Introduction to International Business
Final Exam IIB
(chapter 1-16)
Second edition of ‘International Business
Strategy’ by Alain Verbeke, chapter 1-16
Chapter 1: Conceptual foundations of
international business strategy
IB is concerned with the relation between a firm and its new
host country environment. Each firm has got something
unique and that makes it competitive and successful. How
can his firm use this unique “thing” and sell to foreigners or
go to other countries to sell from there?
Where do you locate what type of activity in which
way, and what effect does this have on firm and
environment?
Type: Efficiency & natural resource seeking Market seeking
Strategic asset (e.g. knowledge seeking)
Where: Location decision / geography (distance is
multidimensional concept, geographical, institutional,
cultural, economic)
Which way: Organizational aspect, e.g. entry modes
(Strategic alliance, merger and acquisition, but also
headquarter- subsidiary relationships)
,What effect: Impact of MNE on home and host country
economy and society (competition effects, spillover effects)
Firms and multinationals should develop unique resources
- Physical resources (natural resources, buildings, plant
equipment)
- Financial resources (equity and borrowed capital)
- Human resources (individuals and teams, entrepreneurial
and operational skills)
- Upstream knowledge (product and process-related
technological knowledge).
- Downstream knowledge (marketing, sales, distribution and
after sales service).
- Administrative knowledge (organizational structure, culture
and systems).
- Reputational resources (brand names, reputation for honest
business dealings).
Building upon its resource base, as well as its access to
location advantages, the MNE will develop key resources
(e.g., brand names, patents) and routines, and will also
engage in resource recombination.
This will create a firm specific advantage →FSAs reflect the
firm’s distinct strengths vis-à-vis rivals, and are the source of
its competitive advantage in the market place.
,Routines: The distinct ability to combine further the firm’s
resources, in unique ways valued by the firm’s stakeholders.
Routines are stable patterns of decisions and actions that
coordinate the productive use of resources, and thereby
generate value, whether domestically or internationally. So
not just able to develop a resource once, but over and over!
Recombination of existing resources in new ones:
Constitutes the heart of international business strategy. Artful
orchestration of resources, especially knowledge bundles, as
a response to differences between national and foreign
environments, and to satisfy new stakeholder demands in
these foreign environments. Entrepreneurial judgment is at
the heart of the MNE’s recombination capability.
Stand-alone resources + routines + recombination skills =
Firm specific advantages
Pyramid:
On the broad basis of the location advantages of the home
country (LAs)
The firm builds a smaller subset of FSAs that are location
bound (LB)
And then a still smaller subset of FSAs that are non-location
bound (NLB)
1. Internationally transferable FSAs and the four MNE
archetypes
MNE = multinational enterprises
, When crossing its home country border to create value in a
host country, the MNE is at disadvantage as compared to
firms from the host country → additional costs of doing
business abroad, resulting from cultural, economic,
institutional and spatial distance between home and host
country environments.
In order to overcome these additional costs, the MNE must
have proprietary internal strengths → non-location-bound
FSAs; don’t stop creating value when the border is crossed,
precise value may be somewhat different.
When faces with natural of government-imposed trade
barriers, the MNE may transfer some FSAs abroad directly, as
‘intermediate’ products. The exploitation of FSAs transferred
abroad can also be done by external actors or by network
partners →may add their own complementary resources
→strengthen the MNE’s position in the foreign marketplace
by filling resource gaps.
Paradox: if the FSA consists of easily codifiable knowledge,
the costs of FSA transfer, deployment and exploitation may
be low, but the potential value that can be derived from
actually deploying and exploiting the FSA may also be
relatively low, namely if competitors can easily imitate what
the MNE is best at.
Hence, FSAs that are difficult to imitate and unique for a firm
are the more important FSAs because these cannot be copied
easily.
