LOCATION STRATEGIES AND PERFORMANCE OF DEVELOPING COUNTRY MNCS YUAN LIN (B.A. (Hons.) Finance, M.A. Economics, NanKai University) A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF PHILOSOPHY DEPARTMENT OF STRATEGY AND POLICY NATIONAL UNIVERSITY OF SINGAPORE 2009 ACKNOWLEDGEMENTS I would first and formost like to thank to my supervisor Nitin Pangarkar for his insightful guidance and his support throughout this process, without which I could not have completed the study. He has encouraged me to research in the international business area, and has constantly shaped the development of my research agenda. I am thankful that he was there to answer any question, to provide valuable feedback on my papers, and to lead me forward. The knowledge he imparted is priceless, invaluable and can never be found in a textbook. To me he is not only a great scholar and mentor, but also a wonderful person, being generous, patient, nice, thoughtful and reliable. I can never thank him enough for his help and guidance in the past five years. I am also indebted to my committee members for their pointed comments and suggestions, and for improving the quality of my dissertation. Prof. Andrew Delios’ optimistic outlook, energetic working style and critical scholarship have served as a model throughout my time at NUS. I thank Prof. Sai Yayavaram for guiding me to improve the research with insightful advice, and reviewing my work on a short notice. Additionally, I extend my sincere appreciation to Marleen Dieleman, XiaoHui Lu and WenZhen Lu for their warm encouragement and mentorship at i different stages during my PhD study. The Business Policy Department’s administrative staff, Woo Kim and Koon Cheng, have helped me a lot with administrative issues. I am thankful to each of them for their support. I also would like to express my gratitude to my friends in the PhD and MBA programs, for their emotional support and encouragement. Thank you for being wonderful friends and colleagues with me. Last, but most importantly, my parents, JiTang Yuan and XinZhi Wang, and sister, Yu Yuan, always encouraged me to persevere in my efforts to achieve my goals. By firmly and lovingly keeping me on track, they have been my greatest resource and also been enormous sources of strength. With their unwavering love, my journey is fulfilled with blessing and happiness. I dedicate my dissertation to them. ii TABLE OF CONTENTS ACKNOWLEDGEMENTS . i  SUMMARY . vi  LIST OF TABLES ix  LIST OF FIGURES xi  CHAPTER ONE 1  INTRODUCTION 1  BACKGROUND 1  UNIQUE CHARACTERISTICS OF DEVELOPING COUNTRY MNCS . 2  TRENDS IN CHINA’S OUTWARD FDI 5  LOCATION CHOICE OF CHINESE MNCS: TWO CASES . 7  ORGANIZATIONAL LEARNING THEORY 10  Overview of Organizational Learning Theory 10  Application in IB Literature 12  OVERVIEW OF RESEARCH QUESTIONS 13  CONTRIBUTIONS 15  Contributions . 15  Empirical Findings 17  STRUCTURE OF THE DISSERTATION . 20  CHAPTER TWO . 26  INTERNATIONALIZATION LOCATIONS AND PERFORMANCE OF DEVELOPING COUNTRY MNCS . 26  INTRODUCTION 26  LITERATURE REVIEW . 30  Internationalization-performance Relationship 30  HYPOTHESES . 32  Resource-based Ownership Advantage, Transaction Cost-minimizing Ownership Advantage and Institution-based Ownership Advantage . 32  Product Diversification and Internationalization Strategies . 34  iii Firm Size and Internationalization Strategies . 37  Ownership Identity and Internationalization Strategies 38  Dynamic Explanation of Performance 40  Short-term Performance 42  Longer-term Performance Improvement 46  METHODOLOGY . 50  The Sample . 50  Variables and Measures 52  Dependent Variables . 52  Independent Variables 53  Control Variables 54  Models . 56  Statistical Methods 57  RESULTS AND DISCUSSION . 60  Robustness Checks 64  DISCUSSION AND CONCLUSION . 66  CHAPTER THREE . 93  EXPLOITATION VERSUS EXPLORATION IN LOCATION CHOICES BY DEVELOPING COUNTRY MULTINATIONALS 93  INTRODUCTION 93  LITERATURE REVIEW . 97  Location Choice in Internationalization 97  CONCEPTUAL DEVELOPMENT AND HYPOTHESES . 98  Uncertainty and FDI Location 98  Exploitation and Location Choice 100  Exploration and Location Choice . 103  Exploitation versus Exploration in Location Choice 104  Economic Openness as a Moderating Factor 108  Economic Stability as a Moderating Factor 110  METHODOLOGY . 111  The Sample . 111  Variables and Measures 112  Dependent Variable 112  Independent Variables 112  Control Variables 114  Model 116  iv RESULTS AND DISCUSSION . 117  DISCUSSION AND CONCLUSION . 122  CHAPTER FOUR 135  DISCUSSION AND CONCLUSION . 135  CONCLUSION . 135  CONTRIBUTIONS 139  FUTURE DIRECTIONS 143  BIBLIOGRAPHY 145  v SUMMARY This dissertation aims to contribute to the study of foreign direct investment (FDI) location, one of the most important and complex decisions facing multinational companies (MNCs). Drawing from the organizational learning theory (OLT), I model international location selection by developing country MNCs as a tradeoff between exploitation and exploration considerations. The dissertation comprises two essays, both of which are based on organizational learning theory. I use a unique database, and identify the differences between developing and developed country MNCs and their (differences’) implications for location choices. My study raises questions concerning the generalizability of traditional International Business (IB) theories, which are draw from developed