RESEARCH INTERESTS

I am a global strategy scholar interested in understanding how context affects value creation. My expertise is concentrated in two topics: global strategic management and global sustainability governance, which I analyze using economic-based theories. Much of my research studies emerging market firms, which I use as a laboratory for extending theory, and on which I have built a deep understanding and connections. 

Global Strategic management: institutional influences on firms' value creation. On the topic of global strategic management, I explain how institutions affect firms’ capability upgrading and internationalization and, subsequently, value creation. This research stream started with my Ph.D. thesis at the Massachusetts Institute of Technology, in which I proposed that a coevolution of resources and scope in response to pro-market reforms helped firms become internationally competitive. This sparked my interest in how firms, especially emerging market ones, overcome contextual challenges and succeed.  

My contributions can be grouped into two areas: capability upgrading and internationalization. First, I explained how the institutional context of operation modifies the ways in which firms upgrade their technological capabilities. Earlier in my career, I studied research and development (R&D), proposing that the incentives to invest in R&D varied with the home country and firm conditions. Thus, I argued that regional economic integration agreements reinforced product but not factor market pressures on R&D investment ; that access to foreign technology led multinationals’ subsidiaries to reduce external but not internal R&D ; that existing knowledge resources led some firms to never invest in R&D; that R&D collaborations with universities, suppliers, customers, and competitors varied on their innovation impact, and that sources of funds altered these collaborations’ effectiveness. Building on these insights, I then studied how emerging market firms upgraded their technological capabilities despite the unsupportive home country innovation system. I proposed that such context altered innovation incentives, constrained absorptive capacity, changed learning-by-doing, and created informality costs. However, some firms built a frugality advantage and innovated to serve middle-of-the-pyramid consumers. 

Second, following a similar logic, I explain how the home country’s institutional context affects internationalization, focusing on emerging market multinationals. I started this line by clarifying the drivers of the difficulties in internationalization and explaining how emerging market firms overcame such difficulties and succeeded. These insights on emerging market multinationals improved our understanding of home country contextual effects on internationalization. I explained how the underdevelopment of the home country influenced the country,  entry mode, and non-sequential internationalization process used by emerging market multinationals. Going deeper into home-country institutions' role in internationalization, I proposed that emerging market firms built an institutional advantage at home that supported their foreign success because they learned to deal with underdeveloped institutions, pro-market reforms, and skepticism of globalization. 

Global sustainability governance: incentives for societal value creation. On the topic of global sustainable governance, I explain how incentives and norms drive firms’ value creation for society. My interest in this topic began with my doctoral studies at the University of Salamanca on how owners’ private objectives drove value creation. I have developed two research lines, one on ownership and another on misbehavior. First, I studied large owners’ effect on diversification and the worldwide diffusion of codes of good governance to modify incentives. I then focused on state-owned firms, explaining how politicians’ non-business objectives created disadvantages and advantages of stateness that shaped the state-owned firms’ foreign challenges and internationalization as they became tools of discreet power. Second, and bridging with my studies on emerging market firms, I analyzed how companies address host country corruption. I argued that corruption did not deter foreign investors from corrupt nations and that laws against bribery abroad were effective when implemented in multiple countries. I then expanded these ideas to study other types of misbehavior, and explained that firms in emerging markets undertake sustainability to overcome government failures and address unintended externalities, enabling them to benefit from such investments.

PUBLICATIONS

Below is a list of books, books, chapters in academic books, and teaching cases with links to the published manuscripts, grouped into the two research topics, global strategic management and global sustainability governance.  Another list of publications with their citations appears on my Google Scholar page. Pre-publication versions of the journal articles can be downloaded from my SSRN author page and the books can be purchased from my Amazon page. 

Cuervo-Cazurra, A., Duran, P., Arregle, J.-L., van Essen, M. 2023. Host country politics and foreign multinationals' internationalization: a meta-analytical review. Journal of Management Studies (forthcoming).

Implementing meta-analytical methods, we study how host country politics influence foreign multinational enterprises’ (MNEs) internationalization. Our meta-analysis helps clarify which ideas receive support across the empirical literature and provides additional theorization in three areas: the conceptualization of host country politics, the impact of host country politics on internationalization steps, and the moderating influence of home country conditions on the previous relation. First, regarding the concept of host country politics, we suggest differentiating host country politics between political decision-making (regulation creation) and political administration (regulation implementation) and find that not all dimensions deter foreign MNEs. Second, on the effect of host country politics on the various internationalization steps, we theorize on the dynamic management of host country politics across internationalization decisions as we find that each step is differentially affected by host country politics. Third, studying how home country conditions modify the impact of host country politics on internationalization, we theorize how MNEs build political and uncertainty management capabilities through their exposure to home country conditions, as we find a variety of home country political and nonpolitical conditions altering MNEs’ reaction to host country politics.

Cuervo-Cazurra, A., and Pananond, P. 2023. The rise of emerging market lead firms in global value chains. Journal of Business Research, 154: 113327

Extending the resource-based view that location characteristics influence firms’ resources and internationalization, we argue that the global value chains (GVCs) of lead firms from emerging and advanced economies differ in three dimensions: objectives, trajectory, and governance. First, because GVC objectives are driven to resolve home-country endowment deficiencies, we propose that emerging market lead firms use GVCs to upgrade resources while advanced economy lead firms do so to distribute activities. Second, as GVC trajectory reflects home country consumer characteristics, we argue that emerging market lead firms expand abroad to accumulate additional value-added segments of their GVCs to serve more sophisticated demands, while advanced economy lead firms disaggregate simplified segments to reduce costs. Third, since GVC governance reflects the home-country institutional quality, we propose that emerging market lead firms use more internalization, particularly acquisitions, to exert control in their GVCs, while advanced economy lead firms rely more on externalization, especially offshore outsourcing.

Cuervo-Cazurra, A., and Un. A. 2023. Beauty in the eyes of the beholders: how government- and consumer-based country-of-origin advantages and disadvantages drive host country investment dynamics. Management International Review (forthcoming).

