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22 Cards in this Set
- Front
- Back
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Trade has assumption of perfect market/competition, this means? |
Notrade barriers Perfectinformation/symmetric information Largenumber of players/ perfect competition Nocost of entry & exit |
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Three types of FSA |
1)Stand alone FSA’s: patented knowledge or brand name 2)Routines: the way things are done at the firm 3)Recombining capabilities: capacity to augment |
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Rugman et al (2011) and Buckley & Casson (2009) say what about trade theory and the MNE? |
Strong assumption that differences in factor endowmentsacross borders will lead to international transactions,whether transfers of capital or goods. Focused on capital mobility. |
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Dunning (1958) observationsof UK and Canadian Subsidiaries of US MNE's |
MNEs upgrade the macroeconomic infrastructure and economic benefits |
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Hymer (1960), Kindleberger (1969) & Caves (1971/82) Monopolistic advantages |
MNEs possession of FSAs that allow them to overcome ‘cost of doing business abroad’ or liability of foreignness. Two conditions have to be fulfilled to explain the existence of FDI: 1) Foreign firms must posses an advantage over local firms 2) The market must be imperfect |
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Ronald Coase (1937) Coasian Transaction Cost Economics |
One of the reasons of going abroad is that it saves money compared to the home country. It is about reducing costs. Internalization allows coordination when a transaction in the intermediate market would not have taken place due to too high transaction costs.- Emphasizes most efficient coordination mechanism. |
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Buckley & Casson (1976) Internalizing theory Imperfect intermediate product markets. |
Focus on interdependencies. Incentives to bypass imperfect intermediate product markets by creating internal markets. The eiterdependent activities are brought under common ownership and control. Internalization of market(s) across the national boundary(s) de facto results in a multinational enterprise.- not only importing/exporting but also establishing (equity) |
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General Theory of Internalizing (Rugman, 1981) |
Internalization equally applicable for explaining domestic and international production – Existence of the MNE. MNEs play an important role in overcoming external market imperfections in host countries. Two types of strategy; market & efficiency seeking |
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Hennart's (1982) Internalizing theory |
For international expansion to take place; setting up facilities abroad must be more efficient thanexporting to foreign markets (which entails domesticinternalization); and a firm must find it desirable to own the foreign facilities. Two types of establishment; Brown- and greenfield |
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Relative efficiency of FDI versus Exporting: If the MNE can organize inter-dependencies between economic actors located in different countries more efficiently than markets and is met when three conditions are satisfied (see Hennart 2009a); |
-Interdependent actors must be located in different countries - The MNE must be the most efficient governance system to organize these interdependencies (otherwise, only domestic actors located in different countries would be involved in international transactions) -The costs incurred by MNEs to organize these interdependencies in the market (as in the case of licensing) must be higher than those of organizing them within MNEs -Managing interdependencies refers to (a) accessing, (b) recombining, and (c) orchestrating the productive usage of various sets of resources that are dispersed geographically |
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Dunning's (1977, 1988, 1998)OLI paradigm |
Three types of advantages influence FDI Oa= Asset advantages (Oa) include various tangible and intangible assets Ot= Transactional advatages (Ot) refers to strengths in coordinating a network of geographically dispersed affiliates L= advantages reflect foreign countries having some country-specific advantages (CSAs) I=Internalization (I) advantages refer to benefits of creating,transferring, deploying, recombining and exploiting FSAsinternally instead of via contractual arrangements withoutside parties |
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Internationalization (Process) Theory –Scandinavian / Uppsala Model. |
The potential benefits of exploiting FSAs abroad need to be weighed against the risks of operating in unknown foreign environments and the costs of learning to do business there. It provides a mirror of Hymers analysis. The Uppsala model states that there are stages of internationalization whereby the potential benefits of exploiting FSA’s abroad need to be weighted against the risks of operating in unknown environments and the costs of learning. -Not everything happens at the same time - Introduce stages and time>process>dimension of time -First begin with markets that are close, then move to markets which are more difficult and farther away. Overcoming LOF due to the firms ability of recombining FSA;s with host countries CSA’s |
