AIB 2012 Conference Proceedings - Academy of International ...

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Competing Formally in an Increasingly Formal World: Foreign Market Entry Motivation and Competition from
Informal Players
Margaret Spring Schomaker, Université Laval
Anna Lamin, Northeastern University
IB theory argues that MNEs respond to institutional hazards in host countries by adjusting their entry strategies
and subsidiary operational integration so as to "immunize" the firm against the threat of expropriation of its
assets in the host environment. However, IB theory is silent on how domestic firms may also adopt their
operational strategies to deal with institutional hazards within their home country. Locating parts of the value
chain with the informal economy offers local players a means of adapting to their competitive environment in
ways that make them very different from foreign entrants. This paper investigates how a strong informal
economy shapes competition and therefore presents significant competitive challenges for multinational
enterprises, beyond the threat of expropriation traditionally examined in IB literature. Building on an analysis of
the advantages held by informal and semi-formal players, we show that the risks and solutions for an MNE
actually differ depending upon what the firm is seeking from the foreign market. We then offer propositions
contrasting the effects of a strong informal economy on MNEs in the cases of product-market seeking, servicemarket
seeking, natural resource seeking, and labor seeking entries. (For more information, please contact:
Margaret Spring Schomaker, Université Laval, Canada: margaret.schomaker@mng.ulaval.ca)
The Provisioning of Collective Goods by MNEs in Emerging Markets
Jean Boddewyn, Baruch College, CUNY
How will investors in emerging markets obtain at production sites the water, electricity, roads, security, training
and health care for their employees, and safeguards against various institutional hazards The provisioning of
these "collective goods" differs from that of the private goods which attracted investors there in the first place,
and its study in the light of internalization theory and transaction-cost economics requires: (1) reconsidering the
alliance mode when it involves the collaboration of economic and nonmarket partners, and (2) identifying a
distinct type of governance mode so far overlooked – namely, the inducement of the not-for-profit partners
whose support is crucial. Therefore, (1) there are four governance modes – market contracting, alliance (in a
modified form), internalization and inducement (a novel mode) – available for the provisioning of collective
goods by and/or for MNEs in emerging markets; (2) the choice among these four governance mode is affected
by both the type of ordering system prevailing in emerging markets and the transactional characteristics
pertaining to the provisioning of collective goods, and (3) this choice is best represented by a matrix than by
the traditional "continuum" between the price system and hierarchy. (For more information, please contact:
Jean Boddewyn, Baruch College, CUNY, USA: jean.boddewyn@baruch.cuny.edu)
Session: 1.1.5 - Competitive
Track: 4 - Strategy, Alliances, and Competitiveness
Catch-up and Firm Performance in Internationalization
Presented On: July 1, 2012 - 09:00-10:15
Chair: Xavier Martin, Tilburg University
Who is Seeking Strategic Assets for Competitive Catch-Up Broadening the Awareness-Motivation-Capability
Framework
Lin Cui, Australian National University
Klaus Meyer, China Europe International Business School
Helen Hu, University of Melbourne
AIB 2012 Conference Proceedings
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