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.
Gammeltoft, P., & Cuervo-Cazurra, A. 2021. Enriching internationalization process theory: insights from the study of emerging market multinationals. Journal of International Management, 100884.
We argue and explain how the study of emerging market multinational companies can help enrich our understanding of the internationalization process. Firms' internationalization process is a central and enduring theme in international business. However, most of the theoretical models are built on the analysis of advanced economy multinationals. Emerging market multinationals differ crucially in the role that the home country plays in their behavior, resulting in different patterns of internationalization. We propose that the discussion of the applicability of extant theory can be advanced by differentiating internationalization theories according to three different ontological perspectives: resource oriented, transaction oriented, and process oriented. We further suggest that the study of emerging market multinationals' internationalization processes reveals three contextual accelerators: government, catch-up, and global value chains. These accelerators help adapt internationalization process models to new contextual realities.
Bu, J., & Cuervo-Cazurra, A. 2020. Informality costs: Informal entrepreneurship and innovation in emerging economies. Strategic Entrepreneurship Journal, 14 (3): 329-368.
We analyze the impact of informal entrepreneurship on innovation in emerging markets. Building on agency and imprinting theories, we introduce the concept of informality costs, that is, the higher agency costs from adverse selection and moral hazard problems caused by a firm’s informal creation. These informality costs become imprinted and affect internal agency relationships among employees and managers and external agency relationships with suppliers and distributors, constraining the firms’ incentives and ability to innovate even after formalization. As a result, informally created firms engage more in imitative and less in innovative new product development. We further propose that changes in ownership and the innovation environment alter the persistence of informality costs. Specifically, foreign firm and business group ownership reduces the persistence of informality costs and results in more innovativeness, while state ownership heightens informality costs and leads to less innovativeness. Moreover, improvements in national innovation systems decrease informality costs, strengthening the innovativeness of informally created firms.
Cuervo-Cazurra, A. Doz, Y., and Gaur, A. 2020. Skepticism on globalization and global strategy: Increasing regulations and countervailing strategies. Global Strategy Journal, 10 (1): 1-20.
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.
Cuervo-Cazurra, A., Gaur, A., Singh, D. 2019. Pro-market institutions and global strategy: The pendulum of pro-market reforms and reversals. Journal of International Business Studies, 50 (4): 598-632.
We review the literature analyzing the impact of pro-market institutions on firms’ global strategy. We propose that the ideological tension between whether the government or the market should drive economic development results in a pendulum of pro-market reforms and reversals that drive changes in firm strategy and performance. Much progress has been made in the analyses of pro-market reforms and their impact on firms’ international strategies and performance. However, there is a need to further learn about four areas: (1) the concept of pro-market institutions, in particular the variety of institutional dimensions, the measures, and the influence of informal institutions on firm strategies; (2) the drivers of changes in pro-market institutions, especially firms’ influences and the co-evolution of firm strategies and institutional changes; (3) the implications of changes in pro-market reforms for the interactions among integration, diversification, and internationalization strategies, the causality chains connecting institutions and strategies, and the reconfiguration of activities globally; and (4) the non-traditional moderators that alter the impact of pro-market institutional dynamics on firms’ strategies, such as country-level political systems, industry-level competitor reactions, and individual-level managerial capabilities and perceptions.
Cuervo-Cazurra, A., Mudambi, R., & Pedersen, T. 2019. Subsidiary power: Loaned or owned. The lenses of agency theory and the resource dependence theory. Global Strategy Journal, 9 (4): 491-501.
We analyze power relationships in subsidiaries of multinational firms. We explain how despite many advances in the literature, there is still an unresolved debate between two theoretical perspectives, agency theory and resource dependence, in their resolution of the critical question of whether subsidiary power is loaned or owned. We develop an overarching framework that encompasses both agency theory and resource dependence theory as the two pillars to understand decision‐making by managers in subsidiaries. We propose that agency theory applies more when the subsidiary's decision rights are “loaned” by headquarters, while resource dependence theory applies more when the subsidiary “owns” its decision rights. We also explain how subsidiary evolution integrates the arguments of these two theories as the theories apply at different stages of evolution.