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Rugman's most important contribution. How does he bridge the gap between internalization theory and strategic management? |
by developing the concepts of location bound (LB) and non-location bound (NLB) firm specific advantages (FSAs) (Rugman and Verbeke 1992, 2001, 2003) |
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How do resources give a firm SCA according to Barney? |
It must be valuable It must be rare It must be imperfectly imitable The firm needs to be organized to exploit the resource |
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Peng (2001) RBV of market entry decisions versus TCE |
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The OLI paradigm allows identifying the key location advantages of fourtypes of international production |
-Natural resource seeking -Marketing seeking -Efficiency seeking -Strategic asset seeking |
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There are four main types of foreign based MNE activities according to Dunning (2000) |
a) Marketing seeking (or demand oriented): designed to satisfy a particular foreign market or set of foreign markets. b) Resource seeking (or supply oriented): designed to gain access to natural resources. c) Rationalized of efficiency seeking: designed to promote a more efficient division of labour or specialization of an existing portfolio of foreign and domestic assets by MNEs. d) Strategic asset seeking: designed to protect or augment the existing O specific advantages of the investing firms and/or reduce those of their competitors. |
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Peng's (2001)Resource-based view (RBV) has four areas of central interest |
1. MNC management (MNC=Multinational Corporation) 2. Strategic alliances 3. Market entries 4. International entrepreneurship |
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Peng's (2001) RBV of Strategic Alliances |
Since the 1980’s, the corporate world has experienced an “alliance revolution”. The RBVStuvia.com - The Marketplace to Buy and Sell your Study Material9focuses on one aspect, organizational learning. The capabilities to learn from partners maybe a tacit resource underlying a firm’s competitive advantage. |
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Peng's (2001) RBV of International Entrepreneurship |
International Business research focuses on large MNCs and entrepreneurship studiesconcentrate on small and medium-sized enterprises (SMEs) within a domestic context. RBVhas solved the key question: How can some SMEs succeed abroad rapidly without goingthrough different stages suggested by the stage model? The answer is superb tacitknowledge about global opportunities and the equally superb capability to leverage suchknowledge in a way not matched by competitors. |
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Peng's (2001) RBV of Emerging Market strategies |
1. MNCs: In emerging economies, traditional liability of foreignness is magnified. MNCs have to figure out 1) when to enter, 2) how to enter, 3) how to win. 2. State-owned enterprises (SOE): SOEs often resort to a compromise strategy through strategic alliances and networks with both foreign and domestic firms to develop their capabilities. 3. Privatized firms 4. Entrepreneurial start-ups: Throughout emerging economies, market transitions have opened the opportunities of entrepreneurship. 5. Conglomerates: They seem to persist, but also enhance firm performance in many emerging economies |
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Peng's (2001) RBV of MNC Management |
a) Global strategies MNCs face a substantial “liability of foreignness”. To overcome such a liability, MNCs need to equip their overseas subsidiaries with certain firm-specific advantages (FSAs). b) Subsidiary capability development MNCs exist because of their capabilities to transfer and exploit knowledge more effectively in the intrafirm context that through external markets. Subsidiary growth is driven by its own distinctive capabilities developed through entrepreneurial efforts of subsidiary management, rather than given by parent management. Subsidiary capability-building adds to our understanding that capability flows within the MNC are not necessarily a one-way process originating from the headquarters. c) Human resources management There are three levels: 1) The parent firm: At the parent level, primary attention has been focused on top managers. 2) The subsidiary: The first insight is that it seems important to staff subsidiaries with entrepreneurial managers. The second finding is that to facilitate subsidiary capability development and knowledge sharing, the MNC need to provide sufficient incentive to subsidiary managers, such as linking bonuses with such desirable behaviors. The third result is that MNC needs to seek a fit between its HR practices. 3) The employee: Firms which value people as a source of competitive advantage are more likely to attain higher performance. |
