A Meta-analysis of the International Experience-Ownership Strategy Relationship: A Dynamic Capabilities View.
| Verfasser | Tang, Ryan W. |
| Posten | RESEARCH ARTICLE - Report |
1 Introduction
A critical issue in international business (IB) research is the investigation of factors that influence firms' strategic decisions in the process of internationalization (Hitt et al. 2015). Previous studies of international entry strategy have contributed significantly to IB literature, with an explicit focus on the relationship between international experience and the ownership strategy at international entry (IE-OS relationship) (Li and Meyer 2009; Nielsen and Nielsen 2011). Over the last decades, an enormous body of research has examined the direct (Padmanabhan and Cho 1996), moderating (Cho and Padmanabhan 2005), linear (Delios and Beamish 1999), and nonlinear (Erramilli 1991) effects of international experience on firms' ownership strategy for small, medium (Erramilli and D'Souza 1993), and large firms (Musteen et al. 2009) in manufacturing (Somlev and Hoshino 2005) and service industries (Blomstermo et al. 2006), as well as for firms entering mature (Chen and Hennart 2002) and emerging markets (Delios and Henisz 2000). Yet findings on the IE-OS relationship have often been criticized because of the mixed conclusions suggesting positive impacts (Cho and Padmanabhan 2005), negative influences (Maekelburger et al. 2012), and inconclusive effects (Blomstermo et al. 2006) of international experience on firms' ownership strategy at international entry.
Current theoretical perspectives that frame the association between international experience and IB decisions, such as the internationalization process paradigm (e.g., Figueira-de-Lemos and Hadjikhani 2014), institution-based view (e.g., Peng et al. 2008), organizational learning theory (e.g., Hotho et al. 2015), and dynamic capabilities view (Teece 2014), provide reasoning for how and what international experience may influence firms' ownership strategy in host countries. In addition, a thoughtful investigation of the contextual settings pertaining to the firm, industry, and country contexts would benefit from incorporating where the significance of international experience lies and advancing both IB research and practice. This multiple-contingency consideration (i.e., simultaneously examining multiple conditional settings), however, is not commonly presented in existing studies, which suggests the absence of a theoretically grounded and empirically supported explanation of contingencies that moderate the relationship between international experience and ownership strategies of multinational companies (MNCs). The current paper addresses this gap by employing meta-analytic techniques.
The theoretical framework proposed and tested in this study makes several noteworthy contributions to the extant IB literature. First, this paper answers the call for a more context-based understanding of the IE-OS relationship. Because experience does not always imply learning (Anand et al. 2015), it is crucial to understand whether and under what conditions firms have learned from experience (Hitt et al. 2015; Hotho et al. 2015). Prior studies have raised the concern that contingent considerations are critical for international experience research (Li and Meyer 2009; Liao 2015). However, a theoretically driven framework that illustrates the contingent effects on the IE-OS relationship in consideration of multiple contexts (e.g., firm, industry, country) has not been available. This paper fills this critical gap by conceptualizing IE as dynamic capabilities that enable firms to strategically operate after an international entry and by examining how their impact on ownership strategy is conditional on their context-specificity. This will specifically address the firm's size as an indicator of the extent to which firms are able to leverage their experience-based dynamic capabilities, the sources from which the firm's international experience is gained as an indicator of the applicability of their dynamic capabilities, the industry as an indicator of knowledge-based complexities that further characterize the applicability of the firm's dynamic capabilities, and the host country development stage as a proxy for the institutional environment where international experience is used and firms depend on the deployment of dynamic capabilities. Accordingly, dynamic capabilities represent "the capacity of an organization to purposefully create, extend, or modify its resource base" (Helfat et al. 2007) to compete successfully following an international entry. Yet the success of their deployment is context-dependent (e.g., Easterby-Smith and Prieto 2008).
