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Global Strategy Journal Global Sot 0-36 (2011) Published online in Wiley Online Library (aileyelinelibrary.com). DOE 00.11119 2025805,201.0015 GLOBAL STRATEGY AND GLOBAL BUSINESS ENVIRONMENT: THE DIRECT AND INDIRECT INFLUENCES OF THE HOME COUNTRY ON A FIRM'S GLOBAL STRATEGY ALVARO CUERVO-CAZURRA Northeastern University College of Business Administration. Boston Massachusetts, USA INTRODUCTION Therefore, this article aims to refocus attention to the host country and explain the role it can play in This article studies one aspect of the influence of the the firm's global strategy. The article builds on an global business environment on the finn's global extended view of the resource-based view (Penrose, strategy: the impact of a firm's home country, Most 1959) to explain how one can separate the influences international business literature studies the influence of the home country on a tim's global strategy into of specific characteristics of the host country on a two types: (I) a direct influence in which the home tirm's global strategy (see recent reviews of the lit- country becomes a resource for the company that erature in Rugman. 2009). The literature has paid helps er hinders its global strategy depending on the less attention to how specific characteristics of the views of the home country in host countries and (2) home country influence the global strategy of the an indirect influence in which the home country firm, at most focusing on distances between home induces the firm to create particular resources to and host country Johanson and Vahine, 1977, se operate there and these resources then affect the Cuervo Cazurra and Genc. 2011. for a recent firm's global strategy review). One reason is that much literature focuses on the expansion across countries and takes the country of origin as a given. This neglect of the home HOME COUNTRY AND country is understandable, since location tends to GLOBAL STRATEGY receive limited attention in international business (Dunning, 1998), but unfortunate because studies Environment and resources that focus on how particular characteristics of the To explain the influence of home country on global home country affect a firm's foreign expansion can strategy, 1 extend the resource-based view and its provide valuable insights (eg, Cuervo Cazurra, application to international business Cuervo 2006 Cuervo-Cazurra and Genc. 2008: del Sol and Carurra. Maloney, and Manrakhan, 2007. Peng. Kogan, 2007; Garcia-Canal and Guillen, 2018 2001: Tallman and Fladmoe-Lindquist, 2002). The Holburn and Zelnet, 2010) Tesource-based view understands firms as bundles of resources assets that are tied semipermanently to Keywords plotal strategy, environment home country inte the firm. These resources are used by managers national business, resource-based thory to create value for customers in competition with "Contexpondence to Alvaro Coro Carum, Northeastern the offers of other firms (Penrose, 1959). Some University College of Business Admin. 313 Hayden Hall, 360 Huntington Avenue, Boston, MA 0115 USA resources give the firm a relative advantage in E-mail: a cercado its current operations when they provide value to Copyright 2011 Strategic Management Society Commentary 383 customers, are raro, and cannot be easily imitated or host countries, it can use these resources to continue substituted by competitors (Barney, 1991). However, its expansion and, as a result, the influence of the not all resources support a firm's advantage. Some home country diminishes may merely help the firm operate and, thus, be neutral on the advantage achieved (Montgomery, Direct effect: home country as a resource used 1995). Others may become a source of disadvantage to the firm and reduce its value creation potential in global strategy (Leonard-Barton, 1992). Existing resources can also The home country becomes a resource that affects be used to expand the firm's operations into new the firm's global strategy directly. Individuals in the activities or new geographies, thus enabling the firm host country associate the firm with its perceived to achieve economies of scale on resources it has home country, which becomes a resource to the firm, already developed (Montgomery, 1995). an asset that is tied semipermanently to it. The characteristics of the home country in which How the country of origin affects a fimm's advan- the firm emerges influence the types of rewurces the tage abroad depends on the valuation that individuals firm develops in two ways. First, new resources can in the host country give to the foreign home country, be created by the firm by modifying inputs the Some consumers dislike foreign products over company obtains from its environment and by com domestic ones for the sole reason that they are made bining external inputs with existing resources in the in another country, reflecting their nationalist senti firm (Penrose. 