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It is well known that Chinese multinationals’ international expansion is often supported by the home-country government. This study argues that the political embeddedness of Chinese multinationals’ headquarters may impair their managerial intentions and abilities to carry out their entrepreneurial and administrative roles and, indirectly, their capacity to achieve reverse knowledge transfers from their foreign subsidiaries. Based on a study of 177 subsidiaries of 99 Chinese multinationals, we find no support for the argument that political embeddedness affects headquarters’ centralization of subsidiary decisions, although such centralization is negatively associated with reverse knowledge transfer. Additionally, our findings show that home-country political embeddedness is negatively associated with headquarters’ entrepreneurial role vis-à-vis individual subsidiaries. This hampers subsidiaries’ reverse knowledge transfers. The results contribute to understanding the value of political embeddedness and headquarters’ roles in the context of Chinese multinationals. They also provide insights into the strategic asset-seeking internationalization of Chinese multinationals. By developing and operationalizing the multidimensional concept of political embeddedness, this study further contributes to the research on firm-government relations.

International diversification is a fundamental pillar of multinational corporations' (MNCs) growth strategies. Consequently, there is a considerable body of research on the performance implications of MNCs' international diversification strategies. We extend this literature by adopting a relational view where we compare the diversification profiles of firms in an inter-organizational context. We argue that the relative characteristics of firms' and their partners' diversification profiles is an indicator of parties' resource bases and thereby can explain if and when inter-organizational ties yield optimum performance outcomes. We examine these relative characteristics and propose a conceptual refinement by differentiating between the degree and content dimensions of international diversification. Analyzing data from 202 manufacturing firms from the S&P 500 list, we find that firms achieve optimum performance when their partners have moderately higher degrees of international diversification and a moderate overlap of presence in foreign markets.

La diversification internationale constitue un pilier fondamental des stratégies de croissance des entreprises multinationales. Il existe en conséquence un corps important de travaux portés sur l’implication en matière de performance des stratégies de diversification internationale de ces dernières. Nous étendons cette littérature en adoptant une perspective relationnelle dans laquelle nous comparons des profils de diversification des entreprises dans un contexte inter-organisationnel. Nous argumentons que les relatives caractéristiques des profils de diversification des entreprises et de leurs partenaires sont un indicateur des bases de ressources des parties, et peuvent donc expliquer si et quand les liens inter-organisationnels génèrent des performances optimales. Nous examinons ces relatives caractéristiques et proposons un raffinement conceptuel par le biais d’une distinction entre les deux dimensions – degré et contenu – de la diversification internationale. En analysant les données de 202 entreprises manufacturières de la liste S&P 500, nous observons que les entreprises atteignent une performance optimale lorsque leurs partenaires ont des degrés de diversification internationale modérément plus élevés et un chevauchement modéré en matière de présence sur des marchés internationaux.

La diversificación internacional es un pilar fundamental de las estrategias de crecimiento de las empresas multinacionales (MNCs por sus iniciales en inglés). Como consecuencia, hay un corpus de investigación considerable sobre las implicaciones en el desempeño de las estrategias de diversificación internacional de las empresas multinacionales. Ampliamos esta literatura adoptando una visión relacional donde comparamos los perfiles de diversificación de las empresas en un contexto inter-organizacional. Sostenemos que las características relativas de los perfiles de diversificación de las empresas y de sus socios son un indicador de las bases de recursos de las partes y, por lo tanto, pueden explicar si los vínculos inter-organizacionales producen resultados óptimos de rendimiento y cuándo lo hacen. Examinamos estas características relativas y proponemos un refinamiento conceptual diferenciando entre las dimensiones de grado y contenido de la diversificación internacional. Analizando los datos de 202 empresas manufactureras de la lista S&P 500, encontramos que las empresas logran un rendimiento óptimo cuando sus socios tienen grados moderadamente altos de diversificación internacional y un solapamiento moderado de la presencia en los mercados extranjeros.

