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Is Competitive Advantage a Necessary Condition for the Emergence of the Multinational Enterprise?

Networked Multinational Enterprises in the Modern Global Economy

Niron Hashai and Peter J. Buckley

This article challenges the view that competitive adantage is a necessary condition for the emergence of the multinational enterprise. It formally derives the conditions under which multinational enterprises may emerge without possessing a competitive advantage vis-a-vis their rivals. This counterintuitive argument is based on three insights: (1) the ability of a larger number of disadvantaged home country entrepreneurs to enroll workers in the host country more efficiently than a smaller number of advantaged host country entrepreneurs; (2) asymetric liability of foreignness for home and host country entrepreneurs; and (3) the ability of location and internalization advantages to substitute for ownership advantage.

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Peter J. Buckley and Niron Hashai

The paper presents a model that evaluates how upgraded technological capabilities of emerging country based multinationals (EMNCs) and an increase in the domestic market size of large emerging countries affect value chain location choices and the competitiveness of emerging country based firms versus advanced country based ones. The model shows that, even without possessing a competitive advantage in terms of technology and/or brands, EMNCs from large or rapidly technologically advancing countries can become dominant players in the global system. The model highlights the central role of firm level technological intensity and product differentiation in determining the location of value chain activities as well as defining organisational boundaries. Empirical analysis of the location choices of the world's top multinationals from large advanced and emerging countries in 2010 supports the model's predictions.

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The Performance Implications of Speed, Regularity, and Duration in Alliance Portfolio Expansion

Networked Multinational Enterprises in the Modern Global Economy

Niron Hashai, Mario Kafouros and Peter J. Buckley

Extant research on the management of time shows that the speed of undertaking new strategic moves has negative consequences for firm profitablilty. However, the literature has not distinguished whether this outcome results from the effects of speed on firms' revenues or from the effects of speed on firms' costs, or examined how firms can become more profitable by reducing the negative consequences of speed. We address these gaps for a specific strategic move: alliance portfolio expansion. We show that the speed at which firms expand their alliance portfolios increases managerial costs disproportionately relative to revenues, leading to an overall negative effect on firm profitability. However, a more regular rhythm of expansion and a longer duration of existing alliances reduce the negative profitability consequences of expansion speed by moderating the increase in managerial costs. These findings suggest that firms that make strategic moves, such as alliances, may reduce the negativity profitability consequences of speed when they maintain a regular expansion rhythm and when their existing strategic engagements require modest managerial resources.