Success factors of regional strategies for multinational corporations: exploring the appropriate degree of regional management autonomy and regional product/service adaptation.
| Verfasser | Gilbert, Dirk Ulrich |
| Posten | RESEARCH ARTICLE - Report |
Abstract This paper examines the factors that drive the success of multinational corporations (MNCs) in their pursuit of regional strategies. Based on contingency theory, we develop a comprehensive regional success factor model to investigate the effects of regional management autonomy and regional product/service adaptation on the regional success of MNCs. Using structural equation modelling, we also analyse the interaction effects of regional orientation and inter-regional distance. We evaluate our model by means of both primary and secondary data for Fortune Global 500 firms. Our findings show that appropriate degrees of regional management autonomy and regional product/service adaptation are highly contingent upon contextual influences on MNCs.
Keywords International business theory ? Contingency theory * Regional strategy or strategies * Multinational corporations (MNCs) and enterprises (MNEs) * Semiglobalisation * Performance * Structural equation modelling
1 Introduction
Recent literature on regional multinationals (Arregle et al. 2013; Banalieva and Dhanaraj 2013; Heinecke 2011; Rugman 2005; Rugman and Oh 2010, 2013; Rugman and Verbeke 2008a; Rugman et al. 2011, 2012) proposes regional strategies of multinational corporations (MNCs) as a promising alternative to earlier internationalisation strategies that build on the concepts of global integration and local responsiveness (e.g., Bartlett and Ghoshal 1989; Prahalad and Doz 1987). The increased strategic importance of the region for MNCs, as an intermediate geographical level in between the traditional world-country dichotomy, is largely attributed to changing patterns in both world trade and foreign direct investment (FDI) over time--particularly the development of the broad triad regions of North America, Europe, and Asia (Ohmae 1985; Rugman 2000; Rugman and Hodgetts 2001). The majority of trade takes place between neighbouring countries and the region explains a large portion of the activities of MNCs (Rugman and Oh 2013). This is largely attributed to the liability of foreignness, which is typically lower within a certain region than the liability of foreignness between regions. The relevance of regional strategies is also supported by observations of an incomplete cross-border integration for different types of markets (i.e., for products, capital, labor, and knowledge), referred to as semiglobalisation, where both the barriers and the links among these markets explain the regional expansion of MNCs (Banalieva and Dhanaraj 2013; Ghemawat 2003, 2005, 2007). This trend is reflected in regional sales data for Fortune Global 500 firms, which shows that most MNCs fail to achieve a truly global sales dispersion because they are regionally oriented, mainly towards their home region (Rugman 2003a, b; Rugman and Oh 2010, 2013; Rugman and Verbeke 2004). The recent work of Rugman and others on regional strategies indicates that managers should have a differentiated picture of geographical space when defining corporate strategies (Rugman and Oh 2013). When looking at a world map, in contrast to prior recommendations, managers should devote special attention to regional, rather than only to global or national contours (Banalieva and Dhanaraj 2013; Rugman 2005, 2009; Rugman and Oh 2013).
