Obligating, Pressuring and Supporting Dimensions of the Environment and the Non-Market Advantages of Developing-Country Multinational Companies

Journal of Management Studies, 48(2): 441-445

13 Pages Posted: 27 Dec 2018

See all articles by Alvaro Cuervo-Cazurra

Alvaro Cuervo-Cazurra

Northeastern University - Department of International Business and Strategy

Mehmet E Genc

Ozyegin University

Multiple version iconThere are 2 versions of this paper

Date Written: June 22, 2010

Abstract

We analyze 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 ideas that distance is always directionless and always results in a disadvantage.

Keywords: developing countries, emerging economies, advanced economies, multinationals, psychic distance, competitive advantage, competitive disadvantage, resource-based theory

JEL Classification: F23, M16

Suggested Citation

Cuervo-Cazurra, Alvaro and Genc, Mehmet E, Obligating, Pressuring and Supporting Dimensions of the Environment and the Non-Market Advantages of Developing-Country Multinational Companies (June 22, 2010). Journal of Management Studies, 48(2): 441-445. Available at SSRN: https://ssrn.com/abstract=3298385

Alvaro Cuervo-Cazurra (Contact Author)

Northeastern University - Department of International Business and Strategy ( email )

D'Amore-McKim School of Business
313 Hayden Hall, 360 Huntington Avenue
Boston, MA 02115
United States
16173736568 (Phone)
16173738628 (Fax)

HOME PAGE: http://cuervo-cazurra.com

Mehmet E Genc

Ozyegin University ( email )

Kusbakisi Cd. No: 2
Altunizade, Uskudar
Istanbul, 34662
Turkey
+90-216-564-9389 (Phone)

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