Skip to main content
SpringerLink
Log in

International venturing by emerging economy firms: the effects of firm capabilities, home country networks, and corporate entrepreneurship

  • Article
  • Published:
Journal of International Business Studies Aims and scope Submit manuscript

Abstract

Past literature on foreign direct investment generally supports an economics perspective that there is a direct relationship between firm-specific ownership advantages and international expansion. However, in emerging economies, with their institutional environment context characterized by low resource munificence and continuous economic liberalization, a theoretical extension of the current perspective is needed. This paper introduces new parameters by focusing on specific ownership advantages and strategic actions that firms have to develop in response to the institutional characteristics of the emerging economies when they decide to pursue outward FDI. The focus here is on international venturing that requires a firm to engage in activities for new business creation in a foreign country rather than simply seek to distribute a product in another nation. It is shown empirically that the relationship between firm-specific ownership advantages and international venturing is moderated by the degree of home industry competition and export intensity. In addition, such a relationship is mediated by the intensity of corporate entrepreneurial transformation in the form of innovation, new business creation, and strategic renewal.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Figure 1

Similar content being viewed by others

Notes

  1. We thank reviewers for their insightful comments on the sample selection.

References

  • As-Saber, S., Dowling, P.J. and Liesch, P.W. (1998) ‘The role of human resource management in international joint ventures: a study of Australian-Indian joint ventures’, International Journal of Human Resource Management 9 (5): 751–766.

    Article  Google Scholar 

  • Barney, J.B. (1986) ‘Strategic factor markets: expectations, luck and business strategy’, Management Science 32 (10): 1512–1514.

    Article  Google Scholar 

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

    Article  Google Scholar 

  • Baron, R.M. and Kenny, D.A. (1986) ‘The moderator-mediator variable distinction in social psychological research: conceptual, strategic, and statistical considerations’, Journal of Personality and Social Psychology 51 (6): 1173–1182.

    Article  Google Scholar 

  • Bartlett, C.A. and Ghoshal, S. (1988) ‘Creation, adoption, and diffusion of innovations by subsidiaries of multinational corporations’, Journal of International Business Studies 19 (3): 365–388.

    Article  Google Scholar 

  • Baumol, W.J. (1996) ‘Entrepreneurship: productive, unproductive, and destructive’, Journal of Business Venturing 11 (1): 3–22.

    Article  Google Scholar 

  • Bromiley, P. (1991) ‘Testing a causal model of corporate risk taking and performance’, Academy of Management Journal 34 (1): 37–59.

    Article  Google Scholar 

  • Buckley, P.J. and Casson, M. (1976) The Future of the Multinational Enterprise, Macmillan: London.

    Book  Google Scholar 

  • Buckley, P.J. and Lessard, D.R. (2005) ‘Regaining the edge for international business research’, Journal of International Business Studies 36 (6): 595–599.

    Article  Google Scholar 

  • Cai, K.G. (1999) ‘Outward foreign direct investment: a novel dimension of China's integration into the regional and global economy’, China Quarterly (160): 856–880.

  • Cantwell, J. and Narula, R. (2001) ‘The eclectic paradigm in the global economy’, International Journal of the Economics of Business 8 (2): 155–172.

    Article  Google Scholar 

  • Caves, R.E. (1971) ‘International corporations: the industrial economics of foreign investment’, Economica 38 (149): 1–27.

    Article  Google Scholar 

  • Caves, R. (1989) ‘International Differences in Industrial Organization’, in R. Schmalensee and R. Willig (eds.) Handbook of Industrial Organization, Vol. 2, North Holland: Amsterdam, pp: 1226–1249.

    Google Scholar 

  • Chan, L.L.M., Shaffer, M.A. and Snape, E (2004) ‘In search of sustained competitive advantage: the impact of organizational culture, competitive strategy, and human resource management practices on firm performance’, International Journal of Human Resource Management 15 (1): 17–35.

