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The future of global strategy
Abstract
Research Summary
Global strategy, that is, the analysis of strategy in an international context, has co-evolved with the dramatic changes in the global economy in the 21st century. Research advances have enabled a more sophisticated understanding of how firms develop strategies in an increasingly turbulent global environment in which societal expectations, technological advances, and political decisions are all in a state of continuous change. In this article, we reflect and provide suggestions for how the field may evolve on five key themes of global strategy: cooperation, coordination, governance, politics, and innovation. We also outline suggestions for future research on global issues that are gaining increasing centrality in business decisions: climate change, artificial intelligence, and geopolitics.
Managerial Summary
The study of how the context affects firms' strategies has changed with the transformation of the world in the 21st century. Research has provided a better understanding of how managers create and implement strategies in response to changes in societal expectations, technological advances, and political decisions. In this article, we reflect and provide suggestions for future studies on five key themes of global strategy: cooperation, coordination, governance, politics, and innovation in multinationals. We also outline suggestions for analyzing the increasingly important grand challenges that affect business decisions: climate change, artificial intelligence, and geopolitics.
... An important characteristic of blockchain technology is anonymity or, at least, pseudonymity, which precludes the collection of detailed information on consumers. Protecting consumer privacy is a key concern for regulators and governments (Benito et al., 2022). Blockchain data records do not contain exact information on individuals. ...
... However, such cutting-edge designs may require a large amount of computing power, making them expensive. Hence, a cost-benefit analysis would help enhance our understanding of the theoretical drivers of collaboration by integrating transaction-cost economics and the resource-based view (Benito et al., 2022). Such an analysis could use either analytical modeling (e.g., game theory) or simulation studies with participants. ...
... For example, future research could use case studies to show how blockchain data can be integrated within a firm and where such an initiative might fail. In addition, as blockchain data is inherently pseudonymous, consumer privacy protection could be at the forefront of the policymaking agenda (Benito et al., 2022). As consumers are increasingly concerned about their data being hacked or leaked from various databases, an investigation of whether data breaches significantly affect firms that store and analyze blockchain data is essential. ...
Research Summary
New technology plays a key role in shaping the global strategy of the MNC. We propose a perspective on how and why a novel technological development—blockchain technology—and its relevant applications affect the global strategy of the MNC. We focus on the trade‐offs associated with cryptocurrencies, smart contracts, and blockchain data, and provide several real‐world examples. While cryptocurrencies could lower financial costs and broaden consumers' payment options, they require new investments in cybersecurity and payment infrastructure. Smart contracts could increase trust in collaboration due to their automated, transparent, and inflexible rules, but their rigidity can harm collaboration. Finally, while blockchain data can enhance the MNC's analytics capabilities, it can also jeopardize consumer privacy.
Managerial Summary
Is blockchain technology all hype or a useful advancement for global firms? We propose that this technology has merits and drawbacks for financial transactions, collaboration, and data analytics. Cryptocurrencies have stolen the headlines and several leading organizations have already added them as payment methods. Their merits include lower transaction fees, better security, and higher speed, but they require expensive infrastructure and carry a stigma. Smart contracts can streamline agreements between parties but lack the flexibility that global firms need when interacting with suppliers and partners. Novel blockchain data can be plugged into marketing dashboards but can also threaten consumer privacy. Overall, the jury is still out on the role of blockchain technology for global firms.
... Decisions on strategy and technology complexities have largely influenced the nature of cross-border market entry (Benito et al., 2022). ...
... With the ease of information sharing across borders and globally, technology drives much more global business engagements, even at a lower cost (Benito et al., 2022;Stallkamp & Schotter, 2021). Benito et al. (2022) suggest that there is a need for IBs to examine withincountry and cross-country network externalities. ...
... With the ease of information sharing across borders and globally, technology drives much more global business engagements, even at a lower cost (Benito et al., 2022;Stallkamp & Schotter, 2021). Benito et al. (2022) suggest that there is a need for IBs to examine withincountry and cross-country network externalities. Technological advancements such as AI can play a role in international market selection (IMS). ...
The emergence of artificial intelligence (AI) has transformed global business, aiding operational efficiency and innovation. It utilizes machine learning and big data analytics, driving predictive market trends and strategic decision‐making. However, despite the rising discussion and accessibility of AI tools, understanding its impact on international business remains limited. This article explores AI's potential in international business strategies, practices, and activities. To address this aim, we reviewed 37 articles in the existing literature to critically explore AI within the context of international business. More specifically, we explored how AI can be applied to innovation approaches in international business, international market selection, entry modes, foreign exchange, international human resource management, international supply chains, managing across cultures, and more topics. AI has necessitated changes in workplace configurations and the need for organizational and employee adjustments in response to this technology. As a result of the foregoing issues on AI integration within international business, our analysis provided an exploratory discussion around its use, challenges, managerial implications, and suggested areas requiring future studies.
... The above banking sector experience (see 5.2.2) supports this argument. Further, drawing on to the international business literature, it is proposed that the recent turbulence in the world such as natural disasters, pandemic, and political conflicts have raised new questions about developing resilience (Benito et al., 2022). In this regard, MNEs may need to develop global strategy for new learnings (Benito et al., 2022). ...
... Further, drawing on to the international business literature, it is proposed that the recent turbulence in the world such as natural disasters, pandemic, and political conflicts have raised new questions about developing resilience (Benito et al., 2022). In this regard, MNEs may need to develop global strategy for new learnings (Benito et al., 2022). ...
While scholars have been elaborating on the nature and scope of the resilience for some time, the contemporary era of monumental disruptions have elevated this topic to the top of scholarly and practical attention. Yet, there is much confusion and ambiguity about how it should be defined and measured. In addition, definitions of resilience appear to vary greatly across disciplines. Given these shortcomings, this study first presents a framing of resilience definition using categorization of attributes under process, structure and strategic move/action, emanating from cross-disciplinary foundation. Second, the study offers conjectures and propositions for multinational enterprises (MNEs) under process, structure and strategic move/action drawing ideas from social, mechanical, and ecological literature regarding this construct. Third, we present a new frame-based methodo-logical approach in presenting the attributes and subordinate concepts of resilience.
... Sustainability in global supply chains has recently received increasing attention (Benito, Cuervo-Cazurra, Mudambi, Pedersen, & Tallman, 2022). Studies have shown that the effectiveness of voluntary standards for governing environmental issues is limited (Aragon-Correa et al., 2020;Locke et al., 2009;Mayer & Gereffi, 2010). ...
... Our research expands our understanding of how local NGOs facilitate the diffusion of sustainable practices from MNEs to local supply-chain partners. There is a rapidly growing scholarly interest in how sustainable practices diffuse globally (Benito, Cuervo-Cazurra, Mudambi, Pedersen, & Tallman, 2022;Tashman, Marano, & Kostova, 2019). Work on sustainability issues in global supply chains privileges private, voluntary governance initiatives promoted by MNEs, including codes of conduct (Bondy et al., 2008), product certifications (Mayer & Gereffi, 2010), and social auditors (Short et al., 2016). ...
This paper presents new theory and evidence on how cross-border, cross-sector collaborations affect the global diffusion of sustainable practices. By highlighting the structural characteristics of global supply chains, we study how non-governmental organizations (NGOs) constrained by autocratic political regimes exploit the collaborative opportunities presented by foreign multinational enterprises (MNEs) to enhance local firms’ sustainability performance. Drawing on social movement and resource dependence theories, we propose that global supply chains that tie MNEs to their local partners offer these NGOs a favorable opportunity structure to gain leverage over local firms by establishing MNE–NGO collaborations. This two-step form of leverage helps NGOs increase their influence and legitimacy to facilitate the adoption of sustainable practices by local firms within the MNEs’ global supply-chain networks. Yet, this mediated stakeholder effect decreases when governmentally produced structural conditions reduce the synergistic potential of this opportunity structure: greater priority given to environmental protection by governments substitutes for MNE–NGO collaborations. To test our theory, we examine the relationship between Chinese NGOs’ collaborations with 167 MNEs across 24 countries and these MNEs’ local green supply-chain ratings in the period 2014–2020. This study contributes to the literature on social movements, MNE–NGO collaborations, and sustainability in global supply chains.
... Concerning the future of strategic management Benito et al. (2022) predict that multinational managers will face three key challenges in the strategic direction of firms: climate change, the development of artificial intelligence (AI), and geopolitical influences. Many other studies focus on the issue of strategic business model innovation (BMI) to ensure firms' long-term prosperity. ...
... In the current era, the role of religion in the political arena affects not only elections and domestic policies but also international relations and global strategies. One example is the influence of religious dynamics in the Middle East, where the Sunni-Shiite split between Saudi Arabia and Iran influenced their foreign policies and led to proxy conflicts in countries such as Yemen and Syria, thus impacting global geopolitical strategies (Benito et al., 2022;Tsourapas, 2021). Religious considerations can strengthen transnational solidarity as well as fuelling conflict and division. ...