Second, the body of knowledge about the IE-OS relationship has become fragmented. While some researchers have attempted to connect organizational learning with IB strategies (see Hotho et al. 2015 and the special issue it appears in) and to link the international experience gained during the process of internationalization to firms' dynamic capabilities (e.g., Bingham et al. 2007), an integrated framework showing what we know about the IE-OS relationship has not been forthcoming. Compared to the number of quantitative reviews of the international experience-firm performance relationship (e.g., Bausch and Krist 2007; Yang and Driffield 2012) and the number of qualitative reviews of experiential learning (e.g., Barkema and Schijven 2008), a meta-analysis of the IE-OS relationship is surprisingly absent in the literature. As one of the critical IB decisions, ownership strategy based on international experience is both an antecedent to effective multinational performance and an outcome of a firm's dynamic capabilities. Thus, it is crucial for IB literature to present an explicit explanation of the IE-OS relationship.
The lack of integration across research findings limits the contributions of current research on experience and strategy to, and its overall impact on, IB literature as well as literature in related disciplines such as management and marketing. Previous meta-analyses have investigated issues related to firms' international entry strategies and contributed a number of insights (e.g., "external antecedents" in Morschett et al. 2010; and "transaction costs" in Zhao et al. 2004). However, none of these either systematically assesses the effects of experiential learning through its dynamic capabilities or offers a comprehensive understanding of the contextual effects on the IE-OS relationship. The study presented in this paper investigates this relationship and provides insightful meta-analytic findings.
Finally, this paper significantly advances the literature by testing the simultaneous effects of essential contingencies on the IE-OS relationship. The findings establish that a firm's international experience positively relates to the firm's ownership strategy at international entry and that this relationship rests on the firm's experience-based dynamic capabilities. Accordingly, this paper reveals that it is the firm's ability to deploy these dynamic capabilities and their applicability that condition this relationship. Specifically, the effect of international experience on ownership strategy is contingent upon firm size, sources of firms' international experience, and host countries' economic development stages. Among these contingencies, experience accrued in host countries is more influential than the others. Furthermore, the meta-analytic assessment reveals an ambiguous effect of industry on the IE-OS relationship and implies that the industry in which a firm resides may not influence its ownership strategy based on international experience. This paper therefore contributes theoretically insightful and practically useful implications, as elaborated in detail below.
In the following sections, we discuss in detail how the IE-OS relationship is conceptualized and elaborate on the variety of contexts in which international experience affects ownership strategy at international entry. We then develop hypotheses that delineate the moderating effects of these contextual factors on the IE-OS relationship. Following descriptions of data collection and analytic procedures, we present analytic results. The paper concludes with a discussion of implications and limitations that suggest avenues for future research.
2 Theoretical Background
The ownership strategy decision has strategic and long-term consequences because of ensuing path dependencies and affects the foreign subsidiary's performance (Uhlenbruck et al. 2006). In this paper, ownership strategy represents the percentage of ownership at international entry, which can range from sole ventures that are wholly owned subsidiaries to joint ventures with majority or minority ownership. Prior works suggest that firms with greater international experience tend to use wholly owned ventures (Brouthers and Brouthers 2003; Chang and Rosenzweig 2001; Sanchez-Peinado and Pla-Barber 2006). Indeed, Hymer (1960) and Shenkar (2001) have already argued that international entry using a wholly owned venture with the resulting full control allows firms to operate their subsidiaries' businesses as they consider most appropriate, rather than depending on local partners whose strategic intentions and behaviors are little understood and often unpredictable.
These unclear intentions and hard-to-predict behaviors of foreign partners imply uncertainty and risk for firms entering a foreign market. For example, potential appropriation risk of a firm's capabilities reconfigured with host-country resources in a foreign subsidiary leads the firm to maintain independence for the control over the subsidiary (Lu and Hebert 2005; Hennart 2009). Therefore, although situational conditions may influence a firm's collaborative endeavors, as a rule, a firm tends to choose the least-constraining approach to managing relations with business partners and maintaining autonomy in partnerships because independency allows for minimizing uncertainty (Davis and Cobb 2000) and maximizing the firm's influence...
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