country MNCs. In the first paper, I analyze the antecedents and consequences of different location strategies of developing country MNCs. Theoretically I identify institution-based ownership advantage from resource-based and transaction costminimizing ownership advantages. Empirically, I find that higher degree of product diversification, larger size and non-SOE ownership identity will lead to higher degree of internationalization into developed countries than into vi developing countries. I also argue that, to systematically evaluate the benefits from internationalization, it is important to consider immediate performance as well as longer-term performance improvement, which has been ignored by prior studies. I predict that internationalization into developing countries has a positive effect on immediate performance, while the immediate effect of internationalization into developed countries is negative. Moreover, I predict that internationalization into developed countries might deliver greater longer term benefits than internationalization into developing countries. My analysis of international entries by Chinese listed MNCs between 1992 and 2005 strongly supports my hypotheses. My results show that, while choosing internationalization strategies, developing country MNCs should attempt to balance immediate benefits with potential longer-term gains. In the second paper, I draw mainly from organizational learning theory, and model the trade-offs between exploitation and exploration in location choice. I develop a series of hypotheses predicting positive relationships between prior selection of the particular host country by a focal firm and its key rivals and the likelihood that the focal firm will select that FDI location. I test the hypotheses on a unique and comprehensive panel dataset including 661 new market entries (FDI location choices) by 207 listed Chinese MNCs between 1992 and 2005. My analyses provide strong support for the hypothesized relationships. Specifically I vii find that firms are affected by exploitation considerations (i.e., they leverage their own prior experience) as well as exploration considerations (i.e., leveraging of rivals’ experiences) in choosing FDI location. However, the positive effect of exploration considerations on firm’s location choice is much weaker than the exploitation considerations. I also find that exploitation and exploration considerations are substitutable to each other in location choice. My analyses also reveal that the exploitation as well as exploration effects are stronger in more uncertain country environments—countries that are less open and characterized by lower stability. The theoretical arguments, based on organizational learning theory, and the findings I present in this dissertation enrich our understanding about the location strategies of developing country multinationals. viii LIST OF TABLES Table 2.1: Summarizing the Argument for Performance Effects 72 Table 2.2: Location of Chinese FDI 1992-2005…………………………………73 Table 2.3: Descriptive Statistics and Correlations……………………………….74 Table 2.4: Results of 2SLS Regressions of Listed Chinese MNCs: First stage…75 Table 2.5: Results of 2SLS Regressions of Listed Chinese MNCs for Performance: Second stage…………………………………………………………………… 76 Table 2.6: Results of 2SLS Regressions of Listed Chinese MNCs for Performance Improvement: Second stage…………………………………………………… .78 Table 2.7: Robust Test 1: Results of 2SLS Regressions of Listed Chinese MNCs: First stage……………………………………………………………………… .79 Table 2.8: Robust Test 1: Results of 2SLS Regressions of Listed Chinese MNCs for Performance: Second stage………………………………………………… 80 Table 2.9: Robust Test 1: Results of 2SLS Regressions of Listed Chinese MNCs for Performance Improvement: Second stage……………………………………82 Table 2.10: Robust Test 2: Results of Random Effects Regressions Analysis of Location Strategies of Listed Chinese MNCs: ………………………………… 83 Table 2.11: Robust Test 3: Results of 2SLS Regressions of Listed Chinese MNCs: First stage……………………………………………………………………… .84 Table 2.12: Robust Test 3: Results of 2SLS Regressions of Listed Chinese MNCs for Performance: Second stage………………………………………………… 85 Table 2.13: Robust Test 3: Results of 2SLS Regressions of Listed Chinese MNCs for Performance Improvement: Second stage……………………………………87 Table 3.1: Descriptive Statistics and Correlations…………………………… .127 Table 3.2: Location of Chinese FDI 1992-2005 by Countries…………………129 ix Hitt M. A., Hoskisson R. E. and Kim H. 1997. International diversification: effects on innovation and firm performance in product-diversified firms. Academy of Management Journal, 40(4): 767-796. Hitt M. A., Gimeno J. And Hoskisson R.E. 1998. Current and future research methods in strategic management. Organizational Research Methods, 1: 6-44. Hoang B. P. 1998. A causal study of relationships between firm characteristics, international marketing strategies, and export performance. Management International Review, 38: 73-93. Hodgson A. 2007. Mounting inflation in Argentina threatens business environment. Retrieved from http://www.euromonitor.com/ Holmqvist M. 2003. A dynamic model of intra- and inter-organizational learning. Organization Studies, 24(1): 95–123. Hood, N. and Young, S. 1979. The Economics of Multinational Enterprise. London: Longman Group Ltd. Hoskisson R.E. 1987. Multidivisional structure and performance: The contingency of