Home-region orientation in international expansion strategies

Despite the emerging consensus that most multinational enterprises (MNEs) are regional, systematic theory explaining regionalization is conspicuously absent, and empirical findings on its implications for MNE performance remain mixed. Drawing on internalization theory, we suggest that technological...

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Bibliographic Details
Published in:Journal of international business studies 2013-02, Vol.44 (2), p.89-116
Main Authors: Banalieva, Elitsa R, Dhanaraj, Charles
Format: Article
Language:English
Subjects:
Business and Management
Business Strategy/Leadership
Business structures
Business studies
Consensus
Corporate strategies
Countries
Expansion
Geographic regions
Globalization
High technology
Hypotheses
Increasing returns
International Business
International trade
Longitudinal studies
Management
Multinational corporations
Multinational enterprises
Organization
Product diversification
Regionalism
Research design
Strategic management
Studies
Technology adoption
Trade regionalization
U.S.A
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Summary:Despite the emerging consensus that most multinational enterprises (MNEs) are regional, systematic theory explaining regionalization is conspicuously absent, and empirical findings on its implications for MNE performance remain mixed. Drawing on internalization theory, we suggest that technological advantage and institutional diversity determine firms' home-region orientation (HRO), and we posit a simultaneous relationship between HRO and performance. We apply insights from the firm heterogeneity literature of international trade to explain the influence of technology on HRO. We predict a negative and nonlinear impact of technological advantage on HRO driven by increasing returns logic, and a negative impact of institutional diversity on HRO driven by search and deliberation costs. We find empirical support for our model using simultaneous equations methodology on longitudinal data on Triad-based MNEs. Performance significantly reduces HRO, but HRO does not have a significant effect on performance.
ISSN:0047-2506
1478-6990
DOI:10.1057/jibs.2012.33