Editorial

Citation

Oh, C.H. and Li, J. (2015), "Editorial", Multinational Business Review, Vol. 23 No. 4. https://doi.org/10.1108/MBR-09-2015-0041

Editorial

Article Type: Editorial From: The Multinational Business Review, Volume 23, Issue 4

Essays in honour of Alan Rugman

Introduction

The late Professor Alan Rugman was one of the pioneers and leading eminent scholars in the field of international business. He was a strong advocate for international business research as a main and stand-alone research field. This special issue is dedicated to him for his endless intellectual contributions to the international business field.

Rugman’s main contributions to theory and practice include internalization theory, international competitiveness, international diversification, emerging economy multinationals, regional multinational theory, subsidiary capability, network organization and trade and environmental policies. In this editorial, we briefly review his contributions to internalization theory focusing on the country-specific advantage/firm-specific advantage (CSA/FSA) framework and regional multinational theory. We then highlight the key ideas in the six research papers in this special issue.

Alan Rugman’s contributions to international strategic management

Rugman first developed the CSA/FSA framework 34 years ago to analyze competitive advantages of a multinational enterprise (MNE) (#B2). At the heart of internalization theory, this classic framework suggests that successful MNEs are often built on the interaction between strong CSAs in, for example, natural resource endowments, labor force and associated cultural factors, and strong FSAs in unique resources and capabilities. While Rugman’s early work focused on home CSAs and parent FSAs, he and colleagues further developed the new internalization theory by explicitly discussing host CSAs and subsidiary-specific advantages (SSAs), and by distinguishing between location-bound and non-location-bound FSAs (#B7, #B8). The new internalization theory has been the cornerstone of international business research, offering answers to a fundamental question – that is, why and how MNEs differ in their ability to survive and thrive in the international business arena. In the past decade, Rugman applied internalization theory to understand the strategy and structure of MNEs from emerging markets, suggesting the persistent power of this classic theory in offering insights to a new phenomenon in international business (#B4; #B5).

Regional multinational theory (#B3; #B9) was developed from Rugman’s early research and can be considered as his last masterpiece, which provided a new research stream in international strategic management. Derived from rich evidence and clear theoretical underpinnings, Rugman’s regional multinational theory correctly identifies opportunities and challenges of large multinationals in the triad economic system. Most of the large MNEs are able to overcome the hurdle of home country national borders, but they are not able to cross the regional borders. Only a few large MNEs operate globally. Rugman theorized regional strategy as a firm-level strategic decision. Thus, his view was substantially different from related concepts in management, economics and political science. Now that rich empirical evidence and theoretical advancement have been provided to support regional multinational theory, it is positioned centrally in wide-ranging international business research.

Highlights of the papers in this special issue

The six papers in this special issue are focused on extending Rugman’s CSA/FSA framework, and regional multinational theory. Four of these papers were presented at the Rugman Memorial sessions of the Reading-UNCTAD IB Conference in June 2015 at the Henley Business School, University of Reading.

The first paper by Chen, Li and Shapiro contributes to Rugman’s CSA/FSA framework by integrating an institution-based view of CSAs into the discussion of FSAs. In particular, the authors look at CSAs at the subnational level, recognizing that an important feature of emerging economies is the subnational heterogeneity in market-supporting institutions. Using a sample of Chinese firms, they find evidence to support two ideas: first, that such subnational heterogeneity represents an important source of variation in firms’ FSAs; second, that firms from subnational locations with effective and well-functioning markets tend to develop strong market-related capabilities, which enable them to invest in developed markets.

Using an impressive longitudinal data set, Mullen and Berrill investigated comprehensively the globalization patterns of over 1,200 companies from 1998 to 2012. The paper shows whether and how firms have changed their globalization patterns over time, which has implications for the persistence of the liability of interregional foreignness. Moreover, it proposes a new method (i.e. tracking firms’ regional sales footprint and matching it with global economic activity), to capture the extent to which firms operate close to a hypothetical global company. Their findings that a small group of firms accounted for the majority of international sales growth and that almost 60 per cent of firms still focused on either their home country or home regional market, add new evidence to support the main themes of regionalization theory proposed by Rugman and colleagues.

The paper by Asmussen, Nielsen, Osegowitsch and Sammartino looks at the dynamics of regional and global expansion. These authors developed a model proposing that a firm’s additional regional (or global) expansion is affected by the firm’s current level of regionalization (or globalization). Their study is also supported by a large longitudinal data set. Their findings imply the existence of a steady state in the level of regional (and global) expansion, which is consistent with the finding in an earlier issue of this journal showing that most large MNEs have maintained over time a level of about 70 per cent of sales in the home region (#B1).

