مزایای مربوط به شرکت، منشا FDI درونی و عملکرد شرکت های چند ملیتی
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of International Management, Volume 18, Issue 2, June 2012, Pages 132–146
Using original data on large Korean multinational enterprises (MNEs), this paper examines the impact that their firm-specific advantages (FSAs) have on performance as and when they receive inward direct investment from foreign countries. Two types of FSAs are examined: innovation capabilities measured by research and development (R&D) intensity and marketing capabilities measured by selling, general, and administrative (SGA) intensity. It is found that both FSAs affect diverse MNE performance in a non-linear U-shaped fashion, and that the home region origin of the inward foreign direct investment (FDI) moderates the curvilinear relationship between the two constructs into an inverted U-shaped one.
It is well known that the competitive advantages of multinational enterprises (MNEs) are determined by the interaction of two sets of factors. First are factors internal to the firm which lead to the development of unique capabilities, so-called firm-specific advantages (FSAs). Second are external factors to the firm that offer complementary resources for the exploration and/or exploitation of FSAs in foreign markets, so-called country-specific advantages (CSAs). The nature of FSAs, CSAs, and their interaction has been developed into a basic FSA/CSA framework to analyze the activities and performance of MNEs by Rugman (1981) and is popularized in textbooks such as Rugman and Collinson (2009). The FSA/CSA framework captures the essence of the resource-based view (RBV) of firms as suggested by Wernerfelt, 1984 and Barney, 1991, and internalization theory as developed by Buckley and Casson, 1976 and Buckley and Casson, 2009. According to the RBV of firms, acquisition and accumulation of hard-to-imitate resources and capabilities will allow firms to achieve sustainable competitive advantages, translating into high performance in the markets (Barney, 1991, Barney, 1997, Day, 1994 and Wernerfelt, 1984). Internalization theory also posits that MNEs are created when they internalize certain markets for intangible assets across national borders (Buckley and Casson, 1976 and Hymer, 1976), and, as a result, MNEs can internalize knowledge-based resources and capabilities—either in innovation- or marketing-related activities—inside their firm boundaries in order to effectively offset additional costs from the liability of foreignness (Caves, 1996 and Zaheer, 1995). MNEs thereby achieve higher performance in foreign markets (Dunning, 1973 and Hymer, 1976). In addition, the FSA/CSA framework advances on the RBV and internalization theory by highlighting country factors as strategically relevant for the performance of MNEs. It shows that MNEs need to locate their foreign business in countries where they can maximize the full benefits of exploring and/or exploiting FSAs from the internationalization process. The influence of country factors on MNE performance has been extensively explored in the international business literature so far in terms of host country characteristics/context/institutional changes (Allred and Swan, 2005, Aulakh and Kotabe, 2008 and Christmann et al., 1999), cross-cultural differences/distance (Ambos and Ambos, 2009 and Calhoun, 2002), alliance partner origins (Acquaah, 2009), and diversification strategies (Nachum, 1999 and Qian and Li, 1998). Considering that there are two dimensions in the internationalization of firms (i.e., outward and inward activities), more attention needs to be given to an input-oriented perspective ( Hassel et al., 2003). This inward dimension of internationalization highlights the potential ‘linkages’ between foreign investors and domestic recipients, whereby the latter wish to build and/or upgrade their own FSAs from the firm-specific advantages (FSAs) possessed by the former, leading to the economic development of FDI-receiving host countries ( Rugman and Doh, 2008). Foreign MNEs usually possess knowledge-based tangible and intangible assets—such as patents, manufacturing technology, marketing skills, trademarks, etc.—which indigenous firms usually lack. As a result, one way for indigenous MNEs to accumulate FSAs is to attract inward FDI from foreign MNEs. This provides additional resources and capabilities such as new financial capital, technology, management skills, and access to foreign markets and sources of raw materials among others ( Dunning, 1994). When indigenous firms try to build and/or upgrade their own FSAs based on the inward dimension of internationalization, the proximity between the providers and recipients of the inward FDI should be considered as an important component of CSAs. This is because direct investment from all countries is not necessarily homogeneous (Buckley et al., 2004 and Buckley et al., 2007). Different home country (or region) origins of inward FDI may create different effects on the accumulation of FSAs, and, as a result, they may have a substantial influence on the performance of