Building on the resource-based view, we propose conceptualizing a foreign multinational’s country of origin as a resource, an asset tied semi-permanently to the firm, and analyze how this asset affects its host country investments. We argue that the country of origin provides an advantage or disadvantage in the host country depending on its positive or negative view among the host-country government and consumers. This results in four alternative configurations of host country investment dynamics based on the alignment of their views. First, when a multinational’s country of origin generates a government-based advantage and a consumer-based disadvantage, the multinational is more likely to make larger initial investments to benefit from incentives and larger subsequent localization investments to disassociate itself from the country of origin. Second, when the country of origin creates a government-based disadvantage and a consumer-based advantage, the foreign firm is more likely to make smaller initial and subsequent investments to maintain its association with the country of origin. Third, when the country of origin leads to government-based and consumer-based advantages, foreign multinationals are more likely to make a large initial investment to benefit from government incentives and smaller subsequent investments to maintain their association with the country of origin. Finally, when the country of origin leads to government-based and consumer-based disadvantages, foreign multinationals are more likely to make smaller initial investments to minimize risk and larger subsequent investments to localize.

Benito, G., Cuervo-Cazurra, A., Mudambi, R., Pedersen, T., and Tallman, S. 2022. The future of global strategy. Global Strategy Journal, 12 (3): 421-450.

Global strategy, that is, the analysis of strategy in an international context, has co-evolved with the dramatic changes in the global economy in the twenty-first century. Research advances have enabled a more sophisticated understanding of how firms develop strategies in an increasingly turbulent global environment in which societal expectations, technological advances, and political decisions are all in a state of continuous change. In this article, we reflect and provide suggestions for how the field may evolve on five key themes of global strategy: cooperation, coordination, governance, politics, and innovation. We also outline suggestions for future research on global issues that are gaining increasing centrality in business decisions: climate change, artificial intelligence, and geopolitics. 

Cuervo-Cazurra, A, Silva-Rego, B., and Figueira, A. 2022. Financial and fiscal incentives and inward foreign direct investment: When quality institutions substitute incentives. Journal of International Business Policy, 5: 417-443.

We analyze the impact of host country investment incentives on inward foreign direct investment. Building on institutional economics, we argue that financial and fiscal incentives are effective in attracting greenfield projects because they reduce the short-term establishment and long-term operational costs, respectively. We also propose that the effectiveness of the incentives varies with the institutional quality of the host country because institutional quality reduces the indirect cost of transacting in the location; thus, quality institutions have the potential to act as substitutes for incentives. The analysis of greenfield projects in 106 countries in 2010–2017 reveals that although financial and fiscal incentives have a positive impact on greenfield investments when studied separately, financial but not fiscal incentives are effective in attracting greenfield projects when analyzed together. This is a novel finding as much of the literature has concentrated on studying one type of incentive at a time. Additionally, we find that financial incentives are more effective in attracting greenfield projects in countries with high-quality institutions, while fiscal incentives are more effective in countries with low-quality institutions. Policymakers may want to concentrate on creating high-quality institutions not only because of their direct effect in attracting foreign investments, but also because they substitute for the need to provide incentives to attract foreign direct investment.

Li, D., Hitt, M.A., Batjargal, B., Ireland, R.D., Miller, T.L. and Cuervo‐Cazurra, A. 2021. Institutions and entrepreneurship in a non‐ergodic world. Global Strategy Journal, 11(4), 523-547.

This study clarifies the complex relationship between institutions (the rules and norms that govern economic transactions) and entrepreneurship. Our discussion of existing literature, special issue articles, institutions and entrepreneurship in a world of significant change, and several promising avenues for future research highlights to entrepreneurs and their stakeholders the critical role that institutions play in entrepreneurial strategies and actions in three ways. First, the types of institutions and their complexity in a location alter entrepreneurs' incentives and ability to create new ventures. Second, the continued changes in institutions - some in favor of free-market relationships and others restricting them - alter entrepreneurs' behaviors. Third, the entrepreneurial spirit and the creation of new ventures can drive the transformation of institutions that govern future market transactions.

We analyze how skepticism of globalization, the socially constructed vulnerability that emanates from global interdependencies, affects global strategy. We argue that inequality, identity, and influence drive skepticism and propose that the increase in rhetoric against globalization and for new regulations do not seem to result in significant reductions in cross‐border economic flows. We explain this discrepancy by proposing that multinationals' strategies counteract the impact of politicians' regulatory reactions to the skepticism of globalization. Specifically, we propose that firms increase flexibility in global value chains in response to skepticism of cross‐border trade, rework the localization of global operations to deal with skepticism of cross‐border investment, use lobbying in global finance to address skepticism of cross‐border finance, nativize the global workforce in reaction to skepticisms of cross‐border labor, and protect global knowledge to solve the skepticisms of cross‐border knowledge flows.

We review the relationships between institutions and global strategy and explain several clarifications for future research. First, studies need to clarify the standard used to assess quality in institutional dimensions they research rather than let readers assess them from the measures. Second, analyses need to specify the theoretical approach used, which may be based on the paradigm from a single discipline (economics, sociology, politics, psychology) or the integration of underlying disciplines, as often seen in management. This must form the basis of a consistent set of assumptions rather than a potpourri of arguments from incompatible logics. Third, investigations need to clarify the direction of relationship and mechanisms. On the one hand, studies on the impact of institutions on strategy should clarify the institutional influences used (adapt, appeal, avoid). On the other hand, research on the effect of strategy on institutional change should clarify the institutional strategies (inform, influence, incentivize) and institutional spillovers (compete, command, copy) by which firms change institutions.

We analyze frugality-based advantage and explain its types and implications. Frugality-based advantage is an advantage that a firm achieves over competitors in its ability to develop and use frugal innovations, that is, innovations that overcome external resource constraints. We differentiate among three types of frugality-based advantages based on the external constraints they solve: (1) Input frugality-based advantage, which is the result of addressing restrictions in the provision of inputs needed for the production process; (2) Income frugality-based advantage, which is driven by solving limitations in the income of consumers; and (3) Infrastructure frugality-based advantage, which is the outcome of resolving constraints in the hard and soft infrastructure of the country. We explain how these three types of frugality-based advantages differ in their transferability across locations and their sustainability across time. Frugality-based advantage complements the resource-based view by explaining how the scarcity of external resources, rather than their abundance, can support the advantage of some firms.