1959). The presence of absence of ments (Shimp and Sharma, 1987). This gives firms specific inputs outside the firm induces it to develop from these countries a disadvantage. Other consum distinct resources that either rely on the availability es prefer products made in other countries over of particular external inputs or compensate for the domestic ones, because they perceive the countries lack of certain external inputs (Penrose. 1959, to be more developed and the products made there to Khanna and Palepu. 2010). Second, the particular be better (Bailey and Gutierrez de Pineres. 1997), norms and institutions prevailing in the country This provides an advantage to firms from such coun induce the company to develop specific resources to tries. These relative preferences depend on the per be able to interact with other players in the market ceptions about the particular country of origin of the place (Oliver. 1997; Peng. Wang, and Jiang. 2008). firm and are not restricted to consumers Govern In these ways, the environment in which the firm first ments also react to the country of origin Gover- operates affects the resources the firm develops ments give preferential treatment to firms from These influences of the home country on the particular home countries because there are friendly resources a firm develops become more noticeable historical relationships or trade and investment outside the home country and at the beginning of a agreements between the countries (Frankel and firm's multinationalization. In a domestic setting. Rose. 2002: Rangan and Drummond, 2004) or other domestic competitors develop similar sets of because they perceive firms from certain countries as resources in response to the similar availability of bringing desirable resources to the country, inputs and interaction needs and norms. As a result, However, governments also discriminate against managers tend to pay little attention to these firms from particular countries because they dislike resources because they are not rate. However, in a their governments or they perceive these firms as global setting, competitors in the host country have potentially harmful to the country (Stopford and responded to different inputs and institutions, result Strange, 1992) ing in noticeable differences in their resource sets Thus, the home country directly influences a from those of the focal firm. Managers, therefore, firm's global strategy in multiple ways. The influ. can use resources developed at home as strategic ences vary between consumers and governments resources abroad, since these resources have a because they have different relationships with the degree of rarity in comparison to resources devel firm. Consumers' views of the home country usually oped by domestic firms. This influence of the home affect the marketing of products in the host country, country on global strategy is most noticeable at the with consumers buying products according to their beginning of a firm's multinationalization, when preferences for particular home countries and com- the home country represents the main source of panies reacting to these preferences by highlighting resources to the firm. As the firm expands across or modifying the origin of products (Bilkey and Nes, countries and develops new resources in multiple 1982). In contrast, governments views of the home CSS d. 13-18) DO1011111 384 A. Cuervo-Cazurra country have a broader impact on the operations of tions (Cuervo-Cazurra and Genc, 2008), while firms the company, with firms choosing countries in which that operate in regulated industries at home learn how governments do not restrict investments to firms to manage government relationships and become from particular countries and selecting entry modes dominant investors in regulated industries in other based on government support or restriction. Addi- countries (Garcia-Canal and Guillen, 2005) tionally, other individuals in the country react to the Third, still other resources can help the firm home country and affect the firm's operations, such achieve an advantage against domestic competitors as the hiring of local employees or its exposure to Some dimensions of the home country environment lawsuits (Mezias, 2002) induce the firm to develop highly sophisticated resources to operate thene Coervo-Cazurra and Genc, 2011), for example to abide by high quality Indirect effect: home country inducing the firm to develop resources that are used in regulations or satisfy the needs of highly demanding capital markets. These highly sophisticated global strategy resources can then be used in countries with lower The home country indirectly affects the firm's global requirements, providing the firm with an advantage strategy. It does so by inducing the firm to develop over domestic competitors that have not been forced particular resources at home to deal with character to upgrade their resources. Thus, in contrast to the istic conditions of the environment there. These traditional arguments that distance has a negative resources are then used by the firm in its interna impact on the firm (Johanson and Vahine, 1977), in tional expansion, providing it with the ability to some dimensions the distance between home and pursue specific global strategies bost have a positive impact on the ability of the There are several ways resources developed at foreign firm to achieve an advantage over domestic home in response to existing inputs and institutions companies. For example, companies that face pro can be used abroad, with various implications for the market reforms in their home country generate firm's strategy. First, some of these resources induce the ability to deal with them and achieve superior the firm to select countries hased on its ability to use profitability in other countries that experience pro the resources there. For example, firms from corrupt market reforms later (del Sol and Kogan, 2007) countries become adept at dealing with it and are attracted, rather than repelled, by corruption abroad (Cuervo Cazurra. 