diversification strategy. Academy of Management Journal, 30: 625-644. Hoskisson R.E., Eden L., Lau C. M., and Wright M. 2000. Strategy in emerging economies. Academy of Management Journal, 43(3): 249–267. Hoskisson R.E. and Hitt M.A. 1988. Strategic control systems and relative R&D investment in large multiproduct firms. Strategic Management Journal, 9: 605-621. Hoskisson R.E., Kim H., White R. and Tihanyi L. 2004. A framework for understanding international diversification by business groups from emerging economies. In Advances in International Management, Vol. 16, Hitt M, Cheng JL (eds). Elsevier/JAI Press: Oxford, UK: 137-163. Hu A.G.Z and Jefferson G.H. 2006. A great wall of patents: What is behind China’s recent patent explosion? Manuscript available at http://people.brandeis.edu_jefferso/res Huang Hai Min. 2004. TCL’s internationalization in Vietnam. Retrieved from www.XINHUANET.com 155 Huber G. 1991. Organizational learning: The contributing processes and the literatures. Organization Science, 2: 88–115. Hummel J. R. 2007. Death and taxes, including inflation: the public versus economists. Economic Journal Watch, 4(1): 46-59. Hymer S. H. 1960. The international operations of national firms: A study of direct foreign investment. Unpublished doctoral dissertation, Massachusetts Institute of Technology, Cambridge, MA. Hymer S. H. 1976. A Study of Foreign Direct Investment. Cambridge, MA: MIT Press. Jo S. H. 1981. Overseas direct investment by South Korean firms: Direction and pattern. in Kumar, K. and McLeod, M. G. (ed), Multinationals from Developing Countries, Lexington, 1981. Johanson J. and Vahlne J.E. 1977. The internationalization process of the firm: a model of knowledge development and increasing foreign market commitment. Journal of International Business, 8(1): 23-32. Johanson J. and Vahlne J. 1990. The mechanism of Internationalization. International Marketing Review, 7(4): 11–24. Johanson J. and Vahlne J. E. 2003. Business relationship learning and commitment in the internationalization process. Journal of International Entrepreneurship, 1(1): 83-101. Johanson J. and Vahlne J.E. 2009. The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership. Journal of International Business Studies, 40: 1411-1431. Jones, G. R., & Hill, C. W. L. 1988. Transaction cost analysis of strategy structure choice. Strategic Management Journal, 9: 159-172. Juan C. G., Ross L. and Sérgio S. 2009. Globalization and international capital raisings. World Bank Research Digest, 3(4):6. Kalnins Arturs and Chung Wilbur. 2004. Resource-seeking agglomeration: A study of market entry in the lodging industry. Strategic Management Journal, 25: 689-699. 156 Kaplan R.S. and Norton D.P. 2004. Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business School Publishing, Boston, Massachusetts. Kaya H. and Erden D. 2008. Firm-specific capabilities and foreign direct investment activities of Turkish manufacturing firms: An empirical study. Journal of Management Development, 27(7): 761-777. Khanna T. and Palepu K. 1997. Why focused strategies may be wrong for emerging markets. Harvard Business Review, July-August: 41-51. Khanna T. and Palepu K. 2000. The future of business groups in emerging markets: long-run evidence from Chile. Academy of Management Journal, 43(3): 268–285. Khanna Tarun, Palepu Krishna G., Sinha Jayant, Klump Andy, Kaji Niraj, Sanchez Luis and Yacoub Max. 2005. Strategies that fit emerging markets. Harvard Business Review, 83 (6): 63-76. Khanna T. and Rivkin J. W. 2001. Estimating the performance effects of business groups in emerging markets. Strategic Management Journal, 22 (1): 45–74. Khavul S., Bruton G. D., Zheng C. C. and Wood E. 2007. Learning during and after internationalization by entrepreneurial firms from emerging economies. Academy of Management Proceedings: 1-6. Khoury Sarkis, J. 1979. International banking: A special look at foreign banks in the U.S. Journal of International Business Studies, 10 (Winter): 36-52. Kim H., Hoskisson R.E. and Lee S-H. 2007 Multinationality and firm profitability of emerging economy firms: Insights from institutional economics and the resource-based view. Working paper, presented at NUS seminar, July 6, 2007. Kim L. 1997. Imitation to Innovation: The Dynamics of Korea’s Technological Learning. Harvard Business School Press: Boston, MA. Kimberly J. R. and Evanisko M. J. 1981. Organizational innovation: The influence of influence of individual, organizational, and contextual factors on hospital adoption of technological and administrative innovations. Academy of Management Journal, 24: 689–713. Kravis I. B. and Lipsey R. E. 1982. The location of overseas production and production for export by US multinational firms. Journal of International Economics, 12(3/4): 201–223. 157 Kogut B. 2003. Globalization and context. Keynote Address at the First Annual Conference on Emerging Research Frontiers in International Business, Duke University. Kogut B. and Zander U. 1992. Knowledge of the firm, combinative capabilities, and the replication of technology. Organization Science, 3(3): 383–397. Lall S. 1983. The rise of MNCs from the third world. Third World Quarterly, 5(3): 618-26. Lall S. 2000. The technological structure and performance of developing country manufactured exports, 1985–98. Development Studies, 28(3): 337-369. Lane P.R. and Milesi-Feretti G.M. 2006. The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970– 2004. International Monetary Fund Working Paper. Retrieved from http://www.imf.org/. Latin America Monitor: Southern Cone Monitor. 