A New Perspective On the Regional and Global Strategies of Multinational Services Firms

Zusammenfassung

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This article explores the differences in international strategy between multinational enterprises (MNE) in services and manufacturing, especially in terms of their international diversification, as measured by their sales and asset dispersion. The longitudinal data show that the largest MNEs in services have a much stronger home-region orientation than manufacturing MNEs. Large MNEs in the services sector average 83.9% of their sales in their home region, which is significantly higher than large manufacturing firms at 65.6%. The article explores the possible reasons for the relative lack of globalization of services firms. The two main reasons are: the difficulty of adapting separately upstream activities and downstream activities in high distance host environments, and the difficulty of selecting activity locations as a function of supply side criteria. The article offers a refinement of regional strategy theory applicable to services MNEs.

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Auszug

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A New Perspective On the Regional and Global Strategies of Multinational Services Firms

Introduction

Conventional Approaches to the Globalization of Services

Rugman and Verbeke (2004, 2007a) have demonstrated that most of the world's largest 500 companies pursue regional, rather than global strategies. They show that few firms actually have balanced sales across the broad Triad regions of Europe, North America and Asia. They define a global firm as a company with less than 50 percent of sales in its home Triad region and at least 20 percent in each of the two other Triad regions. The typical Fortune Global 500 company averages over 70 percent of its overall sales in its home region of the broad Triad, and substantially less than 20 percent of its overall sales in each of the two other regions. Such discrepancy in sales performance is then mostly reflected in regionally adapted strategies and structures (Rugman/Verbeke 2007b). The home-region orientation of most multinational enterprises (MNEs) implies that the reality of globalization has been vastly exaggerated. Here, we extend Rugman and Verbeke's (2004, 2007a) regional strategy analysis in two ways, namely by adding the parameter of asset dispersion, and by focusing on the differences, if any, between manufacturing and services industries.

First, Rugman and Verbeke's (2004,2007a) original data did not address the geographic dispersion of production activities. Yet, low sales dispersion could be accompanied by high asset dispersion, for example if MNEs engage in substantial off-shoring. MNEs may want to tap into attractive (sometimes low cost) input markets in host regions, and subsequently import components or finished products for sale in their home region. A similar phenomenon occurs in services provision, as with off-shored software development or call-centers.

For MNEs pursuing a strategy of sourcing in host regions to support sales in the home region, one might observe a higher interregional dispersion of assets than sales. However, the normative implications of sales dispersion versus asset dispersion are different. High sa...

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