Cuervo-Cazurra, A., Carneiro, J., Finchelstein, D., Duran, P., Gonzalez-Perez, M. A., Montoya, M. A., Borda Reyes, A., Fleury, M. T. L., Newburry, W. 2019. Uncommoditizing strategies by emerging market firms.  Multinational Business Review, 27 (2): 141-177.

We analyze how pro-market institutions affect firm performance in emerging markets. Integrating transaction costs and signaling theory, we advance three arguments. First, we separate four dynamic components of pro-market institutions: intensifying and fading pro-market reforms and intensifying and fading pro-market reversals. Second, we propose an asymmetric dynamic view whereby not only intensifying reforms but also fading reversals improve firm performance, while not only fading reforms but also intensifying reversals reduce performance. Finally, we argue that more efficient firms perform better under each of the dynamics. We test these arguments on a sample of 1092 firms from 34 emerging markets during 1998–2011. 

We build on the knowledge-based view to study the relative impact of alternative R&D sources on innovation performance. We contrast two arguments that have created a debate in the literature: One is that diversity of knowledge is better for innovation, because the integration of a larger variety of knowledge helps create new products that can fulfill unmet customer needs; another is that control of knowledge is better, because the incentives and contextual system of the firm facilitate employees' experimentation, which supports the creation of new products. We provide one solution to this debate by arguing that the relative importance of diversity and control of knowledge on innovation depends on the sources of finance. Hence, we find that, in general, control of knowledge has a higher impact than diversity of knowledge on the sale of new products. We also find that alternative sources of finance moderate the relationships: internal funds strengthen the impact of R&D sources with more diversity of knowledge on the sale of new products, while external funds strengthen the impact of R&D sources with more control of knowledge on the sale of new products. 

We analyze how a firm’s home country influences its internationalization. We propose two complementary types of influence. First, we conceptualize a firm’s international trade as shaped by four drivers: comparative advantage, comparative disadvantage, country-of-origin advantage, and country-of-origin liability. Second, we conceptualize the firm’s foreign direct investment as shaped by four other drivers: institutional learning, competitive learning, institutional escape, and competitive escape. Taken together, these eight drivers help pull together recent theoretical advances on topics such as emerging-market multinationals, investment in tax havens, and cross-border acquisitions of firms in advanced countries. We also highlight other home-country related issues, such as strategic responses and home-host country links, in the spirit of fostering future research on home-country effects that warrant a more nuanced understanding. 

We briefly review the evolution in the analysis of the boundaries of the firm in global strategy. We explain how initial studies that argued that firm boundaries were driven by the minimization of transaction costs were later complemented by analyses that proposed that firm boundaries were driven by the development and use of resources to maximize value creation and capture. Studies of global strategy combine these two approaches and introduce the influence of location—both the home and host countries—as a third influence on boundary decisions. We encourage future studies to focus more deeply on the complexity, dynamics, and mechanisms of three themes: the consideration of all boundary options, the study of the entirety of the multinational, and the simultaneous consideration analysis of the characteristics of all the locations in which the multinational is active. These suggestions help better connect the three drivers of firm boundaries: transactions, resources, and locations. 

We analyze the impact of home country uncertainty on the internationalization-performance relationship of emerging market firms. Building on organizational learning theory and the institutional approach, we argue that internationalization has a positive impact on the performance of emerging market firms, and that this relationship is strengthened for firms based in emerging countries with higher corruption and political risk. The reason is that by being exposed to high levels of home country uncertainty in the form of political risk and corruption, firms develop an uncertainty management capability at home that helps them face the challenges of internationalization better. We also propose that this uncertainty management capability helps emerging market firms perform better outside of their home region. We test our arguments on a sample of 536 firms from Argentina, Brazil, Chile, and Peru.

We briefly review the evolution in the analysis of the boundaries of the firm in global strategy. We explain how initial studies that argued that firm boundaries were driven by the minimization of transaction costs were later complemented by analyses that proposed that firm boundaries were driven by the development and use of resources to maximize value creation and capture. Studies of global strategy combine these two approaches and introduce the influence of location, both the home and the host countries, as a third influence on boundary decisions. We encourage future studies to focus more deeply on the complexity, dynamics, and mechanisms of three themes: the consideration of all boundary options, the consideration of all operations of the multinational, and the simultaneous consideration of the characteristics of all the locations where the multinational operates. These suggestions help better connect the three drivers of firm boundaries: transactions, resources, and locations. 

Latin America is an under-researched region that has the potential to yield new and important insights on the internationalization of firms from emerging markets, particularly as compared with the experience of firms from other regions. At the same time, some of the unique features of Latin America are generating new ideas that contribute to a better understanding of how the home country influences the behavior of firms in general and their foreign expansion in particular. In this article, we discuss such contributions and present some suggestions for future research. 

Africa is an increasingly important business context, yet we still know little about it. We review the challenges and opportunities that firms in Africa face and propose that these can serve as the basis for extending current theories and models of the firm. We do so by challenging some of the implicit assumptions and stereotypes on firms in Africa and by proposing three avenues for extending theories. One is taking the extreme conditions of some Africa countries and using them as a laboratory for modifying current theories and models of the firm, as we illustrate in the case of institutional theory and the resource-based view. A second one is identifying new themes that arise from analyzing firms in Africa and their contexts of operation, and we discuss four themes: migrating multinationals and the meaning of home country, diaspora networks within and across countries, a recasting of cultural and institutional distance, and new hybrid organizational forms. A third one is developing new theories based on alternative paradigms of social relationships that have emerged in Africa that differ from those underpinning existing theories of the firm, such as kgotla and its view of community-based relationships or ubuntu and its humanizing view of relationships. 

We identify how barriers to absorptive capacity limit success in integrating external technology by firms in emerging markets. We refine previous barriers to absorptive capacity and classify them into internal (managerial biases and weak social integration mechanisms) and external (muted activation triggers, conflicting source relationships, and feeble appropriability regimes). We also identify how particular conditions in emerging markets (higher restraints on incentives, higher information asymmetries, and weaker contract protection) heighten the barriers. Using agency theory as the theoretical base, we provide a better understanding of absorptive capacity and of the influence of the home country on capability upgrading. 