2007. Inflation poses risks to growth outlook, 24(11): 5. Lavie D. and Rosenkopf L. 2006. Balancing exploration and exploitation in alliance formation. Academy of Management Journal, 49(4): 797-818. Law S.K. 2007. Does a country’s openness to trade and capital accounts lead to financial development? Evidence from Malaysia. Asian Economic Journal, 22 (2): 161–177. Lawrence T. B., Mauws M. K., Dyck B. and Kleysen R. F. 2005. The politics of organizational learning: Integrating power into the 4I framework. Academy of Management Review, 30(1): 180–191. Le T.B.N., Venkatesh,S. & Nguyen V.T. 2006. Getting bank financing: A study of Vietnamese private firms. Asia Pacific Journal of Management, 23, 209– 227. Lecraw D.J. 1983. Performance of transnational corporations in less developed countries. Journal of International Business Studies, 14(1): 15–34. Lee C. and Beamish P. 1995. The characteristics and performance of Korean joint ventures in LDCs. Journal of International Business Studies, 26: 637-654. 158 Lee G.K. and Lieberman M.B. 2007. Acquisition vs. Internal development as entry modes for new business development: The dynamics of firm-market relevance. Academy of Management Proceedings: 1-6. Lee H.-U. and Park J.-H. 2006. Top team diversity, internationalization and the mediating effect of international alliances. British Journal of Management, 17: 195-213. Lee S.-H., Peng M.W., and Barney J. 2007. Bankruptcy law and entrepreneurship development: A real options perspective. Academy of Management Review, 32: 257–272. Lee J. and Slater J. 2007. Dynamic capabilities, entrepreneurial rent-seeking and the investment development path: The case of Samsung. Journal of International Management, 13: 241–257. Levinthal D.A. and March J.G. 1993. The myopia of learning. Strategic Management Journal, 14: 95–112 Levitt T. 1983. The globalization of markets. Harvard Business Review, 61(3):92–102. Levitt B. and March J. G. 1988. Organizational learning. American Journal of Sociology, 14: 319–340. Lieberman M.B. 1997. The learning curve, diffusion, and competitive strategy. Strategic Management Journal, 8(5): 441-452. Linge G J R. 1984. Developing-country Multinationals: A Review of the Literature. Pacific Viewpoint, 25(2): 173-195. Li, P.P. 2003. Toward a geocentric theory of multinational evolution: the implications from the Asian MNEs. Asian Pacific Journal of Management, 20, 217–242. Li, P.P. 2007. Toward an integrated theory of multinational evolution: The evidence of Chinese multinational enterprises as latecomers. Journal of International Management, 13: 296–318. Li S. X. and Greenwood R. 2004. The effect of within industry diversification on firm performance: Synergy creation, multi-market contact and market structuration. Strategic Management Journal, 25: 1131–1153. 159 Liu X.M., Xiao W. and Huang X.H. 2008. Bounded entrepreneurship and internationalization of indigenous Chinese private-owned firms. International Business Review, 17: 488–508. Lu D. 2000. Industrial policy and resource allocation: implications on China's participation in globalization. China Economic Review, 11 (4): 342-360. Lu J. W. 2002. Intra- and Inter-organizational imitative behavior: institutional influences on Japanese firm’s entry mode choice. Journal of International Business Studies, 33 (1): 19-37. Lu J. W. and Beamish Paul W. 2004. International Diversification and Firm Performance: The S-curve Hypothesis. Academy of Management Journal, 47 (4): 598-609. Luo X.W. and Chung C.N. 2005. Keeping it all in the family: The role of particularistic relationships in business group performance during institutional transition. Administrative Science Quarterly, 50: 404–439 Luo Y. and Mezias J.M. 2002. Liabilities of foreignness: Concepts, constructs, and consequences. Journal of International Management, 8(3): 217–221. Luo YaDong and Tung R. L. 2007. International expansion of emerging market enterprises: A springboard perspective. Journal of International Business Studies, 38 (4): 481-498. Lutz J. 2005. Political openness and economic openness in developing countries in an ear of increasing globalization. Paper presented on International Trade and Finance Association 15th International Conference. Ma Xufei, Yao Xiaotao and Xi Youmin. 2005. Group affiliation and firm performance during institutional transitions. Paper presented at APJM conference 2005, Singapore. Majumdar Sumit. 1998. Assessing comparative efficiency of the state-owned mixed and private sectors in Indian industry. Public Choice, 96: 1-24. Makino Shige, Lau Chung-Ming and Yeh Rhy-Song. 2002. Asset-exploitation versus asset-seeking: implications for location choice of foreign direct investment from newly industrialized economies. Journal of International Business Studies, 33: 403-421. 