    Article  Google Scholar 

  • Chen, H. and Chen, T.J. (1998) ‘Network linkages and location choice in foreign direct investment’, Journal of International Business Studies 29 (3): 445–467.

    Article  Google Scholar 

  • Cheng, J. and Kesner, I. (1997) ‘Organizational slack and response to environmental shifts: the impact of resource allocation patterns’, Journal of Management 23 (1): 1–18.

    Article  Google Scholar 

  • Child, J. and Rodrigues, S.B. (2005) ‘The internationalization of Chinese firms: a case for theoretical extension?’, Management and Organization Review 1 (3): 381–410.

    Article  Google Scholar 

  • Clegg, J. (1987) Multinational Enterprises and World Competition, Macmillan: London.

    Book  Google Scholar 

  • Covin, J.G. and Slevin, D.P. (1991) ‘A conceptual model of entrepreneurship as firm behavior’, Entrepreneurship Theory and Practice 16 (1): 7–25.

    Google Scholar 

  • Davidson, R. and MacKinnon, J.G. (1993) Estimation and Inference in Econometrics, Oxford University Press: New York.

    Google Scholar 

  • Delery, J.E. and Doty, D.H. (1996) ‘Modes of theorizing in strategic human resource management: tests of universalistic, contingency, and configurational performance predictions’, Academy of Management Journal 39 (4): 802–835.

    Article  Google Scholar 

  • Dunning, J.H. (1980) ‘Toward an eclectic theory of international production: some empirical tests’, Journal of International Business Studies 11 (1): 9–31.

    Article  Google Scholar 

  • Dunning, J. (1993) Multinational Enterprises and the Global Economy, Addison Wesley: Reading, MA.

    Google Scholar 

  • Dunning, J. (1995) ‘Reappraising the eclectic paradigm in an age of alliance capitalism’, Journal of International Business Studies 26 (3): 461–492.

    Article  Google Scholar 

  • Dunning, J. (2006) ‘Comment on dragon multinationals: new players in 21st century globalization’, Asia Pacific Journal of Management 23 (2): 139–141.

    Article  Google Scholar 

  • Frost, T.S. and Zhou, C. (2005) ‘R&D co-practice and “reverse” knowledge integration in multinational firms’, Journal of International Business Studies 36 (6): 676–687.

    Article  Google Scholar 

  • Grubaugh, S. (1987) ‘Determinants of direct foreign investment’, Review of Economics and Statistics 69 (1): 149–152.

    Article  Google Scholar 

  • Guillén, M.F. (2000) ‘Business groups in emerging economies: a resource based view’, Academy of Management Journal 43 (3): 362–380.

    Article  Google Scholar 

  • Guillén, M.F. (2002) ‘Structural inertia, imitation, and foreign expansion: South Korea firms and business groups in China’, Academy of Management Journal 45 (3): 509–525.

    Article  Google Scholar 

  • Guth, W.D and Ginsberg, A. (1990) ‘Guest Editors' introduction: corporate entrepreneurship’, Strategic Management Journal 11 (Summer Special Issue): 5–15.

    Google Scholar 

  • Hennart, J.F. and Park, R.Y. (1993) ‘Greenfield vs. acquisition: the strategy of Japanese investors in the US’, Management Science 39 (9): 1054–1068.

    Article  Google Scholar 

  • Hitt, M.A., Lee, H. and Yucel, E. (2002) ‘The importance of social capital to the management of multinational enterprises: relational networks among Asian and western firms’, Asia Pacific Journal of Management 19 (2/3): 353–372.

    Article  Google Scholar 

  • Hymer, S. (1976) The International Operations of National Firms: A study of Direct Investment, MIT Press: Cambridge, MA.

    Google Scholar 

  • Ireland, R.D., Hitt, M.A., Camp, S.M. and Sexton, D.L. (2001) ‘Integrating entrepreneurship and strategic management actions to create firm wealth’, Academy of Management Executive 15 (1): 49–63.

