Top

Management International Review

Published in:

01-04-2010 | Research Article

Responses of Advanced Country MNEs to Low-cost Country Imports in Their Home Markets

Authors: Prof. Lutz Kaufmann, Dr. Peter Körte

Published in: Management International Review | Issue 2/2010

Activate our intelligent search to find suitable subject content or patents.

search-config

AI-assisted search

Off

Abstract

There has been little exploration of the competition arising from low-cost countries' imports to the home markets of multinational enterprises (MNEs) headquartered in developed countries.
This study presents theoretical and empirical analyses of the level of future MNE activities in LCCs due to the rising prevalence of LCC imports in the MNEs' home markets. Building upon oligopolistic parallel behavior theory, we analyze the impact of LCC competition intensity and LCC product quality.
We test the model using data collected from a top management survey of 423 U.S. and German manufacturing firms.
The intensity of competition from LCCs and the quality of products imported from LCCs significantly explain MNEs' subsequent responses to that competition.
Cross-country comparisons show that while LCC product quality is important in both samples, the intensity of competition from LCCs is significant for MNEs' future activities in LCCs only in the U.S. sample.
A stronger prior orientation toward LCCs and low logistics costs also lead to higher levels of future MNE activities in LCCs, while technological progress does not.

previous article Perceptions of Institutional Environment and Entry Mode

next article Biblio Service

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

über 102.000 Bücher
über 537 Zeitschriften

aus folgenden Fachgebieten:

Automobil + Motoren
Bauwesen + Immobilien
Business IT + Informatik
Elektrotechnik + Elektronik
Energie + Nachhaltigkeit
Finance + Banking
Management + Führung
Marketing + Vertrieb
Maschinenbau + Werkstoffe
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Management International Review

MANAGEMENT INTERNATIONAL REVIEW is a double-blind refereed journal that aims at the advancement and dissemination of research in the fields of International Management.

inform now

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

über 67.000 Bücher
über 340 Zeitschriften

aus folgenden Fachgebieten:

Bauwesen + Immobilien
Business IT + Informatik
Finance + Banking
Management + Führung
Marketing + Vertrieb
Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

inform now

Available only for authorised users

We define LCCs as countries with average labor costs of <$ 3/hour in 2005 (IMD World Competitiveness Yearbook 2006). We use $ 3/hour as a cut-off because of a significant gap between the highest wages of an LCC country (Czech Republic, $ 2.86/hour) and the lowest wages of the remaining countries (Turkey, $ 3.46/hour). We consider the term LCC more appropriate than low-wage countries, as it also refers to other advantages such as purchasing costs, which are lower due to the labor content in previous stages.

We perform the same overall procedure for the U.S. and German country sample separately and obtain results consistent with the findings for the overall sample.

Armstrong, J. S., & Overton, T. S. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Research, 14(3), 396–402.CrossRef

Arpan, J. S., de la Torre, J., & Toyne, B. (1981). International developments and the U.S. apparel industry. Journal of International Business Studies, 12(3), 49–64.CrossRef

Bagozzi, R. P., & Baumgartner, H. (1994). The evaluation of structural equation models and hypothesis testing. In Bagozzi, R. P. (Ed.), Principles of Marketing Research (pp. 386–422). Cambridge, MA: Blackwell Business.

Bagozzi, R. P., & Yi, Y. (1988). On the evaluation of structural equation models. Journal of the Academy of Marketing Science, 16(1), 74–95.CrossRef

Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120.CrossRef

Bernard, A. B., Eaton, J., Jensen, B. J., & Kortum, S. (2003). Plants and productivity in international trade. American Economic Review, 93(4), 1268–1290.CrossRef

Brezis, E. S., Krugman, P. R., & Tsiddon, D. (1993). Leapfrogging in international competition: A theory of cycles in national technological leadership. American Economic Review, 83(5), 1211–1219.

Cantwell, J. A., & Mudambi, R. (2005). MNE competence-creating subsidiary mandates. Strategic Management Journal, 26(13), 1109–1128.CrossRef

Chan, C. M., Makino, S., & Isobe, T. (2006). Interdependent behavior in foreign direct investment: The multi-level effects of prior entry and prior exit on foreign market entry. Journal of International Business Studies, 37(5), 642–665.