This article aims to analyse the complex relationship between religion and politics by exploring collective identities in an increasingly polarised global context. The methodology used is qualitative, with a systematic literature review approach. Data collection techniques included a literature review, utilising more than a thousand previous studies related to politics and religion, as well as secondary data sources, including books, scholarly articles, and reportage. Data analysis involved data condensation, data presentation, and conclusion drawing. The results revealed that the interaction between religion and politics is often symbiotic, where religion can strengthen political legitimacy. Conversely, politics can intensify the integration or marginalisation of religion in society. In the context of Qur'anic literature, analyses show that this sacred text provides relevant guidance for political thought and practice in Muslim societies, putting forward principles such as justice, consultation and the protection of human rights. Furthermore, in understanding the characteristics and objectives of Siyasah (politics) in the Qur'an, it is found that Islamic shari'a directs fair and effective governance, strengthening social relations and justice. This research provides important insights for policymakers and religious leaders to formulate strategies that promote cooperation, tolerance and peace among different religious and political groups.
... Over the past few decades, we have seen significant changes in the characteristics of the world's MNCs. To better capture and create value (Benito et al., 2022), MNCs have both increasingly unbundled and geographically dispersed their activities (BCG, 2019) and shifted their focus to the creation and exploitation of intangible assets. We suggest that the increasing unbundling and geographic dispersion of MNCs and their growing reliance on intangible assets were the most prominent characteristics leading MNCs at the beginning of the 21st century. ...
Over the past decades, we have observed the emergence of multinational corporations (MNCs) that are increasingly characterized by their high levels of unbundling and geographic dispersion of their activities and by their greater reliance on intangible (vs. tangible) assets. We develop a novel typology of MNCs on the basis of these two characteristics and explore how different types of MNCs have been exposed and are likely to respond to the slowdown in the global economic integration since the 2008 global financial crisis. We argue that the degree to which MNCs have unbundled and geographically dispersed their activities and their reliance on intangible (vs. tangible) assets will affect the risks associated with cross-border transfers of goods and services and with holding overseas assets. We advance the international business (IB) literature and contribute to the global strategy literature by using our novel typology to examine MNCs’ exposure and their likely response to deglobalization pressures.
... This rapid speed of globalization raises the question of whether or not it comes at a price, which researchers should look into. As another area of concern, the ownership structure of companies that make investments in adopting cutting-edge technology as part of a pivotal firmsubsidiary network is where academics may put their efforts to find an explanation (Benito et al. 2022;Strange et al. 2022). Based on this discourse, scholars may use a case study methodology to discuss how different types of funding used in mergers and acquisitions influence the success of a business aspiring for global expansion. ...
Industry 4.0 is transforming businesses offering multinational companies a technological framework to structure their global operations. This has attracted the attention of internationalization scholars and practitioners on the use of emerging technologies for it. In this paper, we seek to consolidate and synthesize the scholarly evidence published in leading international business journals on this issue. We identified 108 articles published in eight high-quality international business journals on major themes and applications of emerging technologies for internationalization. Our analysis, using the “coupling by document” method, identified the major application areas, including internationalization of research and development (R&D) activities, international ambidexterity, IoT-enabled global value chains, reshoring and location choice, digitized governance, global smart factory, global project management, global human resource management, and international relations and cybersecurity. We end our investigation by suggesting future research avenues.
... As information technology advances, entrepreneurial activities are becoming a topic of global concern. With the increasing popularity and recognition of entrepreneurship in various countries worldwide, entrepreneurship has been proven to be an essential driving force for promoting economic prosperity, technological innovation, and social development (Benito et al., 2022). Especially in the "Internet Plus" era, entrepreneurship can accelerate industrial structure upgrades, improve labor productivity, promote employment growth, and stimulate the creative potential of members of society (Lei et al., 2020;Li et al., 2021). ...
The traditional entrepreneurial resource decision-making model that relies on empirical decision-making or simple template matching is difficult to adapt to the current complex social environment. Therefore, the multi-objective grey wolf algorithm (MOGWO) is used to solve the Pareto frontier of the problem model, replacing the optimal solution with the optimal solution set, and then selecting the optimal scheduling plan according to the actual situation, so as to make the decision-making plan more scientific and reasonable. In order to optimize this algorithm, two improvement strategies are proposed on the basis of analysing the movement of individual grey wolves. The research in this paper provides an important reference for the machine learning algorithm and the improved multi-objective grey wolf algorithm. The experimental results show that the MOGWO algorithm can overcome the shortcomings of the basic grey wolf algorithm (GWO) in terms of insufficient exploratory ability and local convergence, and has higher search efficiency, better optimality finding ability and stability.
... The initiatives were categorized based on addressing challenges and capitalizing on opportunities. Cultures and societies 15 The findings reveal that 56% of the initiatives, focusing on cultures and societies, are implemented to address 28% of the challenges identified in Figure 3, while also leveraging 45% of the available opportunities as depicted in Figure 8. ...
This research explores and analyzes the challenges and opportunities due to globalization's impact on sustainable strategic management. The research uses a mixed-method design, combining primary and secondary data collection methods. Secondary data is sourced from various credible publications and analyzed through an extensive literature review. A case study approach is adopted, involving semi-structured interviews with six experienced managers from Tazweed Venture Capital in Jordan. The study employs a qualitative, descriptive, and analytical approach to develop a conceptual framework by exploring managers' experiences and perspectives on Globalization and its impact on Sustainable Strategic Management. The findings identify challenges of environmental degradation, economic inequality, transportation and logistics pressures, and compliance challenges for sustainability. While implementing sustainable practices incurs upfront costs, accessing renewable energy markets and financial support presents opportunities. Tazweed successfully implements sustainable strategic management, emphasizing stakeholder engagement and collaboration across departments. This research offers valuable insights and guidance for companies navigating globalization's impact on sustainability strategic management.
... Moreover, collaborative events and projects, such as forums and conferences, should facilitate discussions among governments, scientists, and experts on AI development, as demonstrated by the Global Partnership Conference in December 2020 [23,66] . Future efforts in deep learning should streamline access to data and digital infrastructure [67] . ...
In recent years, artificial intelligence, particularly deep learning, has garnered significant attention among practitioners and scholars in meteorology and atmospheric sciences, leading to a substantial body of literature. This study aims to delineate the present research status and trends in climate innovation through CiteSpace visual analysis. To comprehend the current landscape, prevalent terms, and research frontiers of deep learning for climate change research (DLCCR) within meteorology and atmospheric applications, we gathered 256 published papers spanning from 2018 to 2022 from the Web of Science (WOS) core database. Employing these articles, we conducted co-authorship, co-citation, and keyword co-occurrence analyses. The findings unveiled a steady rise in DLCCR publications over the last five years. However, the correlation between high yield and high-citation authorship appears inconsistent and weak. Notably, prolific authors in this domain included Zhang Z.L. and Bonnet P. Furthermore, leading institutions such as the Chinese Academy of Sciences Science and Technology (China) have played pivotal roles in advancing DLCCR. The primary contributors among high-yield countries primarily cluster in a select group comprising China, the USA, South Korea, and Germany. Identifying significant information gaps in numerical weather, atmospheric physics and processes, algorithm parametrizations, and extreme events, our study underscores the necessity for future researchers to focus on these and related subjects. This study provides valuable insights into research hotspots, developmental trajectories, and emerging frontiers, thereby delineating the knowledge structure in this field and highlighting directions for further climate innovation research.
... • ensuring the enterprise`s rapid response to changes in the external environment, which creates a targeted impact on its condition and forms the required terms for the implementation of the strategy to achieve the goals that have been set (in this case, the external environment refers to a set of strategic changes that may occur in the process of fulfilling the enterprise`s management strategy) (Benito et al., 2022); • forecasting the consequences of the management decisions based on scenario prediction with due regard to the corresponding changes in resource distribution, effective networking with other business entities, and the formation of strategic staff behavior (Dhar et al., 2022); ...
This study is aimed at developing a methodological approach to identify and justify the strategy for the development of enterprises` innovative processes, which enables considering alternatives and determining the priorities of adaptation as well as increasing the level of flexibility to changes in the business operating conditions. The study is based on the materials of 21 motor transport companies in Ukraine. The methodological toolkit is based on the proposed polyfactorial 3D model with the implementation of correlation, regression and cluster analysis. The use of the strategy for the innovation process development of the motor transport enterprise with the introduction of focus on the asymmetry of its directions increases efficiency, which becomes equal to the benchmark or close to the maximum efficient value.
... These are challenging times for multinational enterprises (MNEs), i. e., firms with value-added activities in multiple countries (Benito et al., 2022). On the one hand, MNEs are often the target of societal and political pressures to address global issues concerning the environment and society (e.g., poverty, human rights, inequalities, and discrimination) (UN, 2021). ...
