How do linking, leveraging and learning capabilities influence the entry mode choice for multinational firms from emerging markets?
Abstract
Purpose
Based on the linkage-leverage-learning (LLL) framework developed by Mathews (2006), the purpose of this paper is to examine how linking, leveraging and learning capabilities influence the choice of foreign-entry mode, and the way such influences are contingent on context factors in the emerging markets.
Design/methodology/approach
Contrary to a prior literature applying the LLL framework, which mainly used case studies, this paper adopts a quantitative approach and is based on a sample of 321 Chinese listed companies to test the hypotheses.
Findings
The results show that multinational firms from emerging markets (EMFs) with stronger LLL capabilities are more likely to choose the wholly owned mode in foreign entries. In addition, the relationship between linking capability and wholly owned entry mode choice is weaker at higher levels of cultural distance between home and host country. At the same time, the relationship between learning capability and wholly owned entry mode choice is weaker at higher levels of cultural distance between home and host country, and of institutional distance between prior entries and the focal entry.
Research limitations/implications
An entry mode strategy for firms without ownership advantages and the identification of boundary conditions for applying different LLL capabilities are recommended. The generalizability of the findings from a single-country setting still needs further validation with other emerging economies.
Originality/value
This paper treats internationalization of firms from emerging countries with a different perspective. The underlying idea in this study is that internationalization is not only a process for EMFs to utilize externally accessible assets abroad, but also a process of simultaneously combining internationalization with experiential learning and capability utilization in overseas markets. In addition, the authors also contribute to the literature by providing strong empirical evidence for validating the LLL model and extending the existing entry mode studies.
Keywords
Acknowledgements
The authors thank for the valuable comments and suggestions from Tom Wansbeek, Jane W. Lu, Xufei Ma, Ravi Ramamurti and other participants in the “From Emerging to Emerged: A Decade of Development of Dragon Multinationals” conference held in Macquarie University, Sydney, Australia in 2015. The authors also gratefully acknowledge the financial support from research project “The Determinants of Entry Mode and Location Choice for OFDI in Chinese Manufacturing Enterprises: An Integrative Framework from the LLL Perspective” which is funded by the National Natural Science Foundation of China (NSFC, Grant Number 71372054).
Citation
Li, W., Guo, B. and Xu, G. (2017), "How do linking, leveraging and learning capabilities influence the entry mode choice for multinational firms from emerging markets?", Baltic Journal of Management, Vol. 12 No. 2, pp. 171-193. https://doi.org/10.1108/BJM-10-2016-0218
Publisher
:Emerald Publishing Limited
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