Chang, S. J. (1995). International expansion strategy of Japanese firms: capabilities building through sequential entry. Acadamey of Management Journal, 38(2), 383–407.CrossRef

Davidson, W. H. (1980). The location of Foreign Direct Investment activity: Country characteristics and experience effects. Journal of International Business Studies, 11(2), 9–22.CrossRef

Davies, H., & Walters, P. (2004). Emergent patterns of strategy, environment and performance in a transition economy. Strategic Management Journal, 25(4), 347–364.CrossRef

DeVellis, R. F. (2003). Scale development: Theory and applications. Thousand Oaks, CA: Sage.

Dillman, D. A. (1991). The design and administration of mail surveys. Annual Review of Sociology, 17, 225–249.CrossRef

Doh, J., Jones, G., Mudambi, R., & Teegen, H. (2005). Foreign research and development and host country environment. Management International Review, 45(Special Issue 2), 121–154.

DuBois, F. L., Toyne, B., & Oliff, M. D.(1993). International manufacturing strategies of U.S. multinationals: A conceptual framework based on a four-industry study. Journal of International Business Studies, 2(2), 307–333.CrossRef

Dunning, J. H. (1993). Multinational enterprises and the global economy. Wokingham: Addison-Wesley.

Dunning, J. H., & Lundan, S. M. (1998). The geographical sources of competitiveness of multinational enterprises: An econometric analysis. International Business Review, 7(2), 115–133.CrossRef

Eden, L., & Molot, M. A. (1996). Made in America? The U.S. auto industry, 1955–95. International Executive, 38(4), 501–541.CrossRef

Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50.CrossRef

Gerbing, D. W., & Anderson, J. C. (1988). An updated paradigm for scale development incorporating unidimensionality and its assessment. Journal of Marketing Research, 25(2) 186–192.CrossRef

Graham, E. M. (1974). Oligopolistic imitation and European direct investment in the United States. Unpublished doctoral dissertation. Boston, MA: Harvard Business School.

Grant, R. M. (1989). Competing against Low Cost Cutlery Imports. Long Range Planning, 22(5), 59–68.CrossRef

Guillen, M. F. (2002). Structural inertia, imitation, and foreign expansion: South Korean firms and business groups in China, 1987–1995. Academy of Management Journal, 45(3), 509–525.CrossRef

Hambrick, D. C., & Lei, D. (1985). Toward an empirical prioritization of contingency variables for business strategy. Academy of Management Journal, 28(4), 763–788.CrossRef

Heenan, D. A., & Keegan, W. J. (1979). The rise of Third World multinationals. Harvard Business Review, 57(1), 101–109.

Helleiner, G. K. (1973). Manufactured exports from less-developed countries and multinational firms. The Economic Journal, 83(329), 21–47.CrossRef

Hymer, S. H. (1976). The international operations of national firms: A study of direct foreign investment. Cambridge, MA: The M.I.T. Press.

Insch, G. S. (2003). The impact of country-of-origin effects on industrial buyers' perceptions of product quality. Management International Review, 43(3), 291–310.

Ito, K., & Rose, E. L. (2002). Foreign direct investment location strategies in the tire industry. Journal of International Business Studies, 33(3), 593–602.CrossRef

Jaworski, B. J., & Kohli, A. K. (1993). Market Orientation: Antecedents and Consequences. Journal of Marketing, 57(3), 53–70.CrossRef

Kaufmann, L., & Carter, C. R. (2006). International supply relationships and non-financial performance. Journal of Operations Management, 24(5), 653–675.CrossRef

Kaufmann, L., & Roessing, S. (2005). Managing conflict of interests between headquarters and their subsidiaries regarding technology transfer to emerging markets—a framework. Journal of World Business, 40(3), 235–253.CrossRef

Kennedy, P. (2003). A guide to econometrics. Malden, MA: Blackwell Publishing Ltd.

Kirkpatrick, C., & Yamin, M. (1981). The determinants of export subsidiary formation by U.S. transnationals in developing countries. World Development, 9(4), 373–382.CrossRef

Knickerbocker, F. T. (1973). Oligopolistic reaction and multinational enterprise. Boston, MA: Harvard University.

Kogut, B. (1983). Foreign direct investment as a sequential process. In C. Kindleberger & D. Audretsch. (Eds.), The multinational corporation in the 1980s (pp. 38–56). Cambridge, MA: MIT Press.

Kogut, B. (1985). Designing global strategies: Comparative and competitive value added chains. Sloan Management Review, 26(4), 15–28.

Kogut, B., & Chang, S. J. (1991). Technological capabilities and Japanese foreign direct investment in the United States. Review of Economics and Statistics, 73(3), 401–413.CrossRef

Kotabe, M., & Swan, K. S. (1994). Offshore sourcing: Reaction, maturation, and consolidation of U.S. multinationals. Journal of International Business Studies, 25(1), 115–140.