A diversificação internacional é um pilar fundamental nas estratégias de crescimento das empresas multinacionais (MNCs). Consequentemente, há um corpo de pesquisa considerável sobre as implicações no desempenho de estratégias de diversificação internacional de MNCs. Ampliamos essa literatura adotando uma visão relacional em que comparamos os perfis de diversificação de firmas em um contexto interorganizacional. Argumentamos que as características relativas dos perfis de diversificação de empresas e de seus parceiros são um indicador das bases de recursos das partes e, portanto, podem explicar se e quando os laços interorganizacionais produzem resultados ótimos de desempenho. Examinamos essas características relativas e propomos um refinamento conceitual diferenciando entre as dimensões de grau e conteúdo na diversificação internacional. Analisando dados de 202 empresas manufatureiras da lista S&P 500, descobrimos que empresas atingem um desempenho ótimo quando seus parceiros têm graus moderadamente mais altos de diversificação internacional e uma moderada sobreposição de presença em mercados estrangeiros.

Research Summary

This paper examines an understudied aspect of network relationships—that is, direction of relational ties. Tie direction is important since it can shape when and how firms can benefit from the international experience of other firms. We focus on a specific type of network relationship—that is, interlocking directorates, which provides a clinical context to study directionality. We show that, due to their higher familiarity, identification, and executive power, focal firm directors serving in other firms' boards (i.e., outgoing ties) are more beneficial for utilizing partners' international experience. However, outside directors sitting on the boards of focal firms (i.e., incoming ties) can bring more useful first-hand experience and facilitate international expansion once these ties get stronger. Theoretical and practical implications of these results are discussed.

Managerial Summary

As they grow internationally, firms need to manage risks and uncertainties of doing business abroad. In this regard, they can potentially benefit from the international experience of other firms in their network. We show how firms can realize these benefits by means of interlocking ties (i.e., shared board memberships). To that end, we examine the directionality of interlocking ties. Specifically, we argue that a firm's ability to utilize partners' experience for its own international expansion is greater when its directors sit on the boards of other firms (so-called outgoing ties) compared to when other firms' directors sit on its own board (so-called incoming ties). However, experience coming through incoming ties is more effective for a firm's international expansion once these ties get stronger.

There is a wealth of research analyzing sender-receiver transfers within multinational corporations focusing on the characteristics of (a) the sender, (b) the receiver, (c) the knowledge subject to transfer, and (d) the immediate transfer context. However, less is known about how networks external to the sender-receiver transfer dyad influence the outcomes of a transfer project. In this paper, we focus on the receiving subunits' internal and external networks and how embedded actors in these networks influence transfer effectiveness. More specifically, by means of an inductive multiple-case study, we explore how internal and external networks of subunits influence the effectiveness of capability transfers from headquarters to subunits. We study 18 transfers of the same capability from headquarters to subunits’ innovation projects. We theorize about how the capacity and configuration of receiving subunits’ networks can have a unique and detrimental influence on transfer effectiveness. The results of our study suggest that the receiver in a transfer project is not so much a specific unit as a network.

Recent attempts to extend internalization theory into new fields of enquiry illustrate the crucial role of control in the theory. In this paper, we focus on two examples: one applying internalization theory to external business relationships of multinational enterprises (MNEs) and one applying new internalization theory to MNEs' governance. We argue that, in both cases, the ability of the extended theory to explain MNE behavior can be questioned, either because of the governance of the external relationships is shared between the MNE and its counterparts (as in the first case), or because of the substantial increase in the level of complexity of the MNE's decision-making system (as in the second case). We conclude that scholars applying internalization theory to MNEs' external business relationships, and to their decision-making processes, should address what shared governance in external business relationships, and the issue of bounded rationality/bounded reliability, actually mean for the possibility to apply the usual economic logic behind internalization theory. It is essential that future research focuses on what impact the circumscribed control in the two cases has on the ability of MNEs to assess, both ex ante and ex post, the level of transaction costs and managerial costs as bases for its decisions to invest abroad and run foreign operations.

