The regional nature of Japanese multinational business
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The regional nature of Japanese multinational business Simon Collinson1 and Alan M Rugman2 1 Warwick Business School, The University of Warwick, Coventry, UK; 2Kelley School of Business, Indiana University, Bloomington, USA
Correspondence: Simon Collinson, Warwick Business School, The University of Warwick, Coventry CV4 7AL, UK. Tel: þ 44 (0)2476 524508; Fax: þ 44 (0)2476 524628; E-mail: [email protected]
Abstract In the world’s largest 500 firms, there are 64 Japanese multinational enterprises (MNEs) with data on regional sales, but only three operate globally; whereas 57 of them average over 80% of their sales and foreign assets in their home region. Why is there such a strong intra-regional dimension to their activities? Using empirical data and a new framework for analysing both downstream (sales) assets and upstream (production) assets we analyse why most large Japanese firms appear to have firm-specific advantages (FSAs) that are based in their home region. A structural contingency approach is applied to two case studies to explain how home-region-bound FSAs constrained the ability of Japanese MNEs to implement internationalisation strategies. Journal of International Business Studies (2008) 39, 215–230. doi:10.1057/palgrave.jibs.8400347 Keywords: Japan; multinational enterprises; firm-specific advantage; regional strategy; structural contingency approach; internationalisation
Received: 15 September 2004 Revised: 1 February 2007 Accepted: 20 April 2007 Online publication date: 3 January 2008
INTRODUCTION This paper consists of two main parts. The first part presents aggregate sales and asset data across the largest 64 Japanese firms, showing that they are predominantly home-region oriented, as defined by Rugman and Verbeke (2004). The second part presents an adapted structural contingency approach to identify and explain factors that limit internationalisation. The framework is applied to two case studies of home-region-oriented Japanese firms to examine their failure to internationalise in response to the recessionary economic environment in 1990s Japan. We trace upstream and downstream sources of embeddedness in the two firms to gain insights into the aggregate patterns of limited inputrelated (assets) and output-related (sales) internationalisation. Extant research is dominated by a focus on the difficulties that firms face when entering foreign markets. Moreover, past studies have tended to look at the challenges experienced by firms that have successfully internationalised. Our focus is the home-region characteristics that make some firm-specific advantages (FSAs) home-region bound, meaning that they have limited geographic scope and are difficult to transfer. Recent empirical research has demonstrated that the world’s 500 largest firms, most of which are multinational enterprises (MNEs), average 72% of their sales in their home region (Rugman & Verbeke, 2004). While each region of the triad has three tr
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