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Explaining outcomes in competition among foreign multinationals in a focal host market

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  • Subramanian Rangan
  • Aldemir Drummond

Abstract

Multinational enterprises (MNEs) from different home regions now routinely confront one another in third markets. There is, however, little conceptual or theoretical literature on the determinants of outcome patterns in these contests. This paper offers a first attempt at systematic and parsimonious conceptualization of the issue. In Brazil, for instance, while U.S.‐based MNEs such as Coca‐Cola and IBM lead in their sectors, other leading U.S. MNEs including Citibank, GE, and Pfizer are outsold by European rivals that appear less competitive globally. Extending theory on the liability of foreignness and firm‐specific advantages, we contend that (i) the MNE whose home nation has greater ties to the focal host nation (along geographic, colonial, immigration, linguistic, and institutional dimensions) will lead in that host nation; and (ii) ties notwithstanding, if an MNE's firm‐specific advantages are so superior that it outsells a rival MNE in that rival's home market, then it will outsell that rival as well in the focal host market. Based on this we develop a conceptual framework, statistical analysis pertaining to MNE competition in Brazil, and three avenues for fruitful new research. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Subramanian Rangan & Aldemir Drummond, 2004. "Explaining outcomes in competition among foreign multinationals in a focal host market," Strategic Management Journal, Wiley Blackwell, vol. 25(3), pages 285-293, March.
    • Handle: RePEc:bla:stratm:v:25:y:2004:i:3:p:285-293
    DOI: 10.1002/smj.375
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    1. Denk, Nikola & Kaufmann, Lutz & Roesch, Jan-Frederik, 2012. "Liabilities of Foreignness Revisited: A Review of Contemporary Studies and Recommendations for Future Research," Journal of International Management, Elsevier, vol. 18(4), pages 322-334.
    2. Chowdhury, Reza H. & Maung, Min, 2018. "Historical ties between nations: How do they matter in cross-border mergers and acquisitions?," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 30-48.
    3. Yadong Luo & Huan Zhang & Juan Bu, 2019. "Developed country MNEs investing in developing economies: Progress and prospect," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 633-667, June.
    4. Caterina Moschieri & Maria Fernandez-Moya, 2022. "A dynamic long-term approach to internationalization: Spanish publishing firms’ expansion and emigrants in Mexico (1939–1977)," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(5), pages 818-849, July.
    5. Cao, Mingchun & Alon, Ilan, 2021. "Overcoming the liability of foreignness – A new perspective on Chinese MNCs," Journal of Business Research, Elsevier, vol. 128(C), pages 611-626.
    6. Chen, Zibang & Giroud, Axèle & Rygh, Asmund & Han, Xia, 2024. "Chinese SMEs’ location choice and political risk: The moderating role of legitimacy," International Business Review, Elsevier, vol. 33(3).
    7. Maung, Min, 2022. "Trust and cross-border mergers and acquisitions," International Review of Financial Analysis, Elsevier, vol. 83(C).
    8. Barnard, Helena, 2010. "Overcoming the liability of foreignness without strong firm capabilities -- the value of market-based resources," Journal of International Management, Elsevier, vol. 16(2), pages 165-176, June.
    9. Nishani Bourmault & Jordan Siegel, 2022. "Why Local Adaptation Sometimes Fails to be Effective for MNEs: Exploring the Dynamics of Collective Bonuses, Egalitarianism, and Informal Norms," Journal of Management Studies, Wiley Blackwell, vol. 59(4), pages 886-924, June.
    10. Lisha He, 2022. "Spatial Linkages in Chinese Service and Manufacturing Outward Fdi: Empirical Evidence From the United States," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 113(5), pages 450-468, December.
    11. Ozkan, Kubilay S.L. & Khan, Huda & Deligonul, Seyda & Yeniyurt, Sengun & Gu, Qian (Cecilia) & Cavusgil, Erin & Xu, Shichun, 2022. "Race for market share gains: How emerging market and advanced economy MNEs perform in each other’s turf," Journal of Business Research, Elsevier, vol. 150(C), pages 208-222.
    12. Perez-Batres, Luis A. & Eden, Lorraine, 2008. "Is there a liability of localness? How emerging market firms respond to regulatory punctuations," Journal of International Management, Elsevier, vol. 14(3), pages 232-251, September.
    13. Maung, Min & Shedden, Myles & Wang, Yuan & Wilson, Craig, 2019. "The investment environment and cross-border merger and acquisition premiums," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 19-35.
    14. Luis Perez-Batres & Van Miller & Michael Pisani, 2010. "CSR, Sustainability and the Meaning of Global Reporting for Latin American Corporations," Journal of Business Ethics, Springer, vol. 91(2), pages 193-209, February.
    15. Stoyan Stoyanov & Richard Woodward & Veselina Stoyanova, 2018. "The Embedding of Transnational Entrepreneurs in Diaspora Networks: Leveraging the Assets of Foreignness," Management International Review, Springer, vol. 58(2), pages 281-312, April.
    16. Fernández-Méndez, Laura & García-Canal, Esteban & Guillén, Mauro F., 2018. "Domestic political connections and international expansion: It's not only ‘who you know’ that matters," Journal of World Business, Elsevier, vol. 53(5), pages 695-711.
    17. Casanova Lourdes & Rodríguez-Montemayor Eduardo, 2014. "The bridge model: how Spanish multinationals are building economic ties between Asia and Latin America," Business and Politics, De Gruyter, vol. 16(3), pages 1-19, October.
    18. Demirbag, Mehmet & McGuinness, Martina & Akin, Ahmet & Bayyurt, Nizamettin & Basti, Eyup, 2016. "The professional service firm (PSF) in a globalised economy: A study of the efficiency of securities firms in an emerging market," International Business Review, Elsevier, vol. 25(5), pages 1089-1102.
    19. Jisun Yu & Sung Kim, 2013. "Understanding liability of foreignness in an Asian business context: A study of the Korean asset management industry," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1191-1217, December.
    20. Han, Xia & Lukoianove, Tatiana & Zhao, Shasha & Liu, Xiaohui, 2024. "International relations in international business research: A review and research agenda," Journal of Business Research, Elsevier, vol. 174(C).
    21. Jing Li & Klaus E Meyer & Hua Zhang & Yuan Ding, 2018. "Diplomatic and corporate networks: Bridges to foreign locations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(6), pages 659-683, August.
    22. Zainap Binti Abdullah, 2016. "The Evolution of Theories of MNEs: Minimizing the Liability of Foreignness through Globally Intelligent Subunits," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(7), pages 1-95, June.
    23. Maung, Min & Tang, Zhenyang & Wilson, Craig & Xu, Xiaowei, 2021. "Religion, risk aversion, and cross border mergers and acquisitions," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    24. Jane W. Lu & Hao Ma & Xuanli Xie, 2022. "Foreignness research in international business: Major streams and future directions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(3), pages 449-480, April.

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