Tommi Rissanen, Liubov Ermolaeva, Lasse Torkkeli, Ali Ahi and Sami Saarenketo
This paper aims to explore the underlying reasons for business model change among internationalizing SMEs and illustrate how home market context affects that change.
Abstract
Purpose
This paper aims to explore the underlying reasons for business model change among internationalizing SMEs and illustrate how home market context affects that change.
Design/methodology/approach
This is a comparative case study of two companies with similar backgrounds from different countries of origin. In each case, the data were collected by means of in-depth interviews with key informants. For its theoretical background, the study draws on the business model innovation and international business literature.
Findings
The authors found that home market context has two kinds of effect on business model change in internationalizing SMEs. First, home market maturity has a strong effect on the timing of companies’ internationalization efforts. Second, the company’s home market can either be used to strengthen the value proposition or may be disguised, depending on how the country of origin is seen in international markets. This factor has a strong influence on how SMEs change their business model when internationalizing.
Research limitations/implications
The study’s limitations relate to its qualitative and exploratory nature. Future research should further assess the generalizability of these findings across different cultural contexts and countries of origin by quantifying the central concepts and examining how they relate to larger-scale cross-national and cross-sectional panel data.
Practical implications
As internationalization increasingly poses both threats and opportunities, companies must be able to experiment with business models when necessary to adapt to the host market. In so doing, it is also important to consider how a company’s home market affects business model change.
Originality/value
This is one of the first studies to illustrate how the process of internationalization drives SMEs to change their business models. As such, the paper enhances existing understanding of business model change in the context of internationalization. To our knowledge, no previous study has described these dynamics in a comparative context that takes account of SME country of origin.
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Keywords
Liubov Ermolaeva, Andrei Panibratov and Desislava Dikova
This paper aims to use the obsolescing bargaining power (OBP) Model (Vernon, 1977, 1998) to analyze the case of United Company Rusal, a Russian politically connected multinational…
Abstract
Purpose
This paper aims to use the obsolescing bargaining power (OBP) Model (Vernon, 1977, 1998) to analyze the case of United Company Rusal, a Russian politically connected multinational companies (MNCs) that was one of the world’s largest aluminum companies between 2005 and 2014, having acquired and, ultimately, sold the Montenegrin aluminum smelter company Kombinat aluminijuma Podgorica.The authors did so with the aim of answering the following question: How do geopolitics affect the bargaining balance of power between a Russian MNC and a host country?
Design/methodology/approach
The authors used the discourse analysis methodology to identify the key players in the bargaining process and illustrate the evolving bargaining process.
Findings
The authors demonstrated that, over time, the shift in power from the Russian MNC to the host government had not merely been the result of the increase in committed MNC assets in the host country but, rather, of a geopolitical chess game involving the Russian Government, North Atlantic treaty organization (NATO) and the European Union (EU). By extending the OBP model with geopolitics, the authors found that a political agenda can influence the outcome of a bargaining process.
Originality/value
The authors extended the OBP model to illustrate the complex interaction between an emerging market MNC and an emerging host country government, indirectly influenced by two supranational organizations – the EU and NATO.
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The purpose of this paper is to reveal how the host and the home countries’ formal institutions may affect mergers and acquisitions (M&A) abandonment by Russian multinational…
Abstract
Purpose
The purpose of this paper is to reveal how the host and the home countries’ formal institutions may affect mergers and acquisitions (M&A) abandonment by Russian multinational enterprises (MNEs), and how MNE industry can influence the results. The second objective of the study is to have a separate look at the negative experience, and to uncover its influence on M&A deal completion.
Design/methodology/approach
In the study, a sample of 446 international M&A deals initiated by Russian MNEs in the period of 2000–2014 is empirically tested by means of logistic regression analysis.
Findings
The empirical analysis indicates that better business environment in the host country is crucially important whereas development of business freedom at home may make the international M&A less attractive and increases the likelihood of M&A deal abandonment. Thus, the larger the institutional distance by this indicator the more likelihood the deal is completed. Contrary results are implied for property rights: the larger the distance between Russia and host country, the lower likelihood of M&A deal completion. Failure experience decreases the likelihood of acquisition completion whereas international experience increases.
Research limitations/implications
The study has number of limitations: individual-level variables were not included in the model; and a limited number of factors were tested due to availability of data and moderate sample size.
Practical implications
The study indicates that better development of business freedom and moderate property rights protection in the host country are the most favorable factors for an M&A deal completion. Russian policymakers should realize that development of property rights protection in Russia ensures success of MNEs abroad, and development of business freedom reduces the outflow of capital from the economy.
Originality/value
The paper makes several theoretical and practical contributions: it contributes to institutional international business literature, indicating in which particular cases institutional distance has positive or negative effect on M&A completion. It also contributes to organizational learning literature, confirming that failures inhibit learning, and firms tend to repeat previous mistakes. Finally, the paper widens the scarce research on Russian MNEs, and on the role of the home country institutions for MNE’s behavior abroad.