Session 384

Multinational Location Decisions: New Approaches Across Different Perspective

Track G

Date: Tuesday, September 23, 2014


Time: 11:00 – 12:15

Common Ground

Room: Glasgow


  • Todd Alessandri, Northeastern University

Title: China’s OFDI location: Differences between SOEs and non-SOEs


  • Diego Quer Ramón, University of Alicante
  • Enrique Claver Cortés, University of Alicante
  • Laura Rienda García, University of Alicante

Abstract: We examine the extent to which state ownership interacts with host country political risk, behavioral inertia and mimetic behavior, and how these relationships affect Chinese outward foreign direct investment (OFDI) location decisions. We hypothesize that government ownership makes Chinese multinational enterprises (MNEs) less risk averse and less dependent on their previous entry experience in a particular host country and on the experience of other Chinese firms in the same host environment. Using a data set of 489 China’s OFDI location decisions between 2005 and 2013, we find empirical evidence that state ownership moderates the effect of political risk, inertial and mimetic behavior on the location choice of Chinese MNEs.

Title: Co-evolution and Co-location: The Role of Institutional Change in Development of Industrial Clusters


  • Kathleen Yi Jia Low, WU-Vienna
  • James Robins, WU-Vienna

Abstract: Location advantages have been a key concern of global strategy for three decades and an important issue in economics for more than a century. This area of research increasingly has focused on the location of firms in agglomerations or clusters, particularly in emerging economies. Substantial institutional change may be necessary to create conditions that make a location attractive to domestic and foreign enterprises and promote growth of industrial clusters. Multinational enterprises (MNEs) play an important part in this process, particularly in emerging economies. MNEs serve as institutional entrepreneurs, interacting with local institutions to reshape the business environment. We extend recent work on co-evolution by Cantwell, Dunning and Lundan (2010) to a more general theory of institutional change in the development of industrial clusters.

Title: Effect of Post-Entry Organizational Design Choices for Learning


  • Izzet Sidki Darendeli, California State University, East Bay
  • Robert Hamilton, Temple University
  • Masaaki Kotabe, Temple University

Abstract: Using multinational retail chains, we investigate how organizations manage bi-directional knowledge flows to achieve standardization of the organizational knowledge that they had accumulated through years to achieve economies of accurate replication without imitation and, at the same time, benefit from tapping into new knowledge bases by adapting while they internationalize. (Barlett & Ghoshal, 1989; Grifith & Hi, 2000; Kaufman & Eroglu, 1999; Szulanski & Jensen, 2006). Our novel study reviews multinational retail chains' decisions after they have entered a foreign country and tracks their alteration of initial ownership and format decisions over time. Our preliminary results indicate strong positive results for increasing post ownership percentages to support standardization, altering format changes in response to better adaptation and also the joint effects of both of these on performance at the host-country.

Title: International Diversification and the Nature of Value Creation: A Real Options Perspective


  • Todd Alessandri, Northeastern University
  • Anju Seth, Virginia Tech

Abstract: Firms pursue international diversification to create value. We examine how the location of diversification influences the nature of firm value. Based on real options theory, we argue that for U.S. firms, international diversification into emerging economies increases growth option value. In contrast, expansion into advanced economies will be associated with assets-in-place value. Using a sample of 672 firms from the S&P 1,500 over a period of 9 years, we find support for these arguments. We also examine the impact of the focus of the firm’s diversification strategies, finding that that greater within-economy diversity reduces the level of growth option value or assets in place value created. These results suggest that the location of international diversification and within-economy diversity both determine the nature of value creation.

Title: Switching Options and Foreign Entry Decisions


  • Rene Belderbos, University of Leuven
  • Shubin Wu, Shanghai University of Finance and Economics

Abstract: The literature on foreign market entry by multinational firms has rarely considered that entry decisions depend on the existing portfolio of overseas affiliates. We argue that multinational firms take into account the contribution that each entry into a new location makes towards enhancing the operational flexibility of their manufacturing affiliate portfolios. We establish boundary conditions to the influence of such switching options on entry. Substantial differences in labor cost levels across locations reduce effective switching potential, while moderate differences increase it. Product diversification in manufacturing portfolios hampers switching across plants, while growth potential in the host country market can compensate for the carrying costs of maintaining switching options. Hypotheses are tested on longitudinal data (1989-2006) on the population of publicly listed Japanese manufacturing firms.

Title: Terrorism and the International Expansion of Multilocational Firms


  • Ariel Casarin, Adolfo Ibañez University
  • Maria Eugenia Delfino, Austral University

Abstract: Political uncertainty impacts firms’ expansion into foreign markets. Still, political risk differs from terrorist risk, which is subnational in nature. We rely on market-access and experiential learning theories to elaborate competing hypotheses on the impact of terrorism on multilocational firms’ expansion into foreign markets. We use multinomial panel data probit techniques to examine how terrorism affects the location and speed of expansion of DIY outlets across South America over a 21-year period. We find that terrorism affects the dynamics of within country firm expansion. Our results indicate that, in counties where terrorist threats are smaller, firms prioritize geographical expansion by entering new local markets, while higher terrorist threats lead firms to open outlets in markets they had already entered. We also find that terrorism explains the velocity of firm expansion, as first entry is quicker than second entry

All Sessions in Track G...

Sun: 08:00 – 09:15
Session 389: Managing the Multinational Organization in an Increasingly Complex World
Sun: 09:30 – 10:45
Session 221: Global Stakeholder Networks
Session 390: Local Determinants of Competitive Advantage and Disadvantage
Sun: 11:15 – 12:30
Session 2: Offshore Outsourcing, Dynamic Capabilities, and the Changing Nature of Firm Boundaries
Sun: 15:45 – 17:00
Session 270: Innovation in MNCs and Global Networks
Session 371: Inter and Intra Organizational Learning Across Borders: A Knowledge Management Perspective
Session 380: Small, Young and Entrepreneurial Firms: A Unique Perspective in Globalization
Sun: 17:15 – 18:30
Session 603: Global Strategy IG Business Meeting
Mon: 08:00 – 09:15
Session 335: Internationalization and Strategic Decisions
Session 379: Emerging Markets: Understanding the Importance of Context
Mon: 11:00 – 12:15
Session 372: The Challenges of Global Operations: Managing R&D and Complexity
Session 373: Global Diversification: Governance and Performance Implications
Mon: 14:45 – 16:00
Session 375: Changing External Environments: How do Multinationals Respond?
Session 381: Firm boundaries in Multinational Organizations: Antecedents and Consequences
Session 414: Global Networks and Business Groups
Mon: 16:30 – 17:45
Session 226: Culture, Norms and Institutions: The contextual influences on Entrepreneurship
Session 374: Antecedents and Consequences of Multinational Location Decisions
Session 382: Drivers of Multinational Performance:What, Where and When?
Tue: 08:00 – 09:15
Session 383: Globalization of R&D: Implications for Learning and Innovation
Tue: 11:00 – 12:15
Session 376: Headquarters Subsidiary Relationship: New Approaches to an Old Question
Session 384: Multinational Location Decisions: New Approaches Across Different Perspective
Tue: 15:30 – 16:45
Session 263: Innovation Models in Emerging Economies
Session 377: Organizing Assets Across Borders: Drivers and Consequences
Session 385: Multinational firms and the External Environment: The Role of Institutions
Tue: 17:15 – 18:30
Session 378: Global Outsourcing & Offshoring: Implications for Multinational Decisions

Strategic Management Society