    Article  Google Scholar 

  • Jefferson, G.H., Rawski, T.G. and Zheng, Y. (1997) ‘Innovation in Chinese manufacturing enterprises: a preliminary analysis of survey data’, MOCT-MOST 7 (4): 101–120.

    Article  Google Scholar 

  • Khanna, T. and Palepu, K. (1997) ‘Why focused strategies may be wrong for emerging markets’, Harvard Business Review 75 (4): 41–51.

    Google Scholar 

  • La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and Vishny, R. (1998) ‘Law and finance’, Journal of Political Economy 106 (6): 1113–1155.

    Article  Google Scholar 

  • Lall, S. (1983) The New Multinationals: The Spread of Third World Enterprises, Wiley: New York.

    Google Scholar 

  • Lall, S. and Siddharthan, N. (1982) ‘The monopolistic advantages of multinationals: lessons from foreign investment in the US’, The Economic Journal 92 (367): 668–683.

    Article  Google Scholar 

  • Lau, C.M. and Ngo, H.Y. (2004) ‘The HR system, organizational culture, and product innovation’, International Business Review 13 (6): 685–703.

    Article  Google Scholar 

  • Lecraw, D.J. (1993) ‘Outward direct investment by Indonesian firms: motivation and effects’, Journal of International Business Studies 24 (3): 589–600.

    Article  Google Scholar 

  • Li, P.P. (2003) ‘Toward a geocentric theory of multinational evolution: the implications from the Asian MNEs as latecomers’, Asia Pacific Journal of Management 20 (2): 217–242.

    Article  Google Scholar 

  • Lim, S.-H. and Moon, H.-C. (2001) ‘Effects of outward foreign direct investment on home country exports: the case of Korean firms’, Multinational Business Review 9 (1): 42–49.

    Google Scholar 

  • Liu, X., Buck, T. and Shu, C. (2005) ‘Chinese economic development, the next stage: outward FDI?’ International Business Review 14 (1): 97–115.

    Article  Google Scholar 

  • Lumpkin, G.T. and Dess, G.G. (1996) ‘Clarifying the entrepreneurial orientation construct and linking it to performance’, Academy of Management Review 21 (1): 135–172.

    Google Scholar 

  • Luo, Y. (2000) ‘Dynamic capabilities in international expansion’, Journal of World Business 35 (4): 355–378.

    Article  Google Scholar 

  • Madhok, A. (1997) ‘Cost, value and foreign market entry mode: the transaction and the firm’, Strategic Management Journal 18 (1): 39–61.

    Article  Google Scholar 

  • Makino, S., Beamish, P.W. and Zhao, N.B. (2004) ‘The characteristics and performance of Japanese FDI in less developed and developed countries’, Journal of World Business 39 (4): 337–392.

    Article  Google Scholar 

  • Makino, S., Lau, C.M. and Yeh, R.S. (2002) ‘Asset-exploitation versus asset-seeking: implications for location choice of foreign direct investment from newly industrialized economies’, Journal of International Business Studies 33 (3): 403–421.

    Article  Google Scholar 

  • Mathews, J.A. (2002) ‘Competitive advantage of the latecomer firm: a resource-based account of industrial catch-up strategies’, Asia Pacific Journal of Management 19 (4): 467–488.

    Article  Google Scholar 

  • Mathews, J.A. (2006) ‘Dragon multinationals: New players in 21st century globalization’, Asia Pacific Journal of Management 23 (1): 5–27.

    Article  Google Scholar 

  • McDougall, P.P. and Oviatt, B.M. (2000) ‘International entrepreneurship: the intersection of two research paths’, Academy of Management Journal 43 (5): 902–908.

    Article  Google Scholar 

  • Ministry of Commerce and the State Statistics Bureau of China (2004) China Outward FDI Report.

  • Morck, R. and Yeung, B. (1991) ‘Why investors value multinationality’, Journal of Business 64 (2): 165–187.

    Article  Google Scholar 

  • Morck, R. and Yeung, B. (1992) ‘Internalization: an event study test’, Journal of International Economics 33 (1–2): 41–56.