... The expansion of responsibility boundaries institutionalized through a change in public policy created a collective action problem that opened up a space for individual firms to create and capture transactional value through increasing value chain integration. A practical implication for managers of individual firms within the GVC, including mid-tier suppliers, suggests that they must identify the inherent structural flaws within their GVCs and may enact strategic initiatives that spearhead changes to GVC structure (i.e., internalization) to capitalize on increasing chain-wide responsibility; moreover, managers can engage in political global strategies to encourage the adoption of country-level policies that institutionalize these expanded responsibility boundaries and motivates individual firm actions by enhancing the value of such strategies (Benito et al., 2022). ...
Research Summary
I explore the relationship of firm global strategy and global value chain (GVC) governance, within a context of expanding responsibility boundaries for unethical practices in the value chain. Specifically, focusing on the tantalum supply chain within the digital electronics GVC, I conduct a case‐based process study that contextualizes the different strategic responses of three manufacturers of tantalum capacitors when faced with similar efficiency, ethical, and institutional pressures. Integrating the GVC and global strategy literatures, I find that structural inertia in GVCs limits the efficacy of strategies that preserve, rather than alter, the governance structure, instead requiring a strategic restructuring carried out by individual firms, whose internalization of responsibility boundaries is encouraged by the institutionalization of these boundaries through public policy.
Managerial Summary
Unethical practices within global value chains are increasingly becoming the responsibility of firms with no direct control over such practices, leading to growing pressures for firms to alter their global strategies to meet social and institutional demands. Research has focused on strategies that preserve the structure of the value chain, despite questions about the efficacy of these approaches. By looking at the case of “conflict minerals” within the digital electronics value chain, this study finds that inherent flaws in value chain structures, which managers can identify, require individual firms to implement strategies that change the structure of the value chain, specifically by increasing ownership and control over the linkages where unethical practices occur and encouraging public policies that add value to these strategies.
... Managing global human resources remains an important aspect of global strategy (Benito et al., 2022;Casson, 2022). Of central concern is hiring of specialized workers (Barnard et al., 2019;Hajro et al., 2021;Schaefer, 2020). ...
Research Summary
In this special issue introduction, we analyze how a firm's international ownership affects its global strategy. We reinterpret the literature by grouping dominant owners into four categories: (1) individuals (entrepreneurs and families), (2) labor (managers and employees), (3) state (national and subnational governments), and (4) institutions (pension funds, mutual funds, hedge funds, private equity, venture capital, and impact investors). We argue that although all seek financial returns from their investments, they differ markedly in their non‐financial objectives, resulting in differences in strategies for expanding abroad. We also propose that the home country context modifies the impact of ownership on global strategy, directly by influencing the prevalence of owner types, and indirectly by affecting owners' incentives and constraints in their pursuit of non‐financial objectives.
Managerial Summary
Although all firms' owners search for financial returns from their investments, differences across dominant owners in their non‐financial objectives result in significant diversity in the global strategies of invested firms. We clarify these differences by grouping owners into four categories: (1) individuals (entrepreneurs and families), (2) labor (managers and employees), (3) state (national and subnational governments), and (4) institutions (pension funds, mutual funds, hedge funds, private equity, venture capital, and impact investors). We explain how their specific non‐financial objectives influence the global strategies of invested firms. We also discuss how the characteristics of the home country affect both the prevalence of types of owners and owners' strategies. The special issue articles illustrate some of these ideas.
Employing a prosocial perspective, this study examines how crowdfunders' prosocial motivation influences their lending decisions on international crowdfunding platforms, addressing the global challenge of poverty alleviation. We posit that prosocially motivated crowdfunders, concerned about economic inequality and others' well-being, are more likely to lend to poorer borrowers to minimize inequality and improve welfare. Analyzing a large dataset from Kiva.org with machine learning techniques, we find that higher prosocial motivation indeed leads to the lending choice of poorer borrowers across borders. However, cultural distance weakens this relationship by creating cognitive and emotional barriers, while crowdfunders' platform experience and women-owned businesses strengthen it. These findings highlight how digital platforms enable prosocial motivations to cross national borders in poverty-reduction efforts, while revealing barriers and enablers in cross-border lending. Our study contributes to the international business literature by introducing a prosocial perspective to digital platform research and advancing methodological approaches through machine learning. For practitioners, we suggest strategies to enhance prosocial crowdfunding platforms' effectiveness, including cultural bridge-building initiatives, leveraging experienced users as mentors, and highlighting women-owned businesses. Policymakers can use these insights to create frameworks maximizing prosocial crowdfunding's impact on poverty alleviation.
Introducción: En el municipio de Tequila se desarrolla una fuerte actividad de producción y comercialización de la bebida alcohólica tequila, la materia prima para este producto es el agave azul, su proceso de obtención es intensivo, por lo cual se están contaminando y erosionando recursos naturales como el suelo, agua, bosques y montes. Objetivo: demostrar el nivel de sustentabilidad actual del cultivo agave azul en Tequila y cómo coadyuva la política ambiental municipal vigente a su incremento. Metodología: se utilizó el estudio de caso con entrevistas y cuestionarios practicados con actores clave. Resultados: la investigación muestra que la política ambiental ha sido apenas regularmente eficiente en el manejo de suelos y bosques, todos los entrevistados coincidieron en que el principal problema es la falta de eficiencia en el tratamiento y uso del agua. Discusión: se centra en la necesidad de reducir la producción e innovar en los procesos asociados al agave, el problema es que se verían afectados los ingresos de los participantes en la industria. Conclusiones: es necesaria una política ambiental incluyente y eficiente, nutrida de procesos innovativos al tiempo de ser amigable con la inversión en el sector tequilero.
La recherche en management vise de manière croissante à contribuer à la résolution des problèmes rencontrés par nos sociétés (changement climatique, pauvreté, crises migratoires), et ce, en mobilisant de plus en plus souvent le terme de grand challenges. Face à cet engouement s'élèvent néanmoins des critiques concernant le manque de cohérence et de différenciation d'un concept relativement nouveau pour la discipline. Cet article soulève la question de savoir comment les grand challenges, assimilables à un concept-ombrelle, peuvent passer les épreuves de validité et de rationalisation afin de rendre le concept plus robuste. Pour ce faire, cet article propose une cartographie de la littérature sur les grand challenges en s'appuyant sur une méthodologie mixte d'analyse bibliométrique, combinant la co-citation et le couplage bibliographique. En identifiant les racines intellectuelles et les différents courants de cette littérature, cet article caractérise la diversité de mobilisations des grand challenges ainsi que les incohérences qui en découlent. Les faiblesses actuelles du concept de grand challenges nécessitent ainsi une clarification de ses attributs. Nous identifions alors les enjeux et les modalités de cette redéfinition et discutons des possibilités de développement théorique du champ.
Management scholars increasingly seek to make a contribution to addressing the big issues faced by Society (climate change, poverty, migratory crises, etc.), often using the term Grand Challenges to refer to these. However, after an initial phase of enthusiasm, the lack of coherence and distinctiveness of a relatively new management research concept-typical of an 'umbrella concept'-has been criticized. This article addresses the research question of how Grand Challenges can pass the tests of validity and rationalization in order to improve the robustness of the concept. To this end, we map out the literature on Grand Challenges using a mixed methodology of bibliometric analysis, combining co-citation and bibliographic coupling. By identifying the intellectual foundations and research streams, our paper analyzes the different uses of Grand Challenges in the literature as well as the resulting inconsistencies-thereby tidying up the concept. The current weaknesses of the Grand Challenges concept call for a clarification of its attributes. We pinpoint the importance of this redefinition and how it can be achieved, and discuss the possibilities for theoretical development of the field.
Research Summary
We contribute to theorizing global human resource strategy by analyzing the mobility of workers laid off due to the failure of a MNC employer. The job opportunities of laid‐off workers are affected by their industry legitimacy. Focusing on scarce specialized workers, we propose that prospective MNC employers share an interest in retaining such workers' legitimacy. However, in the light of organizational failure, they may suffer from cross‐border legitimacy loss conditioned by their former employer's MNC structure—specifically, their former organizational units or geographical locations. We present an illustrative case study of traders laid off by a spectacular bankruptcy in the global bunker industry. This inspires a discussion of how MNC top management can manipulate worker legitimacy following an organizational failure.
Managerial Summary
Strategic hiring of globally mobile scarce specialized workers is central to global human resource strategy. We analyze what drives the legitimacy and mobility of such workers after being laid off by a bankruptcy of their former employer. We demonstrate that laid off workers experience comparatively high legitimacy loss when they were previously assigned to an MNC organizational unit or geographical location where other workers were suspected of being responsible for failure. This weakens their bargaining position vis‐a‐vis a prospective employer. We present an illustrative case study of traders laid off by a spectacular bankruptcy in the global bunker oil industry.
Research Summary
The multinational corporation (MNC) is a typical example of a complex organization. In this essay, we employ an established body of literature on complexity in organizations to explore and discuss the nature and consequences of complexity for global strategy and MNCs. On that basis, we develop a simple organizing framework for complexity in global strategies emphasizing the source (external and internal complexity) and type (process and structural complexity) of complexity. We use this framework to structure and discuss the six research contributions in this Special Issue. We conclude by suggesting additional avenues of research on the interface between global strategy and complexity.