We analyze how firms in underdeveloped countries overcome human capital voids—a prevalence of very low levels of skills among individuals—to improve performance. Building on the knowledge‐based view, we argue that managers can strategically select organizational upgrading mechanisms to compensate for the negative effect of the human capital deficiencies of employees on firm performance improvement. We propose that external mechanisms (e.g., operating a joint venture with foreign partners) are better than internal mechanisms (e.g., internal research and development) because external mechanisms provide appropriate ready‐made knowledge for learning of low‐skilled labor, whereas internal mechanisms create additional learning inefficiencies. However, these influences change in countries with more developed human capital: external mechanisms have a lower compensating influence, whereas internal mechanisms become less inefficient. 

We review advances in research methodology used in global strategy research and provide suggestions on how researchers can improve their analyses and arguments. Methodological advances in the extraction of information, such as computer‐aided text analysis, and in the analysis of datasets, such as differences‐in‐differences and propensity score matching, have helped deal with challenges (e.g., endogeneity and causality) that bedeviled earlier studies and resulted in conflicting findings. These methodological advances need to be considered as tools that complement theoretical arguments and well‐explained logics and mechanisms so that researchers can provide better and more relevant recommendations to managers designing the global strategies of their organizations. 

We analyze learning-by-doing and how emerging market multinationals use it to upgrade their capabilities. Building on an in-depth case study, we present two novel arguments. First, we clarify the concept of learning-by-doing by identifying four distinct processes in which learning-by-doing occurs: Integration, whereby the firm incorporates external knowledge and coordinates multiple sources of knowledge to undertake an activity; trial and error, whereby the firm attempts a new activity until it succeeds; repetition, whereby the firm improves the activity by undertaking it multiple times; and extension, whereby the firm takes on a larger and more complex activity. Second, we extend our understanding of how the country of origin influences firm behavior by explaining how particular characteristics of emerging markets (few specialized providers, relative knowledge isolation, rapid market growth, and increasing consumer sophistication) strengthen the relationships between the four learning-by-doing processes and the upgrading of capabilities to international levels. 

This study reviews the literature on multilatinas, Latin American multinationals, and provides suggestions for using these firms as a laboratory for extending existing theories and models of the multinational. Analyses of their behavior tend to discuss their upgrading of capabilities and their patterns of internationalization. An additional opportunity exists to contribute to the literature by analyzing how some of the unique characteristics of Latin American countries affect the internationalization of firms. The review explains how four characteristics of their home countries (political uncertainty, violence, pro-market reforms and reversals, and geographic isolation) can result in the foreign expansion of firms, either because managerial learning of the home country conditions facilitates internationalization (the learning driver), or because the home country conditions induce internationalization to escape those conditions (the escape driver). 

The complex nature of international business research, with its cross-country and multilevel nature, complicates the empirical identification of relationships among theoretical constructs. The objective of this editorial is to provide guidance to help international business scholars navigate this complexity and ensure that readers can trust their findings. We provide suggestions for how to rule out alternative explanations, explaining key considerations not only in empirical analyses, but also in theory building and in research design. Our discussion covers both qualitative and quantitative studies, because we believe that it is imperative to understand how trustworthiness is established in both traditions, even for international business researchers who self-identify with only one. This enables scholars to have a broader scope of knowledge when interpreting past research in the field and to be more adept at explaining their design choices to a diverse audience. 

In this paper, we examine the effects of pro-market institutions on both formal and informal entrepreneurship. While formal entrepreneurship has long been studied in economic literature, informal entrepreneurship has been less frequently discussed. The purpose of this paper, therefore, is not only to examine the impact of pro-market institutions, but also to foster a better understanding of, and introduce a method to measure, informal entrepreneurship. For the purpose of this paper, pro-market institutions are broken into their two main components: economic liberalization and governance levels. The arguments posit that economic liberalization positively impacts both formal and informal entrepreneurship while governance levels have a positive impact on formal entrepreneurship but a negative effect on informal entrepreneurship. Furthermore, governance levels reduce informal entrepreneurship to a greater extent than they increase formal entrepreneurship, resulting in a net reduction in entrepreneurial activity. The analyses of a panel covering 51 countries from 2002–2009 provide robust support for these arguments. 

We analyze how the quality of intellectual property rights (IPR) protection in developing countries impacts patent applications. We extend institutional economics to propose that firms vary in their interpretation of institutions, specifically arguing that foreign and domestic inventors respond to different institutional signals because of their different positions as institutional outsiders and insiders. Thus, we propose that foreign inventors, as institutional outsiders, respond more positively to the quality of IPR protection in countries with more democratic political systems, whereas domestic inventors, as institutional insiders, respond more positively to the quality of IPR protection in countries with higher quality legal systems. 

We analyze how location advantage is created and developed at the country level. We argue that location advantage can be best understood as the result of the interaction between two distinct types of co-evolutionary processes: emergent, whereby location advantage is created as the result of agglomeration dynamics in product and factor markets; and guided, whereby location advantage is created as the result of infrastructure dynamics in institutions and endowments. We illustrate empirically the application of the co-evolutionary perspective and the differences between emergent and guided co-evolutionary processes with the analysis of the development of location advantage in the Costa Rican tourism industry. 

Many manuscripts submitted to the Journal of International Business Studies propose an interaction effect in their models in an effort to explain the complexity and contingency of relationships across borders. In this article, we provide guidance on how best to explain the interaction effects theoretically within and across levels of analysis. First, in the case of interactions within the same level of analysis, we suggest that authors provide an explanation of the mechanisms that link the main independent variable to the dependent variable, and then explain how the interaction variable modifies these mechanisms. Moreover, to ensure that the arguments are theoretically complete, we suggest that authors theoretically rule out the potential reverse interaction effect between the main variable and moderating variable. Second, in the case of interactions across levels of analysis, we suggest that authors identify the cross-level nature of the moderating relationships, specify the level of analysis of the main relationship and the nested nature of the cross-level influences, and theoretically explain these cross-level influences. Additionally, we suggest that authors pay particular attention to nesting in order to theoretically rule out reverse interactions. 