    Article  Google Scholar 

  • Muller, D., Judd, C.M. and Yzerbyt, V.Y. (2005) ‘When moderation is mediated and mediation is moderated’, Journal of Personality and Social Psychology 89 (6): 852–863.

    Article  Google Scholar 

  • Narula, R. and Dunning, J.H. (2000) ‘Industrial development, globalization and multinational enterprises: new realities for developing countries’, Oxford Development Studies 28 (2): 141–167.

    Article  Google Scholar 

  • Neter, J., Wasserman, W. and Kutner, M.H. (1990) Applied Linear Statistical Models, 3rd edn, Irwin: Homewood, IL.

    Google Scholar 

  • O'Reilly, C. (1989) ‘Corporations, climate, and commitment: motivation and social control in organizations’, California Management Review 31 (4): 9–25.

    Article  Google Scholar 

  • Oh, D., Ju, C.J. and Choi, E. (1998) ‘The globalization strategy of Daewoo Motor Company’, Asia Pacific Journal of Management 15 (2): 185–203.

    Article  Google Scholar 

  • Pananond, P. and Zeithaml, C.P. (1998) ‘The international expansion process of MNEs from developing countries: a case study of Thailand's CP group’, Asia Pacific Journal of Management 15 (2): 163–184.

    Article  Google Scholar 

  • Peng, M.W. (2003) ‘Institutional transitions and strategic choices’, Academy of Management Review 28 (2): 275–296.

    Google Scholar 

  • Peng, M.W., Lee, S.H. and Wang, W.Y.L. (2005) ‘What determines the scope of the firm over time? A focus on institutional relatedness’, Academy of Management Review 30 (3): 622–633.

    Article  Google Scholar 

  • Pfeffer, J. (1998) The Human Equation: Building Profits by Putting People First, Harvard Business School Press: Boston, MA.

    Google Scholar 

  • Pfeffer, J. and Salancik, G. (1978) The External Control of Organizations: A Resource Dependency Perspective, Harper & Row: New York.

    Google Scholar 

  • Prahalad, C.K. and Bettis, R.A. (1986) ‘The dominant logic: a new linkage between diversity and performance’, Strategic Management Journal 7 (6): 485–501.

    Article  Google Scholar 

  • Schoenecker, T. and Swanson, L. (2002) ‘Indicators of firm technological capability: validity and performance implications’, IEEE Transactions on Engineering Management 49 (1): 36–44.

    Article  Google Scholar 

  • Schuster, F.E. (1982) ‘A tool for evaluating and controlling the management of human resources’, Personnel Administrator 27 (10): 63–69.

    Google Scholar 

  • Shane, S. and Venkataraman, S. (2000) ‘The promise of entrepreneurship as a field of research’, Academy of Management Review 25 (1): 217–226.

    Google Scholar 

  • Soh, P.H., Mahmood, I.P. and Mitchell, W. (2004) ‘Dynamic inducements in R&D investment: market signals and network locations’, Academy of Management Journal 47 (6): 907–917.

    Article  Google Scholar 

  • Spenner, K.I., Suhomlinova, O.O., Thore, S.A., Land, K.C. and Jones, D.C. (1998) ‘Strong legacies and weak markets: Bulgarian state-owned enterprises during early transition’, American Sociological Review 63 (4): 599–617.

    Article  Google Scholar 

  • Stopford, J.M. and Baden-Fuller, C. (1994) ‘Creating corporate entrepreneurship’, Strategic Management Journal 15 (7): 521–536.

    Article  Google Scholar 

  • Swedenborg, B. (1979) The Multinational Operations of Swedish Firms, Stockholm Industrial Institute for Economic and Social Research: Stockholm.

    Google Scholar 

  • Thomas, D.E., Eden, L. and Hitt, M.A. (2002) ‘Who Goes Abroad? International Diversification by Emerging Market Firms into Developed Markets’, Paper presented at the Academy of Management Annual Meeting at Denver, CO.