Although considerable evidence highlights the existence and increasingly important role of regional strategies for MNCs, theoretical work in this area is still in its infancy. According to Rugman et al. (2011), future research may benefit from a stronger focus on the regional dimension in international business. It seems that more conceptual and empirical research needs to be done to solve the puzzle that many large MNCs mainly limit their geographic scope to their home region (Banalieva and Dhanaraj 2013) and have serious problems to become successful in other regions of the triad (Rugman et al. 2011, 2012). In addition to answering the question of how to adapt or change regional strategies to achieve success outside the home region, it is of high relevance to learn more about the differences in culture, political regulation, economic and financial institutions, etc. and their impact on MNC's operations across regions. Although Rugman (2005, 2009) highlights that the success of MNCs is dependent on a fit between their regional strategies and such contextual factors, he does not elaborate in more detail on this question. In this paper we deal with these research problems in greater detail, and are particularly interested in investigating success factors of regional strategies and how MNCs should actually respond on the organisational and strategic level to the recent trend to regionalisation. We believe that this is a relevant research gap because much scholarly work on regionalisation focuses either on the different phenomena of regional strategies (e.g., Girod and Rugman 2005; Li 2005; Yin and Choi 2005) or on their outcome, such as the geographical distribution of sales and assets (e.g., Collinson and Rugman 2008; Oh 2009) or the regional performance of MNCs (e.g., Yip et al. 2006). However, in existing combinations of these two research fields, leading to a regional strategy-performance relationship, a foundation in organisation theory is largely missing in the international business literature. Few authors have considered the organisational context of MNCs, and thereby the fact that the relationship between regional strategies and MNC performance is highly contingent on conditions and developments inside and/or outside of the firm (e.g., Banalieva and Dhanaraj 2013; Bausch et al. 2007; Goerzen and Asmussen 2007; Heinecke 2011). Furthermore, existing empirical studies about the performance of regional strategies largely focus on relative figures of regional data--for example, regional sales divided by total sales or return on sales (e.g., Li and Li 2007; Rugman and Oh 2007). This methodology based on secondary data analyses may be eye-opening for regional performance phenomena, but it is unfit to explore their causal influences. Finally, most studies in the regionalisation literature by regional orientation mean home-regional orientation. As outlined in detail below, we depart from this literature by applying our regional success factor model only to the most successful region of our sample firms--which can be the home region, but also every other region.
The aim of this paper is to address these challenges by examining the factors that drive the success of MNCs in their pursuit of regional strategies. A promising path for conceptualising such factors is provided by the recent academic work on regional strategies by Rugman (2005, 2009), where autonomous management at the regional level and product/service adaptations to regional market requirements characterise a regional strategy. Besides these two basic elements of regional strategies--representing the conceptual basis of our paper--we aim to consider contextual influences in the regional strategy-performance relationship, resulting in a contingency perspective for the explanation of the success of the regional strategies of MNCs. To investigate these causal relationships, we develop a regional success factor model and explore the interactions of regional success factors with MNC performance. Accordingly, this paper also contributes to the literature in international business by not studying the traditional independent variable--which is corporate-level performance--but the regional performance of MNCs (Rugman and Oh 2010). To put it briefly, the core contribution of our paper is that we test whether the fit between regional management autonomy and product-service adaptation--representing the notion of regional strategy--and certain environmental contingencies (i.e., regional differences) actually leads to better regional performance. This means that we posit a contingency perspective and analyse if the relationship between regional strategies and MNC's regional performance is contingent on conditions and developments inside/and or outside of the firm. Apart from these conceptual contributions, we also aim at extending existing knowledge in methodological terms by collecting not only secondary but also primary data for Fortune Global 500 firms. In assessing the regional success of these MNCs, we intend to consider various regional success indicators, which are derived from longitudinal data over nine financial reporting periods (2000-2008). As we will show in detail, three measures are used to investigate and operationalise regional success of MNCs: The percentage of intra-regional sales, the ratio of regional profits to total profits, and the ratio of regional assets to total assets.
The remainder of this paper is structured as follows. In the following section, we briefly introduce the contingency theory, representing the theoretical foundation of our paper, before reviewing the literature on regional strategies and their constituting elements: Regional management autonomy and regional product/ service adaptation, as well as regional contextual influences. We then put forward hypotheses on these relationships to derive our regional success factor model. Subsequently, we outline the research design and research methodology to empirically test our hypotheses. We analyse the relationships in our model by means of the structural equation modelling (SEM) technique on the basis of the partial least squares (PLS) method. After presenting the empirical results, we conclude with a discussion of the implications of our findings, the limitations of our study, and some suggestions for further research.
2 Theoretical Foundation and Literature Review
2.1 Contingency Theory
In this paper we adopt contingency theory, which was initially developed in the 1960s (Bums and Stalker 1961; Lawrence and Lorsch 1967) and suggests that the relationship between an independent variable and a dependent outcome relies, or is...
Um weiterzulesen
FORDERN SIE IHR PROBEABO ANCOPYRIGHT GALE, Cengage Learning. All rights reserved.
