Research SummaryLike all companies, multinational enterprises (MNEs) recombine their activities in search of efficient business solutions. While these ideas have been widely acknowledged in the global strategy literature, there is limited understanding of how internationalization affects the outcomes of such boundedly rational search. In this paper, we develop a computational model of search that allows for an essential property of the MNE-distributiveness of performance across multiple geographies-and show that, in a given market, MNEs can outperform more specialized domestic companies long term. More broadly, our work illustrates that adjusting general theories of bounded rationality to the specifics of global strategy can deepen our understanding of value creation across borders.Managerial SummaryThis study shows how MNEs can outperform domestic firms by leveraging their global presence in local markets. While domestic firms have deep local insights, MNEs benefit from their ability to adapt across markets, allowing them to enhance local responsiveness over time without sacrificing global integration. This way, MNEs can better understand local customer needs than domestic competitors. This highlights the value of appointing leaders with international experience for new market entries, as they bring a broader perspective critical to long-term success. For global managers, these insights emphasize global operations as a pathway to strengthening local competitiveness.

Research Summary We present novel theoretical arguments suggesting that the contraction of international market presence does not only allow firms to expand their presence into new business domains, but also to resume their international market presence in the long term. We argue that when firms contract their international market presence, they spark two subsequent processes: First, they free up non-scale free financial resources that become available for expanding into new business domains. Subsequently, such expansion creates new scale free technological knowledge resources that facilitate renewed international expansion. We find support for the existence of this novel growth trajectory in an analysis of changes in the international market presence and business segment presence of an extensive sample of public US-based firms between 1997 and 2019. Managerial Summary Political frictions, economic crises, and pandemics in the wake of the 21st century have led to volatility in the international presence of firms. In this article, we argue and show that firms that contract their international market presence can use scarce financial resources that are freed up due to such contraction to expand their business scope. In turn, business scope expansion allows these firms to create new technological knowledge resources that support resumed international expansion. Generalizing this phenomenon, we argue that, in an age where firms need to navigate international contraction and expansion, contracting international presence in the short term does not only allow the expansion of business domains but also supports the expansion of international presence in the long term. Studying an extensive sample of public US-based firms between 1997 and 2019 lends support to this view.

In this entry, we account for research on foreign operation modes (FOMs) with an emphasis on the dynamic aspect— i.e., the decisions to expand, switch and add operation modes in a foreign country after initial entry. As highlighted in the entry on foreign entry mode, the overwhelming bulk of research has focused on the mode chosen by a company at the moment in time when it decides to go into a particular location to pursue some business activity there. While research on initial entry mode choices has developed into a mature international business (IB) sub-field, studies of firms' post-entry decisions are somewhat fewer and in general of a newer date.

Goerzen et al. (J Int Bus Stud 44:427–450, 2013) became influential because it generated a broader view of the international business (IB) domain. The paper broke new ground by going beyond the country and regional levels to analyze MNE location choices, a novel approach that revealed the importance of global cities. The original argument suggested that global connectedness, cosmopolitanism, and advanced producer services mitigated the liability of foreignness, thereby highlighting the complexity of MNE location decisions. It also drew attention to the need for IB research to take a more nuanced view of MNE behavior. Developments since 2013, however, have rendered a very different world. Our goal in this commentary, therefore, is to challenge the IB community to think more deeply about the future of global cities specifically and about IB more generally. We do this by re-evaluating the role of cities as micro-locations against the emergence of megatrends that are shaping our future, including demographic shift and an increase in social awareness, the changing natural environment and an increase in sustainability concerns, and the rise in capability and application of digital technologies. We conclude by suggesting that IB research must connect more deeply with interdisciplinary theories and methodologies to produce generative IB research.