Cuervo-Cazurra, A., Mudambi, R., & Pedersen, T. 2019. Clarifying the relationships between institutions and global strategy, Global Strategy Journal, 9 (2): 151-175.
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.
Asakawa, K., Cuervo-Cazurra, A., & Un. A. 2019. Frugality-based advantage. Long Range Planning, 52 (4): 101809.
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.
This paper aims to analyze how emerging market firms upgrade their capabilities by focusing on “uncommoditizing strategies” that enable them to achieve levels of international competitiveness beyond the comparative advantages of their home countries and serve markets with premium pricing, quality, and reputation of products. The authors studied 18 Latin American companies across six countries. Latin America represents an ideal setting because many of these countries have traditionally developed using natural resource endowments, and their firms have tended to rely on these in their internationalization. To facilitate the analysis of each case and the comparisons across cases, the authors used the same analytical framework for the companies, identifying the sources of differentiation and cost efficiency strategies that enabled these firms to upgrade their capabilities and compete on the basis of premium pricing, quality, and reputation. The analysis identified a general framework that represents an abstraction of the actions taken by these companies over time. The proposed model consists of three main elements used to pursue uncommoditizing strategies: tropicalized innovation, global efficiency, and coordinated control. Recent research on emerging market firms has shown interest in how these firms upgrade their capabilities. This paper contributes to this stream of research by providing an overarching framework that not only bridged previous narrower studies but also explained how firms can develop uncommoditizing strategies to upgrade their capabilities. Further, this paper helps managers by providing a comprehensive yet succinct overview of the main strategies that they can use to help their firms to achieve international competitiveness.
Banalieva, E., Cuervo-Cazurra, A., Sarathy, R. 2018. Dynamics of Pro-Market Institutions and Firm Performance. Journal of International Business Studies, 49 (7): 858-880.
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.
Cuervo-Cazurra, A. Nieto. M. J., Rodriguez, A. 2018. The impact of R&D sources on new product development: Sources of funds and the diversity versus control of knowledge debate. Long Range Planning, 51 (5): 649-665.
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.
Cuervo-Cazurra, A., Luo, Y., Ramamurti, R., & Ang, S. H. 2018. The impact of the home country on internationalization. Journal of World Business, 53 (5): 593-604.
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.
Cuervo-Cazurra, A., Mudambi, R., and Pedersen, T. 2018. The boundaries of the firm in global strategy. Global Strategy Journal, 8(2): 211-219.
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.
Cuervo-Cazurra, A., Ciravegna, L., Melgarejo, M., and Lopez, L. 2018. Home country uncertainty and the internationalization-performance relationship: Building an uncertainty management capability. Journal of World Business, 53 (2): 209-221.
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.
Cuervo-Cazurra, A. 2018. Thanks but no thanks: State-owned multinationals from emerging markets and host country policies. Journal of International Business Policy, 1 (3–4): 128-156.
I study the impact of the internationalization of state-owned companies from emerging markets on host-country government policy. Whereas the literature commonly recommends that host-country governments design policies to attract foreign direct investment, governments instead question or block investments by state-owned firms from emerging markets. I address this conflict between theory and practice by separating the causes of this behavior into six types depending on the characteristics of the firm (i.e., state ownership and emerging market origin) and the logic (i.e., economics, politics, and psychology). I suggest the development of ex-ante rule-based policies that provide clarity, address concerns, and support the benefits of inward investments, while limiting state capture by domestic interests. Thus, I explain how economic concerns over national security sectors and strategic technologies can be dealt with via exclusion, the political worries over opacity and weak governance can be addressed through monitoring, and the psychological anxieties of unfriendly governments and loss of relative status can be ameliorated using controls.
