Building a strong foothold in an emerging market

A link between resource commitment and environment conditions

Research output: Contribution to journalArticle

43 Citations (Scopus)

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 2004

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Industry
Economics
Resource commitment
Emerging markets
Costs
Multinational enterprises
Cultural distance
Uncertainty
Environmental conditions
Resources
Market uncertainty
Foreign subsidiaries
Economic exposure

ASJC Scopus subject areas

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

Cite this

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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.",
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