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Determinants of Corporate International Expansion Beyond the Home Region: An Empirical Examination of U.S. Multinational Enterprises Expansion to Europe and Asia‐Pacific
Author(s) -
Mauri Alfredo,
Song Sangcheol,
Neiva de Figueiredo João
Publication year - 2017
Publication title -
global strategy journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.814
H-Index - 24
eISSN - 2042-5805
pISSN - 2042-5791
DOI - 10.1002/gsj.1155
Subject(s) - multinational corporation , business , economic geography , industrial organization , productivity , host (biology) , market size , internationalization , international trade , economics , commerce , economic growth , ecology , finance , biology
Research Summary This study extends Rugman and Verbeke (2001)'s model by examining how firm‐specific advantages ( FSA s) and host region conditions affect multinational enterprise expansion at the inter‐regional level. We examine the impact of their three constructs (non‐location‐bound FSA s, location‐bound FSA s, and complementary resources in the host regions) on U . S . MNE s’ sales in E urope and A sia/ P acific. We also suggest and examine the impact of two additional factors (host market efficiency and FSA fragmentation). For empirical testing, we use U . S . industry‐ and firm‐level panel data and compare results from both datasets. We find that location‐bound FSA s and fragmented FSA s hinder expansion to other regions, while non‐location‐bound FSA s, host region complementary resources, and host market efficiencies facilitate expansion to other regions. Results from the two datasets are highly consistent. Managerial summary This study aims to provide guidelines for multinational enterprise ( MNE ) managers seeking to expand to areas beyond their home region. Some firm capabilities “travel” well to distant countries, to different cultures, and across economic levels, i.e., they are transferable. Others are not, i.e., they are more embedded in the firm's home‐country environment. Expansion of U . S . MNE s to E urope and A sia/ P acific is facilitated by (a) higher levels of intrafirm transfers, (b) access to complementary resources abroad, and (c) relative host market efficiencies. In contrast, such expansion is hindered by (a) higher productivity of labor at home relative to that abroad and (b) fragmentation of its product portfolio. This analysis is helpful for managers interested in building the systems, conditions, and mechanisms that increase the MNE 's geographic reach. Copyright © 2017 Strategic Management Society.