Although the Journal of International Business Studies is not a practice-oriented journal, thinking deeper about the practical relevance of our articles can only help enrich them and help decision makers implement better decisions. However, while many academic articles in social sciences go to great lengths to explain their theoretical and empirical impact, in many cases their explanation of practical relevance is a paragraph in the conclusion section with a few cursory ideas that appear to be an afterthought rather than an integral part of the article. Here we provide suggestions for crafting a practical implications section that is relevant for decision makers. 

I analyze how the study of developing country multinational companies (DMNCs) can help extend theory. The renewed interest in DMNCs has generated a ‘Goldilocks’ debate, with one camp arguing that the analysis of DMNCs is ‘hot’ and requires new theory, another camp arguing that it is ‘cold’ and no new theory is required, and a third camp arguing that it is ‘just right’ and it can be used to extend theory. I follow this third camp and argue that the unique conditions of developing countries influence the internationalization of DMNCs, creating a laboratory for extending theory. I illustrate this idea by reviewing some of the key theories and models of the multinational company and explaining how they can be extended with the study of DMNCs. 

In this paper I refocus attention to the home country and explain the role it plays on the firm’s global strategy. I build on an extended view of the resource-based theory to argue that one can separate the influences of the home country on a firm’s global strategy into two types. First, a direct influence in which the home country becomes a resource for the company that helps or hinders its global strategy depending on the views of the home country in host countries. Second, an indirect influence in which specific characteristics of the home country induce the firm to create resources to operate there, and these resources, in turn, affect the firm’s global strategy. 

The paper analyses the selection of the country in which a firm starts internationalization. It proposes that some firms strategically choose a non-sequential internationalization, that is, they select a country that is dissimilar to their country of origin for their first foreign expansion. The reason for this is that some firms develop, in their home country, three types of knowledge that are useful to overcome foreign expansion difficulties: knowledge to manage complexity, developed by having multiple operations at home; knowledge to manage differences in competitive conditions, developed by operating in business-to-business industries, and knowledge to manage differences in institutional environments, developed by allying to a foreign firm at home. 

We analyse the non‐market advantages of developing‐country multinational companies (DMNCs) over advanced‐economy multinational companies (AMNCs) when both compete in the same host country. Non‐market advantages are advantages based on resources developed by the firm to operate in a country's environment. Building on the resource‐based theory and the concept of distance, we classify dimensions of a country's environment into three types (obligating, pressuring, and supporting) and argue that each type has a different impact on the advantages of DMNCs over AMNCs. First, obligating dimensions are those dimensions in which countries are not more or less developed than others; they are merely different, obligating a firm to develop particular non‐market resources to operate there. In such cases, the advantage of DMNCs over AMNCs cannot be differentiated. Instead, MNCs from more distant home countries have a disadvantage compared to MNCs from less distant countries. This is the traditional conceptualization of distance in the literature. Second, pressuring dimensions are those dimensions in which countries are more or less demanding in pressuring the firm to continuously upgrade its non‐market resources. For these dimensions, DMNCs face a disadvantage against AMNCs, because the latter have more sophisticated non‐market resources than the former. Third, supporting dimensions are those in which countries are more or less developed in their provision of external non‐market resources that support the firm's operations. In this case, DMNCs tend to enjoy an advantage over AMNCs, because the former are better at dealing with a lack of supporting resources than the latter. These last two types of dimensions challenge the commonly held ideas that distance is always directionless and always results in a disadvantage. 

Distinctive features of articles accepted by the Journal of International Business Studies are that they are multidisciplinary in scope and interdisciplinary in content and methodology, and they make a substantial theoretical contribution to international business studies. Failure to meet this last requirement is an often cited reason given by reviewers for article rejection. Sometimes reviewers mean that a manuscript does not conform to the dominant paradigm, in that it is not the next logical step in the study of a phenomenon, or they mean that there is little if any integration of several theories used to explain a phenomenon. However, perhaps the most common underlying meaning when reviewers cite “lack of a theoretical contribution” for rejection is that the nature of the relationships proposed is not well explained. While the first two meanings may be influenced by the specific discipline or methodology involved, this final one is not. In this editorial, we provide a set of guidelines that authors can use to ensure that their paper meets the standard of explaining the logic of the relationships they propose. 

In this paper, we study the frequency of formal R&D investments. We link real options theory to the knowledge‐based view to explain how a firm's knowledge resources influence its frequency of investing in R&D to establish technological options. Specifically, we propose that a firm that lacks internal knowledge resources is more likely to never invest in R&D, a firm that has both internal and external knowledge resources is more likely to sometimes invest in R&D, while a firm that has internal knowledge resources but lacks external knowledge resources is more likely to always invest in R&D. 

This paper studies the relative impact on product innovation of research and development (R&D) collaborations with universities, suppliers, customers, and competitors. It argues that each type of R&D collaboration differs in terms of the breadth of new knowledge provided to the firm and in the ease of access of this new knowledge, resulting in a different impact on product innovation. As a result, it proposes that R&D collaborations with universities are likely to have the highest impact on product innovation, followed by R&D collaborations with suppliers, customers, and, finally, competitors. These arguments are tested on the R&D collaborations undertaken by a sample of 781 manufacturing firms during 1998–2002. The tests find that R&D collaborations with suppliers have the highest positive impact on product innovation, followed by collaborations with universities. Surprisingly, R&D collaborations with customers do not appear to affect product innovation, and collaborations with competitors appear to harm it. Moreover, the positive influence of R&D collaborations with universities and suppliers is sustained over the long‐term, but the negative influence of R&D collaborations with competitors is, fortunately, short‐lived. These findings indicate that ease of knowledge access, rather than breadth of knowledge, appears to drive the success of R&D collaborations for product innovation. R&D collaborations with suppliers or universities, which are characterized by relatively easy knowledge access, have a positive influence on product innovation, whereas R&D collaborations with customers or competitors, which are characterized by reduced ease in knowledge access, are not related or are even negatively related to product innovation. Moreover, to achieve product innovation with the help of R&D collaborations, it appears that the collaboration must first have mechanisms in place to facilitate the transfer of knowledge; once these are in place, it is better if the partner has a relatively narrow knowledge base. Thus, while R&D collaborations with both suppliers and universities are positively related to product innovation, the narrow knowledge base provided by collaborations with suppliers appears to have a larger positive impact on product innovation than the wider knowledge base provided by collaborations with universities. These arguments and findings are important and novel. The paper is one of the first to theoretically explain and empirically show that various types of collaborations have a differential influence on product innovation. It goes beyond previous literature by providing a theoretical logic for ranking the likely impact of types of collaborations on product innovation. The study also suggests to managers to carefully select the partners for their firms' R&D collaborations. Collaborations with suppliers appear to be the most promising for product innovation, followed by collaborations with universities, whereas collaborations with competitors may be detrimental to product innovation. 