indigenous MNEs in world markets. For example, Lecraw (1993) argues that the motivations of FDI vary with the geographic origin of investors. Tan and Meyer (2011) show that the shared socio-cultural backgrounds under the same country (or region) of origin facilitate the development of trust, reduce the uncertainty of economic exchanges, and enhance the legitimacy on the part of foreign investors conducting FDI in host countries. Makino and Tsang (2011) also suggest that historical ties that can be formulated within a geographic region should be considered as an additional factor when examining FDI decisions. As such, based on the inward dimension of internationalization, we can find the countries/regions which are linked to indigenous MNEs and the impact on performance. Knowledge gaps identifiable in the literature on the relationship among the FSA-building process of indigenous firms, their attracted inward FDI, and firm performance in the markets are two-fold. First, although suggesting an important connection between FSAs and firm performance, both the RBV and internalization theory do not clearly explain the nature of the relationship between FSAs and firm performance, i.e., in which ways FSAs affect firm performance in the markets. In fact, while an extensive literature has examined the functional relationship between FSAs and firm performance, there are still no agreed results on the nature of this relationship (e.g. Delios and Beamish, 2001, Lu and Beamish, 2001, Souitaris, 1999 and Sriram and Sapienza, 1991). This is due to the problem that core capabilities may turn into core rigidities and have a negative impact on overall firm performance ( Haas and Hansen, 2005 and Leonard-Barton, 1992). Second, the impact of country factors on MNE performance has been recognized in the now classic step-wise process theory of internationalization by Johanson and Vahlne, 1977 and Johanson and Vahlne, 1990 and their Uppsala colleagues, the regionalism argument by Rugman and Verbeke, 2004, Rugman, 2003 and Rugman, 2005, and the parallel work by Ghemawat (2007) on semi-globalization, and they have been tested from the output side rather than the input side of internationalization. Yet, as discussed above, indigenous MNEs strive to receive inward direct investment from foreign investors in order to build up and/or strengthen their FSAs. In fact, previous research has suggested diverse channels through which inward foreign direct investment (FDI) can upgrade the FSAs of recipient companies in host countries (e.g. Buckley et al., 2006, Buckley et al., 2007, Caves, 1974, Peng, 2001 and Urata and Kawai, 2000). In order to fill these gaps in the literature, we investigate in this current study (1) in which ways FSAs built in MNEs affect their firm performance in the markets, and, (2) whether and how the country origin of inward FDI from its home region affects the relationship between FSAs and MNE performance as and when MNEs attract inward direct investment from foreign investors to strengthen their FSAs. Here, using government survey data on inward FDI specific to individual Korean MNEs, we examine the non-linear effects of innovation and marketing capabilities (i.e. FSAs) of these Korean MNEs on their firm performance. We then explore the manner in which the home region origin of inward FDI (i.e. CSAs) interacts with the innovation and marketing capabilities affecting Korean MNE performance. We do this in a novel way where we aggregate the individual CSAs into a regional effect. We distinguish between the CSAs in the home region of Asia-Pacific (i.e. the home region of large Korean MNEs) and those in the non-home region. We examine the extent to which this home region-specific advantage (HRSA) moderates the linkage between FSAs and MNE performance. Thereby we test for the regional effects of the improved FSAs of Korean MNEs on their performance at a company level. We approach the issue of regionality from the input side of firm internationalization by investigating the home region origin of the inward FDI that Korean MNEs receive from foreign countries. Korea provides a good empirical basis for this analysis, because, due to the lack of financial resources and sophisticated technological advantages, internationalization through attracting foreign investors has been a prerequisite for Korean firms in the past several decades. Especially during the late 1990s, the Korean government shifted towards an inward FDI-based economic development policy from a foreign loan-based one to foster development of its national economic system after the Asian financial crisis (Lee and Rugman, 2009). By answering how the performance of MNEs may be affected by FSAs as and when they receive inward investment from foreign countries (and regions) using a Korean sample, this study makes a number of contributions to the international business literature on MNE performance and regional strategy. A key contribution is to test explicitly for the non-linear effects of accumulated FSAs by indigenous MNEs on their performance. Although both the resource-based view (RBV) of