While existing evidence for regional strategies of MNEs has been concentrated at the parent level, the paper by Nguyen is among the first to look at this issue at the subsidiary level. Such a perspective is critical to understanding the extent to which MNEs can leverage SSAs to explore global markets. Using information of publicly listed subsidiaries in ASEAN, the author shows that knowledge, location and profitability of a subsidiary matter in its adoption of a home-region strategy. Specifically, advantages in downstream, marketing knowledge are more likely home-region-bound. Locating in the parent’s home region reinforces a home-region strategy. Profitability, however, declines the home-region orientation of a subsidiary.

Using graph theory, the paper by Seno-Alday investigates the regional trade network of ASEAN countries. The paper usefully combines the traditional economic view of economic integration and regional multinational theory using country-level analysis. The author finds that ASEAN’s regional trade network became more connected and clustered between 1990 and 2012. During the three structural breaks, that is the 1997 Asian financial crisis, the 2000 internet bubble and the 2008 global financial crisis, ASEAN regional trade network helped to reduce the negative impact of these macroeconomic risks. This finding is consistent with #B6, in which they argued that MNEs with regional business networks benefit from international diversification in their FSAs.

By extending several earlier research efforts on the topic of regional multinationals (#B10; #B11), the last paper, written by Aguilera, Ricardo and Kim, re-conceptualizes regional borders and distinguishes between distance effects and border effects. The authors analyze different mechanisms leading to the liability of regional foreignness. They provide several potential research avenues to extend further regional multinational scholarship, and to challenge the conventional views of international business research.

Conclusion

This special issue provides an opportunity to review critically Alan Rugman’s contributions to international strategic management and to strengthen and extend his conceptual insight. To improve the field of international business, Rugman always fiercely challenged conventional perspectives, warmly supported under-researched subjects and actively helped junior scholars in their career development. We have composed this special issue in the spirit of his long-term vision for the field and his relentless efforts to develop international business as a legitimate subject area of scholarly inquiry in the world’s leading management departments and business schools.

Finally, we would like to thank Rajneesh Narula, Editor-in-Chief, and Alain Verbeke, Senior Editor, for their guidance and support, and all the authors for their excellent contributions to this special issue.

Chang Hoon Oh and Jing Li

Beedie School of Business, Simon Fraser University, Vancouver, Canada

References

Oh, C.H. and Rugman, A.M. (2014), “The dynamics of regional and global multinationals, 1999-2008”, Multinational Business Review, Vol. 22 No. 2, pp. 108-117.

Rugman, A.M. (1981), Inside the Multinationals: The Economics of Internal Markets, Croom Helm, London.

Rugman, A.M. (2005), The Regional Multinationals: MNEs and “Global” Strategic Management, Cambridge University Press, Cambridge.

Rugman, A.M. and Li, J. (2007), “Will China’s multinationals succeed globally or regionally?”, European Management Journal, Vol. 25 No. 5, pp. 333-343.

Rugman, A.M. and Nguyen, Q.T. (2014), “Modern international business theory and emerging market multinational companies”, in Cuervo-Cazurra, A. and Ramamurti, R. (Eds), Understanding Multinationals from Emerging Markets, Cambridge University Press, Cambridge, pp. 53-80.

Rugman, A.M. and Oh, C.H. (2011), “Regional multinational enterprise and the international financial crisis”, in Hutson, E. and Sinkovics, R. (Eds), Firm-level Internationalization, Regionalism, and Globalization, Palgrave MacMillan, Basinstoke, pp. 64-78.

Rugman, A.M. and Verbeke, A. (1992), “A Note on the transnational solution and the transaction cost theory of multinational strategic management”, Journal of International Business Studies, Vol. 23 No. 4, pp. 761-771.

Rugman, A.M. and Verbeke, A. (2001), “Subsidiary-specific advantages in multinational enterprises”, Strategic Management Journal, Vol. 22 No. 3, pp. 237-250.

Rugman, A.M. and Verbeke, A. (2004), “A perspective on regional and global strategies of multinational enterprises”, Journal of International Business Studies, Vol. 35 No. 1, pp. 3-18.

Rugman, A.M. and Verbeke, A. (2007), “Liabilities of regional foreignness and the use of firm-level versus country-level data: a response to Dunning et al. (2007)”, Journal of International Business Studies, Vol. 38 No. 1, pp. 200-205.

Sammartino, A. and Osegowitsch, T. (2013), “Dissecting home regionalization: how large does the region loom?”, Multinational Business Review, Vol. 21 No. 1, pp. 45-64.