This study proposes that promarket reforms positively affect firms' profitability in developing countries because the accompanying improvements in external monitoring decrease firms' agency costs. We also argue that firms benefit unequally from promarket reforms because their agency problems are affected differently, proposing that promarket reforms improve profitability more for domestic state-owned and domestic private firms than for subsidiaries of foreign firms. Analyses of the 500 largest firms in Latin America from 1989 to 2005 support the arguments, suggesting that, contrary to the views of many critics of globalization, domestic firms are the main beneficiaries of promarket reforms in developing countries. 

We analyze the impact of structural reform on firm exports. We argue that structural reform generates new opportunities and reduces transaction costs, inducing firms to improve their efficiency and competitiveness to international levels, therefore, helping them to export. However, we propose that not all companies benefit equally, because firms differ in how structural reform affects their competitiveness. We argue that subsidiaries of foreign firms are the main beneficiaries of structural reform, followed by domestic private firms, and finally by domestic state-owned firms. We test these arguments on a sample of the largest companies in Latin America for the period 1990–2005. We find that structural reform induces firms to export. Furthermore, it has the highest positive impact on the exports of subsidiaries of foreign firms, followed by those of domestic private firms. Surprisingly, we find that structural reform has a negative impact on the exports of domestic state-owned firms. The paper contributes to a better understanding of how changes in institutions affect firm behavior by explaining the mechanisms that link structural reform to firm exports and how these vary across firms. Moreover, by indicating that not only foreign but also domestic private firms benefit from structural reform, it counters the arguments of detractors of globalization who claim that foreign firms are the sole beneficiaries of structural reform. The paper also highlights the need to discuss who benefits from structural reform rather than whether structural reform is beneficial or detrimental. 

Despite the growing involvement of multinational enterprises (MNEs) in foreign-based research and development (R&D), there has been little research comparing R&D investments of subsidiaries of foreign MNEs to domestic firms. Subsidiaries of foreign MNEs enjoy advantages that help them compete against domestic firms. However, when deciding on R&D investments, these advantages exert competing influences on their R&D investment decision. On the one hand, better access to and transfer of knowledge and technologies from the MNE and other subsidiaries and centers of excellence may encourage the subsidiary of a foreign MNE to invest less in R&D relative to a domestic firm. On the other hand, better access to sources of capital through the MNE and other subsidiaries may induce the subsidiary to invest more in R&D in comparison to domestic firms. We find that subsidiaries of foreign MNEs invest less in total R&D than domestic firms. The reason is that they invest less in external R&D than domestic firms; however, they have similar internal R&D investments compared to domestic firms. These findings support the notion that the transfer of technology and knowledge from other parts of the MNE acts as a substitute for the purchase of external R&D while internal R&D acts as a complement to the technology and knowledge transferred from other parts of the MNE. 

We analyze the advantages and disadvantages of developing-country multinational enterprises (MNEs) in comparison with developed-country MNEs. Developing-country MNEs tend to be less competitive than their developed-country counterparts, partly because they suffer the disadvantage of operating in home countries with underdeveloped institutions. We argue that this disadvantage can become an advantage when both types of MNE operate in countries with “difficult” governance conditions, because developing-country MNEs are used to operating in such conditions. The empirical analysis shows that, although developing-country MNEs rarely appear among the largest MNEs in the world, they are more prevalent among the largest foreign firms in the least developed countries (LDCs), especially in LDCs with poorer regulatory quality and lower control of corruption. 

I study the multinationalization — the decision to establish foreign direct investment (FDI) — of developing country firms, in particular Latin American ones or “Multilatinas”. Despite a long exporting tradition, many firms in Latin America have only recently become multinational enterprises (MNEs). The analysis of case studies reveals three insights. First, Multilatinas take a long time to become MNEs, reflecting the additional challenges and need for sophisticated advantages for establishing FDI. Second, Multilatinas are induced to become MNEs after changes in the home country that follow structural reform induce them to upgrade their competitiveness to international levels. As a result, they can overcome the difficulties of establishing FDI and become MNEs. Third, Multilatinas follow four strategies in their selection of the country where to establish FDI first depending on the interplay between difficulties and advantages of operating abroad. These three arguments build on and link the notion of advantages of internationalization put forward by the eclectic paradigm of international production and the idea of difficulties in internationalization presented by the incremental internationalization model. The strategies are explained by the balancing of the ease of overcoming difficulties and the advantages derived from foreign operations. 

We study the causes of the difficulties faced by firms when they internationalize in search of new markets. We build on the resource-based theory to argue that the difficulties in internationalization can be separated into three main sets based on their relationship to advantage: loss of advantage provided by resources transferred abroad; creation of a disadvantage by resources transferred abroad; and lack of complementary resources required to operate abroad. In each set, we further distinguish difficulties that are specific to a firm from those that are common to a set of firms. We argue that only a few of the resulting types of difficulties of internationalization are exclusive to the cross-border expansion, and propose solutions that address the root cause of each type. 

This paper studies the sequence of value-added activities in the multinationalization of firms from developing countries. Analysis of twenty Latin American multinational firms, or Multilatinas, reveals three alternative sequences: start multinationalizing with marketing subsidiaries in all countries, start multinationalizing with production subsidies in all countries, or start multinationalizing with marketing subsidiaries in some countries and production subsidiaries in others. These alternative sequences are explained through the integration and extension of arguments from the incremental model of internationalization and its discussion of difficulties, and the eclectic paradigm of foreign production and its discussion of advantages. I argue that firms that benefit from a location advantage in the country of origin are more likely to start multinationalizing using marketing subsidiaries, firms that benefit from a location advantage in the host country are more likely to start multinationalizing using production subsidiaries, and firms that face difficulties in the transfer of products across countries are more likely to start multinationalizing using production subsidiaries. 

