Academic journal article Multinational Business Review

Antecedents of MNE Performance: Blinded by the Obvious in 35 Years of Literature

Academic journal article Multinational Business Review

Antecedents of MNE Performance: Blinded by the Obvious in 35 Years of Literature

Article excerpt

Introduction

It is a main goal of modern business enterprises to maximize long-term performance ([18] Buckley, 1993; [53] Goerzen and Beamish, 2003; [76] Itaki, 1991). The field of strategic management has emerged with the overarching theme of identifying antecedents of performance over the past 50 years ([70] Hoskisson et al. , 1999; [109] Nag et al. , 2007). There is one aspect that is not in the focus of the field of strategic management, however, and this aspect is at the core of the field of international business: the country dimension of business activity ([125] Ronda-Pupo and Guerras-Martin, 2012).

While dominant theories in strategic management focus on firms in general, internalization theory, as the dominant theory of international business, analyzes the particular case of multinational enterprises (MNEs). However, neither strategic management nor international business scholars have thus far offered satisfactory, comprehensive insights about the most important antecedents of MNE performance. In this context, the assertion of [84] Kirca et al. (2011) that a huge research gap still exists around antecedents of MNE performance underlines the importance of the literature review that we offer in this paper as a summary of the existing empirical research and as a starting point for future studies.

The constitutive characteristic of an MNE, which differentiates it from purely domestic firms, is that the MNE conducts considerable value-added activities in at least two countries ([3] Al-Obaidan and Scully, 1995; [22] Caves, 1982; [41] Dunning and Lundan, 2008). This brings about a number of derivative characteristics that distinguish MNEs from domestic firms. MNEs have to deal with multiple, heterogeneous country environments, which expose them to a multitude of risks and conflicts and thus increase complexity ([86] Kostova and Zaheer, 1999; [98] Makino et al. , 2004; [150] Sundaram and Black, 1992). Furthermore, the questions how to configure the value chain across different countries and how to coordinate value-added activities across country borders only apply to firms that operate multinationally ([6] Asmussen et al. , 2007; [108] Morrison and Roth, 1992; [116] Porter, 1986a). All in all, MNEs obviously face problems concerning strategy, structure, and management systems that domestic firms, which operate in only one country, do not face.

Solely relying on theories from the field of strategic management that fail to incorporate a country dimension would therefore inhibit a thorough explanation of antecedents of MNE performance; even though strategic management's irrevocable focus on performance is definitely an essential strength. Strategic management findings regarding antecedents of the performance of firms in general might not apply to MNEs in particular, or at least not with the same effect sizes. Even more importantly, the country dimension of MNEs most likely entails important antecedents of MNE performance that simply do not exist if effects at the country level are not explicitly considered in theoretical and empirical research. International business, on the other hand, focuses on the country dimension of business activity. Its dominant theory of the MNE - internalization theory - is primarily directed towards efficiency-seeking, not rent-seeking. Therefore, with the aim to improve our understanding of critical antecedents of MNE performance, we deem it fruitful to integrate strategic management with international business thinking.

In view of that, we address two research questions in this paper. First, we examine the question at which levels of analysis we can expect to find essential antecedents of MNE performance according to dominant strategic management and international business theories. Second, we investigate what the most widely accepted knowledge about critical antecedents of MNE performance is, by reviewing 35 years of empirical evidence.

In order to answer these two research questions, the remainder of this paper is organized as follows. …

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