160 Makki S.S. and Somwaru A. 2004. Impact of foreign direct investment and trade on economic growth: Evidence from developing countries. American Journal of Agricultural Economics, 86(3): 795-801. March J. 1991. Exploration and exploitation in organizational learning. Organization Science, 2(1): 71-87. March J. 1994. A Primer on Decision making: How Decisions Happen. New York: Free Press. Markides C. C. and Williamson P. J. 1994. Related diversification, core competencies, and corporate performance. Strategic Management Journal, 15(Special issue): 149–165. Martin X. and Salomon R. M. 2003. Knowledge transfer capacity and its implications for the theory of the multinational corporation. Journal of International Business Studies, 34(4): 356-373. Mascarenhas B. 1989. Domains of state-owned, privately held, and publicly traded firms in international competition. Administrative Science Quarterly, 34: 582-597. Mata J. and Portugal P. 2002. The survival of new domestic and foreign-owned firms. Strategic Management Journal, 23(4): 323-343. Mathews J.A. 2006. Dragon multinationals: New players in 21st century globalization. Asia Pacific Journal of Management, 23(1): 5–27. McFadden D. 1973. Conditional logit analysis of qualitative choice behavior, in Frontiers in Econometrics (Ed.) P. Zaremka, Acadetnic Ptess, New York. Menard S. 2004. Six approaches to calculating standardized logistic regression coefficients. The American Statistician, 58(3): 218-223. Miller S.M. and Upadhyay M.P. 2002. Total Factor Productivity, Human Capital, and Outward Orientation: Differences by Stage of Development and Geographic Regions. Department of Economics, University of Nevada, Las Vegas NV, and Department of Economics, Eastern Illinois University, Charleston IL Minbaeva D., Pedersen T., Bjorkman I., Fey C.F. and Park H.J. 2003. MNC knowledge transfer, subsidiary absorptive capacity, and HRM. Journal of International Business Studies, 34: 586-599. 161 Miner A. S. and Mezias S. 1996. Ugly duckling no more: pasts and futures of organizational learning research. Organizational Science, 7(1): 88–99. MOFCOM. 2005. Statistical Bulletin of China’s Outward Foreign Direct Investment, Beijing: MOFCOM and National Bureau of Statistical of the People’s Republic of China, 2005. MOFCOM. 2007. Statistical Bulletin of China’s Outward Foreign Direct Investment, Beijing: MOFCOM and National Bureau of Statistical of the People’s Republic of China, 2007. Monkiewicz J. 1986. Multinational enterprises of developing countries: Some emerging trends. Management International Review, 26(3): 67-79. Morck R. and Yeung B. 1991. Why investors value multinationality. Journal of Business, 64(2): 165-187. Morck R., Yeung B. and Zhao M. 2008. Perspectives on China’s outward foreign direct investment. Journal of International Business Studies, 39(3): 337–350. Nachum L. 1999. Diversification Strategies of Developing Country Firms. Journal of International Management, 5(2): 115–40. Nachum L. 2000. Economic geography and the location of TNCs: Financial and professional service FDI to the USA. Journal of International Business Studies, 31(3): 367-85. Nachum L. 2004. Geographic and industrial diversification of developing country firms. Journal of Management Studies, 41(2): 274-294. Nachum L. and Zaheer S. 2007. The persistence of distance? The impact of technology of MNE motivations for foreign investment. Strategic Management Journal, 26: 747–767. Nelson R. R. and Winter S. G. 1982. An Evolutionary Theory of Economic Change. Harvard University Press, Cambridge, MA. Newman K. L. 2000. Organizational transformation during institutional upheaval. Academy of Management Review, 25: 602-619. North D.C. 1990. Institutions, Institutional Change and Economic Performance. Cambridge University Press: Cambridge, UK. 162 Ocampo J. A. 2005. A broad view of macroeconomic stability. United Nations DESA Working Paper series. Retrieved from www.un.org/esa/desa/papers/2005/wp1_2005.pdf OECD. 1999. Open markets matter: The benefits of trade and investment liberalization. Retrieved from: www.oecd.org. Oliver C. 1997. Sustainable competitive advantage: combining institutional and resource-based views. Strategic Management Journal, 18(9): 697–713. Ortenblad A. 2002. Organizational learning: a radical perspective. International Journal of Management Reviews, 4: 87–100. Osland G. and Bjorkman I. 1998. MNC-host government interaction: Government pressures on MNCs in China. European Management Journal, 16 (1): 91-100. Pacheco-López Penélope. 2005. Foreign Direct Investment, Exports and Imports in Mexico. World Economy, 28 (8): 1157-1172. Pally T. I. 1998. Challenging open markets. New Economy, (4): 238-442 Pananond P. and Zeithaml C. 1998. The international expansion process of MNEs from developing countries: A case study of Thailand's CP group. Asia Pacific Journal of Management, 15(2): 163-184. Pangarkar N. and Lim H. 2003. Performance of foreign direct investment from Singapore. International Business Review, 12(5): 601-624. Pangarkar N. and Yuan L. 2009 Location in internationalization strategy: Determinants and consequences. Multinational Business Review, 17(2): 3768. Pantzalis Christos. 2001. Does location matter? An empirical analysis of geographic scope and MNC market valuation. Journal of International Business Studies, 32(1): 133-155. Pedler M., Burgoyne J. and Boydell P. 1999. The Learning Company: A Strategy for Sustainable Development. Maidenhead: McGraw-Hill. Peng M.W. 2003. Institutional transitions and strategic choices. Academy of Management Review, 28(2): 275–296. 