Transcript The Nature of Ownership Advantages in International Business

The Nature of Ownership Advantages
in International Business
Alain Verbeke
Haskayne School of Business,
University of Calgary
Correct Intellectual Basis for “O”
 All business activity - by the self-employed individual and
the largest MNE - follows from entrepreneurial activity:
“An entrepreneur is someone who specializes in taking
judgmental decisions about the coordination of scarce
resources”. (Casson, The Entrepreneur, 2nd ed., 2003) =
“O”.
 International business has specific resource
coordination requirements: (re)combining specific sets of
FSAs and location advantages.
 Essence of resource recombination in competitive
industries is always “managing the innovation process in
its entirety” from R&D to serving customers.
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Figure 1.2 The essence of international business strategy
Home Country
International
border
Stand-alone
FSAs
The shading of the middle of the
host country triangle emphasizes the
importance of developing new, LB
FSAs in the host country. These LB
FSAs complement the FSAs the
firm has transferred from the home
country, and are critical to achieve
the firm’s goals, in terms of
accessing and benefiting from the
location advantages (LAs) of the
host country. If the firm commands
insufficient FSAs internally to
access and benefit from these LAs,
it may draw upon complementary
resources of external economic
actors to achieve its goals in the
host country.
Host Country
y
tar
en
m
le
es
mp urc
Co reso
Routines
Re-combination
capabilities
Internationally
Location advantages Non-transferable (or
location-bound) FSAs transferable (or nonhome country
location bound) FSAs
home country
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Internationally
transferable (or nonlocation bound) FSAs
Non-transferable (or
location-bound) FSAs
host country
Location advantages
host country
Figure 1.3 Centralized exporter
Home Country
International
border
Host Country
The arrow cutting through dotted
areas represents the direct link
between home country NLB
FSAs, and the host country’s
LAs (i.e. the foreign market),
without development of new, LB
FSAs in the host country, or
formal transfer of existing NLB
FSAs to the host country (the
NLB FSAs are embodied in the
centralized exporter’s products).
Internationally
Location advantages Non-transferable (or
location-bound) FSAs transferable (or nonhome country
home country
location bound) FSAs
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Internationally
Non-transferable (or Location advantages
transferable (or non- location-bound) FSAs host country
location bound) FSAs host country
Figure 1.4 International projector
Home Country
International
border
Host Country
The dotted area of LB FSAs in
the middle of the host country
triangle reflects the international
projector’s lack of development
of LB FSAs in the host country,
where operations simply clone
those prevailing in the home
country. Extant NLB FSAs
suffice to access and benefit
from host country LAs.
Location advantages Non-transferable (or
location-bound) FSAs
home country
home country
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Internationally
transferable (or nonlocation bound) FSAs
Internationally
transferable (or nonlocation bound) FSAs
Location advantages
Non-transferable (or
location-bound) FSAs host country
host country
Figure 1.5 International coordinator
International
border
Host
Country A
Home
Country
Host
Country B
The different sizes of the shaded
areas in the various host countries
reflect the different types and levels
of home country NLB FSAs to be
transferred to different host
environments in function of the LAs
the firm wishes to access. The circle
linking the various countries reflects
the international coordinator’s
strengths in putting together a value
chain based upon access to the
coveted LAs of each country where
the firm operates.
Host
Country C
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Figure 1.6 Multi-centered MNE
International
border
Host
Country A
Stand-alone
FSAs
Home
Country
Host
Country B
Routines
Re-combination
capabilities
The multi-centered MNE
transfers only key routines
from the home country to host
countries. The large, shaded
middle areas in the host
countries represent the
necessity to build new, LB
FSAs in each host country. The
double-headed arrows reflect
the close alignment the host
country operations must
develop between their own LB
FSAs and the host’s LAs.
Host
Country C
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Figure 4.1 The MNE’s diminishing stock of internationally
transferable FSAs as a function of “Distance”
Greater “distance” leads to
weaker transferability and
exploitation potential of
NLB FSAs, as indicated by
the smaller NLB FSA
triangles.
Non-LB FSAs
LAs
LB FSAs
Non-LB
FSAs
Non-LB FSAs
Non-LB
FSAs
Domestic base
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“Distance” to foreign markets
Figure 4.2 The need for LB FSAs as a function of “Distance”
Greater “distance” leads
to higher investment
requirements in LB
FSAs, as indicated by
the larger size of the LB
FSA trapezoids
LB FSAs
LAs
LB FSAs
Non-LB FSAs
LB FSAs
LB FSAs
Domestic base
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“Distance” to foreign markets