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Edited by Alain Verbeke and Hemant Merchant
Chapter 14: Foundations of regional versus global strategies of MNEs
The geographic scope of the firm is a key strategic variable for multinational enterprises (MNEs). Over time, managers shape the geographic scope of their firm through their cumulative choices of which foreign markets to enter, in which order, and to what extent. We know by now that these are choices that have pervasive impact on the performance of the MNE, as they potentially affect its scale, risk exposure, cost structure and valuegenerating assets. In recognition of this development, the concept of geographic scope – broadly defined as the number and locations of geographic markets in which the firm does business – has received much attention from international business (IB) scholars. A large number of studies have looked into topics such as which factors guide MNEs’ location decisions (e.g. Dunning, 1996; Rugman and Verbeke, 1993), the order and timing of foreign market entry (e.g. Kogut and Singh, 1988; Benito and Gripsrud, 1992), and the performance implications of international expansion (e.g. Morck and Yeung, 1991; Hitt et al., 1997). Yet, despite all these studies, the best way(s) in which to conceptualize and dimensionalize the central variable – the geographic scope of the MNE – remains curiously elusive. Traditionally, the preoccupation with internationalization as a concept has led researchers to ask a series of ‘how much’ questions, e.g. ‘How global are MNEs really?’, and ‘How much internationalization should a MNE pursue?’ Recent research, in contrast, indicates that the ‘how’ question is as important as, and perhaps more important than, the ‘how much’ question (Vermeulen and Barkema, 2002; Goerzen and Beamish, 2003).
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