Though it’s expensive and time-consuming to transfer, deploy
and exploit tacit knowledge across borders, the benefit to the
Final Exam IIB
(chapter 1-16)
Second edition of ‘International Business
Strategy’ by Alain Verbeke, chapter 1-16
Chapter 1: Conceptual foundations of
international business strategy
IB is concerned with the relation between a firm and its new
host country environment. Each firm has got something
unique and that makes it competitive and successful. How
can his firm use this unique “thing” and sell to foreigners or
go to other countries to sell from there?
Where do you locate what type of activity in which
way, and what effect does this have on firm and
environment?
Type: Efficiency & natural resource seeking Market seeking
Strategic asset (e.g. knowledge seeking)
Where: Location decision / geography (distance is
multidimensional concept, geographical, institutional,
cultural, economic)
Which way: Organizational aspect, e.g. entry modes
(Strategic alliance, merger and acquisition, but also
headquarter- subsidiary relationships)
,What effect: Impact of MNE on home and host country
economy and society (competition effects, spillover effects)
Firms and multinationals should develop unique resources
- Physical resources (natural resources, buildings, plant
equipment)
- Financial resources (equity and borrowed capital)
- Human resources (individuals and teams, entrepreneurial
and operational skills)
- Upstream knowledge (product and process-related
technological knowledge).
- Downstream knowledge (marketing, sales, distribution and
after sales service).
- Administrative knowledge (organizational structure, culture
and systems).
- Reputational resources (brand names, reputation for honest
business dealings).
Building upon its resource base, as well as its access to
location advantages, the MNE will develop key resources
(e.g., brand names, patents) and routines, and will also
engage in resource recombination.
This will create a firm specific advantage →FSAs reflect the
firm’s distinct strengths vis-à-vis rivals, and are the source of
its competitive advantage in the market place.
,Routines: The distinct ability to combine further the firm’s
resources, in unique ways valued by the firm’s stakeholders.
Routines are stable patterns of decisions and actions that
coordinate the productive use of resources, and thereby
generate value, whether domestically or internationally. So
not just able to develop a resource once, but over and over!
Recombination of existing resources in new ones:
Constitutes the heart of international business strategy. Artful
orchestration of resources, especially knowledge bundles, as
a response to differences between national and foreign
environments, and to satisfy new stakeholder demands in
these foreign environments. Entrepreneurial judgment is at
the heart of the MNE’s recombination capability.
Stand-alone resources + routines + recombination skills =
Firm specific advantages
Pyramid:
On the broad basis of the location advantages of the home
country (LAs)
The firm builds a smaller subset of FSAs that are location
bound (LB)
And then a still smaller subset of FSAs that are non-location
bound (NLB)
1. Internationally transferable FSAs and the four MNE
archetypes
MNE = multinational enterprises
, When crossing its home country border to create value in a
host country, the MNE is at disadvantage as compared to
firms from the host country → additional costs of doing
business abroad, resulting from cultural, economic,
institutional and spatial distance between home and host
country environments.
In order to overcome these additional costs, the MNE must
have proprietary internal strengths → non-location-bound
FSAs; don’t stop creating value when the border is crossed,
precise value may be somewhat different.
When faces with natural of government-imposed trade
barriers, the MNE may transfer some FSAs abroad directly, as
‘intermediate’ products. The exploitation of FSAs transferred
abroad can also be done by external actors or by network
partners →may add their own complementary resources
→strengthen the MNE’s position in the foreign marketplace
by filling resource gaps.
Paradox: if the FSA consists of easily codifiable knowledge,
the costs of FSA transfer, deployment and exploitation may
be low, but the potential value that can be derived from
actually deploying and exploiting the FSA may also be
relatively low, namely if competitors can easily imitate what
the MNE is best at.
Hence, FSAs that are difficult to imitate and unique for a firm
are the more important FSAs because these cannot be copied
easily.
Though it’s expensive and time-consuming to transfer, deploy
and exploit tacit knowledge across borders, the benefit to the
