Alain Verbeke Haskayne School of Business, University of Calgary The Nature of Ownership Advantages...

Alain VerbekeHaskayne School of

Business, University of Calgary

The Nature of Ownership Advantages in International

Business

Correct Intellectual Basis for “O”

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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.

Stand-alone FSAs

Routines

Re-combination capabilities

Location advantages home country

Non-transferable (or location-bound) FSAshome country

Internationally transferable (or non-location bound) FSAs

Non-transferable (or location-bound) FSAs host country


Location advantageshost country

International border

Home Country Host Country

Figure 1.2 The essence of international business strategy

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.

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Host Country

Figure 1.3 Centralized exporter

Home 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).

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Home Country

Figure 1.4 International projector

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.

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Figure 1.5 International coordinator

Host Country B

Home Country


Host Country A

Host Country C

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.

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Figure 1.6 Multi-centered MNE

Home Country

Stand-alone FSAs

Routines

Re-combination capabilities


Host Country B

Host Country A

Host Country C

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.

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LAs LB FSAs Non-LB FSAs

Domestic base “Distance” to foreign markets

Non-LB FSAs

Non-LB FSAs

Non-LB FSAs

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.

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Domestic base “Distance” to foreign markets

Figure 4.2 The need for LB FSAs as a function of “Distance”

LB FSAs

LB FSAs

LB FSAs

LAs LB FSAs Non-LB FSAs

Greater “distance” leads

to higher investment

requirements in LB

FSAs, as indicated by

the larger size of the LB

FSA trapezoids

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Alain Verbeke Haskayne School of Business, University of Calgary The Nature of Ownership Advantages...

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