Building a strong foothold in an emerging market: A link between resource commitment and environment conditions

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47 Scopus citations

Abstract

This study examines how MNEs align resource commitment with environmental conditions (challenges and opportunities) when they invest in a foreign emerging market. MNEs often face a dilemma in allocating resources to this environment: without this commitment, they cannot build a strong competitive foothold; yet with over-commitment, there is excessive economic exposure. Our analysis of MNEs in a major emerging market suggests that resource commitment is an inverse function of market uncertainty and this inverse link is stronger for less strategically proactive MNEs. Resource commitment is also an increasing function of market opportunities and this function is stronger for firms emphasizing demand-side (as opposed to cost-side) gains. In addition, in a highly volatile industry, resource commitment is negatively associated with cultural distance, but in a relatively stable industry, it is positively associated with cultural distance. And finally, as foreign subsidiaries become older, the influence of cultural distance on resource commitment is weakened.

Original languageEnglish (US)
Pages (from-to)749-773
Number of pages25
JournalJournal of Management Studies
Volume41
Issue number5
DOIs
StatePublished - Jul 1 2004

ASJC Scopus subject areas

  • Business and International Management
  • Strategy and Management
  • Management of Technology and Innovation

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