2006), while firms that face politi- CONCLUSIONS cal risk at home learn how to manage it and are more likely to invest in countries with similar risk The article focuses attention on how the conditions (Holbum and Zelner, 2010). This not only reduces of the home country affect the global strategy of the the cost of doing business abroad (Hymer, 1976) and firm. It extends the resource-based view from its the related liability of foreignness (Zaheer, 1995). traditional focus on resources developed to achieve but also helps firms achieve economies of scale on an advantage in the industry, toward resources devel. resources they have developed oped in response to the general conditions of the Second, other resources can help the firm achieve home country. Although the latter are not advantages an advantage in comparison to other foreign investors in the home country since all firms develop similar in the same host country. A firm that emerges in a resources), they can provide the firm with an advan country with poorly developed institutions and unso tage abroad and affect its global strategy. The home phisticated providers of inputs and intermediate prod- country can directly become a resource that can be ucts has to compensate for these deficiencies by used abroad or indirectly induce the tim to develop developing some resources (Khanna and Palepu. particular resources to be used abroad later. Their 2010). When this firm enters other countries with use and relation to advantage or disadvantage underdeveloped institutions and weak input pro- induces the firm to follow particular global viders, it can achieve an advantage over firms coming strategies from countries with better institutions. For example, The articles that accompany this article provide firms from countries with poorly developed institu- sophisticated examples of how aspects of the tions generate resources to deal with such institutions home country affect a firms global strategy. First and become dominant investors over firms from Devinney (2011) indicates another limit of the influ- advanced economies in countries with poor institu- ence of the home country on the global strategy of Copyright 2011 Min Sicily DO 01 Commentary 385 the firm Traditionally, multinational companies Fellowship at Nonheastern University are gratefully transferred resources and practices developed in the acknowledged. All errons are mine. home country to other countries to address their cor- porate social responsibilities there. However, the emergence of a global monitoring democracy with REFERENCES actors (such as nongovernment organizations and Jabor unions) overlooking the actions of multina Bailey W. Gutierrez de Pineres SA. 1997. Country of origin tional firms limits the ability of multinationals to attitudes in Mexice the Malinchismo effect Journal of follow this strategy. Instead, multinational firms are Initial Consumer Marketing: 25-41 increasingly being required to create global strate Barney 18. 1991. Fimm resources and sustained competitive gies for dealing with their responsibilities across advantage. Jumal of Managemew 17:99-120 countries, reducing the influence of the home Bilkey W. Nes E 1982. Country of origin effects on county on how they undertake corporate social products evaluation Rumal International Business Studies 13: 89.99 responsibility Boddewyn), Doh J. 2011. Global strategy and the collabo Second, Boddewyn and Doh (2011) illustrate how ration of MNE, NGOs, and poveroments for the prowi a firm not only develops particular resources to com sioning of collective goods in emerging markets, Global pensate for missing inputs at home, but also does this Strategy owal 10 in a host country. Similar to the situation in which a Cuervo Carum A. 2006. Who cares about corruption? firm will develop resources to compensate for the Arnal of International Business Studies 37: 805 822 lack of inputs or collective goods in the home Co-Caruma A. Genc M 200. Transforming disadvan- country, in a host country in which collective goods tapes into advantages developing country MNE in the are missing the multinational will have to invest in least developed countries. Journal of International these their development . However, instead of developing ness Studies 29957.979 them internally, as is often the case in the home Cuervo-Carum A. Gene M. 2011. How content matters country, in a host