Stephen Tallman

Effects of International Diversity and Product Diversity on the Performance of Multinational Firms

This study examined the relationships among international diversity, product diversity, and firm performance. For a sample of large American industrial multinational enterprises (MNEs), it showed a consistent quadratic relationship between product diversification and MNE performance but minimal performance differences across different measures of international diversity. Analysis of the interactions of international diversity and product diversity indicates a weak effect from increasing internationalization on the performance effect of product diversity.

Product and international diversification among Japanese multinational firms

This paper examines the relationship of performance with product and international diversification on Japanese multinational firms from 1977 to 1993. We show the relationships between diversification and performance change over time through the use of multiple time periods and accounting for keiretsu membership. Results show that while diversity strategies vary between keiretsu and non-keiretsu firms, performance is not much different. Across time periods, performance varies considerably, but strategies are less variable. Product diversity has weak effects on firm performance only in one time period, while international diversification has negative profitability and positive growth consequences in in some periods. These results suggest first that diversification strategies and their effects on performance vary across time periods and generally produce some unexpected findings. We do not find strong interactive diversity effects. Copyright

Internationalization, Globalization, and Capability-Based Strategy

Current trends appear to suggest that globally integrated strategies are the wave of the future for many industries, but no theoretically sound, firm-level model explains this situation. International business models explain industry trends from economic perspectives, and organizational theory is beginning to examine the organizing principles of multinational firms, but a gap exists in explaining the strategic motivations of multinational firms as they expand and integrate worldwide. This article develops a capability-driven, as opposed to market-driven, framework of multinational strategy. This contingent framework explains the organizational consequences of international expansion and global integration depending on the capability types, capability strategies, and multinational strategies of the multinational firm.

Make, Buy or Ally? Theoretical Perspectives on Knowledge Process Outsourcing Through Alliances

Outsourcing knowledge and innovation activities offer cost savings and superior performance, but can also put a firms unique resources and capabilities at risk. Characterizations of outsourcing as a make-or-buy decision do not fit well with decisions on knowledge process outsourcing (KPO). KPO is a make-or-ally decision, as firms seek a governance structure that will both protect and leverage their strategic knowledge assets, with the final decision often coming down to a choice between different alliance forms. Our new conceptualization provides an integrated perspective on resource integration and transaction specificity in the knowledge governance decision. The model illustrates the dynamics and learning involved in knowledge outsourcing by identifying two distinct paths to KPO alliances.

A Strategic Management Perspective on Host Country Structure of Multinational Enterprises

This article proposes that the oligopoly power and internalization models of the multinational enterprise should be reviewed in light of the newly developing resource-based model of strategy and managerial decision-making models of strategic management. The perspective described here suggests that strategy-making under conditions of uncertainty and the drive to gain competitive advantage from deployment of firm-specific resources are important issues in the internalization decision of the MNE in a host market. The role of transaction cost efficiency in generating subsidiary governance structures is redefined to be compatible with the demands of these additional considerations of the multinational strategic manager.

When Do Acquisitions Facilitate Technological Exploration and Exploitation

Previous research has suggested that firms need to balance exploitation and exploration. Acquisitions can be used as a way to explore (i.e., develop new areas of technological expertise) or exploit (i.e., reinforce existing technological capabilities). This article examines acquisitions in the semiconductor industry to answer the following question: Under what conditions do acquisitions facilitate exploitation and/or exploratory activity by the acquirer firm? The authors posit that an acquirer firm’s ability to develop such exploratory innovation is a function of three key factors: opportunity available to the acquirer firm for exploration, ability of the acquirer firm to effectively assimilate and establish innovations in new technologies, and extent of control of target firm postacquisition. The results demonstrate strong support for the hypotheses indicating the benefits of target technological uniqueness and for the moderating effects of commonality between acquirer and target firms in geographic bases for exploration. However, the findings contradict expectations about the effects of mergers and suggest that merger enables the acquirer to engage in effective exploration. For exploitation, the authors find negative effects of target technological uniqueness and positive effects of commonality of geographic bases.

Knowledge Spillovers and Alliance Formation

Our study examines the conditions under which firms enter into strategic alliances subsequent to knowledge spillovers. We propose that spillovers serve as signals of knowledge dependence and potential complementarity, encouraging alliance formation to enable better learning and limit appropriation. We posit that the likelihood of a knowledge alliance subsequent to a spillover is contingent on the specialization of each of the firms in the knowledge involved in the spillover. We also hypothesize that the effects of such specialization on knowledge alliance formation are moderated by technological ties and geographic distance between the dyad involved in the spillover. Our results demonstrate significance for the effects of specialization, supporting learning and appropriation motivations. Technological ties strengthen while geographic distance weakens the relationship between specialization and alliance formation.

Contextual Moderating Effects and the Relationship of Firm-Specific Resources, Strategy, Structure and Performance among Japanese Multinational Enterprises

This paper develops and tests a path analytic model of resource value-strategy-structure-performance relationships for multinational enterprises (MNEs) in which resource and strategic variables are interdependent.

JOHN DUNNING’S ECLECTIC MODEL AND THE BEGINNINGS OF GLOBAL STRATEGY

John Dunning’s Eclectic Model, introduced in 1976 (Dunning, 1977) and refined by him several times since then (1988, 1993), is a key contribution to the separation of international business studies (IBS) from international economics and trade theory and to the development of global strategy. Dunning’s proposed model was preceded by Stephen Hymer’s (1960) application of industrial organization economics to the study of international trade and investment, and Ray Vernon’s (1966) definition of an international product lifecycle, both critical steps for IBS away from macro-economic trade theory. He was contemporaneous with the work of McManus (1972) and Buckley and Casson (1976) that introduced Coasian economics to the study of international markets and multinational firms. He was also working at the same time that Stopford and Wells (1971) began the work that led to much of the modeling of global industries at Harvard University. These and related works were important to the development of IBS. However, these other models tended to take a narrowly defined perspective and therefore to examine only a part of the rapidly expanding phenomenon of the global firm. They also tended toward industry-level analysis. Dunning’s Eclectic Model, however, by its inclusive nature, opened up the study of multinational firms to broader influences from organizational studies and business strategy. Its strong grounding in economic theory provided a basis for further development and for the integration of strategic models based on similar theories, while its focus on firm-level characteristics provided opportunities to incorporate new ideas from organizational studies into the study of international strategy. For this reason, I see it as the key theoretical model in the process of turning IBS from a mix of macro-level theoretical approaches to national differences and case-based analysis of industry effects into theoretically grounded studies of business organizations functioning in extra-national markets. While Dunning himself makes the point that the Eclectic Model is aimed at the study of multinational firms (1988), not at evaluating individual firm decisions, it does provide a framework for both descriptive and normative studies of individual firms. This shift in emphasis brought much new insight to the study of international business and added considerable richness to developing theory in strategic management and other business disciplines. It has also led to the incorporation of IBS into most business disciplines and a concomitant decline in the study of international business as a separate area for scholarly endeavor – a sometimes disconcerting example of the law of unintended effects.

Outsourcing of customer relationship management: implications for customer satisfaction

If knowledge about customers is a central driver of strategic marketing success and customer relationships lie at the heart of a firms competitive advantage, why do many firms outsource aspects of customer relationship management (CRM)? This paper addresses this question by developing a conceptual model based on transaction costs economics (TCE), tests it with a cross-industry sample of managers, and draws out the implications for theory and practice. TCE-based antecedents explain most, but not all, CRM outsourcing decisions, with the resource-based value of the firm (RBV) and real options theory offering potential explanations for relationship between CRM outsourcing and technical uncertainty.