Obligating, Pressuring, and Supporting Dimensions of the Environment and the Non-Market Advantages of Developing-Country Multinational Companies
15 Pages Posted: 17 Feb 2011
We analyse the non-market advantages of developing-country multinational companies (DMNCs) over advanced-economy multinational companies (AMNCs) when both compete in the same host country. Non-market advantages are advantages based on resources developed by the firm to operate in a country's environment. Building on the resource-based theory and the concept of distance, we classify dimensions of a country's environment into three types (obligating, pressuring, and supporting) and argue that each type has a different impact on the advantages of DMNCs over AMNCs. First, obligating dimensions are those dimensions in which countries are not more or less developed than others; they are merely different, obligating a firm to develop particular non-market resources to operate there. In such cases, the advantage of DMNCs over AMNCs cannot be differentiated. Instead, MNCs from more distant home countries have a disadvantage compared to MNCs from less distant countries. This is the traditional conceptualization of distance in the literature. Second, pressuring dimensions are those dimensions in which countries are more or less demanding in pressuring the firm to continuously upgrade its non-market resources. For these dimensions, DMNCs face a disadvantage against AMNCs, because the latter have more sophisticated non-market resources than the former. Third, supporting dimensions are those in which countries are more or less developed in their provision of external non-market resources that support the firm's operations. In this case, DMNCs tend to enjoy an advantage over AMNCs, because the former are better at dealing with a lack of supporting resources than the latter. These last two types of dimensions challenge the commonly held ideas that distance is always directionless and always results in a disadvantage.
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