Managerial Summary
Firms internationalize because they recognize business opportunities abroad and devise strategies to successfully exploit them. At the same time, managers face increasing complexity as MNCs expand internationally and engage in more unknown and dispersed operations. Not only do MNCs face considerable complexity by operating in diverse and uncertain environments, but also by managing and coordinating organizational tasks and activities spanning multiple countries. This essay discusses these challenges and corresponding strategies for MNC managers. It also provides an overview of the six research articles included in this Special Issue about complexity and MNCs.
The objective was to identify the factors that drive the implementation of the digital transformation strategy. It was based on the theories of organization, strategic management, and digital technologies. The method, a qualitative analysis and systematic review of recently published and high impact documents was carried out. As a result, a model was proposed that relates the factors and the strategy through propositions at four levels of analysis: individual, organization, ecosystems, and geopolitics. Originally, the knowledge of digital transformation is expanded by associating it with the theoretical perspectives of strategy, organizations, and management.
Research Summary
Drawing on key concepts from management theory, corporate strategy, and economic geography, we argue that the time has come for “Locational Strategy.” Locational strategy is a framework for understanding how the locational decisions of organizations fit into broader corporate strategy. Locational strategy is particularly relevant given rise of knowledge and talent as key factors of productions and the fact that these inputs are so clustered in space. We lay out several principles to guide further work in this area, and briefly anticipate the role for locational strategy in the post‐pandemic economy. Such an approach is well suited to the study of the sprawling modern firm, the footloose geography of talent, and the hyper‐competitive field of regional economic policy.
Managerial Summary
Management needs to consider locational strategy as a key element of broader corporate strategy. This is because location and firm location decisions are ever more central to firm strategy. We review key ideas from the academic literature that bear on how managers can get the best access to talent, knowledge, and customers. Access to talent and embeddedness in complex knowledge systems is a defining feature of Locational strategy over and above simple input cost concerns. Furthermore, firms need to consider the actions and reactions of jurisdictions as they decide how to locate and deploy resources across in places across the world. Management training typically does not feature the geographic considerations of location strategy. The authors have refined their approach while teaching students in their course on The City and Business in the MBA program at the University of Toronto's Rotman School.
Research Summary
A robust academic field must set and revisit boundary conditions that define where, when, and to whom its insights apply. This is particularly true for a field such as global strategy where the ubiquity of the key terms invites indiscriminate use of the phrase. This essay argues that it is useful to define the field of global strategy as the subset of questions that meet the criteria for both “global” and “strategic” decisions. We offer an a priori approach to identifying and formulating problems that are unique to the global strategy field, suggest how our approach may help scholars better understand the “strategicness” of global decisions, and ultimately, offer a way for individuals with varied disciplinary or topical interests to connect with the field's core.
Managerial Summary
It has been observed that few executives can clearly articulate their firm's global strategy. This observation is disappointing given the development of theoretical insights from the fields of international business and strategic management that suggest alternative ways in which organizations can reliably and repeatedly create, capture, and deliver value. The existence of this shortcoming suggests that it will be beneficial to develop unambiguous statements that define what constitutes a global, a strategic, and a globally strategic decision. This essay offers a priori definitions of these terms in the hope of helping individuals both consider the unique and distinctive elements of global strategy and better understand the core decisions that guide an organization's pursuit of its global objectives, scope, and sources of advantage.
We review and bridge the literature on the internationalization of state-owned firms and sovereign wealth funds to provide a novel understanding of how government ownership affects foreign investments in three ways. First, we explain how state-owned firms and funds behave differently from private ones because they need to balance governments' nonbusiness objectives and firms' business goals. This results in competing predictions on whether government ownership helps or hinders internationalization due to particular nonbusiness objectives. Second, building on the review, we provide suggestions on how to extend research topics and theories of the firm by incorporating these nonbusiness objectives in the internationalization decisions in four areas: home government's endowments, characteristics, and attitudes; host-country expansion's support, influence, and impact; home- and host-country relationship conflicts, mediation, and disguising; and management's orientation, opacity, and arbitrage. Third, we capture how governments may use state-owned multinationals and sovereign wealth funds to nudge host-country governments by introducing the concept of discreet power and the use of four strategies (recognition, values, development, and supremacy) to achieve it. This helps to outline the beginning of a unified approach to how governments use their foreign investments to achieve nonbusiness goals.
Supplementary information:
The online version contains supplementary material available at 10.1057/s41267-022-00522-w.
State owned multinational enterprises (SOMNEs) have received extensive attention in recent research in international business and corporate governance, which demonstrates effects of state ownership on a range of international strategic decisions such as the degree of internationalization, foreign entry modes, and host country location choices. Such effects are explained by factors such as SOMNEs’ non-financial goals, corporate governance, and institutional pressures. However, results are mixed and context-dependent, and overall we still have an incomplete understanding of what governments aim to achieve through SOMNEs, and how these goals in turn lead to different international strategies. This conceptual article aims to explore how specific government goals may affect international strategies. We provide a more fine-grained view on SOMNE financial and non-financial goals and link them to key international strategic decisions such as the degree of internationalization, entry and establishment modes, and host country location choice. We review and extend previous literature and identify novel theoretical arguments, leading to an extensive set of propositions. We also sketch ideas for empirical studies of SOMNE objectives.
Building on the concept of externalities, we propose an explanation of how multinationals can contribute to the enactment of the United Nations’ Sustainable Development Goals as part of their ordinary investments. First, we suggest grouping the 17 Sustainable Development Goals into six categories based on whether they increase positive externalities – knowledge, wealth, or health – or reduce negative externalities – the overuse of natural resources, harm to social cohesion, or overconsumption. Second, we propose placing these categories within an extended value chain to facilitate their implementation. Third, we argue that multinationals’ internal investments in host-country subsidiaries to improve their competitiveness contribute to addressing externalities in host-country communities, while external investments in host communities to solve underdevelopment generate competitiveness externalities on host-country subsidiaries.
Research Summary
Firms make footprints as they internationalize. Going beyond simple measures of firms' internationalization, we conceptualize and measure the extent of a firm's international footprint as the number of location‐mode combinations it is active in, whereas the boldness of the footprint shows how widespread (across modes and locations) firms' international activities are, compared to other firms with similar extent. Extent describes the complexity of international activities, and boldness captures the risk‐taking associated with operating in less know contexts. Consistent with a microfoundations lens on global strategy, we find that boldness correlates with managerial risk‐taking attributes, while the extent of internationalization strongly correlates with capabilities conducive to managing more complex operations. These measures offer a highly suitable tool for analyzing the relationship between internationalization and performance.
Managerial Summary
Traditional ways of measuring firms' international footprints do not describe well what they do globally. We develop a more nuanced and sharper view of firms' international footprints and a new way of thinking about the roles of complexity and risk‐taking in internationalization; what we call the extent and the boldness of a footprint, respectively. The new measures are potentially particularly useful for analyzing the relationship between internationalization and performance, which is at the core of what strategy research may offer to managers and business decision‐makers. The new measures are a stepping‐stone toward a better and managerially relevant understanding of global strategy decisions.
RESEARCH SUMMARY
We contend that a synthesis between the literatures on global strategy and global value chains (GVCs) is mutually beneficial. A typology of four themes—managed cross‐border activities, network optimization, bottom‐up upgrading, and strategic coevolution—illustrates the underlying concepts and mechanisms that these two approaches share in common. Our integrative typology provides an analytical framework to understand the interplay between the statics of GVC governance and the dynamics of firm strategy. Firm‐level actions are a key factor in effective GVC‐level policy making, and our framework provides a roadmap to analyze how major disruptions, such as digitalization and pandemics, affect the symbiotic relationships between GVCs and firm strategy.
MANAGERIAL SUMMARY
While the global strategy literature has underplayed the interdependence among firms and other actors in global value chains (GVCs) and highlighted the scope for firm agency, the GVC literature limits the attention to firm strategies per se but puts more emphasis on the governance structure of global industries. In their strategic decision making, managers must take into consideration how firms are positioned along the value chain in terms of four themes: managed cross‐border activities; network optimization; bottom‐up upgrading; and strategic coevolution. Integrating the GVC view adds a further impetus to global strategy beyond the analysis of intra‐firm determinants. Conversely, integrating global strategy into GVC analysis entails a more dynamic view on behaviors of different actors in the value chain. Understanding these interactions enable managers and policy makers to better incorporate how changes and disruptions affect firm strategies within the governance of GVCs.