The first operation mode used by a firm in a new foreign country is referred to as a foreign entry mode (FEM). Hence, the foreign entry mode is the operation mode by which the firm initially enters a given foreign country. More specifically, it is a firm's choice of value chain activities located in a host country, or production in its home country with the purpose of selling abroad (exporting), and the governance form by which these activities are operated. Entry mode research more or less explicitly assumes that mode shift is difficult and costly: "Channel choices, once made, are often difficult to change" (). Therefore, choosing the "right" entry mode initially is considered strategically important and, in the overwhelming bulk of research on foreign operation modes, the focus has accordingly been on modes of entry rather than subsequent shifts of operation modes that might occur. Several overview articles and meta-analyses have been published, indicating that this has become a mature field of research.

To minimize costs, the traditional approach used by multinational corporations (MNCs) to optimize price and quality in the production and delivery of goods and services has been achieved through hierarchical and arm’s length contractual means. This approach combines with the factors that propel economic globalization, yielding complex global value chains (GVCs). However, an emerging challenge facing lead MNCs is that they are unable to control the social and environmental implications of the activities throughout their GVCs. The traditional approach to deal with these issues has been that of “cascading contracts” where responsibility is handed along the GVC sequence of firms. Yet, consumers, civil society, and regulators are increasingly holding lead MNCs morally and financially responsible for social and environmental problems even when these issues do not arise within the MNC’s hierarchical or contractual boundaries. To provide new insights into the organization of MNCs, we develop a formal analytical model that combines cascading responsibilities with the value-adding and value diminishing factors that have begun to arch from the “first mile” of the GVC directly to the lead MNC.

The role of strategic interaction has been largely neglected in research on global corporate social responsibility (CSR). This chapter addresses this gap by analyzing two contexts for strategic interaction: In the intra-firm context, coordination and control problems may arise between subsidiaries, and between HQ and subsidiaries, as local CSR compliance has repercussions for the shared social reputation of the firm. In the inter-firm context, similar problems may arise across global supply chains where firms are held accountable for the actions of their suppliers, while CSR actions of rival firms interact in determining their relative competitive advantages or disadvantages. Combining insights from game theory and research on CSR, the chapter outlines the challenges arising from these issues and identifies avenues for future research.

Breaches of corporate social responsibility (CSR) in global value chains (GVCs) pose a managerial challenge for multinational enterprises (MNEs) and threaten both their reputations and global sustainability. While an MNE-centric perspective on these issues has dominated existing international business research, we show that a dynamic view of bargaining among actors in the GVC can yield novel insights. We draw on coalitional game theory and develop a model where an MNE collaborates, monitors, and negotiates prices with a supplier whose CSR breaches may be revealed by the MNE, external agents, or remain hidden. Our model illustrates how MNEs may face a hold-up problem when irresponsible actions by suppliers are made public, and the suppliers have the power to engage in opportunistic renegotiation. Interestingly, we show that greater monitoring by MNEs, if not combined with specific strategies, can have negative consequences by weakening the MNE’s bargaining position and, in some cases, even prompting more irresponsible actions by the suppliers. Our model advances international business research on GVC sustainability and has important implications for managers and researchers alike.

Research summary The strategic management and international business fields have followed, in some respects, quite similar intellectual trajectories, as reflected in the push for a field of "global strategy." However, a key distinction in the strategy literature-namely, Williamson's distinction between "strategizing" and "economizing"-has not been explicitly recognized in the international business/global strategy fields. We argue that progress can be made in global strategy by recognizing this distinction and exploring the interaction between "strategizing" and "economizing." To lend credence to this claim, we offer a simple model of the entry decision which highlights both economizing and strategizing aspects of this decision. We also offer recommendations on economizing-strategizing research in global strategy. Managerial summary Multinational enterprises gain competitive advantage either by improving the efficiency with which they operate (by having unique resources, lowering costs, or improving managerial practices) or by exercising their market and bargaining power. Most research has emphasized the former source of competitive advantage. However, in actuality, the two sources are intertwined. We detail how they are intertwined by means of a simple numerical example of the entry decision facing a company that can choose between competing or collaborating with the local firm. We show that strategizing plays into the entry decision in this case.