163 Peng, M.W., Sun, S.L., Pinkham, B. and Chen, H. 2009. The institution-based view as a third leg for a strategy tripod. Academy of Management Perspectives, 23(3): 63-81. Peng M.W., Wang D.Y.L. and Jiang Y.L. 2008. An institution-based view of international business strategy: a focus on emerging economies. Journal of International Business Studies, 39: 920–936. Perkins D. 1994. Completing China’s move to the market. Journal of Economic Perspective, 8:23–46. Pisano G. 1994. Knowledge integration and the locus of learning: an empirical analysis of process development. Strategic Management Journal, Winter special issue 15: 85-100. Prahalad C. K. and Lieberthal K. 1998. The end of corporate imperialism. Harvard Business Review, 76(4): 68–78. Prasad A. J. 1985. Pros and Cons of Third World Multinationals. A Case Study of India. Tubingen, J.C.B. Mohr, pp 125. Preston P. 1996. Developing a truly international brand and company. International Journal of Physical Distribution and Logistics Management, 26(7): 19–21. Priem R. L. and Butler J. E. 2001. Is the resource-based “view” a useful perspective for strategic management research? The Academy of Management Review, 26(1): 22-40. Propris D. P., Driffield Nigel and Menghinello Stefano. 2005. Local industrial systems and the location of FDI in Italy. International Journal of the Economics of Business, 12(1):105-121. Prowse Stephen D. 1992. The structure of corporate ownership in Japan. Journal of Finance 47(3): 1121-1140. Qian G. 1996. The effect of multinationality measures upon the risk-return performance of US firms. International Business Review, 5: 247-265. Qian G. 2002. Multinationality, product diversification, and profitability of emerging US small- and medium-sized enterprises. Journal of Business Venturing, 17: 611-633. 164 Qian G., Li L., Li J.L. and Qian Z. 2008. Regional diversification and firm performance. Journal of International Business Studies, 39: 197–214. Ramamurti R. 2004. MNCs and global regulatory convergence: Pfizer and intellectual property rights, Paper presented at the Conference on International Business and Government Relations in the 21st Century, Thunderbird (American Graduate School of International Management); January 2004; Glendale, AZ. Ratnam C S. Venkata. 1998. Multinational companies in India. The International Journal of Human Resource Management, 9(4): 568-589. Rugman A. M. and Brain C. 2003. Multinational enterprises are regional, not global. Multinational Business Review, 11(1): 3–12. Rugman A. and Verbeke A., A. 2004. Perspective on regional and global strategies of multinational enterprises. Journal of International Business Studies, 35(1): 3–18. Ribbens B. A. 1997. Organizational learning styles: Categorizing strategic predispositions from learning. The International Journal of Organizational Analysis, 5(1): 59–73. Sabherwal R. and Sabherwal S. 2005. Knowledge management using information technology: Determinants of short-term impact on firm value. Decision Sciences, 36(4): 531-567. Salomon R. and Martin X. 2008. Learning, knowledge transfer, and technology implementation performance: A study of time-to-build in the global semiconductor industry. Management Science, 54 (7): 1266-1280. Sanders W. M. G., and Carpenter M. A. 1998. Internationalization and Firm Governance: The Roles of CEO Compensation, Top Team Composition, and Board Structure. Academy of Management Journal, 41: 158–178. Sayek S. 2000. Inflation and foreign direct investment: Theory and evidence. Paper presented at Royal Economic Society’s 2000 Annual Conference at the University of St. Andrews, United Kingdom. Sayrs L.W. 1989. Pooled Time Series Analysis. Sage Publications: Newbury Park, CA. Schneider F. and Frey B. 1985. Economic and political determinants of foreign direct investment. World Development, 13(1): 61 - 75. 165 Shan W. and Song J. 1997. Foreign direct investment and the sourcing of technological advantage: Evidence from the biotechnology industry. Journal of International Business Studies, 28: 267–284. Shaver J. and Flyer F. 2000. Agglomeration Economies, Firm Heterogeneity, and Foreign Direct Investment in the United States. Strategic Management Journal, 21 (12): 1175–1193. Shipton Helen. 2006. Cohesion or confusion? Towards a typology for organizational learning research. International Journal of Management Reviews, 8(4): 233–252. Sim A. B. 2006. Internationalization strategies of emerging Asian MNEs- Case stduy evidnence on Singaporean and Malaysian firms. Asia Pacific Business Review, 12(4): 487-505. Sinai E. and Meyer K.E. 2004. Identifying spillovers of technology transfer: the case of Estonia. Journal of Comparative Economics, 32(3): 445-466. Smith D. F. and Florida R. 1994. Agglomeration and industrial location: An econometric analysis of Japanese-affiliated manufacturing establishments in automotive-related industries. Journal of Urban Economics, 36(1): 23–41. Soysa Indra de and Neumayer Eric. 2005. False prophet, or genuine savior? Assessing the effects of economic openness on sustainable development, 1980-99. International Organization, 59: 731-772. Sullivan D. 1994. Measuring the degree of internationalization of a firm. Journal of International Business studies, 2Q: 325-342. Svaleryd H. and Vlachos J. 2005. Financial markets, the pattern of industrial specialization and comparative advantage: Evidence from OECD countries. European Economic Review, 49: 113–144. Svetlic M., Jaklic A. and Burger A. 2007. Internationalization of small and medium-size enterprises from selected central European economies. Eastern European Economics, 45(4): 36-65. Tahir R. and Larimo J. 2004. Understanding the location strategies of the European firms in Asian Countries. The Journal of American Academy of Business, 5(12): 102-109. 