Extending the internationalization process model: Increases and decreases of MNE commitment in emerging economies

By Grazia D. Santangelo, K. Meyer. 2011

306 citations recorded by the source corpus.

The internationalization process model suggests that firms internationalize by building positions in foreign markets and networks, following iterative cycles of learning and changes in commitment. However, as subsidiaries evolve, commitments may be decreased as well as increased, a phenomenon that has rarely been studied. Moreover, it remains an open question why strategic intentions at the outset of an investment project differ from the actual operations established. We address these questions by extending the model and combining it with Mintzberg and Waters’ framework of strategy formation. Specifically, we suggest that commitment decisions correspond to statements of intended strategy, while network positions correspond to realized strategies. The processes of learning, opportunity creation and trust building triggered by commitment decisions are, however, moderated by institutional influences that lead to divergences between realized and intended strategies. We test propositions derived from this framework on a survey data set of subsidiaries of multinational enterprises in Hungary, Lithuania and Poland, and find that institutional voids and institutional uncertainty affect subsidiary strategy implementation, but in opposing directions. Under high institutional uncertainty, investors prefer low commitment but flexible modes that enable later commitment increases, whereas institutional voids increase up-front information search and adaptation costs that reduce the likelihood of early post-entry adjustments. Our analysis reinforces the need for more differentiated theoretical analyses of how institutions affect business strategies over time.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/12f4766281405d11acecd537e35ef5ea4e9e56a6

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In Accounting

1. Jiangyong Lu
2. Xiaohui Liu
3. Yingqi Wei
4. Nan Zheng
5. Lin Cui
6. Fuming Jiang
7. Matthias Baum
8. Rajneesh Narula

In Strategy and Management

1. Jiangyong Lu
2. Xiaohui Liu
3. Yingqi Wei
4. Nan Zheng
5. Lin Cui
6. Fuming Jiang
7. Rajneesh Narula
8. K. Meyer

Citations in the corpus

• Offshoring innovation to emerging markets: Organizational control and informal institutional distance (2014, background): “Given that institutional distance is a major source of uncertainty for MNEs (Feinberg & Gupta, 2009; Santangelo & Meyer, 2011), more pronounced differences in the informal institutions that prevail within the home and host country markets will result in heightened uncertainty for the…”
• Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms (2014, background): “As argued by Santangelo and Meyer (2011), the subjectivity of perceptual measures can be an advantage, because it is the decision-makers’ views of their environment that influence their decision-making process.”
• Internationalization strategy, firm resources and the survival of SMEs in the export market (2014, background): “The sources of these enhanced costs may be insufficient market knowledge, a negative country-of-origin image, and cultural and institutional differences of the home country, to name a few (Cuervo-Cazurra, Maloney, & Manrakhan, 2007; Santangelo & Meyer, 2011).”
• Do we need different frameworks to explain infant MNEs from developing countries (2012, background): “Ot assets also include the knowledge of institutions, because familiarity of institutions plays an important 6    part in reducing the coordination costs, shirking costs and other transaction costs (James 2001, Santangelo and Meyer 2011).”
• LINKING THEORY AND CONTEXT: "STRATEGY RESEARCH IN EMERGING ECONOMIES" AFTER WRIGHT ET AL. (2005) (2012, unknown): “Firms thus find that the ability to adapt to changing rules can become a vital capability in emerging economies (CuervoCazurra and Genc, 2011; Santangelo and Meyer, 2011).”
• State ownership effect on firms' FDI ownership decisions under institutional pressure: a study of Chinese outward-investing firms (2012, methodology): “Prior studies have used two types of measurements for institutional variables: archival index measures (Meyer et al., 2009; Yiu & Makino, 2002) and survey-based perceptual measures (Brouthers, 2002; Davis et al., 2000; Kostova & Roth, 2002; Santangelo & Meyer, 2011).”
• A note on the revisited Uppsala internationalization process model – the implications of business networks and entrepreneurship (2016, unknown): “…model seems to be received as a more appropriate way to analyse firms’ internationalization behaviour (see e.g., Schweizer, Vahlne & Johanson, 2010; Santangelo & Meyer, 2011; Vahlne & Johanson, 2013; Casillas & Moreno-Menendez, 2014; Sui & Baum, 2014; Blankenburg Holm, Johanson & Kao, 2015; Oehme…”