country the multinational firm may on market advantages of developing country MNEN choose instead to assist the government or non- malef Man Sadies 48 441-445 Corro-Caruma A. Maloney M, Manrakin S 2007 governmental organizations in the creation of these Causes of the difficulties in intentionalization, collective goods. The use of this assistance mode of Iremational Business Studies 28 709-725 is the result of high uncertainty in the defense of del Sol L. Kopan 1.2007 Regional competitive advantage contractual obligations and low asset specificity honed on pioneering economic reform: the one of Third, Rangan and Drummond (2011) explain in Chilean FD. Journal of International Business Studies detail how the home country can become a resource 38 901-927. that supports the advantage of the firm in particular Derinney T 2011 Social responsibility, global strategy and host countries, Multinationals face the challenge of the multinational enterprise global monitoring deme controlling their host country operations and captur- racy and the meaning of place and space. Global Strategy Journal (3) ing value. However, firms originating in home coun Dunning JH 1998. Location and the multinational enter tries with significant ties to the host country-such prisca neglected fact Journal of International Bus as economie, security, political, or migratory es Sadis 29. 45-66 benefit from this association in comparison to firms Hankel Rose A. 2002. An estimate of the effect of originating in countries with weak ties. The ties Como cances on trade and income Owarterly facilitate the sanctioning and monitoring of misbe ef Economics 117: 437-466. havior in the host country and enable the firm to Garcia-Canal E. Guillen MF 2008. Rick and the strategy of achieve higher commitment and performance in the foreign location choice in regulated industries Strategie host country Mong Joumal 2910: 1097-1115 Holtan GLF. Zeiner BA 2010. Political capabilities, policy risk, and international investment strategy, evi dence from the global electric power industry. Strategic ACKNOWLEDGEMENTS Management Journal 31(12): 1290-1315 Hymer SH. 1976. The intentional Options of National I thank Steve Talman for providing useful suggestions Firme A Shf Foreign Direct Investment MIT Press for improvement. The financial support of the Center for Cambridge, MA International Business Education and Research at the Johnson I, Vahine E. 1977. The internationalization University of South Carolina and the Robert Morrison process of the firm: a model of knowledge development Cele Management Gel Strat. -11 D.S.BOX Global Strategy Journal Global Sot 0-36 (2011) Published online in Wiley Online Library (aileyelinelibrary.com). DOE 00.11119 2025805,201.0015 GLOBAL STRATEGY AND GLOBAL BUSINESS ENVIRONMENT: THE DIRECT AND INDIRECT INFLUENCES OF THE HOME COUNTRY ON A FIRM'S GLOBAL STRATEGY ALVARO CUERVO-CAZURRA Northeastern University College of Business Administration. Boston Massachusetts, USA INTRODUCTION Therefore, this article aims to refocus attention to the host country and explain the role it can play in This article studies one aspect of the influence of the the firm's global strategy. The article builds on an global business environment on the finn's global extended view of the resource-based view (Penrose, strategy: the impact of a firm's home country, Most 1959) to explain how one can separate the influences international business literature studies the influence of the home country on a tim's global strategy into of specific characteristics of the host country on a two types: (I) a direct influence in which the home tirm's global strategy (see recent reviews of the lit- country becomes a resource for the company that erature in Rugman. 2009). The literature has paid helps er hinders its global strategy depending on the less attention to how specific characteristics of the views of the home country in host countries and (2) home country influence the global strategy of the an indirect influence in which the home country firm, at most focusing on distances between home induces the firm to create particular resources to and host country Johanson and Vahine, 1977, se operate there and these resources then affect the Cuervo Cazurra and Genc. 2011. for a recent firm's global strategy review). One reason is that much literature focuses on the expansion across countries and takes the country of origin as a given. This neglect of the home HOME COUNTRY AND country is understandable, since location tends to GLOBAL STRATEGY receive limited attention in international business (Dunning, 1998), but unfortunate because studies Environment and resources that focus on how particular characteristics of the To explain the influence of home country on global home country affect a firm's foreign expansion can strategy, 1 extend the resource-based view and its provide valuable insights (eg, Cuervo Cazurra, application to international business Cuervo 2006 Cuervo-Cazurra and Genc. 2008: del Sol and Carurra. Maloney, and Manrakhan, 2007. Peng. Kogan, 2007; Garcia-Canal and Guillen, 2018 2001: Tallman and Fladmoe-Lindquist, 2002). The Holburn and Zelnet, 2010) Tesource-based view understands firms as bundles of resources assets that are tied semipermanently to Keywords plotal strategy, environment home country inte the firm. These resources are used by managers national business, resource-based thory to create value for customers in competition with "Contexpondence to Alvaro Coro Carum, Northeastern the offers of other firms (Penrose, 1959). Some University College of Business Admin. 