Purpose – The purpose of this paper is to shed more light on the concept of “strategic asset-seeking FDI”, which is frequently used in discussion of emerging economy multinational enterprises (MNEs), but it is challenged by some scholars. The author argues that he needs this category because an important type of foreign direct investment (FDI) is not captured by the other motives identified by John Dunning, namely, market-, efficiency- and natural-resource-seeking FDI. Design/methodology/approach – The author illustrates the phenomenon of strategic asset-seeking FDI with case examples that form the starting point for his theoretical arguments. Findings – Some FDI is undertaken explicitly with the aim to use assets acquired abroad to enhance the operations of the investor in other markets, including, notably, the investors’ home market. This contribution to capability-building processes of the MNE, indeed, constitutes an important and distinct type of investment motive. Originality/value – The author concluded that Dunning’s typology remains a powerful tool to analyze contemporary business strategies, but it suggests refining the definition of the categories.
Klaus E. Meyer
The process of change from a centrally planned system to a market economy generates an institutional framework that is only partially reformed, and therefore inconsistent and unstable. This leads to high transaction costs for economic agents. Multinational enterprises entering transition countries have to adapt their strategies to the local institutions and reduce exposure to highly imperfect markets. This paper analyzes how the costs of organizing business in transition environments influence entry mode choice. The empirical results show that host country institutions in transition economies, have an impact on the choice of entry modes. Moreover, different mechanisms determine the internalization of managerial and technological knowledge.
Klaus E. Meyer
Klaus E. Meyer
Klaus E. Meyer and Yi Wang
Transaction cost economics (TCE) has been extensively applied by international business scholars to analyze joint ventures and strategic alliances. It provides a theoretical basis to analyze how firms organize their transactions with other firms, and hence their choices of governance structures, for example, between JVs and other organizational forms. However, TCE has also been frequently critiqued and empirical findings on some of the constructs derived from TCE find inconsistent results. This chapter critically evaluates the TCE literature on cross-border business activity to evaluate to what extent this empirical literature actually supports or refutes TCE-based arguments, and to provide directions for future research. We identify four major challenges: (1) the level of analysis used to proxy transaction costs, (2) contextual drivers of transaction costs, especially in emerging economies, (3) the theoretical ambiguity of TCE arguments with respect to distance and experience, and (4) the assumption that JVs are a flexible (low-risk) mode of operation. This discussion leads to suggestions on how to design empirical research more consistent with the theory.
Danchi Tan and Klaus E. Meyer
Foreign investors access local knowledge by co-locating with other foreign direct investment (FDI) firms. However, different aspects of local knowledge can be obtained from different local businesses. Thus some foreign investors co-locate with FDI firms from the same country of origin, while others co-locate with foreign industry peers. We argue that, relative to industry FDI agglomeration, country-of-origin agglomeration provides an effective channel for the sharing of sensitive and tacit knowledge about local business environments. Therefore foreign investors in need of such local knowledge are more likely to locate in country-of-origin agglomerations. Empirical evidence based on FDI in Vietnam indicates that foreign investors who perceive local institutions as particularly weak, and those with a high degree of outsidership in the local environment, are more likely to seek country-of-origin agglomerations than industry FDI agglomerations.