We analyze the influence of a regional economic integration agreement (REIA) on a firm's investments in research and development (R&D). A country's entry into a REIA creates two competing influences on the firm's R&D investments. On the one hand, increased competition in product markets after the REIA would induce the firm to invest in internal R&D to improve its distinctive technological competitiveness. On the other hand, better access to sources of inputs in factor markets after the REIA would induce the firm to purchase external R&D because it can outsource technology more easily. Surprisingly, the empirical analysis shows that the REIA's impact on R&D investment is driven primarily by product markets rather than by factor markets. After the REIA, product markets induce firms not only to invest more in internal R&D but also purchase more external R&D. In contrast, after the REIA factor markets have limited influence on internal or external R&D investments.

We extend the knowledge‐based view by providing an explanation of how firms develop the capability to create knowledge. We take the view that firms are distributed knowledge systems composed of individuals who embody knowledge, and theoretically identify and empirically test the existence and effectiveness of two strategies – organization and project team – that promote their interactions to develop this capability. On the one hand, building on what we call the organization‐level innovation literature, we identify the organization strategy, which suggests investment in organization‐level integrative management practices to facilitate interactions to create knowledge among individuals situated in different parts of the system, independently of when a knowledge‐creation task is established and individuals are organized to create knowledge. On the other hand, building on what we call the team‐level innovation literature, we identify the project team strategy, which suggests investment in project team‐level integrative management practices to facilitate interactions to create knowledge among individuals once a knowledge‐creation task is defined and individuals are placed into teams to create knowledge. The two strategies are substitute approaches for the development of the capability, although the organization strategy appears to better predict outcomes of the capability. However, this approach might be more costly, so not all managers will choose to follow it. 

We analyse the impact of foreign direct investment on domestic investment by emerging market firms. This relationship underlies a key policy debate on whether and how home-country governments should support outward foreign direct investment. While some governments are strongly in favour of supporting their firms’ overseas expansion, many are hesitant as outward foreign investment is considered to replace domestic investment and thus harmful to the home economy. We argue that emerging market firms’ foreign expansion complements rather than substitutes their domestic investment because foreign direct investment enables these firms to increase their efficiency and improve their value chain positioning. 

This chapter explains the benefit of analyzing Mexican multinationals, MultiMexicans, as a laboratory for better understanding of the internationalization of emerging market firms. MultiMexicans are increasingly expanding across countries, and some have become leading firms in their industries. The chapter provides, first, a review of the traditional models of the multinational, which have been based on the study of firms from advanced economies: those that explain the existence of multinationals (the OLI framework, the internalization model, and the knowledge-based view) and those that explain the internationalization process (the product lifecycle model, the incremental internationalization model, and the innovation related model). It then presents a review of models introduced to explain emerging market multinationals: the LLL model, the springboard model, the “new” model of the multinational, and the non-sequential internationalization model. Building on these, the chapter then explains how the analysis of MultiMexicans helps better understand the internationalization of emerging market firms by taking into account the influence of the home country on firm internationalization, and the tradeoffs that emerging market firms face as they expand abroad. The chapter concludes with a summary of the contents of the book and the lessons drawn from the comparison of MultiMexicans in multiple industries. 

This chapter explains how the lessons derived from the analysis of Mexican multinationals, MultiMexicans, in a variety of industries contribute to a better understanding of the strategies used by emerging market firms to upgrade capabilities and internationalize. The chapter explains two main lessons. First, the process of upgrading capability to build an emerging market multinational, and the role played by the characteristics of the home country. The underdevelopment of the country and its institutional weakness influence managers’ skills and mindsets and the industry’s regulation and customer characteristics, thus supporting the funds and technologies available to firms. These, in turn, influence the firm’s capability upgrading and their internationalization speed and breadth. Second, the four alternative upgrading strategies for internationalization that emerging market firms use: Improvement, whereby firms upgrade processes at the local level; Integration, whereby firms upgrade processes at the global level; Inspiration, whereby firms upgrade products at the local level; and Innovation, whereby firms upgrade products at the global level. 

The chapter summarizes the methods used in the analysis of Mexican multinationals, or MultiMexicans. The analysis of these firms is based on the comparison of cases studies. The cases studies were selected on the basis of their ability to provide insights for the analysis of MultiMexicans, covering a wider variety of industries, firm sizes, and level of internationalization. The cases were identified among the leading multinationals in their industries, and data was collected from secondary sources and interviews with company managers. Industry experts analyzed two leading firms in twenty two industries, describing the firms’ capability upgrading and internationalization and drawing conclusions from their comparison. 

I explain how the analysis of emerging country multinationals can be used to help advance theory. I propose that two distinguishing characteristics of emerging economies, their lower level of economic development and their lower level of sophistication of pro-market institutions, can be used to help advance existing theories of the multinational. I discuss how these conditions can be used to modify and undertake a multi-theoretical approach by extending six theories or models that have been used to explain the international expansion of multinational firms: the product life cycle, the incremental internationalization, the eclectic paradigm, internalization theory, neo-institutional theory and the resource-based view. In doing so, I identify some of the assumptions upon which current models and theories are built and extend them by explaining how the study of EMNCs can help identify new arguments. 

I study the relationship between pro-market reforms and the expansion of emerging market multinational companies (EMNCs). Extending institutional economics, I propose a co-evolutionary process, whereby pro-market reforms in emerging markets induce the transformation of domestic firms into EMNCs, and the global expansion of EMNCs, in turn, facilitates the deepening of pro-market reforms in the home country. Specifically, I first explain how pro-market reforms lead to the emergence of EMNCs via international competitiveness, upgrading needs, and escape; I then explain how the global expansion of EMNCs leads to a deepening of pro-market reforms at home via learning, spillovers, and lobbying. I complement these explanations with a discussion of contingencies at the firm (private vs. state, domestic vs. foreign firms), industry (global vs. local industries), and country (developing vs. transition countries) levels. 

We study how the country of origin of a firm influences its internationalization, analyzing emerging economy multinational companies (EMNCs) as a laboratory for extending theory. EMNCs have been observed to vary from advanced economy MNCs (AMNCs), suggesting that the home context is the critical explanation. We propose “resource specialization” as the mechanism explaining differences and argue that firms in emerging economies develop a lower degree of resource specialization and wider sets of resources in response to underdevelopment at home. These more varied sets of resources lead EMNCs to have lower levels of internationalization and different patterns of foreign expansion than AMNCs. 