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Multinational enterprise (MNE) subsidiaries abroad are important organizations in their own rights. They typically hold some of the MNE’s most critical resources, and operate at the forefront of complex international environments. In this review, we identify and organize theoretical and empirical research on subsidiary management based on over 600 articles in leading academic journals. We develop a conceptual framework that integrates complementary streams of theoretical and empirical research with the subsidiary as its focal unit of analysis. In particular, we review six lines of research on subsidiary scope, practices, knowledge management, engagement with local market and nonmarket actors, performance, and individuals within subsidiaries. We highlight theoretical perspectives that have contributed to, and been advanced by, research on MNE subsidiaries. Based on the review, we explore future research agendas, linking the contemporary research themes with two main thrusts. First, subsidiary management is a multi-level phenomenon that would benefit from more microfoundational research. Second, subsidiary management operates at key interfaces of technology paradigm shifts, and of disruptions in the political and institutional environment. Research into the dynamics of subsidiary management would thus enhance our understanding of international business in a volatile global economy.
We use internalization theory to analyze the establishment and entry mode decisions of state-owned (SOE) and privately owned (POE) enterprises. We enrich internalization theory by building on insights from economic theory of corporate governance and taking into account particular characteristics of SOEs such as non-economic motivations, long-term orientation, and different risk preferences. We examine foreign entries over a 10-year period in the Canadian oil and gas industry. This single-country and single-industry context features foreign SOEs and POEs from a wide range of home countries, allowing a focused study of the combined influence of state ownership and home-country factors. Compared to POEs, SOEs tend to prefer acquiring stand-alone assets rather than firms, and to take lower ownership shares. We also find that differences between SOEs and POEs diminish when home countries are characterized by high government quality and market orientation and identify differences between types of SOEs, with partially owned SOEs exhibiting behaviors more similar to POEs than fully owned SOEs. We demonstrate how our enrichment of internalization theory strengthens its predictive and explanatory capacity. Our results also show that SOEs from strong and market-oriented institutional environments are similar to POEs and can be studied using the traditional internalization theory.
Cambridge Core - Strategic Management - Frontiers of Strategic Alliance Research - edited by Farok J. Contractor
Research summary
Digitalization has enabled firms with so‐called platform business models to emerge in many sectors of the economy. By facilitating transactions between different groups of users (e.g., buyers and sellers), platform firms are disrupting industries around the world. However, little is known about the international strategies of platform firms, as research has mostly examined platforms in single‐country contexts. We address this gap by integrating insights from platform research in strategy and economics—specifically the notion of network externalities—with internalization theory. We extend the existing typology of network externalities by distinguishing between within‐country and cross‐country network externalities. We derive testable propositions regarding the foreign entry modes of platform firms, their international strategic posture (multi‐domestic vs. globally‐integrated), as well as foreign market selection criteria and market exit.
Managerial summary
Many companies in the digital economy operate platform business models, which create value by connecting different groups of users, such as buyers and sellers. We examine how network externalities—the notion that a platform becomes more valuable to each user as more users join—influence the international expansion of these firms. We show that it is important to consider the geographic scope of network externalities, i.e., whether network externalities operate across national borders or whether platform firms have to create separate user networks in each country. The distinction between within‐country and cross‐country network externalities affects key internationalization decisions, such as how to enter foreign markets, whether to pursue multi‐domestic or global strategies, how to select foreign markets, and when to exit from a foreign market.
Governments often use direct subsidies or tax credits to encourage investment and promote economic growth and other development objectives. Properly designed and implemented, these incentives can advance a wide range of policy objectives (increasing employment, promoting sustainability, and reducing inequality). Yet since design and implementation are complicated, incentives have been associated with rent-seeking and wasteful public spending. This collection illustrates the different types and uses of these initiatives worldwide and examines the institutional steps that extend their value. By combining economic analysis with development impacts, regulatory issues, and policy options, these essays show not only how to increase the mobility of capital so that cities, states, nations, and regions can better attract, direct, and retain investments but also how to craft policy and compromise to ensure incentives endure.
How has the emergence of born‐digital firms such as Facebook and Uber influenced international business (IB) research? In this essay, I outline the distinctive qualities of these firms, in particular their “global by default” mindset, and I discuss how IB research on strategy, organization, and institutional context is evolving to help us understand them better. I argue that some traditional domains of inquiry (e.g., subsidiary role typologies) have become obsolete, while others (e.g., MNC–government relationships) have become more important. There is also scope for developing new theories to explain what we observe, rather than seeking to “shoehorn” new phenomena into our existing schemata. “Move fast and break things” was the original motto of Facebook (now Meta), and it is emblematic of how many born‐digital firms behave. These firms seek to grow quickly, and they have little regard for international borders, often operating in a global‐by‐default way. They are, in other words, very different to industrial‐era firms that plotted their international expansion in a cautious and sequential way. In this essay, I discuss whether our existing IB theories—which were developed during the industrial era—are still fit‐for‐purpose in an economy increasingly dominated by born‐digital firms.
This chapter provides an overview of research on global strategy and outlines suggestions for future studies. The field has generated three critical decisions: (1) expansion (whether to internationalize and how to select countries and entry modes to ensure effectiveness), (2) management (how to structure, coordinate, and control operations dispersed across countries to achieve efficiency), and (3) advantage (how to build an advantage in scale, learning, and arbitrage across locations to guarantee success). Future research can provide novel insights on these decisions by analyzing the impact of changes in three contexts: (1) countries, and the dynamics in cross-border interactions emerging from globalization, emerging markets, and government activism; (2) industries, and the reorganization of firm boundaries arising from digitalization, big data, and global value chains; and (3) organizations, and the reconsideration of the nature of work derived from global expertise, remote collaboration, and the gig economy.
Research Summary
We show significant variation in the ways mainstream international business strategy (IBS) theories have addressed the discovery and pursuit of entrepreneurial opportunities in the established multinational enterprise (MNE). We adopt an extended “individual—opportunity nexus” perspective and suggest a fourfold repositioning of IBS research on MNE intrapreneurship. First, by acknowledging opportunities in activity types not historically considered as the subject of intrapreneurship, such as imposed resource reconfigurations as well as acquisitions and divestitures. Second, by paying more attention to how bundles of opportunities emerge over time, and to their sequence. Third, by recognizing more systematically different opportunity types, ranging from incremental to radical. Fourth, by analyzing more thoroughly the origins of opportunities, including those that arise from MNE weaknesses.
Managerial Summary
International business strategy (IBS) theories can help managers in multinational enterprises (MNEs) to better understand the unfolding of intrapreneurship. First, business decisions typically considered as merely cost‐driven, including resource reconfigurations, acquisitions, and divestitures, can involve major intrapreneurial opportunities. Second, opportunities do not just appear randomly and in isolation: it is typically bundles of opportunities that emerge over time and in a particular sequence, and these bundles are closely intertwined with the MNE's own strategy that may unearth these opportunities. Third, MNE executives need to recognize more systematically different opportunity types, ranging from incremental to radical because each will require different managerial practices. Fourth, it is not only an MNE's strengths but also its weaknesses that can drive intrapreneurial action.
In this chapter, we explore the role of multinational enterprises (MNEs) in the circular economy (CE). MNEs play a key role in reshaping business systems as they orchestrate a significant part of value activities in various locations across the globe. We argue that MNEs’ adoption of CE opportunities differs due to corporate and contextual influences. In particular, we suggest that MNEs’ corporate strategies regarding value activity integration, product diversification, and location choices influence how they approach CE. Industry and location factors also play roles in facilitating or impeding CE advancement. Regarding the international business ramifications of CE, we discuss the impact of MNEs’ geographical scope in terms of a local, multi-local/regional, or global focus and show how formal and informal institutional contexts influence the design and implementation of CE. Our analysis demonstrates that established conceptualizations in the international business field of MNEs and the business systems in which they operate are useful for understanding CE, but further international business research is needed about how MNEs can help implement the transition towards CE.
Research Summary
The growth of China and President Xi's policies have transformed the global economy in ways that global strategy and international business (IB) scholars have yet to reflect fully in their research. The global economy is increasingly bifurcated between a China‐centered authoritarian system and a market‐oriented democratic system, generating complications and perils largely unknown since the end of the Cold War. The global business environment now bears faint resemblance to existing models in IB. To properly analyze the new reality, global strategy and IB scholars need to adopt a wider‐aperture, systems‐theoretic view that will require the cross‐fertilization of ideas and collaboration with other disciplines such as international political economy. This engagement will allow the development of more broadly based frameworks, theories, and models that can assist decision makers in the private and public sectors.
Managerial Summary
Strategic rivalry between China and the West requires managers to face a new reckoning. China remains the world's factory, but it has a tenuous relationship to even‐handed rules of law, both domestically and internationally. China leverages access to its market and has aligned with other autocratic countries to reshape the world order. Many firms have straddled the divide and tried to play by two sets of rules. This is not viable longer term. The strategic decisions of Western firms, particularly those involved with advanced and, especially, dual‐use technologies, are consequential to the future of democracy. A systemic view of the long‐term health of the enterprise may reveal the need to choose. Choosing democracy means, at minimum, guarding intellectual property, enhancing organizational capabilities, coordinating with peers, and protecting national security.
Research summary
International business strategy and international management are two distinct but related fields of study. This article explores the connections between them. It shows how internalization theory can act as a bridge between them. The key is to analyze not only core activities, such as production, marketing and R&D, but support services such as human resource management, information technology, and corporate finance. Internalization decisions and location decisions must be analyzed holistically, and diagrammatic techniques show how this can be done. These diagrams reveal the networks of communication and the hierarchical structures that emerge from such decisions.
