Testing home regionalization

Citation

Rugman, A.M. (2013), "Testing home regionalization", Multinational Business Review, Vol. 21 No. 1. https://doi.org/10.1108/mbr.2013.57221aaa.001

Testing home regionalization

Article Type: Letter from the Editor From: Multinational Business Review, Volume 21, Issue 1

This issue of MBR contains two novel empirical papers that test the nature and extent of home regionalization. This is followed by a theoretical paper that examines the limits of home regionalization. Finally, there are two further empirical papers. One is a paper which tests the strategic motivations of Chinese MNEs in Denmark. This applies the FSA/CSA matrix incorporating my revision of Dunning’s OLI from MBR Vol. 18 No. 2. The final paper, by Ans Kolk and Fabienne Fortainier, analyzes MNEs and their environmental accountability in home and host countries.

In the first paper, Ruigrok, Georgakakis and Greve significantly advance the growing literature on regionalization by explicitly examining the nature of the top management teams (TMT) of large European MNEs. They find that, across 211 European firms, the inter-regional composition of the TMT enhances performance. In other words, European firms which have a global orientation and a global TMT perform worse than home-region-based firms with a home-region orientation and home-region TMT. They also find that the performance of home-region firms is moderated by a variable for industry dynamism. The message from this paper is that European firms should not make the mistake of following a global strategy. Instead, they need to align their TMT organizational structure, and industry dynamism, to fit a home-region strategy.

The second paper by Louise Curran and Michael Thorpe engages with the recent paper in MBR Vol. 20 No. 2 by Verbeke and Kano debating the theoretical focus of home regionalization. In an empirical assessment of world technological exports and imports across and within the triad regions, Curran and Thorpe find that there are strong intra-regional effects across trade sectors. Technological trade is not more global than low-tech trade. In other words, home regionalization is empirically confirmed.

In a controversial theoretical discourse, Sammartino and Osegowitsch question the nature of home regionalization and attempt to articulate different archetypes of this empirically observed phenomenon. Readers of MBR may ponder the utility of such a theoretical discourse removed from the empirical logic of the reality of home regionalization. In particular, this entire subfield of research has only become possible following the accounting changes of the late 1990s, which require firms to disclose the “broad region” of their sales and assets. Essentially, the firms themselves define regions and thus their strategic decision making is dependent upon accounting requirements. However, MBR is pleased to offer this paper as part of the ongoing conversation in the field of regional versus global studies.

The second from last paper in this issue uses internalization theory and Dunning’s OLI framework to examine the activities of the subsidiaries of Chinese MNEs in Denmark. The authors find that these modern theories of international business as summarized by the FSA/CSA matrix are highly relevant in explaining FDI in Denmark by Chinese firms. This paper uses the reconciliation of Dunning’s OLI framework with this editor’s FSA/CSA matrix (published in MBR Vol. 18 No. 2) to study the foreign investments of three Chinese firms in Denmark. This is one of the first papers to test how Dunning’s L (CSAs) and the O and I advantages (FSAs) work in the context of Chinese MNEs. This approach throws new light on the asset-seeking behavior of such emerging economy MNEs.

We close this issue with another empirical paper in which Ans Kolk and Fabienne Fortainier apply insights from internationalization to a new assessment of environmental disclosures by MNEs. They find that there is a negative relationship between internationalization and environmental disclosure by MNEs, a converse finding to earlier studies on internationalization and performance. This may be explained by differences in public accountability across the value chain of the MNE. Possibly, upstream activities of MNEs may be less transparent whereas downstream activities of MNEs in host countries are more apparent (and thus may be subject to closer scrutiny, requiring disclosure). In other words, environmental disclosure is an act of national responsiveness for a global/local MNE. Therefore, analysis of MNEs needs to be both at home-country parent level but also at host-country subsidiary level.

Alan M. RugmanEditor-in-Chief