firms and internalization theory of MNEs have consistently suggested that there is a close and substantial relationship between hard-to-replicate FSAs and firm performance, a separate but important empirical issue is in which ways FSAs affect firms' performance in the markets. This has not been extensively investigated yet in the international business literature, and we examine this knowledge gap by testing whether MNEs exploit the effects of FSAs on their firm performance in a U-shaped or inverted U-shaped fashion. In addition, previous studies on regional MNEs have tested the nature of regionality from the output side rather than the input side of internationalization by examining sales revenue segments across the triad. For example, Rugman (2005) and his colleagues have consistently suggested that there is a certain limit to the slow but on-going internationalization process of MNEs in such a way that the world's largest 500 firms do not perform globally but tend to be focused upon their home region of the broad triad of Asia-Pacific, North America, and Europe. Specifically, they found that 320 of the 380 firms for which data on regional sales segments are available averaged 80% of their output sales in their home region (Rugman and Verbeke, 2004). Building on the diverse channels through which inward FDI may upgrade and strengthen the FSAs of recipient companies in host countries, we test the nature of regionality from the input side of firm internationalization by explicitly considering the country origin of the inward FDI from a regional perspective, and investigate whether MNEs receiving inward FDI from their nearby home region countries can exploit their upgraded FSAs more profitably than those receiving inward FDI from their non-home region countries. In short, this paper offers the first explicit test of the moderating effect of input-side regionalism on the relationship between FSAs and MNE performance. We will develop this paper as follows. In Section 2, we construct a theoretical framework and suggest hypotheses to be tested with a Korean sample. In Section 3, we describe our sample, variables, and an empirical model in detail. In Section 4, we report and discuss the main results from empirical estimations that support the hypotheses. In Section 5, we conclude the paper with managerial implications and some limitations for future research.
نتیجه گیری انگلیسی
In order to investigate how the performance of MNEs may be affected as and when they receive inward direct investment from foreign countries, we examined the impact that the two types of FSAs of MNEs—technology-based innovation capabilities and customer-based marketing capabilities—have on their diverse performance measures. We used firm-level data on large-sized Korean manufacturing MNEs collected by the Korean government. Our findings show that both types of FSAs affect the performance of Korean MNEs in a non-linear fashion, and that Korean MNEs may better exploit their FSAs over a certain interval when they attract inward FDI from the Asia-Pacific region—the home region of Korean MNEs—in order to upgrade/strengthen their FSAs. This confirms an indirect but significant moderating effect of the country/region origins of inward FDI attracted by Korean MNEs on the relationship between their FSAs and firm performance. Our empirical findings make two important theoretical contributions to the international business/strategic management literature. First, we analyze the effects of FSAs on firm performance in more detail by exploring the non-linear nature of the FSA-performance relationship applied to the innovation and marketing capabilities possessed by MNEs and their performance. Although both the resource-based view (RBV) of firms (Barney, 1991, Barney, 1997, Day, 1994 and Wernerfelt, 1984) and internalization theory (Buckley and Casson, 1976 and Hymer, 1976) highlight the importance of hard-to-replicate FSAs for companies to possess to achieve high performance in the foreign markets, they do not clearly explain the nature of the relationship between FSAs and firm performance. This research addresses this issue, i.e., in which ways FSAs affect firms' performance, and, our empirical results clearly demonstrate a U-shaped relationship between the two constructs. Second, we confirm the importance of CSAs for MNEs' achieving sustainable competitive advantage in the market as suggested in the FSA/CAS framework. Built on the previous studies on diverse channels between inward FDI and the FSA-building process of recipient companies, we demonstrate that the country origin of inward FDI may be an important source of CSAs that help MNEs accumulate and develop FSAs from the input side of resources. Specifically, the home region origin of inward FDI moderates significantly the relationship between FSAs and MNE performance by changing its functional nature into an inverted U-shaped one. This means that there exist certain intervals of FSAs where the home region origin of inward FDI may help Korean MNEs better exploit their FSAs. As a result, this research shows that when Korean MNEs