Cuervo-Cazurrra, A., Mudambi, R., and Pedersen, T. 2017. Globalization: Rising skepticism. Global Strategy Journal, 7(2): 155-158.
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.
Aguilera, R., Ciravegna, L., Cuervo-Cazurra, A., Gonzalez-Perez, M. A. 2017. Multilatinas and the internationalization of Latin American firms. Journal of World Business, 52 (4): 447-460.
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.
Barnard, H., Cuervo-Cazurra, A., and Manning, S. 2017. Africa business research as a laboratory for theory-building: Extreme conditions, new phenomena and alternative paradigms of social relationships. Management and Organization Review, 13 (3): 467-495.
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.
Cuervo-Cazurra, A., and Rui, H. 2017. Barriers to absorptive capacity in emerging market firms. Journal of World Business, 52 (6): 727-742.
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.
Wang, S., and Cuervo-Cazurra, A. 2017. Overcoming human capital voids in underdeveloped countries. Global Strategy Journal, 7(1): 36-57.
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.
Cuervo-Cazurra, A., Mudambi, R., Pedersen, T., and Piscitello, L. 2017. Research methodology in global strategy research. Global Strategy Journal, 7(3): 233-240.
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.
Rui, H., Cuervo-Cazurra, A. and Un. C. A. 2016. Learning-by-doing in emerging market multinationals: Integration, trial and error, repetition, and extension. Journal of World Business, 51: 686-699.
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.
Cuervo-Cazurra, A. 2016. Multilatinas as a source of new theoretical insights: The learning and escape drivers of international expansion. Journal of Business Research, 69 (6): 1963-1972.
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).
Cuervo-Cazurra, A., Andersson, U., Brannen, M. Y., Nielsen, B. B. and Reuber, R. 2016. Can I trust your findings? Trustworthy research in international business research. Journal of International Business Studies, 47(8): 881-897.
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.
Cuervo-Cazurra, A. Narula, R. and Un, C. A. 2015. Internationalization motives: Sell more, buy better, upgrade and escape. Multinational Business Review, 23: 25-35.
The purpose of this the paper is to review the motives for internationalization to clarify previous arguments and provide a theory-driven classification. The authors build on behavioral economics and propose a classification of internationalization motives as the result of the interaction among two dimensions, an economics-driven exploitation of existing resources or exploration of new resources, and a psychology-driven search for better host country conditions or avoidance of poor home country conditions. These two dimensions result in four internationalization motives: sell more, in which the company exploits existing resources at home and obtains better host country conditions; buy better, in which the company exploits existing resources abroad and avoids poor home country conditions; upgrade, in which the company explores for new resources, and it obtains better host country conditions; and escape, in which the company explores for new resources and avoids poor home country conditions. This theory-driven classification provides predictive power for future analyses of internationalization motives.
Cuervo-Cazurra, A. and Narula, R. 2015. A set of motives to unite them all? Revisiting the principles and typology of internationalization motives. Multinational Business Review, 23: 2-14.
The purpose of this paper is to introduce the debate forum on internationalization motives of this special issue of Multinational Business Review. The authors reflect on the background and evolution of the internationalization motives over the past few decades, and then provide suggestions for how to use the motives for future analyses. The authors also reflect on the contributions to the debate of the accompanying articles of the forum. There continue to be new developments in the way in which firms organize themselves as multinational enterprises (MNEs), and this implies that the “classic” motives originally introduced by Dunning in 1993 need to be revisited. Dunning’s motives and arguments were deductive and atheoretical, and these were intended to be used as a toolkit, used in conjunction with other theories and frameworks. They are not an alternative to a classification of possible MNE strategies. This paper and the ones that accompany it, provide a deeper and nuanced understanding of internationalization motives for future research to build on.
Dau, L. and Cuervo-Cazurra, A. 2014. To formalize or not to formalize: Entrepreneurship and pro-market institutions. Journal of Business Venturing, 29 (5): 668-686.
