Multinationality metrics, regional exports, supply chains and subsidiaries

Citation

Rugman, A.M. (2011), "Multinationality metrics, regional exports, supply chains and subsidiaries", Multinational Business Review, Vol. 19 No. 3. https://doi.org/10.1108/mbr.2011.57219caa.001

Multinationality metrics, regional exports, supply chains and subsidiaries

Article Type: Letter from the Editor From: The Multinational Business Review, Volume 19, Issue 3

At the Multinational Business Review (MBR), we are keen to push back the frontiers of research in international business. In particular, we are seeking to develop a forum for discussion and interchange which questions traditional thinking. In this issue, we include several papers along these lines. This characteristic of innovative thinking in the ongoing conversation of international business is possible because MBR is a “niche” journal, attracting both authors and readers interested in the role of multinational enterprises (MNEs) in international business; see our mission statement on the inside back cover.

The first paper in this issue examines a methodological issue, namely a common empirical mistake in the basic measurement of the extent of internationalization. We criticize papers which use simplistic counts of the number of countries in which a firm has a subsidiary as a valid metric for multinationality. We also criticize metrics which develop an entropy metric for the number of subsidiaries per country. Neither of these scope metrics, allegedly designed to capture the depth of foreign involvement, are as relevant as the conventional multinationality metric, namely, the degree of foreign (F) to total (T) sales or assets. The latter scale metric is a more accurate measure, as explained in the paper. Yet, the literature on multinationality and performance, especially for smaller firms (and, unfortunately, using a Japanese database) is replete with published papers which only use inaccurate scope metrics. The paper here demonstrates that scale metrics offer superior measurement of the multinationality of US firms than do scope metrics. In particular, a paper in Journal of International Business Studies (2006) is shown to be deficient in rudimentary empirical skills. At MBR we welcome a reply from the authors of this paper and others interested in this conversation.

The second paper in this issue, by Paloma Almodóvar, offers an example of good empirical research, demonstrating that Spanish firms have 98 percent of their sales in the home region. This paper also clarifies literature on the so-called “born global” phenomenon, where international new ventures are alleged to operate globally. A long line of entrepreneurship papers have played fast and loose with the data on this topic, often confusing exporting with foreign direct investment, and indeed frequently failing to distinguish between these two types of foreign sales. Dr Almodóvar demonstrates that she is completely in command of the Spanish database by examining home sales and exports, exclusive of foreign direct investment (FDI). Again, we welcome comments on this and related papers which explore the empirical nature of internationalization.

The third paper in this issue offers a management science perspective on supply chain capability. The paper argues that FDI by MNEs is determined jointly by the need to exploit their firm-specific advantages and also by locational factors, i.e. country-specific advantages (CSAs). The paper finds that home CSAs affect supply chain capability, and that this varies between developed and developing countries. The country-level analysis in this paper is an important addition to the analysis of supply chain capability at MNEs level. This paper is followed by two short commentaries, respectively, by Fred A. Niederman, an operations management specialist, and Nitish Singh, an expert on international business strategy. These commentaries, stimulated by the paper, offer further suggestions for future research on this topic.

The fourth paper, by Frank McDonald, Heinz Josef Tüselmann, Svitlana Voronkova, and Sougand Golesorkhi examines the development of MNEs subsidiaries in the European Union and their export behaviour, which is found to be mainly intra-regional (within Europe). The final paper, by Johny K. Johansson and Laurence Leigh, examines marketing issues facing MNEs as they expand into emerging markets, in particular the BRIC countries of Brazil, Russia, India and China. The paper examines market penetration by global brands and the extent to which local brands can survive against them. The paper finds that local brands remain viable even in a world of globalization.

Alan M. RugmanEditor-in-Chief