313 Hayden Hall, 360 Huntington Avenue, Boston, MA 0115 USA resources give the firm a relative advantage in E-mail: a cercado its current operations when they provide value to Copyright 2011 Strategic Management Society Commentary 383 customers, are raro, and cannot be easily imitated or host countries, it can use these resources to continue substituted by competitors (Barney, 1991). However, its expansion and, as a result, the influence of the not all resources support a firm's advantage. Some home country diminishes may merely help the firm operate and, thus, be neutral on the advantage achieved (Montgomery, Direct effect: home country as a resource used 1995). Others may become a source of disadvantage to the firm and reduce its value creation potential in global strategy (Leonard-Barton, 1992). Existing resources can also The home country becomes a resource that affects be used to expand the firm's operations into new the firm's global strategy directly. Individuals in the activities or new geographies, thus enabling the firm host country associate the firm with its perceived to achieve economies of scale on resources it has home country, which becomes a resource to the firm, already developed (Montgomery, 1995). an asset that is tied semipermanently to it. The characteristics of the home country in which How the country of origin affects a fimm's advan- the firm emerges influence the types of rewurces the tage abroad depends on the valuation that individuals firm develops in two ways. First, new resources can in the host country give to the foreign home country, be created by the firm by modifying inputs the Some consumers dislike foreign products over company obtains from its environment and by com domestic ones for the sole reason that they are made bining external inputs with existing resources in the in another country, reflecting their nationalist senti firm (Penrose. 1959). The presence of absence of ments (Shimp and Sharma, 1987). This gives firms specific inputs outside the firm induces it to develop from these countries a disadvantage. Other consum distinct resources that either rely on the availability es prefer products made in other countries over of particular external inputs or compensate for the domestic ones, because they perceive the countries lack of certain external inputs (Penrose. 1959, to be more developed and the products made there to Khanna and Palepu. 2010). Second, the particular be better (Bailey and Gutierrez de Pineres. 1997), norms and institutions prevailing in the country This provides an advantage to firms from such coun induce the company to develop specific resources to tries. These relative preferences depend on the per be able to interact with other players in the market ceptions about the particular country of origin of the place (Oliver. 1997; Peng. Wang, and Jiang. 2008). firm and are not restricted to consumers Govern In these ways, the environment in which the firm first ments also react to the country of origin Gover- operates affects the resources the firm develops ments give preferential treatment to firms from These influences of the home country on the particular home countries because there are friendly resources a firm develops become more noticeable historical relationships or trade and investment outside the home country and at the beginning of a agreements between the countries (Frankel and firm's multinationalization. In a domestic setting. Rose. 2002: Rangan and Drummond, 2004) or other domestic competitors develop similar sets of because they perceive firms from certain countries as resources in response to the similar availability of bringing desirable resources to the country, inputs and interaction needs and norms. As a result, However, governments also discriminate against managers tend to pay little attention to these firms from particular countries because they dislike resources because they are not rate. However, in a their governments or they perceive these firms as global setting, competitors in the host country have potentially harmful to the country (Stopford and responded to different inputs and institutions, result Strange, 1992) ing in noticeable differences in their resource sets Thus, the home country directly influences a from those of the focal firm. Managers, therefore, firm's global strategy in multiple ways. The influ. can use resources developed at home as strategic ences vary between consumers and governments resources abroad, since these resources have a because they have different relationships with the degree of rarity in comparison to resources devel firm. Consumers' views of the home country usually oped by domestic