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.
Khoury, T., Cuervo-Cazurra, A., and Dau, L. 2014. Institutional outsiders and insiders: The response of foreign and domestic inventors to the quality of intellectual property rights protection. Global Strategy Journal, 4(3): 200-220.
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.
Cuervo-Cazurra, A., Martin de Holan, P., and Sanz, L. 2014. Location advantages: Emergent and guided co-evolutions. Journal of Business Research, 67(4): 508-515.
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.
Andersson, U., Cuervo-Cazurra, A. and Nielsen, B. B. 2014. Explaining interaction effects within and across levels of analysis. Journal of International Business Studies, 45: 1063-1071.
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.
Cuervo-Cazurra, A., Caligiuri, P., Andersson, U., and Brannen, M. Y. 2013. How to write articles that are relevant to practice. Journal of International Business Studies, 44: 285-289.
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.
Cuervo-Cazurra, A. 2012. Extending theory by analyzing developing country multinational companies: Solving the Goldilocks debate. Global Strategy Journal, 2(3): 153-167.
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.
Cuervo-Cazurra, A. 2011. Global strategy and global business environment: The direct and indirect influences of the home country on a firm’s global strategy. Global Strategy Journal, 1(3-4): 382-386.
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.
Cuervo-Cazurra, A. 2011. Selecting the country in which to start internationalization: The non-sequential internationalization argument. Journal of World Business, 46(4): 426-437.
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.
Cuervo-Cazurra, A., and Genc, M. 2011. Obligating, pressuring, and supporting dimensions of the environment and the non‐market advantages of developing‐country multinational companies. Journal of Management Studies, 48(2): 441-445.
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.
Thomas, D. C., Cuervo-Cazurra, A., and Brannen, M. Y. 2011. Explaining theoretical relationships in international business research: It’s about the arrows linking the boxes. Journal of International Business Studies, 42: 1073-1078.
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.
Cuervo-Cazurra, A., and Un, C. A. 2010. Why some firms never invest in formal R&D. Strategic Management Journal, 31(7): 759-779.
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.
Un, C. A., Cuervo-Cazurra, A., and Asakawa, K. 2010. R&D collaborations and product innovation. Journal of Product Innovation Management, 27(5): 673-689.
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.
Cuervo-Cazurra, A., and Dau, L. A. 2009. Pro-market reforms and firm profitability in developing countries. Academy of Management Journal, 52(6): 1348-1368.
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.
Cuervo-Cazurra, A., and Dau, L. A. 2009. Structural reform and firm exports. Management International Review, 49(4): 479-507.
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.
Un, C. A., and Cuervo-Cazurra, A. 2008. Do subsidiaries of foreign MNEs invest more in R&D than domestic firms? Research Policy, 37(10): 1812-1828.
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.
Cuervo-Cazurra, A., and Genc, M. 2008. Transforming disadvantages into advantages: Developing country MNEs in the least developed countries. Journal of International Business Studies, 39(6): 957-979.
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.
Cuervo-Cazurra, A. 2008. The multinationalization of developing country MNEs: The case of Multilatinas. Journal of International Management, 14(2): 138-154.
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.
Cuervo-Cazurra, A., Maloney, M., and Manrakhan, S. 2007. Causes of the difficulties in internationalization. Journal of International Business Studies, 38(6): 709-725.
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.
Cuervo-Cazurra, A. 2007. Sequence of value-added activities in the internationalization of developing country MNEs. Journal of International Management, 13(3): 258-277.
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.
Cuervo-Cazurra, A., and Un, C. A. 2007. Regional economic integration and R&D investment. Research Policy, 36(2): 227-246.
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.
Un, C. A., and Cuervo-Cazurra, A. 2004. Strategies for knowledge creation in firms. British Journal of Management, 15(S1): 27-41.
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.