Kumar, N. (1994). Determinants of export orientation of foreign production by U.S. multinationals: An inter-country analysis. Journal of International Business Studies, 25(1), 141–156.

Lee, J. (1986). Determinants of offshore production in developing countries. Journal of Development Economics, 20(1), 1–13.CrossRef

Lieberman, M. B., & Asaba, S. (2006). Why do firms imitate each other? Academy of Management Review, 31(2), 366–385.

Makino, S., Lau, C.-M., & Yeh, R.-S. (2002). Asset exploitation versus asset-seeking: Implications for locational choice of foreign direct investment from newly industrialized countries. Journal of International Business Studies, 33(3), 403–421.CrossRef

Menon, A., Bharadwaj, S. G., Adidam, P. T., & Edison, S. W. (1999). Antecedents and consequences of marketing strategy making: A model and a test. Journal of Marketing, 63(2), 18–40.CrossRef

Miles, W. E., Snow, C. C., & Pfeffer, J. (1974). Organization-environment. Industrial Relations, 13(3), 244–264.

Moxon, R. W. (1975). The motivation for investment in offshore plants: The case of the U.S. electronics industry. Journal of International Business Studies, 6(1), 51–66.CrossRef

Mudambi, R. (1995). The MNE investment location decision: some empirical evidence. Managerial and Decision Economics, 16(3), 249–257.CrossRef

Neter, J., Kutner, M. H., Nachtsheim, C. J., & Wasserman, W. (1996). Applied linear statistical models. Homewood, IL: Irwin.

Posner, M. V. (1961). International trade and technical change. Oxford Economic Papers, 13(3), 323–341.

Ramamurti, R. (2004). Developing countries and MNEs: extending and enriching the research agenda. Journal of International Business Studies, 35(4), 277–283.CrossRef

Revenga, A. L. (1992). The impact of import competition on employment and wages in U.S. manufacturing. Quarterly Journal of Economics, 107(1), 255–284.

Rugman, A. M., & Verbeke, A. (2004). A perspective on regional and global strategies of multinational enterprises. Journal of International Business Studies, 35(1), 3–18.CrossRef

Scherer, F. M. (1970). Industrial market structure and economic performance. Boston, MA: Houghton-Mifflin.

Shankar, V. (1999). New product introduction and incumbent response strategies. Journal of Marketing Research, 36(3), 327–344.CrossRef

Simon, D. (2005). Incumbent pricing responses to entry. Strategic Management Journal, 26(13), 1229–1248.CrossRef

Siotis, G. (2003). Competitive pressure and economic integration: An illustration for Spain, 1983–1996. International Journal of Industrial Organization, 21(10), 1435–1459.CrossRef

Swamidass, P. M., & Kotabe, M. (1993). Component sourcing strategies of multinationals: An empirical study of european and japanese multinationals. Journal of International Business Studies, 24(1), 81–99.CrossRef

Sweeney, J. C., & Soutar, G. N. (2001). Consumer perceived value: The development of a multiple item scale. Journal of Retailing, 77(2), 203–220.CrossRef

Vernon, R. (1966). International investment and international trade in the product cycle. Quarterly Journal of Economics, 80(2), 190–207.CrossRef

Vernon, R. (1979). The product cycle hypothesis in a new international environment. Oxford Bulletin of Economics and Statistics, 4(4), 255–267.

Yang, D. (2003), Intellectual property and doing business in China. Amsterdam: Pergamon.

Yip, G. S., Johansson, J. K., & Roos, J. (1997). Effects of nationality on global strategy. Management International Review, 37(4), 365–385.

Title: Responses of Advanced Country MNEs to Low-cost Country Imports in Their Home Markets
Authors: Prof. Lutz Kaufmann
Dr. Peter Körte
Publication date: 01-04-2010
Publisher: SP Gabler Verlag
Published in: Management International Review / Issue 2/2010
Print ISSN: 0938-8249
Electronic ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-010-0033-4

Springer Professional

Abstract

Please log in to get access to your license.

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Management International Review

Springer Professional "Wirtschaft"

Other articles of this Issue 2/2010

Top Management Team Internationalization and Firm Performance

Managing the Internalisation Process

Perceptions of Institutional Environment and Entry Mode

Resource Dependence and Cross-border Constraint-absorption

Biblio Service

Premium Partner