receive inward FDI from their nearby home region countries, they can exploit their FSAs more profitably than when receiving inward FDI from distant countries in their non-home regions, due to the home region-specific advantages (HRSAs) that reduce transaction costs for FDI-receiving Korean MNEs. Actionable implications that Korean MNE executives could learn from our research findings are clear. First, when Korean MNEs attempt to accumulate FSAs to enhance their performance, our research confirms that it may take a time for the accumulated FSAs to be translated into positive performance due to the so-called ‘threshold effects’ identified in this current study. As a result, Korean MNE executives are advised to be patient before they make divestment decisions on the accumulation of FSAs over the course of their business. Second, when Korean MNEs attract direct investment from foreign investors to strengthen and/or upgrade their innovation and/or marketing capabilities, our findings show that the superior effects of inward FDI from their home region—i.e., Asia-Pacific region—on firm performance (compared to that from non-home regions) are prominent when their innovation and/or marketing capabilities are neither weak nor strong. This may suggest a practical solution to the stuck-in-the-middle situation where, as argued by Porter, 1980 and Porter, 1985, the combination of both cost leadership and differentiation strategies is unlikely to result in enhanced firm performance due to capable competitors who choose either cost reduction or differentiation. Our empirical results show, however, that the addition of a regional dimension to the channels between inward FDI and the FSA-building process of recipient companies may help Korean MNEs pursue both cost leadership and differentiation strategies successfully leading to better performance, because FDI from foreign countries within the same home region provide them with economies of scale (for cost reduction) and modification of their final products (for differentiation) due to cultural and institutional similarities. This paper has several limitations that can serve as directions for future research. First, we use cross-sectional data for Korean MNEs in the current study. It would be interesting to investigate if the results would be significantly different with the same sample in a different time period and/or with firms from a country other than Korea. Second, we investigate the home region effects of inward FDI that Korean MNEs receive in this study. A similar argument could be applied to outward Korean foreign direct investment made into its home region. In other words, as the Korean MNEs go abroad, their innovation- or marketing-related FSAs might have a greater impact on their firm performance as they implement their foreign operations in their home region of the triad. It would be even more interesting to examine if MNEs could achieve better performance when they have a two-way flow of both inward and outward FDI in their home region. Third, since our current analysis is a purely cross-sectional, we are not completely free from endogeneity issues. MNEs are highly performing due to the high level of their internalized FSAs and the inward FDI made, but it might be possible that the highly performing MNEs can attract more funds to upgrade their FSAs. Fourth, we acknowledge limitations of the measurements used in our current empirical study. We depend on the indirect pieces of accounting information—such as R&D and SGA intensities—for measuring the degree of FSAs due to the lack of precise data for knowledge-based FSAs such as innovation and marketing capabilities. In addition, although we use diverse performance measures of Korean MNEs to guarantee the robustness of our research findings, we could not experiment with all possible types of ratio-based performance measures. Lastly, we use a ‘scope’ metric to indicate the home region origin of inward FDI made in each Korean MNE. However, it does not necessarily indicate the ‘scale’ of each MNE's home region orientation. When data on geographic segments of inward FDI amounts across different regions are available for each MNE, it is recommended to use a magnitude or scale metric instead of a scope metric. Overall, this paper has advanced the literature on regional MNEs and their performance by demonstrating that the performance of MNEs is significantly affected by their FSAs in a non-linear fashion, and that this relationship is also significantly moderated when a variable for the regionality of inward FDI is included. This finding offers an interesting update and new explanation of the important regional nature of international business by large MNEs from the input-oriented perspective of firm internationalization. While the empirical work in this study encompasses the normal limitations of working with accounting data which do not precisely reflect the theoretical nature of FSAs, nor of performance, we believe that the results are striking and act as an important spur for further work on the regional nature of MNE operation and performance.