  • Tolentino, P.E.E. (1993) Technological Innovation and Third World Multinationals, Routledge: London, UK.

    Google Scholar 

  • United Nations Conference on Trade and Development (UNCTAD) (1997) World Investment Report, United Nations: New York.

  • United Nations Conference on Trade and Development (UNCTAD) (2003) World Investment Report, United Nations: New York.

  • Wei, L.Q. and Lau, C.M. (2005) ‘Market orientation, HRM importance and competency: determinants of strategic HRM in Chinese firms’, International Journal of Human Resource Management 16 (10): 1901–1918.

    Article  Google Scholar 

  • Weick, K.E. (1998) ‘Improvisation as a mindset for organizational analysis’, Organization Science 9 (5): 543–555.

    Article  Google Scholar 

  • Wells, L.T. (1983) Third World Multinationals: The Rise of Foreign Investment from Developing Countries, MIT Press: Cambridge, MA.

    Google Scholar 

  • Wesson, T. (1999) ‘A model of asset-seeking foreign direct investment driven by demand conditions’, Revue Canadienne des Sciences de l’Administration 16 (1): 1–10.

    Google Scholar 

  • White, H. (1980) ‘A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity’, Econometrica 48 (4): 817–838.

    Article  Google Scholar 

  • Wooldridge, J.M. (2003) Introductory Econometrics: A Modern Approach, South-Western College Publishing: Mason, OH.

    Google Scholar 

  • Wright, M., Filatotchev, I., Hoskisson, R.E. and Peng, M.W. (2005) ‘Strategy research in emerging economies: challenging the conventional wisdom’, Journal of Management Studies 42 (1): 1–33.

    Article  Google Scholar 

  • Zahra, S.A. (1996) ‘Governance, ownership, and corporate entrepreneurship: the moderating impact of industry technological opportunities’, Academy of Management Journal 39 (6): 1713–1735.

    Article  Google Scholar 

  • Zahra, S.A. and Covin, J.G. (1995) ‘Contextual influences on the corporate entrepreneurship–performance relationship: a longitudinal analysis’, Journal of Business Venturing 10 (1): 43–58.

    Article  Google Scholar 

  • Zahra, S.A. and Dess, G. (2001) ‘Entrepreneurship as a field of research: encouraging dialogue and debate’, Academy of Management Review 26 (1): 8–20.

    Article  Google Scholar 

  • Zahra, S.A., Ireland, D.R., Gutierrez, I. and Hitt, M.A. (2000a) ‘Privatization and enterpreneurial transformation: emerging issues and a future research agenda’, Academy of Management Review 25 (3): 509–524.

    Google Scholar 

  • Zahra, S.A., Neubaum, D.O. and Huse, M. (2000b) ‘Entrepreneurship in medium-size companies: exploring the effects of ownership and governance systems’, Journal of Management 26 (5): 947–976.

    Article  Google Scholar 

  • Zhao, S. (2001) Human Resource Management Studies, People's University Press: Beijing.

    Google Scholar 

Download references

Acknowledgements

This study is supported by a research grant (CERG4310/01H) extended to the second author.

Author information

Authors and Affiliations

  1. Department of Management, Chinese University of Hong Kong, Shatin, NT, Hong Kong

    Daphne W Yiu & ChungMing Lau

  2. The Neeley School of Business, Texas Christian University, Fort Worth, USA

    Garry D Bruton

Authors
  1. Daphne W Yiu
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. ChungMing Lau
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Garry D Bruton
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Daphne W Yiu.

Additional information

Accepted by Rosalie L Tung and Yadong Luo, Departmental Editors, 22 November 2006. This paper has been with the authors for two revisions.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Yiu, D., Lau, C. & Bruton, G. International venturing by emerging economy firms: the effects of firm capabilities, home country networks, and corporate entrepreneurship. J Int Bus Stud 38, 519–540 (2007). https://doi.org/10.1057/palgrave.jibs.8400278

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/palgrave.jibs.8400278

Keywords

Search

Navigation