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The Relationship between Location-Bound Advantages and International Strategy: An Empirical Investigation

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  • Lo, Fang-Yi

    (Feng Chia University)

  • Mahoney, Joseph T.

    (University of Illinois)

  • Tan, Danchi

    (National Chengchi University)

Abstract

This paper examines the impact of location-bound advantage on the internationalization strategy of multinational enterprises (MNEs). The extant research literature suggests that an advantage's location boundedness may be driven by: the nature of the firm advantage; organizational embeddedness, and environmental embeddedness. We posit that these different drivers of location boundedness exert different impacts on internationalization strategies. Our empirical results reveal that organizational embeddedness lowers the breadth of internationalization of MNEs, and increases the tendency of these firms to employ a global strategy. We also find that MNEs whose advantages are tacit and complex have a lower depth of internationalization and are more likely to expand into culturally similar countries. Finally, our results show that MNEs whose advantages are highly embedded in the home environment tend to adopt a multi-domestic strategy and decentralized organizational structures.

Suggested Citation

  • Lo, Fang-Yi & Mahoney, Joseph T. & Tan, Danchi, 2010. "The Relationship between Location-Bound Advantages and International Strategy: An Empirical Investigation," Working Papers 10-0103, University of Illinois at Urbana-Champaign, College of Business.
  • Handle: RePEc:ecl:illbus:10-0103
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    File URL: http://www.business.illinois.edu/Working_Papers/papers/10-0103.pdf
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    1. Alan M Rugman & Alain Verbeke, 1992. "A Note on the Transnational Solution and the Transaction Cost Theory of Multinational Strategic Management," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(4), pages 761-771, December.
    2. Alvaro Cuervo-Cazurra & Mary M Maloney & Shalini Manrakhan, 2007. "Causes of the difficulties in internationalization," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(5), pages 709-725, September.
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    1. repec:spr:manint:v:51:y:2011:i:6:d:10.1007_s11575-011-0102-3 is not listed on IDEAS

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