Such entries viewed as an option to maintain access to innovations resident in

Such entries viewed as an option to maintain access

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Such entries viewed as “an option to maintain access to innovations resident in the host country, thus generating information spillovers that may lead to opportunities for future organizational learning and growth.” o Important Note: L-S advantages may grow, change, and/or decline, prompting a firm to relocate. If policy makers fail to maintain the institutional attractiveness (e.g. raising taxes) and if companies overcrowd and bid up factor costs such as land and talents, some firms may move out of certain locations previously considered advantageous E.g. Chinese government has raised min. wages and tightened environmental regulations Also due to one child policy # of low-skill youth entering labour market has declined These changes = eroded the L-S advantages of coastal China centred on low costs As result many labour-intensive, cost-conscious firms moved to inland China or SE Asia countries Cultural/Institutional Distances and Foreign Entry Locations
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o Cultural distance Difference between two cultures along identifiable dimensions such as individualism o Institutional Distance The extent of similarity or dissimilarity between the regulatory, normative, and cognitive institutions of two countries o Cultural distance is a subset of institutional distance o To overcome these distances, two schools of thought : Associated with the stage model Firms will enter culturally similar countries during their first stage of internationalization and will then gain more confidence to enter culturally distant countries in later stages o E.g. Belgian firms enter France first or Mexican firms enter Texas to take advantage of common cultural and language traditions On avg. countries that share a language is 3x greater than b/w countries w/o a common language Overall certain performance benefits seem to exist when competing in culturally & institutionally adjacent countries More important to consider strategic goals such as market and efficiency rather than culture and institutions E.g. hostile Congress and unfriendly US media, many Chinese firms are eager to do business in the US o b/c US is the largest market = cultural and institutional distances b/w China and US don’t seem to matter 10-3 When to Enter? Entry timing refers to whether there are compelling reasons to be an early or late entrant in a particular country First-Mover Advantages o Benefits that accrue to firms that enter the market first and that later entrants do not enjoy E.g. Google in internet search engines “google it” o May gain advantage through proprietary technology E.g. Apple’s iPod, iPad, iPhone o May also make pre-emptive investments # of Japanese MNEs cherry picked leading local suppliers and distributors in SE Asia as new members of expanded Japanese businesses networks, and blocked access to suppliers and distributors by late entrants from the West o May erect significant entry barriers for late entrants Such as high switching costs due to brand loyalty o
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