Yadong Luo

Dynamic capabilities in international expansion

This article articulates a dynamic capability perspective on international business. The three essential ingredients of dynamic capability--capability possession (distinctive resources), capability deployment (resource allocation), and capability upgrading (dynamic learning)--have become increasingly fundamental to international expansion and global operations. Capability possession is critical to gaining competitive advantages and determining firm-level strategies to exploit such advantages. Capability deployment is crucial to mitigating the disadvantages of foreignness and preempting emerging opportunities. Capability upgrading is essential to the evolutionary development of sustainable advantages and creating new bundles of resources. Each of these capabilities is a necessary condition for sustained success in todays world economy characterized by increasing technological advancement and business globalization.

Determinants of Entry in an Emerging Economy: A Multilevel Approach

The dynamics of the world economy and global competition patterns are encouraging multinational enterprises (MNEs) to expand into emerging economies. This study validates the proposition that entry mode selection in an emerging economy is influenced by situational contingencies at four levels: nation, industry, firm, and project. Analysis of data collected from China suggests that the joint venture is preferred when perceived governmental intervention or environmental uncertainty is high or host country experience is low. The wholly-owned entry mode is preferred when intellectual property rights are not well protected, the number of firms in the industry is growing fast, the need for global integration is high, or the project is located in an open economic region. The importance of these multilevel determinants requires simultaneous and inseparable considerations of the risk, return, control, and resource effects of the entry mode decision. This necessitates a theoretical integration of multiple perspectives such as transaction cost, the eclectic paradigm, bargaining power, and organizational capability.

Strategic alignment and performance of market-seeking MNCS in China

This study explores the environment–strategy–performance relation of foreign firms, especially those with a market‐seeking mandate, in China. The results indicate that the Analyzer orientation is best suited to the turbulent Chinese market, which has been undergoing an economic transition in recent years. There is also a significant difference in financial performance among market‐seeking MNCs depending on strategic orientations, with the Analyzer orientation producing the highest performance. The Prospector and the Defender orientations lead to poor financial performance because of the mismatch with Chinas market, which is highly dynamic and complex. Our findings reiterate the importance of understanding local market traits and opportunities and developing proper strategic configurations for market‐seeking MNC subsidiaries, especially in an emerging economy like China. Copyright

Capability Exploitation and Building in a Foreign Market: Implications for Multinational Enterprises

This study examines environmental and organizational factors that influence a multinational enterprises (MNEs) capability exploitation and building in a complex foreign market. Analysis of data from 167 MNE subunits in the Peoples Republic of China suggests that capability exploitation and capability building are inversely associated with environmental complexity and industrial uncertainty. Business cultural specificity impedes capability exploitation but not capability building. While capability exploitation is associated with the use of wholly owned entry mode, capability building is linked to the joint venture mode. MNEs seeking local market expansion also deploy greater capability exploitation and building than those seeking export market growth. Our analysis further suggests that the threats of environmental hazards on capability building are reduced when the joint venture entry mode is used. An appropriate alignment of capability exploitation or building with its identified determinants is found to be associated with high performance.

Antecedents and Consequences of Personal Attachment in Cross-Cultural Cooperative Ventures

This study examines how personal attachments between boundary spanners within cross-cultural international cooperative ventures (ICVs) are established and their association with venture performance. Results of analysis of 282 ICVs in an emerging market (Peoples Republic of China) show that the development of personal attachment depends on factors at three levels. At the individual level, attachment is an increasing function of overlap in tenure between boundary spanners. At the organizational level, attachment is heightened by goal congruity between the parent firms but is impeded by cultural distance. At the environmental level, market disturbance and regulatory deterrence lead to strong attachments. Such attachments stimulate an ICVs process performance and increase financial returns.

Does Guanxi Influence Firm Performance

It is widely acknowledged that guanxi constitutes a key strategic factor affecting firm performance in the greater China area. However, very little empirical research on the issue has been done in the literature. In this study we explore the systematic linkage between guanxi and firm performance from a business strategy perspective. The evidence shows that guanxi-based business variables have a profound and positive impact on firm efficiency and growth.

Building Trust in Cross-Cultural Collaborations: Toward a Contingency Perspective

This study examines the trust-performance link in international strategic alliances (ISAs) from a contingency view. Departing from previous research, we argue that the trust-performance link varies according to its underlying contingency variables such as alliance age, risk commensuration, market uncertainty, resource interdependency, and reciprocal commitment. Our analysis of 255 ISAs in a dynamic environment (the People’s Republic of China) suggests that trust plays a stronger role in improving ISA performance such as sales and profitability when an alliance is younger, risk is more commensurate between parties, market is less volatile, interpartner dependency in resources is greater, and commitment to the ongoing partnership from each party is higher. Cultural distance between alliance parties does not moderate the trust-performance link but influences the level of trust.

Determinants of local responsiveness: perspectives from foreign subsidiaries in an emerging market

This study examines various determinants of local responsiveness as perceived by MNE subsidiary managers in a dynamic environment. It proposes and validates three levels of factors affecting responsiveness, including environmental, structural, and organizational. Analysis of data containing 168 MNE subsidiaries in the People’s Republic of China suggests that environmental complexity and business culture peculiarity heighten local responsiveness. Structural factors such as competition intensity, demand heterogeneity, and component localization elevate local responsiveness. A subsidiary’s local market orientation and the strength of its established network with the business community and governmental agencies also propel such responsiveness. Finally, there is a stronger relationship between environmental and industrial factors and responsiveness for firms seeking local market expansion than for those pursuing export growth.

Impact of product pricing and timing of investment decisions on supply chain co-opetition

Abstract In supply chain co-opetition, firms simultaneously compete and co-operate in order to maximize their profits. We consider the nature of co-opetition between two firms: The product supplier invests in the technology to improve quality, and the purchasing firm (buyer) invests in selling effort to develop the market for the product before uncertainty in demand is resolved. We consider three different decision making structures and discuss the optimal configuration from each firm’s perspective. In case 1, the supplier invests in product quality and sets the wholesale price for the product. The buyer then exerts selling effort to develop the market and following demand potential realization, sets the resale price. In case 2, the supplier invests in product quality followed by the buyer’s investment in selling effort. Then, after demand potential is observed, the supplier sets the wholesale price and the buyer sets the resale price. Finally, in case 3, both firms simultaneously invest in product quality and selling effort, respectively. Subsequently, observing the demand potential, the supplier sets the wholesale price and the buyer sets the resale price. We compare all configuration options from both the perspective of the supplier and the buyer, and show that the level of investment by the firms depends on the nature of competition between them and the level of uncertainty in demand. Our analysis reveals that although configuration 1 results in the highest profits for the integrated channel, there is no clear dominating preference on system configuration from the perspective of both parties. The incentives of the co-opetition partners and the investment levels are mainly governed by the cost structure and the level of uncertainty in demand. We examine and discuss the relation between system parameters and the incentives in desiging the supply contract structure.

MANAGING HUMAN RESOURCES IN CROSS-BORDER ALLIANCES

The media often portray business organizations as warring enemies who define their own success by the demise of their competitors. Executives sometimes use similar imagery to motivate their “troops.” What such images ignore are the strong interdependencies among business organizations and the degree to which cooperation results in mutual gains. Just as nations have discovered the benefits of economic cooperation, businesses have learned that success often depends on forming strategic alliances.