • Pearce, Robert
  • Sinani, Evis
Registered author(s):

    The purpose of this paper is to analyse the determinants of global expansion strategies of newcomer Multinational Corporations (MNCs) by focusing on Iceland, Israel and Ireland. We argue that newcomer MNCs from small open economies pursue complex global expansion strategies (CGES). We distinguish four different types of global expansion strategies, namely, horizontal, vertical, lateral integration, and risk diversification. Building upon the traditions of Caves and Dunning and applying a multinomial logistic approach, we model CGES as a function of firm and country specific factors. The empirical evidence suggests that newcomer MNCs move away from simplistic dualities in the formulation of their strategic choices towards more complex options as a means of maintaining and enhancing their global competitiveness.

    If 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.

    File URL: http://www.sciencedirect.com/science/article/pii/S1090951611000770
    Download Restriction: Full text for ScienceDirect subscribers only

    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.

    Article provided by Elsevier in its journal Journal of World Business.

    Volume (Year): 47 (2012)
    Issue (Month): 4 ()
    Pages: 686-695

    as
    in new window

    Handle: RePEc:eee:worbus:v:47:y:2012:i:4:p:686-695
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/620401/description#description

    Order Information: Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/620401/bibliographic
    Web: http://www.elsevier.com/wps/find/journaldescription.cws_home/620401/bibliographic

    References listed on IDEAS
    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.:

    as in new window
    1. Rachel Griffith & Helen Simpson, 2003. "Characteristics of Foreign-Owned Firms in British Manufacturing," NBER Working Papers 9573, National Bureau of Economic Research, Inc.
    2. Shang-Jin Wei, 1997. "Why is Corruption So Much More Taxing Than Tax? Arbitrariness Kills," NBER Working Papers 6255, National Bureau of Economic Research, Inc.
    3. Yeaple, Stephen Ross, 2003. "The complex integration strategies of multinationals and cross country dependencies in the structure of foreign direct investment," Journal of International Economics, Elsevier, vol. 60(2), pages 293-314, August.
    4. Allen Michel & Israel Shaked, 1986. "Multinational Corporations vs Domestic Corporations: Financial Performance and Characteristics," Journal of International Business Studies, Palgrave Macmillan, vol. 17(3), pages 89-100, September.
    5. Braconier, Henrik & Norback, Pehr-Johan & Urban, Dieter, 2005. "Multinational enterprises and wage costs: vertical FDI revisited," Journal of International Economics, Elsevier, vol. 67(2), pages 446-470, December.
    6. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan, vol. 8(1), pages 23-32, March.
    7. Kahle, Kathleen M. & Walkling, Ralph A., 1996. "The Impact of Industry Classifications on Financial Research," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 309-335, September.
    8. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    9. Susan E. Feinberg & Michael P. Keane, 2001. "U.S.-Canada Trade Liberalization And Mnc Production Location," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 118-132, February.
    10. Yeaple, Stephen Ross, 2009. "Firm heterogeneity and the structure of U.S. multinational activity," Journal of International Economics, Elsevier, vol. 78(2), pages 206-215, July.
    11. Haskel, Jonathan & Pereira, Sonia & Slaughter, Matthew, 2002. "Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms?," CEPR Discussion Papers 3384, C.E.P.R. Discussion Papers.
    12. Markusen, James R. & Venables, Anthony J., 2000. "The theory of endowment, intra-industry and multi-national trade," Journal of International Economics, Elsevier, vol. 52(2), pages 209-234, December.
    13. Figueira-de-Lemos, Francisco & Johanson, Jan & Vahlne, Jan-Erik, 2011. "Risk management in the internationalization process of the firm: A note on the Uppsala model," Journal of World Business, Elsevier, vol. 46(2), pages 143-153, April.
    14. Eden, Lorraine & Levitas, Edward & Martinez, Richard J, 1997. " The Production, Transfer and Spillover of Technology: Comparing Large and Small Multinationals as Technology Producers," Small Business Economics, Springer, vol. 9(1), pages 53-66, February.
    15. Hashai, Niron & Almor, Tamar, 2008. "R&D intensity, value appropriation and integration patterns within organizational boundaries," Research Policy, Elsevier, vol. 37(6-7), pages 1022-1034, July.
    16. Jan Johanson & Jan-Erik Vahlne, 2009. "The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership," Journal of International Business Studies, Palgrave Macmillan, vol. 40(9), pages 1411-1431, December.
    17. Lipparini, Andrea & Fratocchi, Luciano, 1999. "The capabilities of the transnational firm: accessing knowledge and leveraging inter-firm relationships," European Management Journal, Elsevier, vol. 17(6), pages 655-667, December.
    18. Alan Rugman, 1977. "Risk, direct investment and International diversification," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 113(3), pages 487-500, September.
    19. Neven, D. & Siotis, G., 1996. "Technology sourcing and FDI in the EC: An empirical evaluation," International Journal of Industrial Organization, Elsevier, vol. 14(5), pages 543-560, July.
    20. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan, vol. 35(3), pages 255-255, May.
    21. Griffith, Rachel, 1999. "Using the ARD Establishment Level Data to Look at Foreign Ownership and Productivity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 109(456), pages F416-42, June.
    22. Zucchella, Antonella & Palamara, G. & Denicolai, S., 2007. "The drivers of the early internationalization of the firm," Journal of World Business, Elsevier, vol. 42(3), pages 268-280, September.
    23. Rajneesh Narula & John Dunning, 2000. "Industrial Development, Globalization and Multinational Enterprises: New Realities for Developing Countries," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 141-167.
    24. Dunning, John H., 2000. "The eclectic paradigm as an envelope for economic and business theories of MNE activity," International Business Review, Elsevier, vol. 9(2), pages 163-190, April.
    25. Nigel Pain & Dawn Holland, 1998. "The Diffusion Of Innovations In Central And Eastern Europe: A Study Of The Determinants And Impact O," NIESR Discussion Papers 205, National Institute of Economic and Social Research.
    26. Isabel Faeth, 2009. "Determinants Of Foreign Direct Investment - A Tale Of Nine Theoretical Models," Journal of Economic Surveys, Wiley Blackwell, vol. 23(1), pages 165-196, 02.
    27. Gomes-Casseres, Benjamin, 1989. "Ownership structures of foreign subsidiaries : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 11(1), pages 1-25, January.