Although received research emphasizes direct experiential knowledge as a key driver of firms' internationali-zation, the role of indirect experience has been increasingly recognized in recent studies. In this paper, we extend these studies by examining the role of source and context of experiential knowledge in relation to firms' internationalization into specific host markets, and offer a fine-grained analysis of when and how indirect experience complement or substitute direct experience. We test our hypotheses with data from 1,478 Swedish SMEs. Our results reveal that a firm can address its knowledge gaps and increase its extent of internationalization into a host market by combining direct and indirect experience, especially when they yield different types of knowledge needed for internationalization. We further show that direct and indirect experience derived from comparable contexts could substitute for each other but may also create knowledge redundancies.

Since the Uppsala process model was launched 1977, we have seen an extensive amount of research on the internationalization of firms, with the model as a point of departure. Here, we analyze an interesting article published in JIBS by Trevino and Doh, who apply a discourse-based view on the internationalization of the firm. We place their work in the context of the research conducted after the Uppsala model was developed with special reference to the generalizing and singularizing purposes of some typical contributions. We raise issues concerning to what extent the Trevino-Doh article is actually modeling firms' internationalization process, how a discourse-based approach differs from other studies on a firm's strategic behavior, and if the cases used by the authors actually contribute to our understanding of the discourse-based methodology.

In the beginning of the twenty-first century, Andersson, Forsgren, and Holm (2001, 2002) published two highly cited articles on the relationship between network embeddedness and the evolution of multinational enterprise (MNE) subsidiary roles. These articles paved the way for research examining the importance of market knowledge acquired by an MNE subsidiary through being embedded in local networks, which would, in time, be expected to positively influence the competence development of other MNE units. The present chapter presents an overview of the key contributions of these seminal papers, followed by a discussion about the theoretical and empirical advancements concerning the relationship between embeddedness and subsidiary competence development. We provide suggestions around how to conceptualize competence development and knowledge transfer in relation to subsidiary external embeddedness and highlight areas where more research is needed.

It is often assumed that Chinese multinationals invest overseas to obtain knowledge. Acknowledging political ties as an important aspect of Chinese multinationals, we investigate the respective interests of headquarters and subsidiaries to support knowledge transfer from host countries to China. Based on data from 177 headquarters-subsidiary relationships, our findings indicate that political ties of Chinese headquarters increase the organizational distance between headquarters and subsidiaries. This distance has a positive impact on headquarters’ demand for subsidiary knowledge transfer, but a negative effect on the subsidiaries’ willingness to actually transfer knowledge. This suggests that Chinese multinationals with strong political ties have to spend efforts in aligning the motives of headquarters and subsidiaries concerning knowledge transfer practices. This study contributes to the research on Chinese multinationals, cross-border knowledge acquisition, and the springboard perspective by shedding light on post-internationalization managerial challenges related to a knowledge-seeking strategy.

From the ‘springboard perspective’, Chinese multinationals are assumed to make knowledge-seeking overseas investments. These investments should be followed by headquarters demands for knowledge transfer from their subsidiaries, particularly those located in advanced markets and running R&D activities, but that is not always the case. Acknowledging political influence as an important unique aspect of emerging-countries organizations, this study is set to generate new knowledge on what drives HQ demand for subsidiary knowledge transfer in Chinese multinationals. Based on the survey data of 128 headquarters-subsidiary dyadic relationships within 80 Chinese multinationals, our findings indicate specifically that political ties of Chinese headquarters enhance organizational distance between home- and host- organizations, which triggers higher demand of knowledge from subsidiaries by headquarters. But, by showing how subsidiary willingness to transfer knowledge (the voice of subsidiaries) is an important driver of headquarters demand of knowledge (the attention of headquarters), we identify a paradox as organizational distance at the same time augment headquarters demand and diminished subsidiary willingness to transfer. This study contributes to international business literature, particularly concerning emerging-market multinationals, cross-border knowledge acquisition and distance, by indicating the indirect effects of political ties and the paradox effects of organizational distance on headquarters knowledge transfer demand.