Global, Local, or Regional? The Locus of MNE Strategies

• DOI: http://doi.org/10.1111/joms.12190
• Published date: 01 September 2016
• Date: 01 September 2016
• Author: Christian Geisler Asmussen,Alain Verbeke

Global, Local, or Regional? The Locus of MNE

Strategies

Alain Verbeke and Christian Geisler Asmussen

University of Calgary; University of Brussels; Henley Business School; Copenhagen Business School

ABSTRACT This paper provides an overview of the main insights arising from the ‘regional

strategy’ literature. It also develops the contours of a new, rich research agenda for future

international strategy scholarship, whereby the region should be introduced as an explicit,

third geographic level of analysis, in addition to the country-level and the global level.

Regional strategy analysis requires a fundamental rethink of mainstream theories in the

international strategy sphere. This rethink involves, inter alia, internalization theory, with its

resource-based view and transaction cost economics components, as well as the integration (I)

– national responsiveness (NR) framework.

Keywords: globalization, global strategy, regional headquarters, regional strategy, resource-

based view, transaction costs

INTRODUCTION

Rugman and Verbeke’s (2004) JIBS article on regional versus global strategies of multi-

national enterprises (MNEs), and Rugman’s (2005) subsequent book on regional multi-

nationals have triggered a renewed reflection in international strategic management

research on the locus of MNE strategies. Here, the focus has been on answering two

questions. First, where do international business opportunities arise? Second, how do

MNEs respond to such opportunities, given the objectives of exploiting – and further

augmenting – their extant reservoir of firm-specific advantages (FSAs), thereby permit-

ting sustained, profitable growth?

A common perception in the international strategy field, and in society at large, is

that internationally operating firms pursue – or should pursue – ‘global’ strategies in

terms of scanning the world for business opportunities and responding to such opportu-

nities with a broad geographic deployment of their ‘non-location-bound’ FSAs

Address for reprints: Alain Verbeke, Haskayne School of Business, University of Calgary, Solvay Business

School, University of Brussels, Alan M. Rugman Memorial Fellow, Henley Business School

(alain.verbeke@haskayne.ucalgary.ca; averbeke@ucalgary.ca).

V

C2016 John Wiley & Sons Ltd and Society for the Advancement of Management Studies

Journal of Management Studies 53:6 September 2016

doi: 10.1111/joms.12190

(Friedman, 2006; Levitt, 1983; Van Agtmael, 2007; Yip, 2001). However, the empirical

evidence does not fully support this view (Verbeke, 2013). Even the suggestion that

MNEs should be scanning the world, including peripheral host locations, to identify and

absorb locally embedded resources (especially knowledge) and blend these with existing

ones, i.e., engage in strategic asset seeking, as the foundation of new FSA generation

(Doz et al., 2001), has been challenged based on the problems of bounded rationality

(BRat) and bounded reliability (BRel)

[1]

inherent in such an approach (Verbeke and

Kenworthy, 2008).

Rugman and Verbeke (2004), focusing on MNE foreign market success, observed

that only nine firms from the Fortune Global 500 (data from ) had actually achieved a

balanced distribution of their sales across the globe. These nine firms included Canon,

Coca-Cola, Flextronics, IBM, Intel, LVMH, Nokia, Philips and Sony. Perhaps more

importantly than the presence of only nine global firms (with this number determined

by the specific metrics adopted

[2]

) was the observation that the Fortune Global 500 firms

had the bulk of their sales in the home region, suggesting a limited ‘non-location bound-

edness’ of these large MNEs’ FSAs. In fact, 320 out of the 380 firms for which data were

available, were solidly home-region based, with home-regional sales representing on

average 80.3 per cent of overall sales.

Rugman and Verbeke (2008) and Rugman and Oh (2013) then extended and

updated this prior focus on sales to include the geographic distribution of assets, thereby

confirming the results obtained for sales activities. The world’s largest MNEs have a lim-

ited deployment of foreign direct investments across value chain activities outside of

their home region: 78 per cent of assets were deployed in the home region and these

were associated with 75.5 cent of overall sales (data for 2007).

These observations have prompted a lively debate among international business

scholars. They also led to an entire new stream of research, including several subsequent

empirical studies that challenged and extended this work (Dunning et al., 2007;

Osegowitsch and Sammartino, 2008), and ultimately corroborated (with new methods

and data) the main conclusion that MNEs do have a strong home region bias in their

expansion patterns (Asmussen, 2009; Asmussen and Goerzen, 2013).

In this paper, we explore some of the key conceptual challenges that the above obser-

vations have prompted for international strategic management research. In particular,

given the apparent importance of regional boundaries, we arguably must revisit some of

the conceptual frameworks in international management that have become axiomatic in

the literature and in business school curricula, such as internalization theory and the

integration – national responsiveness (I – NR) paradigm. These are conceptual frame-

works that address problems associated with the orchestration of resources across bor-

ders and with economizing on spatial transaction costs in managing external business

partners or the MNE internal network (Verbeke and Merchant, 2012).

In the next section, we briefly discuss the possible role of the region being a key locus

for strategy formation, i.e., as a complement to the national and the global levels, build-

ing upon internalization theory. In the third section, we discuss in more detail the possi-

ble reasons for the relative absence of global diversification. We also address the

challenges associated with trying to establish a linkage between geographic footprint

and performance at the firm level. Finally, we assess the infusion of organizational

1052 A. Verbeke and C. G. Asmussen

V

C2016 John Wiley & Sons Ltd and Society for the Advancement of Management Studies