Managerial summary
The organizational structure of a multinational enterprise is inherently complex, making it difficult to determine whether one organizational structure is more efficient than another. Delayering, decentralization, and agility are recommended, but what are their practical implications? Internalization theory addresses these problems in a simple and coherent way. It shows that it is not only core activities, namely production, marketing and R&D, that need to be coordinated, but support services too. Decisions on the location and out-sourcing of support services must be aligned with similar decisions on core activities. A diagrammatic analysis is presented that facilitates the solution of these problems.
Research summary
Digital transformation is a dominant theme in the global economy, but what it means for established companies remains perplexing for both academics and practitioners. As digital erases familiar geographic, industrial, and organizational boundaries, it has led to simplistic characterizations such as “digital changes everything.” Yet while digital changes some things, others remain the same. Here, we identify three core tensions at the heart of digital transformation—products vs platforms, firms vs ecosystems, and people vs tools—and describe their underlying economics, driving forces, and countervailing forces. These tensions frame a concrete discussion of strategic alternatives for global companies. Overall, we emphasize that digital transformation is not an objective state, but rather a strategic choice by executives from an array of alternatives.
Managerial summary
Digital transformation is a dominant theme in the global economy, but what it means remains perplexing for executives and academics. Pundits claim that “digital changes everything” and that leaders must “disrupt or be disrupted,” but is this really true for established companies serving robust customer needs on the global stage? Understanding what digital transformation means can be challenging as it breaks down familiar geographic, industrial, and organizational boundaries, creating new opportunities and threats. In this paper, we explore three key tensions at the heart of digital transformation—products vs platforms, firms vs ecosystems, and people vs tools—and enumerate their enabling and constraining forces. Building on these concrete constructs provides effective foundations for formulating digital transformation strategy.
Research summary
The strategic management and international business fields have followed, in some respects, quite similar intellectual trajectories, as reflected in the push for a field of “global strategy.” However, a key distinction in the strategy literature—namely, Williamson's distinction between “strategizing” and “economizing”—has not been explicitly recognized in the international business/global strategy fields. We argue that progress can be made in global strategy by recognizing this distinction and exploring the interaction between “strategizing” and “economizing.” To lend credence to this claim, we offer a simple model of the entry decision which highlights both economizing and strategizing aspects of this decision. We also offer recommendations on economizing‐strategizing research in global strategy.
Managerial summary
Multinational enterprises gain competitive advantage either by improving the efficiency with which they operate (by having unique resources, lowering costs, or improving managerial practices) or by exercising their market and bargaining power. Most research has emphasized the former source of competitive advantage. However, in actuality, the two sources are intertwined. We detail how they are intertwined by means of a simple numerical example of the entry decision facing a company that can choose between competing or collaborating with the local firm. We show that strategizing plays into the entry decision in this case.
Research Summary
Global strategy must negotiate three vectors of external power: State policies (that often conflict across national boundaries), the demands of civil society, and market pressures. The global strategies of corporations must reflect their two enduring and non‐replicable advantages—innovation and flexibility. These qualities are essential in the face of increased government regulation together with intensification of non‐market strategies as well as improving responses to the increased exigencies of international competition. A radical reappraisal of global strategies is therefore necessary. The global strategies of corporations here are analyzed using the “governance triangle” that examines governance through coordination (the role of the state), governance through competition (the market), and governance through argumentation (civil society). Future global strategies must contend with this web of constraint.
Managerial Summary
This paper suggests that managers need to recognize the web of constraints surrounding their strategic decisions. The three key vectors of external power are the state and government regulation, the power of civil society exercised through argumentation, and competitive action. Recognition of increasing pressure from the three vectors of power is the first step in reformulating global strategy. A wider acknowledgement and inclusion of stakeholders and increasing non‐market strategic activity are no longer optional but are mandatory. Navigating these constraints suggests a new web of opportunity where the true long‐run advantages of successful firms—flexibility and innovation—can be implemented.
Research Summary
Rare events and other nonerror outliers (such as the COVID‐19 pandemic) are important phenomena in global strategy contexts. Despite their salience, however, they have hardly been studied systematically in our field (or organizational research at large). We suggest that this is due to a dominance of the Gaussian paradigm, which (often unrealistically) assumes linearity and independence of observations. Moreover, case‐based qualitative studies which offer contextualization have been underrepresented. We thus call on researchers to abolish the practice of habitually discarding outliers, reflect on nonnormal distributions, and pursue more qualitative studies. Journal editors and reviewers should widen their assumptions regarding “acceptable” papers and reflect on the requirement of contributing to big “T” theories. Finally, PhD training should juxtapose fundamental paradigms and associated implications for epistemological choices.
Managerial Summary
Extreme occurrences, such as organizational crises, recessions, or pandemics, are challenges most practitioners deal with and worry about. Understanding their determinants, characteristics, and dynamics allows for heightened vigilance, preparedness, and ultimately performance. Yet, much of global strategy research (and organizational research at large) has focused on “average” phenomena, based on methodologies that assume bell‐shaped distributions and independent observations. In this note, we argue that this is not a realistic way to think about most social phenomena. In fact, most are characterized by their high degree of interdependence among elements, as well as a relative commonness of “rare” events and outliers. As a result of embracing the reality of nonnormality, scholars will be able to offer more relevant guidance to practitioners.
Research Summary
The argument of this article is that global strategy research should devote greater attention to rent appropriation in global value chains (GVCs). We discuss the concept of intangible assets, emphasize their scalability at low marginal cost and highlight strategies for the appropriation of rents from these assets. Returns captured by intangible assets are shown to be much greater than those captured by tangible assets in GVCs of manufactured products. Regions in the world are found to be specializing in different GVC stages, with China rising as a key location for rent generation in upstream and production activities. We conclude that the rents from intangible assets are major drivers of economic development and of corporate success and offer insights into rent appropriation trends in the future.
Managerial Summary
Intangible assets include computerized information (such as databases and software), innovative property (such as patents, trademarks, and copyrights), and economic competencies (such as brand equity and organizational capital). Our analysis shows that the returns to intangible assets in the GVCs of manufactured goods have risen substantially in importance over the past 20 years. A further finding is that within GVCs, the rent share of upstream stages has been increasing at the expense of rents shares of both the production and downstream stages. These findings suggest that the effective deployment, management, and protection of intangible assets is of critical importance to the ability of firms to create and maintain sustainable competitive advantages in global markets. In GVCs, intangibles matter, big time!
Research Summary
The global economy has recently entered a period of disruptions, increasing barriers to cross‐border business and potentially inhibiting the merits and legitimacy of integrated global strategies. We explore how three major disruptions in the global economy (reduced people mobility, divergent national regulatory institutions, and anti‐globalization populism) affect the strategies of multinational enterprises, and, in particular, the role of their foreign subsidiaries. These external disruptions call for a reassessment of theories regarding the nature of global strategy and the interaction between businesses and their political environment. Specifically, we argue that the international relations perspectives of realism, liberalism, and constructivism help explain the nature of the disruptions, and hence can inform strategy scholarship in explaining and examining strategic responses to such external disruptions.
Managerial Summary
Firms establish subsidiaries abroad in order to exploit the opportunities of globalization to the benefit of their shareholders and other stakeholders. However, the global economy has recently entered a period of disruptions that include reduced people mobility, divergent national regulatory institutions, and increased anti‐globalization populism. We argue that these disruptions will not only create new operational challenges for global strategies and new needs for local adaptation but may even challenge the legitimacy of global business models. We turn to political science for explanations and find that three paradigms of international relations offer contrarian predictions not only on the big disruptions but also on the ability of MNEs to influence political processes driving the disruptions.
Research Summary
We respond to calls in the strategy and international business literature for elucidating how multinational subsidiaries develop contextual intelligence in host countries and how they use the local context as a source of valuable opportunities for learning. Applying the theoretical lens of subsidiary absorptive capacity and building on a gravity model, we propose an approach that can distinguish and compare the influences of the host country context and headquarters over the subsidiary knowledge production. Some subsidiaries may become global second headquarters and innovation hubs, as evidenced qualitatively in the paper with the case of Cisco. Essentially, subsidiaries, characterized by higher stocks of knowledge and greater number of locally hired employees are likely to absorb relatively more knowledge from the local host country context.
Managerial Summary
Managers at multinational companies have to carefully balance acquiring knowledge from the headquarters, vis‐a‐vis acquiring knowledge from the local context of countries where the firm has subsidiaries. In contrast to a “headquarter‐centric” approach where most of the knowledge management activities are centered around the MNC headquarters, we argue that larger subsidiaries, often characterized by a large presence of local R&D workers, might disproportionately draw knowledge from the local context, rather than from the headquarters. In addition to developing theoretical propositions along these lines, we provide an illustrative example of how Cisco opened a “second headquarters” in India, to learn from the rich local context.
