How Home-Country Political Connections Influence the Internationalization of Service Firms.
| Verfasser | Bai, Tao |
| Posten | RESEARCH ARTICLE - Abstract |
1 Introduction
Technological advancements and the liberalization of the service sector have propelled the internationalization of service firms; however, the internationalization of service firms remains under-researched (Goerzen and Makino 2007; Hitt et al. 2006; Kirca et al. 2016; Rammal and Rose 2014). Previous studies on the bases of internationalization of service firms mainly focus on how firm resources such as human capital (Hitt et al. 2006), firm size (Javalgi et al. 2003), technological and marketing assets (Kirca et al. 2016), tangible and intangible resources (Xue et al. 2013), etc. influence firms' internationalization. However, little attention has been paid to how service firms' relationships with their external stakeholders, such as political connections to government, influence their internationalization.
Previous studies have introduced the important role of the government in the home country in supporting and directing the internationalization activities of firms (Buckley et al. 2007; Luo et al. 2010; Yamakawa et al. 2008), and home-country connections have been argued to shape firms' foreign expansion (Guler and Guillen 2010). However, there are inconsistencies in the findings on the effect of political connections in the home country on firms' internationalization. On the one hand, political connections in the home country can facilitate firms' internationalization by allowing firms to gain access to extended resources (financial or non-financial) (Luo and Tung 2007; Luo et al. 2010); on the other hand, home-country political connections may discourage firms from expanding internationally and constrain firms' activities at home, because the advantage of political connections is context-specific and is normally locally contingent, which may increase the resource dependency of politically connected firms on the home country institutions (Cui and Jiang 2012; Du and Luo 2016). Furthermore, politically connected firms might be influenced by political factors instead of commercial interests, which may undermine the development of market-based capabilities needed for internationalization (Lu et al. 2014).
Our literature review indicated that previous empirical studies on political connections are mainly based on companies in all industries (e.g., Du and Luo 2016; Lu et al. 2014; Peng and Luo 2000) and have not examined differences between industries. We argue that it is necessary to contextualize the effects of political connections to resolve the conflicting results found in previous studies. For service firms, the distinct features of services, including intangibility, heterogeneity, inseparability (Boddewyn et al. 1986; Buckley et al. 1992; Song et al. 1999; Zeithaml et al. 1985) amplify the liabilities of foreignness in service firms, which demand greater localization in the host country (Javalgi et al. 2003; Zhang et al. 2015). In this case, even though home-country political connections can help firms to access external resources, the high importance of localization in the host country for service firms results in a constraining effect of political connections as they are home-context specific and normally contingent on local factors in the home country. Therefore, the opportunities to enjoy the benefits of political connections at home combined with the difficulty of transferring and utilizing home-country political connections in the host country make service firms less likely to go abroad. However, we go further and argue that there are differences within the service sector. Every service that is delivered requires specific content and a process, and the process is more easily standardized than the content of service (Kesavan et al. 2014). For content-oriented service sectors, therefore, it is even more important to customize service compared to process-oriented service sectors, which prioritize the local responsiveness for the focal firm. The negative impact of home-country political connections on internationalization would be stronger for content-oriented service sectors compared to the impact for process-oriented service sectors. We further argue that marketing capabilities can help firms transfer and utilize the advantages generated by home-country political connections to the host country, which reduces the negative effect of political connections on firms' internationalization.
We test our arguments on a sample of publicly listed service enterprises in China between the years 2012 and 2016. The significance of internationalization of service sectors and the importance and prevalence of business-political connections in China offers an ideal empirical context for our study. Our study explores the effects of home-country political connections on the internationalization of service firms, and the conditions when political connections at home have different levels of influence. By examining the moderating effect of service industry characteristics, we respond to the call to differentiate internationalization within the service industries (Contractor et al. 2003). By examining the moderating effect of marketing capabilities, we answer the question of how marketing capabilities and political connections interact and influence firms' internationalization, which has been rarely examined, especially in the service sector.
The rest of the paper is structured as follows. Firstly, we review the internationalization of service firms. Then we discuss the effect of home-country political connections on the internationalization of service firms. We present the arguments why this relationship varies among different service sectors and firms with different marketing capabilities. This is followed by a description of the methodology, results and discussion.
2 Theoretical Background and Hypotheses
2.1 Internationalization of Service MNEs
The internationalization of service firms can be related to developments in the general global business environment (Forsgren 2001) in which service firms have constituted the largest share of global foreign direct investment (FDI) in recent decades (Pla-Barber and Ghauri 2012), accounting for 64% of global FDI stock in 2014 (UNCTAD 2016). Service firm internationalization is particularly important in new developing countries (Kundu and Merchant 2008).
However, compared to manufacturing firms, there is a shorter history of research on service firm internationalization (Buckley et al. 1992). Most early internationalization theories, for example, transaction cost theory (Anderson and Gatignon 1986; Williamson 1979), the Uppsala internationalization theory (Johanson and Vahlne 1977, 1990) and the eclectic paradigm (Dunning 1971, 1988) have been developed based on data on manufacturing firms (Laanti et al. 2009). It has been well accepted that service MNEs have different internationalization patterns compared to manufacturers because of the characteristics of services such as intangibility, inseparability and heterogeneity (Erramilli 1990; Javalgi et al. 2003; Knight 1999). These characteristics make the traditional theories based on manufacturing firms less applicable to the internationalization of service firms (Laanti et al. 2009). Previous studies have suggested the inherent differences in manufacturing and service firms necessitate a context-specific approach to understand a service firm's internationalization (Javalgi et al. 2003; Johanson and Vahlne 1990).
Due to the service characteristics, when compared to manufacturing companies, many service companies face additional challenges in their internationalization. Firstly, the intangibility of services makes it very difficult for them to transfer the same service across borders without significant transaction costs (Kirca et al. 2016), especially for some services such as soft-services (Erramilli 1990), location-bound services (Boddewyn et al. 1986), or asset-based services (Clark et al. 1996). Secondly, the heterogeneous nature of services entails independent exchanges, which involves a high degree of customization (Dunning 1989; Kundu and Merchant 2008; Merchant and Gaur 2008). In this case, it requires service firms to communicate and interact more with customers in the host market in order to maintain service quality and their brand reputation (Goerzen and Makino 2007). Thirdly, inseparability, one key attribute of service, causes the production and consumption to occur simultaneously, which requires very close customer contact (Goerzen and Makino 2007). The higher and closer interaction between service firms and local customers requires intensive local knowledge to deal with local customers. It has been argued that firms face the difficulty of getting market-related knowledge in the host market (Martinez and Dacin 1999). Applying professional knowledge in the host market requires learning and adaptation. The performance of service firms relies extraordinarily on developing a relationship between service firms and local customers (Dou et al. 2010). Therefore, there are good reasons to believe that the mechanisms that influence internationalization would be different between service and manufacturing firms. However, despite the above differences, the literature in international business has placed less emphasis on exploring the internationalization of service firms.
Studies on the internationalization of service firms mainly focus on how internal resources influence service firms' internationalization. For example, Kirca et al. (2016) find that service firms are more dependent on marketing assets to succeed in international markets, while manufacturing firms rely more on technological assets; Hitt et al. (2006) explore the resource bases for service firms' internationalization and find that human and relational capital has a positive effect on service firms' internationalization; Javalgi et al. (2003) find that firm size has a positive impact on service firms' internationalization; and Xue et al...
Um weiterzulesen
FORDERN SIE IHR PROBEABO ANCOPYRIGHT GALE, Cengage Learning. All rights reserved.