firms. This influence of the home affect the marketing of products in the host country, country on global strategy is most noticeable at the with consumers buying products according to their beginning of a firm's multinationalization, when preferences for particular home countries and com- the home country represents the main source of panies reacting to these preferences by highlighting resources to the firm. As the firm expands across or modifying the origin of products (Bilkey and Nes, countries and develops new resources in multiple 1982). In contrast, governments views of the home CSS d. 13-18) DO1011111 384 A. Cuervo-Cazurra country have a broader impact on the operations of tions (Cuervo-Cazurra and Genc, 2008), while firms the company, with firms choosing countries in which that operate in regulated industries at home learn how governments do not restrict investments to firms to manage government relationships and become from particular countries and selecting entry modes dominant investors in regulated industries in other based on government support or restriction. Addi- countries (Garcia-Canal and Guillen, 2005) tionally, other individuals in the country react to the Third, still other resources can help the firm home country and affect the firm's operations, such achieve an advantage against domestic competitors as the hiring of local employees or its exposure to Some dimensions of the home country environment lawsuits (Mezias, 2002) induce the firm to develop highly sophisticated resources to operate thene Coervo-Cazurra and Genc, 2011), for example to abide by high quality Indirect effect: home country inducing the firm to develop resources that are used in regulations or satisfy the needs of highly demanding capital markets. These highly sophisticated global strategy resources can then be used in countries with lower The home country indirectly affects the firm's global requirements, providing the firm with an advantage strategy. It does so by inducing the firm to develop over domestic competitors that have not been forced particular resources at home to deal with character to upgrade their resources. Thus, in contrast to the istic conditions of the environment there. These traditional arguments that distance has a negative resources are then used by the firm in its interna impact on the firm (Johanson and Vahine, 1977), in tional expansion, providing it with the ability to some dimensions the distance between home and pursue specific global strategies bost have a positive impact on the ability of the There are several ways resources developed at foreign firm to achieve an advantage over domestic home in response to existing inputs and institutions companies. For example, companies that face pro can be used abroad, with various implications for the market reforms in their home country generate firm's strategy. First, some of these resources induce the ability to deal with them and achieve superior the firm to select countries hased on its ability to use profitability in other countries that experience pro the resources there. For example, firms from corrupt market reforms later (del Sol and Kogan, 2007) countries become adept at dealing with it and are attracted, rather than repelled, by corruption abroad (Cuervo Cazurra. 2006), while firms that face politi- CONCLUSIONS cal risk at home learn how to manage it and are more likely to invest in countries with similar risk The article focuses attention on how the conditions (Holbum and Zelner, 2010). This not only reduces of the home country affect the global strategy of the the cost of doing business abroad (Hymer, 1976) and firm. It extends the resource-based view from its the related liability of foreignness (Zaheer, 1995). traditional focus on resources developed to achieve but also helps firms achieve economies of scale on an advantage in the industry, toward resources devel. resources they have developed oped in response to the general conditions of the Second, other resources can help the firm achieve home country. Although the latter are not advantages an advantage in comparison to other foreign investors in the home country since all firms develop similar in the same host country. A firm that emerges in a resources), they can provide the firm with an advan country with poorly developed institutions and unso tage abroad and affect its global strategy. The home phisticated providers of inputs and intermediate prod- country can directly become a resource that can be ucts has to compensate for these deficiencies by used abroad or indirectly induce the tim to develop developing some resources (Khanna and Palepu. particular resources to be used abroad later. Their 2010). When this firm enters other countries with use and relation to advantage or disadvantage underdeveloped institutions and weak input pro- induces the firm to follow particular global viders, it can achieve an advantage over firms coming strategies from countries with better institutions. For example, The articles that accompany this article provide firms from countries with poorly developed institu- sophisticated examples of