Research Summary
Divisions into an “us” and a “them” across racial, ethnic, economic, geographic, and other demographic divides impede society's capacity to address grand challenges. Firms have an impact on such divisions—whether positively or negatively, intentionally or not—through the dual mechanisms of rents and relationships. Firms may contribute to horizontal inequalities that underlie intergroup conflict through the distribution of the benefits, costs, and risks of firm activities. Through their relational strategies, firms also shape the willingness and ability of different groups to work together for positive change. Firm behaviors emerging from their daily operations can thus change society's capacity to address its grand challenges, necessitating corporate activism that encompasses market and nonmarket strategies, as well as a broader understanding of the strategy‐setting process itself.
Managerial Summary
This paper examines how firms inevitably shape conflict and cooperation in society through their impact on relationships between groups across racial, ethnic, economic, geographic, and other demographic boundaries. Managers distribute the gains and losses of business activities in ways that differently impact identity groups attentive to their relative inequalities. Strategies regarding how stakeholder relationships are built or broken can also change the ability of groups to build consensus on issues of broad social concern. We explain how these managerial decisions can thus affect the capacity of broader society to address collective challenges. We further explore how managers can design and implement inclusive market and nonmarket strategies that strengthen the cooperative potential of different groups to advance important social goals.
Research Summary
The spread of protectionist policies and the COVID‐19 pandemic force policymakers and managers to fundamentally rethink the relationship between location and strategy. We examine this location‐strategy interplay through a structure‐agency perspective by investigating how the economic landscape shapes and, simultaneously, is shaped by firm strategies. Increasing spatial disparity and diversity of innovation and wealth in clusters and city‐regions create both tremendous challenges and opportunities for multinational enterprises to strategically leverage knowledge over space. Locational choices and actions of multinationals, in turn, affect regional economic development paths and geographies of innovation. We argue for deep dialogue and collaboration between economic geography, international business and strategy to untie the knots in the intricate interplay between location and strategy and solve the grand challenges in our turbulent age.
Managerial Summary
The wide spread of protectionism and the COVID‐19 pandemic have disrupted global value chains unprecedently, forcing policymakers and firm managers to rethink the relationship between business strategies and locations. We suggest that this relationship can be understood in a bilateral way. The concentration of innovation and economic activities in city‐regions and clusters creates big challenges but also tremendous opportunities for multinational enterprises. Multinationals need to direct knowledge across space but also have to deal with local resistance and opposition. The choices and actions of these firms are shaped by and, simultaneously, influence spatial patterns of economic activities. We argue for deep collaboration between economic geographers and international business scholars to solve the grand challenges for business, community and society in our turbulent time.
This chapter takes stock of fifty years of research on mode dynamics—that is, the decisions to switch and add operation modes in a foreign country—as a central international business strategy phenomenon. Numerous studies have advanced knowledge about the various forms of mode dynamics and their underlying drivers, especially regarding mode switches. However, this review of the research also reveals that understanding of the phenomenon of mode additions needs further development. The chapter proposes a theoretical framework for understanding mode additions and provides the example of modularization as an illustration of a mechanism that may help improve the cost–benefit balance of mode switches and additions.
Research Summary
Digitalization has three fundamental characteristics, reprogrammability infrastructural elementality, and intangibility. Based on these characteristics, it is transforming how firms organize for value creation, delivery, and capture. Its intangibility and infrastructural character largely free economic and business activities from the constraints of physical geography like those imposed by transportation and collocation. Digital communication technologies typically reinforce the centrifugal forces that favor dispersing the firm's high knowledge activities. Digital in situ technologies strengthen the centripetal forces toward concentrating the firm's low knowledge activities. Location dependence and product modularity are crucial moderators for tangible products, while institutional barriers are important for intangible ones. Finally, digital technologies increase the resilience of firms during disruptive events that impose restrictions on the movements of people and goods, as during the COVID‐19 pandemic.
Managerial Summary
Digitalization is a general purpose technology on the scale of the steam engine and electricity, and affects every aspect of business and society. It is transforming how firms organize for value creation, delivery, and capture. Freeing businesses from the constraints of transportation and collocation, it increases their resiliency in the face of global disruptions like those associated with the COVID‐19 pandemic. Digital communication technologies typically reinforce the centrifugal forces that favor dispersing the firm's high knowledge activities. Digital in situ technologies like advanced robotics strengthen the centripetal forces toward concentrating the firm's low knowledge activities. Location dependence and product modularity are crucial moderators for tangible products, while institutional barriers are important for intangible ones.
In this theoretically original work, two distinguished authors explore the mutual interdependence of states and firms throughout the world. They show how global structural changes - in finance, technology, knowledge and politics - often impel governments to seek the help and cooperation of managers of multinational enterprises. Yet, as Professors Stopford and Strange demonstrate, this is constrained by each country's economic resources, its social structures and its political history. Based on grass-roots research into the experience of over 50 multinationals and more than 100 investment projects in three developing countries- Brazil, Malaysia and Kenya - the authors develop a matrix of agendas. They present the impact on projects of the multiple factors affecting the bargaining relationships between the government and the foreign firm at different times and in a variety of economic sectors. In conclusion they offer some guidelines for actions to both governments and firms and some points to future interdisciplinary research.
Geographically dispersed reservoirs of knowledge represent significant opportunities for multinational enterprises (MNEs), both in terms of feeding the firm's innovation process, as well as adapting technology to new markets. They face serious challenges in accomplishing these tasks, due to the well-known barriers associated with the transfer of knowledge out of its local context. We argue that ethnic inventors might play a role in alleviating these challenges, by acting as a bridge between their countries of origin (CoO) and the MNE headquarters. Using USPTO data on internationally connected patents granted to US-based MNEs operating in knowledge-intensive industries over the period 1975–2009, our empirical exercise shows that patents involving ethnic inventors from a given CoO are associated with greater integration of knowledge originating from that CoO in the MNE innovation process. Further investigation indicates that this effect is probably limited to knowledge developed within the MNE's network, suggesting that ethnic ties – per se – might not be sufficiently powerful to overcome the joint barriers of national borders and organizational boundaries. Finally, our analysis reveals that ethnic inventors may also be associated with knowledge exploitation in their CoO. This mainly seems to occur in CoOs plagued by market-related institutional voids.
Academic abstract
We analyze how skepticism of globalization, the socially constructed vulnerability that emanates from global interdependencies, affects global strategy. We argue that inequality, identity, and influence drive this skepticism and propose that the increase in rhetoric against globalization and for new regulations do not seem to result in significant reductions in cross‐border economic flows. We explain this discrepancy by proposing that multinationals' strategies counteract the impact of politicians' regulatory reactions to the skepticism of globalization. Specifically, we propose that firms increase flexibility in global value chains in response to skepticism of cross‐border trade, rework the localization of global operations to deal with skepticism of cross‐border investment, use lobbying in global finance to address skepticism of cross‐border finance, nativize the global workforce in reaction to skepticisms of cross‐border labor, and protect global knowledge to solve the skepticisms of cross‐border knowledge flows.
Managerial abstract
We study how the increases in negative attitudes toward globalization, which we call skepticism of globalization, influence the global strategy of firms. We explain that inequality, identity, and influence drive this skepticism and propose that the increases in rhetoric and government regulations do not seem to have resulted in significant reductions in cross‐border economic flows because companies have redesigned strategies to counter the effect of rising skepticism of globalization. Specifically, we explain how the regulations of cross border trade, investment, finance, labor, and knowledge flows that accompany increases in skepticism of globalization are countered by multinationals' strategic changes in the flexibility in global value chains, localization of global operations, lobbying in global financing, nativization of global workforce, and protection of global innovations.
The international business (IB) literature has always analyzed multinational enterprises (MNEs) as firms that internalize market transactions across national borders. Over the last few decades, these firms have evolved from vertically integrated organizations to network orchestrators that coordinate geographically dispersed economic activities. In other words, they are the primal actors within global value chains (GVCs). Despite the commonality of their objects of study, the incorporation of GVC research into mainstream IB remains embryonic and fragmented. This review uses the lens of the eclectic paradigm to funnel disconnected strands of the GVC governance literature from multiple disciplines into a coherent framework. Based on a systematic examination of 143 theoretical and empirical studies, we scrutinize the theory, methods and empirical evidence to promote a more structured integration of GVC governance into future IB research.
Research Summary
We study the internationalization‐related legitimacy challenges of firms with disruptive business models by using a case comparison of leading sharing economy companies Airbnb and Uber. We show that they are insulated from many traditional legitimacy challenges to multinationals entering host markets, but exposed to others that have not been noted previously. Specifically, we identify a novel market‐entry legitimacy challenge, “liability of disruption,” which manifests as regulatory, incumbent business, and societal pushback against firms with disruptive business models. After presenting our cross‐case analysis, we theorize about the nature and impacts of these three distinct but interconnected forms of host country institutional pushback on firms’ ability to achieve and maintain legitimacy, and how they are driven by national governance characteristics.