166 Tallman S. B. and Li J. 1996. Effects of international diversity and product diversity on the performance of multinational firms. Academy of Management Journal, 39: 179-196. Tan D. 2009. Foreign market entry strategies and post-entry growth: Acquisitions vs Greenfield investments. Journal of International Business Studies, 40(6): 1046-1063. Teece D. J., Pisano G. and Shuen A. 1997. Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18: 509-533. The Economist. 2005. Globalisation with a third-world face. Section: Economics focus 4/9/2005, Vol. 375, Issue 8421. Thomas Douglas E. and Eden Lorraine. 2004. What is the shape of multinationality-performance relationship? Multinational Business Review, 12 (1): 89-110. Thomsen S. and Pedersen T. 2000. Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 21: 689–705. Tolentino P.E.E. 1993. Technological Innovation and Third World Multinationals. New York, Routledge. Townsend J. D., Yeniyurt S. and Talay M. B. 2009 Getting to global: An evolutionary perspective of brand expansion in international markets. Journal of International Business Studies, 40(4): 539-558. Train K. 2003. Discrete Choice Methods with Simulation. Cambridge: Cambridge University Press. Ulgado Francis M., Yu Chwo-Ming, and Negandhi Anant R. 1994. Multinational enterprises from Asian developing countries: Management and organizational characteristics. International Business Review, 3(2), 123-33. UNCTAD. 2005. World Investment Report 2006, United Nations, Geneva. UNCTAD. 2006. World Investment Report 2006, United Nations, Geneva. UNCTAD. 2007. World Investment Report 2007, United Nations, Geneva. 167 Uotila J. Maula M., Keil T. and Zahar S.A. 2009. Exploration, exploitation, and financial performance: Analysis of S&P 500 corporations. Strategic Management Journal, 30: 221–231. Urata S. and Kawai H. 1998. The Determinants of the Location of Foreign Direct Investment by Japanese Small and Median-Sized Enterprises, The EPA Economic Research Industry, Tokyo. Van Hoorn, T.P. 1979. Strategic planning in small and medium sized companies. Long Range Planning, 12(April): 84. Vera D. and Crossan M. 2004. Strategic leadership and organizational learning. Academy of Management Review, 29(2): 222–240. Vernon-Wortzel H. and Wortzel, L. H. 1988. Globalizing strategies for multinationals from developing countries. Columbia Journal of World Business, 23(1): 27–35. Waguespack D.M., Birnir J.K. and Schroeder J. 2005. Technological development and political stability: Patenting in Latin America and the Caribbean. Research Policy, 34: 1570-1590. Walsh Kathleen. 2003. Foreign high-tech RandD in China. Project conducted by The Henry L. Stimson Center. Retrieved from www.stimson.org/techtransfer/pdf/FinalReport.pdf Wan W. P. 2005. Country resource environments, firm capabilities, and corporate diversification strategies. Journal of Management Studies, 42: 161-182. Wan W. P. and Hoskisson R. E. 2003. Home country environments, corporate diversification strategies, and firm performance. Academy of Management Journal, 46(1): 27-45. Watkins K. and Marsnick V. 1993. Sculpting the Learning Organization: How Organizations Learn and Change. San Fransciso: Jossey Bass. Wells L.T. 1983. Third word multinationals: The rise of foreign investment from developing countries. Cambridge, MA: MIT Press. Weick Karl E. 1982. Management of organizational change among loosely coupled elements. Change in Organizations. P. S. Goodman (ed.), 375–408. San Francisco: Jossey-Bass. 168 Wesson T. 1994. Towards a fuller understanding of foreign direct investment: The example of Hyundai’s investment in the US personal computer industry. Business and Contemporary World, 3: 123-26. Wikipedia. 2009. Inflation. Retrieved from http://en.wikipedia.org/wiki/Inflation Witt M.A. and Lewin A.Y. 2007. Outward foreign direct investment as escape response to home country institutional constraints. Journal of International Business Studies, 38: 579–594. World Competitiveness Report, 2009. World Economic Forum, Geneva, Switzerland 2009. Wright M. 2006. Oregon’s High-Tech Employmet Trends – What is High Tech? OLIMS online publication. Retrieved from http://olmis.emp.state.or.us/ Wright M., Filatotchev I., Hoskisson R. E. and Peng M. W. 2005. Strategy research in emerging economies: Challenging the conventional wisdom. Journal of Management Studies, 42(1): 1–33. Wu Y-C J. and Lee P-J. 2007. The use of patent analysis in assessing ITS innovations: US, Europe and Japan. Transportation Research, 41: 568-586. Wu C. and Liu Y.H 2004. Use of the IPC and various retrieval systems to research patent activities of US organizations in the People’s Republic of China. World Patent Information, 26: 225-233. Xie Y.L. 2005. The http://finance.sina.com.cn internationalization strategy of TCL. Yamakawa Y., Peng M. W. And Deeds D. L. 2008. What drives new ventures to internationalize from emerging to developed economies? Enterpreneurship Theory and Practice, 32(1): 59-82. Yang X., Jiang Y., Kang R and Ke Y. 2009. A comparative analysis of the internationalization of Chinese and Japanese firms. Asia Pacific Journal of Management, 26: 141-162. Yeung H. W.-C. 1994. Third world multinationals revisited: a research critique and future agenda. Third World Quarterly, 15(2): 297-31. Zahra S. A., Ireland D. R. and Hitt M. A. 2000. International expansion by new venture firms: International diversity, mode of market entry, technological learning and performance. Academy of Management Journal, 43(5): 925-950. 