We explore coevolution in the growth of technological knowledge and international scope in multinational corporations (MNCs). We focus on technological knowledge and international scope because they are core to the performance of MNCs and because research has found that technological knowledge stimulates international growth, while internationalization stimulates technological growth. We address this seeming paradox by consolidating arguments about their growth under the coevolutionary umbrella. In so doing, we advance a novel coevolutionary argument: technological knowledge and international scope are both outcomes of interdependent, long-term strategic decisions aimed at optimizing the complementary effects of both dimensions on MNC performance. Accordingly, we develop a formal model of the dynamic processes by which technological knowledge and international scope coevolve. Our dynamic optimization model identifies four coevolutionary trajectories: (1) a trajectory in which growth in technological knowledge and international scope occur simultaneously; (2) a trajectory that has simultaneous reductions in both; (3) a trajectory in which technologically rich but domestically oriented firms expand international scope but reduce technological knowledge; and (4) a trajectory in which highly internationalized but technologically lagging firms expand technological knowledge but reduce international scope.

In responding to the Forsgren and Holm (2021) critique of internalization theory, we develop a capability-based model of internalization and quasi-internalization, highlighting the key role of the international recombination of assets. With external control mechanisms becoming more sophisticated, full internalization has become increasingly unnecessary. Rather, the capacity to orchestrate complex networks is an increasingly important source of competitive advantage. We demonstrate that internalization theory does not need to assume that the MNE is all powerful, or that it can dictate the choice of mode with its foreign business partners. We also disagree with the argument that internalization theory presumes perfect rationality. When managers’ perceptions deviate from reality, they do indeed make wrong choices (over- and under-internalization) that come with various types of efficiency penalties. We share the Forsgren and Holm view that a learning perspective can provide insights on the evolution of an MNE’s asset recombination mode, as it gains experience and knowledge. Furthermore, we show that internalization theory has been extended to incorporate such a learning perspective.

This paper examines the factors determining the subnational geographic location of the investments of multinational enterprises (MNEs). Building on the tension between the costs and benefits that agglomeration confers on firms, we compare and contrast Marshallian and Jacobian agglomeration mechanisms to understand the micro-location patterns of domestic and foreign firms. We test these ideas on a dataset of 387.000 workplace year observations located across 93 municipalities in Denmark. The results show that while agglomeration is systematically related to both foreign and domestic location patterns, some of these relationships vary across agglomeration types and across subsamples of domestic and foreign workplaces. We also demonstrate the importance of controlling for global connectivity, which may otherwise confound these relationships.

Research has examined how “economizing” and “strategizing” mechanisms interact in driving competitive outcomes, but the role of coalitions in this process has received little attention. Coalitions between players are established to increase value creation (i.e., economizing), as well as to facilitate positioning (i.e., strategizing). Based on a coalitional model we derive several non-intuitive results. Contrary to Williamson (1991), economizing is not always the best strategy as creating more value may lead other players to strategize more aggressively, offset-ting the additional value creation. Furthermore, creating countervailing power — that is, building a coalition against players with significant power such as monopolists or monopsonists — not only allows the coalition to appropriate more value, but also increases overall benefits by reducing value-destroying competition among the coalition members.

International and business diversification are two common strategies of firms. We present novel theoretical arguments and empirical evidence suggesting that contracting a given diversification path (be it in the international or business dimension), does not only allow firms to expand the other path in the short term, but also to again diversify the initially contracted path, thereby expanding both diversification paths in the long term. We argue and show that when firms contract a given diversification path, they spark two subsequent processes: They free up non-scale free resources from the contracted diversification path to invest in the other diversification path, which allows them to expand this path. In turn, this expansion creates new scale free resources that also facilitate renewed diversification along the initially contracted path.