We explain the importance of studying emerging market multinationals and their potential contribution to the literature. We also summarize the content of the book, which is organized in three sections on different facets of EMNCs. The first section consists of chapters that take a historical view of EMNCs or argue for more research that extracts the lessons of history. The second section analyzes the mechanisms that facilitate or hinder EMNCs from upgrading their capabilities to international levels to compete in global markets. In the third part, we abstract from these themes and explain how the economic and institutional under-development that characterizes developing countries lead to distinctive internationalization behavior by EMNCs. 

We provide an overview of the contributions of the papers in the book and add our own analysis of what is theoretically new or interesting about EMNCs, compared to MNCs from the advanced economies. In addition, we propose an agenda for future research on EMNCs that reflects the collective wisdom of our contributors. Specifically, we discuss how the underdevelopment of the economy and institution that characterize emerging markets have a positive and negative effect on firms that induce their internationalization following eight drivers: trickle-up innovation, self-reliant innovation, improvisation management self-reliant management, technological escape, marketing escape, institutional escape and discriminatory escape. 

In this commentary I analyze global value-chain configuration by EMNEs, specifically describing four strategies that these firms can use in advanced economies to upgrade their capabilities and solve their developing-country comparative disadvantages: Low-cost and reliable finance, technology, customer intelligence and innovation, brands and marketing. I then illustrate the four strategies using the four country studies in this part of the book. 

In this chapter we provide depth to the concept of distance and its impact on international business by separating dimensions of the environment and their associated distances into three  types: 1) those along which countries cannot be ranked by development, but are merely different from one another, obligating firms to develop non-market resources to operate in a different country (obligating dimensions), 2) those along which countries can be ranked by the extent to which they provide non-market resources that support firms’ operations (supporting dimensions), and 3) those along which countries can be ranked by the extent to which they pressure the firm to continuously improve its non-market resources and capabilities (pressuring dimensions). This classification challenges the assumptions that distance is symmetric and always has a negative impact on the multinational company. 

This chapter analyzes the influence of economic integration agreements on the technological capabilities of domestic firms. The review of the literature reveals that most research has focused on how increased competition that accompanies economic integration induces firms to upgrade their technological capabilities. However, economic integration also helps firms upgrade their technological capabilities through the opening of markets, easier access to foreign inputs and intermediate products, and increased public support for R&D. These limitations in existing research result in the identification of two main areas for future research. One is the analysis of the concept of economic integration in more detail, studying how the characteristics of different types of economic integration and the characteristics of countries in the agreement affect the relationship between economic integration and a domestic firm’s technological capabilities. Another is the analysis of the concept of technological capabilities in more depth, studying how different types of firms and alternative mechanisms for technological upgrading react differently to the influence of economic integration on a domestic firm’s technological capabilities. 

This chapter reviews the state of knowledge on a firm’s internationalization process, the sequence of events that a firm follows as it expands outside its country of origin. First I review traditional models and organize them around the questions they answer: How to internationalize, how to enter a country, and how to select among countries in which to expand. I then discuss challenges to these models that have emerged in recent times – the rapid internationalization of small high-tech firms and learning through networks – and indicate how these challenges can be integrated with previous arguments. I continue the review by discussing how new phenomena, offshoring and global supply chains and developing-country multinationals, require new explanations. I conclude with a reflection on research areas that need attention: the transformation from a small and simple to large and complex multinational firm, the reduction of internationalization, and the relationship between internationalization process and performance. 

This chapter analyzes the ways in which firms can use their interactions with customers to generate innovations and better foresight future trends in the marketplace. We discuss how the interaction with customers varies depending on the type of innovation the firm is aiming to achieve: Product improvement, product versioning, new product development, and new product discovery. Each of them has distinct knowledge creation challenges in terms of the identification, transfer, and integration of customer knowledge to create innovations that fulfill their needs and preferences. 

We extend the literature on the difficulties of internationalization by discussing their types and specific consequences associated with each type. The types of difficulties can be separated into three main groups based on their cause and specificity: the inabilities to transfer advantage and to create value, the disadvantages of transfer and of foreignness, and the liabilities of expansion, newness, foreignness, and infrastructure. We discuss how each type has specific consequences associated with it, and suggest strategies for identifying them. 

We build on the resource-based theory (RBT) and the international management literature to analyze the sources of a firm’s advantage in international competition. We propose that the firm can potentially benefit not only from firm-specific sources of advantage –parent, subsidiary, and multinational– but also, contrary to existing RBT arguments, from non-firm-specific ones –home, host, and foreignness. We analyze the conditions under which these provide an advantage to the firm and the location of such advantage. We conclude with a discussion of the use of diverse sources of advantage against different types of competitors. 

We analyze the internationalization process, clarifying and integrating existing research into a more complete and realistic model. We argue that the theories of organizational change that underlie internationalization process models must be made explicit in order to clarify the models’ boundaries. Furthermore, we integrate valid insights into a comprehensive model with an underlying teleological theory of organizational change, providing a more realistic explanation of the internationalization process. 

We analyze the sources of and potential solutions to the difficulties that developed country multinational enterprises (DCMNEs) face when they internationalize into less developed countries (LDCs). Despite being highly competitive and having large resource pools, DCMNEs still encounter difficulties when they enter LDCs. We apply the resource-based theory and the related knowledge-based view of the firm to develop the internationalization literature and explain that such difficulties arise from their lack of advantageous resources, the presence of disadvantageous resources, and their lack of neutral complementary resources, which create related but separable difficulties. We discuss the characteristics of firms and the different types of difficulties they face and analyze how such challenges might be solved through the management and development of resources, particularly knowledge. 

I study the transformation processes used by firms in their quest to develop a competitive advantage in the experimental setting of firms facing radical changes in the institutional environment. The inductive analysis reveals that firms use the co-evolution of resources and scope, the interactive transformation of resources and activities, to manage their transformation in a changing environment, enabling them to upgrade their resources and alter their activities interactively. Additionally, I provide specific motives and processes that drive the relationships among dimensions of resources and activities and link them to the development of the competitive advantage.