169 Zedtwitz Macimilian von. 2005. International R&D strategies in companies from developing countries- the case of China. Online paper of UNCTAD: http://www.unctad.org/sections/meetings/docs/zedtwitz_paper_en.pdf Zhang Ruimin. 2006. How does Haier http://info.feno.cn/2006/1205/c000006755.shtml internationalize. Zhou C., Delios A. and Yang J.Y. 2002. Locational determinants of Japanese foreign direct investment in China. Asia Pacific Journal of Management, 19(1): 63–86. Zollo M. and Winter S. 2002. Deliberate Learning and the Evolution of Dynamic Capabilities. Organization Science, 13(3): 339-35. 170 [...]... of developing country MNCs may vary from those of developed country firms due to distinct resource advantages/disadvantages, and different home country environments and makes it important and worthwhile research undertaking to study and understand developing country MNCs strategies as well as performance attained TRENDS IN CHINA’S OUTWARD FDI The past two decades have witnessed significant rise of. .. We still have little knowledge of the effect of organizational learning on developing country MNCs international strategies and performance and hence this will be focus of my dissertation OVERVIEW OF RESEARCH QUESTIONS This dissertation aims to contribute to the study of FDI location choice, one of the most important and complex decisions facing MNCs, both theoretically and empirically I develop two... further explore the questions of what factors affect developing country firms’ location strategies and how to evaluate the performance implication of their location strategies The two essays in this dissertation draw from the organizational learning theory to study different factors affecting international location choices of developing country firms I argue that developing country firms enter overseas... antecedents and performance implications of developing country MNCs location strategies as well as incorporate the firm level ownership advantages arising from home country institutional environment I believe that this chapter will be an appropriate place to summarize some of the key aspects of the dissertation including my motivating factors (a function of the unique characteristics of the developing country. .. performance implications of developing country MNCs location strategies The second paper (Chapter Three) examines how two conflicting forces (exploitation and exploration) affect the location choice of developing country MNCs The last chapter (Chapter Four) combines the findings from the two papers and discusses the managerial implications I also discuss the limitations and conclusions of my research in... country MNCs as well as the increasing importance of China’s outward FDI); two brief case studies to illustrate some typical location strategies of Chinese MNCS as well as to motivate the research topic and its importance; the theoretical perspective deployed; the specific research questions addressed by the study and, finally, the contributions of the study UNIQUE CHARACTERISTICS OF DEVELOPING COUNTRY MNCS. .. implications for the relevance and usefulness of my studies The literature on developing country MNCs has identified some unique advantages and disadvantages versus their developed country counterparts especially in terms of resources Developing country MNCs disadvantages include: weaker research capability/ technology base (Tolentino, 1993; Nachum, 1999; Luo and Tung, 2007), smaller size (and the consequent... each addressing a different aspect of internationalization In the first paper, I examine two research questions: (1) What factors drive developing country MNCs to choose different location strategies (entering developed countries versus entering developing countries)? and (2) How do firms’ location strategies influence their immediate performance and longer-term performance improvement? To answer the... applicable to many developing country firms In the first study, I find that developing country MNCs may be driven to expand more broadly in developed countries than developing countries by large firm size, high degree of product diversification and ownership identity I also find that developing country MNC’s internationalization into developing countries is positively related to its short-term performance; ... developed country firms I will explain these differences in detail in Essay 2 Regarding the level of analysis, the first study uses parent-firm level data to examine how parent firms’ ownership advantages affect their location strategies, and how location strategies influence performance I differentiate between two kinds of location strategies in this paper: entering developed countries and entering developing . LOCATION STRATEGIES AND PERFORMANCE OF DEVELOPING COUNTRY MNCS YUAN LIN (B.A. (Hons.) Finance, M.A. Economics, NanKai University) A THESIS SUBMITTED FOR THE DEGREE OF DOCTOR OF. understanding about the location strategies of developing country multinationals. ix LIST OF TABLES Table 2.1: Summarizing the Argument for Performance Effects 72 Table 2.2: Location of. Results of Random Effects Regressions Analysis of Location Strategies of Listed Chinese MNCs: ………………………………… 83 Table 2.11: Robust Test 3: Results of 2SLS Regressions of Listed Chinese MNCs: First