Managerial Summary
Sharing economy companies Airbnb and Uber have engaged in rapid processes of global growth, but their practices and right to operate have been challenged by a variety of host country stakeholders. This study shows that their international expansion efforts have been affected by emergent regulatory scrutiny, incumbent businesses’ opposition, and other societal concerns about their impacts on employees, customers, competitors, and the communities where they operate. We label these challenges as the “liability of disruption” and illustrate their importance for understanding the internationalization‐related complexities faced by sharing economy firms and, more generally, internationalizing ventures with disruptive business models that aim to restructure entire industry sectors.
Microfoundations have become an important theme in recent macro-management research. However, the international management (IM) field is an exception to this. We document the lack of attention on microfoundations in IM research by focusing on knowledge sharing – a key IM research field – which we investigate by means of a keyword-based literature study of the leading IM and general management journals. We discuss possible reasons why microfoundations have so far met with less resonance in IM research. We point to the training and background of IM scholars as possible reasons. We also highlight the significance that IM scholars place on context and structure in explanation. These may be seen as contrary to a microfoundations perspective, a view that we show is incorrect. We end by identifying several microfoundational issues in IM research, calling for a sustained effort with respect to theory, heuristics, and empirics.
Research Summary
We analyze power relationships in subsidiaries of multinational corporations. We explain how despite many advances in the literature, there is still an unresolved debate with respect to the critical question of whether subsidiary power is loaned or owned. We develop an overarching framework that encompasses both agency theory and resource dependence theory as the two pillars to understand decision‐making by managers in subsidiaries. We propose that agency theory applies more when the subsidiary's decision rights are “loaned” by headquarters, while resource dependence theory applies more when the subsidiary “owns” its decision rights. We also explain how subsidiary evolution integrates the arguments of these two theories. Agency appears to apply earlier while resource dependence is more relevant at later stages.
Managerial Summary
We provide a framework that helps address the challenges of managing power relationships in subsidiaries of multinational firms. Traditionally, studies have proposed to explain these relationships using either agency theory and the idea that subsidiary managers need to be controlled by headquarters or resource dependence and the idea that subsidiary managers can chart their own path. We solve this conflict by proposing that agency theory applies when the subsidiary's decision rights are “loaned” by headquarters, while resource dependence theory applies when the subsidiary “owns” its decision rights. We also explain how the analysis of subsidiary evolution integrates the arguments of these two theories as agency seems to apply earlier in the evolution of the subsidiary while resource dependence seems to apply at a later stage.
This paper addresses the growing but fragmented research area of changes in foreign operation modes. Previous research claims this field to be under-researched and at the same time more complex than hitherto assumed. Moreover, a majority of studies investigating mode change include the topic rather inexplicitly. In consequence, literature on mode change is fragmented across different research streams and is characterized by incoherent nomenclature, a variety of research foci as well as results that are hard to compare. By conducting a structured literature review we consolidate existing findings, provide a deeper understanding of firms’ foreign operation mode change, related theoretical perspectives, and its antecedents and consequences. Based on our findings we discuss relevant areas for future research in this research field.
Cooperation has become the leading strategy adopted by business and other organizations. It is taking on new forms that are adapted to changing market expectations and technological possibilities in the rapidly evolving business environment. This new edition of Cooperative Strategy provides a comprehensive view of the practical and theoretical literature concerning cooperative strategies, and the alliance and network organizational forms that are the enablers of these strategies. It takes the reader through the stages of developing a cooperative alliance, from choosing a cooperative form and selecting partners, to establishing an alliance and managing the process of cooperation. It examines cooperative strategies in different sectors as well as internationally, and discusses performance criteria and evolution of cooperation over time. With insights from internationally recognized experts on cooperative strategy, this book presents extensive research on the topic while also addressing practical issues of alliance management. Echoing the words of the famous social psychologist Kurt Lewin that “there is nothing so practical as a good theory,” the authors provide a sound understanding of the theory and research on cooperative strategy so as to inform its practice. In this respect, this new edition follows its predecessor as an essential resource for both students and managers alike.
Research summary
We review the relationships between institutions and global strategy and explain several clarifications for future research. First, studies need to clarify the standard used to assess quality in institutional dimensions they research rather than let readers assess them from the measures. Second, analyses need to specify the theoretical approach used, which may be based on the paradigm from a single discipline (economics, sociology, politics, psychology) or the integration of underlying disciplines, as often seen in management. This must form the basis of a consistent set of assumptions rather than a potpourri of arguments from incompatible logics. Third, investigations need to clarify the direction of relationship and mechanisms. On the one hand, studies on the impact of institutions on strategy should clarify the institutional influences used (adapt, appeal, avoid). On the other hand, research on the effect of strategy on institutional change should clarify the institutional strategies (inform, influence, incentivize) and institutional spillovers (compete, command, copy) by which firms change institutions.
Managerial summary
The study of institutions (controls of the behavior of individuals and firms) has become a popular topic analyzed in global strategy. Unfortunately, there is some confusion on how institutions affect the global strategy of firms because of differences in the viewpoints used to explain the relationships. We clarify past arguments by explaining the need to identify the standards used to assess quality in institutions, and the assumptions of approaches based on underlying disciplines (economics, sociology, politics, or psychology) as well as those that integrate these disciplines like in management. We also explain the mechanisms by which institutions affect the global strategy of firms (adapt, appeal, avoid), as well as the mechanisms by which global strategies influence the transformation of institutions via institutional strategies (inform, influence, incentivize) and institutional spillovers (compete, command, copy).
Drawing on the experience of firms of various sizes from Francophone Africa, we explore how the internationalization trajectories of frontier economy firms may vary from those predicted by theory. The firms studied followed social, linguistic, cultural, and institutional gradients to internationalize first to France, rather than to neighboring countries, and did so in search of not only markets and resources but also legitimacy. In turn, the sales, resources, and legitimacy acquired in France supported further international expansion, sometimes even to neighboring countries. Although our insights derive from the experience of Francophone firms from Africa, we argue that for firms from all former colonies, the internationalization trajectory leads through the colonial center. Our findings underline the roles of legitimacy-seeking and network ties in the internationalization of frontier market firms and serve as a salutatory reminder of the lingering influence of colonial ties on international business.
We review four decades of research about the corporate governance of multinational corporations (MNCs), which we label International Corporate Governance (ICG). We identify and discuss three main streams of research that draw on different conceptualizations and theoretical lenses of (corporate) governance. After synthesizing their respective findings, we propose several avenues for future research that integrate these three streams of research with the goal of developing a more nuanced understanding of ICG. We hope this review article will inspire international business scholars to continue examining how corporate governance can be an effective tool for MNC success.
Research Summary
The global strategy literature highlights the role of headquarters (HQ) in realizing global integration benefits while enabling independent subsidiary strategic initiatives. We construct a game‐theoretic model of the interaction between HQ and subsidiaries, and, building on procedural justice theory, we analyze the motivational costs that can result from the anticipation or realization of HQ intervention in subsidiary initiatives. We also analyze the implications for MNC‐level value creation when HQ managers, fearing subsidiary managers’ emotion‐based reactions, refrain from intervening. We derive a number of counter‐intuitive results, for example, that good HQ behavior may involve forgoing opportunities for value creation, and that procedural justice systems may sometimes be counterproductive.
Managerial Summary
Headquarters (HQ) in multinational corporations are required to balance global integration and local autonomy within the organization. This balancing act sometimes requires HQ to intervene in subsidiary matters and to overrule the subunits’ decisions. While an intervention might create integration advantages, it may also have a negative impact on the motivation of subsidiary managers, who might feel that their effort and their decisions are overruled. We focus on such motivational issues and investigate how fair decision‐making processes applied by the HQ influence subsidiaries’ entrepreneurial behavior and their reactions to the overruling. Our findings show that, under specific conditions, HQ need to forgo value creating interventions, and that a strong focus on a procedural justice culture within the firm can be detrimental.
Frontiers of Strategic Alliance Research - edited by Farok J. Contractor March 2019
Frontiers of Strategic Alliance Research - edited by Farok J. Contractor March 2019
We review the literature analyzing the impact of pro-market institutions on firms’ global strategy. We propose that the ideological tension between whether the government or the market should drive economic development results in a pendulum of pro-market reforms and reversals that drive changes in firm strategy and performance. Much progress has been made in the analyses of pro-market reforms and their impact on firms’ international strategies and performance. However, there is a need to further learn about four areas: (1) the concept of pro-market institutions, in particular the variety of institutional dimensions, the measures, and the influence of informal institutions on firm strategies; (2) the drivers of changes in pro-market institutions, especially firms’ influences and the co-evolution of firm strategies and institutional changes; (3) the implications of changes in pro-market reforms for the interactions among integration, diversification, and internationalization strategies, the causality chains connecting institutions and strategies, and the reconfiguration of activities globally; and (4) the non-traditional moderators that alter the impact of pro-market institutional dynamics on firms’ strategies, such as country-level political systems, industry-level competitor reactions, and individual-level managerial capabilities and perceptions.