Location influence Flashcards
Mention as many characteristics of a SOE as possible
> 10% owned by Gov.; control; availability of assets; societal objectives; Soaks up capital and talent; overcomes institutional voids, political interference; historical
How does SOE-/SO-MNE behavior differ from MNC behavior
Why invest? MNC wants the internalize the comparative advantages, the SEO has political objectives.
Where? MNC goes where resources and capabilities are applicable to achieve higher profitability. SOE goes where the government wants influence/diplomacy
How to invest? MNC entry mode that reduce risk/commitment. SOE idc just get me what i want
Explain what you know about North (1990,1991) perspective on institutional economics (mention 4 mechanisms as well)
North talks about the governmentally regulated set up as a country, and how it affects strategy. He discusses informal and formal in relation to the following mechanisms.
1) Transaction costs
2) Agency costs
3) governance structures
4) political hazards
Institutions: comparative capitalism
In short, how much the government influence company and industries /environment. E.g., is the country able to attract FDI? Liberal (small state) = little influence on strategy. influence of unions. How state driven are they?
What 6 levels of institutions are there?
World (WTO, IMF); Regional (EU); Country/societal (Government); Industry (NAFTA), Organizational (America example), deparment (manager)
OBS: EU is not the institution, they create an institution
What is a formal institution
National laws, business policies, governmental regulations
What is a informal insitution
Sanctions, taboos, customer, traditions, and code of conducts
Institutional-based view
How the environment impacts firm strategy in 3: Distance, Voids, Transition/Change
What are institutional voids
Environments in which institutions are not working well or are completely absent.
(e.g. IP protection could be present but not reinforced)
What are some main conclusions/advice we drew for the discussion on institutional voids?
1) You don’t want to internationalize into risky environments w high institutional voids.
2) Don’t go where association can hurt your image.
3) Don’t go where there is no governmental support
What does institutional pressure by local governments consider. Why is it important?
basic answer would be economic/state interventionism. Based on the type of capitalism ranging from liberal to state-led capitalism.
Importance: impacts strategy
How does institutional change/transition impact businesses
e.g. once IP protection was established there were a massive increase in innovation inflow
What 5 institutional dimenstions exist (“markets”)
Capital (equity/bank?).
Labor (schools).
Product (regulations).
Governmental regulation (low/high; corruption?). Contract enforcement (yes/no)
institutional environment: Adaptability and strategic 4 choices.
Political, economic and social.
1. Replicate/adapt model
2. Compete alone/collaborate to navi institutional voids
3. accept/change contezt: ok or fill voids
4. enter, wait, exit
MNC adaptability: political/social. Why, how, cons.
Require dynamic capability.
how: political adaption: partner with governments, NGOs, SOEs. show local commitment (finance, local development)
social adaption: Local stakeholder management
MNC adaptability: economic. Why, how, cons.
Design local business model, Local manager is key player.
Objective: social capital (access to information/ informal network).
Con: Image spillovers from local partner. Fast growth is problematic
What is institutional arbitrage
Exploitation of formal and informal institutional differences.
e.g. formal: IP standards, tax rates, labor regulations.
e.g. informal: benefot of popularity of US culture, label french wine
Characteristics of EMNEs
From an emerging market. Agile/flexible. Disruptive innovations/frugal. Internationalize in the “wrong” way
EMNE internationalizing: Springboard perspective
- acquire critical resources needed to compete at home or abroad.
- to avoid intitutional or market constraints
- If you don’‘t have the O, go get it. get access to competitive advantage
- can overcome barriers to entry
- gain advantage/knowledge/asset take it back to home market
e.g. Indian firm bought german company
What are challenges of the springboard perspective
It is hard to acknowledge, implement, and integrate advantages achieved in the environment.
Lack of experience
What is the LLL framework
Linkage, leverage, learning:
linkage:
o EMNEs are not leveraging their advantages but leveraging the advantages of other firms through linkages. Preferable through JVs (mitigate risk)
Leverage:
o focus on resources that are available externally and the accessibility of these resources, rather than spreading your own O-advantage
Learning:
- Learn through repeated acquisitions, ensure knowledge flow between partner and EMNE
How are O different in EMNEs
Ownership is not necessariluy something you have, you might acquire it. Also, you don’t want to diffuse the O, you enter markets to gain theirs.
O could however be:
- strong relationships
- market understanding
- contry of origin effect
- the industry they operate in
So saying a firm can only internationalize when they are unique, transferable is NOT true
Institutional arbitrage logic (EMNE view)
exit view:Although it can be a method for utilizing institutional voids, it can also be an escapism from the home, and avoid weak institutional environments. They will often go for advanced markets.
Exploitation view:At the same time they might exploit their institutional commonality and dare to operate in fucked locations
EMNES and OLI - L argument
All resources are already eaten by the existing firms. you need to be their friend to dine with them. Internationalizing is not enough, establish relationshis. This affects your location decision, where do you have friends?