how aspects of the tions generate resources to deal with such institutions home country affect a firms global strategy. First and become dominant investors over firms from Devinney (2011) indicates another limit of the influ- advanced economies in countries with poor institu- ence of the home country on the global strategy of Copyright 2011 Min Sicily DO 01 Commentary 385 the firm Traditionally, multinational companies Fellowship at Nonheastern University are gratefully transferred resources and practices developed in the acknowledged. All errons are mine. home country to other countries to address their cor- porate social responsibilities there. However, the emergence of a global monitoring democracy with REFERENCES actors (such as nongovernment organizations and Jabor unions) overlooking the actions of multina Bailey W. Gutierrez de Pineres SA. 1997. Country of origin tional firms limits the ability of multinationals to attitudes in Mexice the Malinchismo effect Journal of follow this strategy. Instead, multinational firms are Initial Consumer Marketing: 25-41 increasingly being required to create global strate Barney 18. 1991. Fimm resources and sustained competitive gies for dealing with their responsibilities across advantage. Jumal of Managemew 17:99-120 countries, reducing the influence of the home Bilkey W. Nes E 1982. Country of origin effects on county on how they undertake corporate social products evaluation Rumal International Business Studies 13: 89.99 responsibility Boddewyn), Doh J. 2011. Global strategy and the collabo Second, Boddewyn and Doh (2011) illustrate how ration of MNE, NGOs, and poveroments for the prowi a firm not only develops particular resources to com sioning of collective goods in emerging markets, Global pensate for missing inputs at home, but also does this Strategy owal 10 in a host country. Similar to the situation in which a Cuervo Carum A. 2006. Who cares about corruption? firm will develop resources to compensate for the Arnal of International Business Studies 37: 805 822 lack of inputs or collective goods in the home Co-Caruma A. Genc M 200. Transforming disadvan- country, in a host country in which collective goods tapes into advantages developing country MNE in the are missing the multinational will have to invest in least developed countries. Journal of International these their development . However, instead of developing ness Studies 29957.979 them internally, as is often the case in the home Cuervo-Carum A. Gene M. 2011. How content matters country, in a host country the multinational firm may on market advantages of developing country MNEN choose instead to assist the government or non- malef Man Sadies 48 441-445 Corro-Caruma A. Maloney M, Manrakin S 2007 governmental organizations in the creation of these Causes of the difficulties in intentionalization, collective goods. The use of this assistance mode of Iremational Business Studies 28 709-725 is the result of high uncertainty in the defense of del Sol L. Kopan 1.2007 Regional competitive advantage contractual obligations and low asset specificity honed on pioneering economic reform: the one of Third, Rangan and Drummond (2011) explain in Chilean FD. Journal of International Business Studies detail how the home country can become a resource 38 901-927. that supports the advantage of the firm in particular Derinney T 2011 Social responsibility, global strategy and host countries, Multinationals face the challenge of the multinational enterprise global monitoring deme controlling their host country operations and captur- racy and the meaning of place and space. Global Strategy Journal (3) ing value. However, firms originating in home coun Dunning JH 1998. Location and the multinational enter tries with significant ties to the host country-such prisca neglected fact Journal of International Bus as economie, security, political, or migratory es Sadis 29. 45-66 benefit from this association in comparison to firms Hankel Rose A. 2002. An estimate of the effect of originating in countries with weak ties. The ties Como cances on trade and income Owarterly facilitate the sanctioning and monitoring of misbe ef Economics 117: 437-466. havior in the host country and enable the firm to Garcia-Canal E. Guillen MF 2008. Rick and the strategy of achieve higher commitment and performance in the foreign location choice in regulated industries Strategie host country Mong Joumal 2910: 1097-1115 Holtan GLF. Zeiner BA 2010. Political capabilities, policy risk, and international investment strategy, evi dence from the global electric power industry. Strategic ACKNOWLEDGEMENTS Management Journal 31(12): 1290-1315 Hymer SH. 1976. The intentional Options of National I thank Steve Talman for providing useful suggestions Firme A Shf Foreign Direct Investment MIT Press for improvement. The financial support of the Center for Cambridge, MA International Business Education and Research at the Johnson I, Vahine E. 1977. The internationalization University of South Carolina and the Robert Morrison process of the firm: a model of knowledge development Cele Management Gel Strat. -11 D.S.BOX