    28. Alan M. Rugman & Alain Verbeke, 2004. "A Perspective on Regional and Global Strategies of Multinational Enterprises," Working Papers 2004-19, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    29. Liu, Zhiqiang, 2008. "Foreign direct investment and technology spillovers: Theory and evidence," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 176-193, February.
    30. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan, vol. 29(1), pages 45-66, March.
    31. Aw, Bee Yan & Lee, Yi, 2008. "Firm heterogeneity and location choice of Taiwanese multinationals," Journal of International Economics, Elsevier, vol. 76(2), pages 403-415, December.
    32. Peter J Buckley & Pervez N Ghauri, 2004. "Globalisation, economic geography and the strategy of multinational enterprises," Journal of International Business Studies, Palgrave Macmillan, vol. 35(2), pages 81-98, March.
    33. Bruce Kogut & Udo Zander, 1993. "Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation," Journal of International Business Studies, Palgrave Macmillan, vol. 24(4), pages 625-645, December.
    34. Doukas, John A. & Kan, Ozgur B., 2008. "Investment decisions and internal capital markets: Evidence from acquisitions," Journal of Banking & Finance, Elsevier, vol. 32(8), pages 1484-1498, August.
    35. Peter J Buckley & L Jeremy Clegg & Adam R Cross & Xin Liu & Hinrich Voss & Ping Zheng, 2007. "The determinants of Chinese outward foreign direct investment," Journal of International Business Studies, Palgrave Macmillan, vol. 38(4), pages 499-518, July.
    36. Oliver Hart & Sanford Grossman, 1985. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Working papers 372, Massachusetts Institute of Technology (MIT), Department of Economics.
    37. Gordon H. Hanson & Raymond J. Mataloni & Matthew J. Slaughter, 2003. "Vertical Production Networks in Multinational Firms," NBER Working Papers 9723, National Bureau of Economic Research, Inc.
    38. James R. Markusen & Keith E. Maskus, 1999. "Multinational Firms: Reconciling Theory and Evidence," NBER Working Papers 7163, National Bureau of Economic Research, Inc.
    39. Krugman, Paul, 1998. "What's New about the New Economic Geography?," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 7-17, Summer.
    40. Robert C. Feenstra & Gordon H. Hanson, 1996. "Globalization, Outsourcing, and Wage Inequality," NBER Working Papers 5424, National Bureau of Economic Research, Inc.
    41. Klaus E Meyer & Evis Sinani, 2009. "When and where does foreign direct investment generate positive spillovers? A meta-analysis," Journal of International Business Studies, Palgrave Macmillan, vol. 40(7), pages 1075-1094, September.
    42. Buckley, Peter J & Casson, Mark, 1981. "The Optimal Timing of a Foreign Direct Investment," Economic Journal, Royal Economic Society, vol. 91(361), pages 75-87, March.
    43. John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan, vol. 11(1), pages 9-31, March.
    44. Luo, Yadong, 2000. "Dynamic capabilities in international expansion," Journal of World Business, Elsevier, vol. 35(4), pages 355-378, January.
    45. Caves, Richard E, 1974. "Causes of Direct Investment: Foreign Firms' Shares in Canadian and United Kingdom Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 279-93, August.
    46. Sanjeev Agarwal & Sridhar N Ramaswami, 1992. "Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internationalization Factors," Journal of International Business Studies, Palgrave Macmillan, vol. 23(1), pages 1-27, March.
    47. Culem, Claudy G., 1988. "The locational determinants of direct investments among industrialized countries," European Economic Review, Elsevier, vol. 32(4), pages 885-904, April.
    48. 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.
    49. Pfaffermayr, Michael & Bellak, Christian, 2000. "Why foreign-owned firms are different : a conceptual framework and empirical evidence for Austria," HWWA Discussion Papers 115, Hamburg Institute of International Economics (HWWA).
    50. James R. Markusen, 1997. "Trade versus Investment Liberalization," NBER Working Papers 6231, National Bureau of Economic Research, Inc.
    51. James R. Markusen, 1995. "The Boundaries of Multinational Enterprises and the Theory of International Trade," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 169-189, Spring.
    52. Kathleen M. Kahle & Ralph A. Walkling, . "The Impact of Industry Classifications on Financial Research," Research in Financial Economics 9607, Ohio State University.
    53. Aw, Bee Yan & Lee, Yi, 2008. "Firm heterogeneity and location choice of Taiwanese multinationals," Journal of International Economics, Elsevier, vol. 75(1), pages 167-179, May.
    54. Mataloni Jr., Raymond J., 2011. "The structure of location choice for new U.S. manufacturing investments in Asia-Pacific," Journal of World Business, Elsevier, vol. 46(2), pages 154-165, April.
    55. Michael P. Keane & Susan E. Feinberg, 2006. "Accounting for the Growth of MNC-Based Trade Using a Structural Model of U.S. MNCs," American Economic Review, American Economic Association, vol. 96(5), pages 1515-1558, December.
    56. Andrew Delios & Dean Xu & Paul W Beamish, 2008. "Within-country product diversification and foreign subsidiary performance," Journal of International Business Studies, Palgrave Macmillan, vol. 39(4), pages 706-724, June.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:worbus:v:47:y:2012:i:4:p:686-695. See general information about how to correct material in RePEc.

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.