Stepping out of the comfort zone?

An examination of regional orientation in emerging-economy MNEs’ cross-border M&As

Authored by: Yoo Jung Ha , Yingqi Wei , Yaoan Wu

The Routledge Companion to the Geography of International Business

Print publication date:  March  2018
Online publication date:  March  2018

Print ISBN: 9781138953345
eBook ISBN: 9781315667379
Adobe ISBN:

10.4324/9781315667379-21

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Abstract

The geographic orientation of multinational enterprises (MNEs) has long attracted scholarly attention. Rugman and colleagues have argued that MNEs are regionally rather than globally oriented, and that such geographic orientation has a positive performance impact (Rugman, 2003, 2005; Rugman & Verbeke, 2004, 2005; Lee & Rugman, 2012; Rugman, Oh & Lim, 2012). In a parallel work, Ghemawat argues that today’s environment should be characterised as “semi-globalisation”, because empirical evidence on cross-border integration, including product-market integration (trade flows, foreign direct investment (FDI) and price) and factor-market integration (capital, labour and knowledge), shows that most measures still fall far short of “perfect integration” as envisaged by economic theory (Ghemawat, 2003, 2007). Studies have shown that large MNEs from developed economies (DMNEs) focus on their home region in the triad as this strategy can minimise costs of doing business across subsidiaries operating in nearby countries (Rugman & Verbeke, 2005). Examining data on the activities of the 500 largest MNEs from triad economies, Rugman and Verbeke (2004) find evidence of home-region bias. This research supports regional MNE theory (Rugman, 2005; Rugman & Verbeke, 2005; Lee & Rugman, 2012; Oh & Li, 2015) by proposing that regional distribution of MNEs’ international activities focuses on leveraging home-region-specific assets. However, the empirical evidence so far is based on DMNEs. What could be expected of regional orientation of emerging-economy MNEs (EMNEs)?

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