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“Outside in”: Global demand heterogeneity and dynamic capabilities of multinational enterprises

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Abstract

We conceptualize the dynamic capabilities of multinational enterprises (MNEs) as learning and adaptation capabilities that address the pressure of global integration and local responsiveness. Complementing the extant literature on dynamic capabilities, which is focused on the supply side, our study draws attention to the demand-side influences, especially in terms of global demand heterogeneity. We propose that global demand heterogeneity provides pressures and opportunities for MNEs to learn and adapt and, thus, positively relates to the development of MNE dynamic capabilities. However, external sources per se may be insufficient. Firm-specific advantages, particularly human capital (at the managerial and employee levels), facilitate the internalization of external knowledge and pressure into the development of dynamic capabilities. An empirical study of Chinese multinational service firms strongly supports these arguments.

Résumé

Nous conceptualisons les capacités dynamiques des entreprises multinationales (EMN) en tant que capacités d’apprentissage et d’adaptation permettant de faire face aux pressions de l’intégration globale et de la réactivité locale. En complément de la littérature existante sur les capacités dynamiques, qui est axée sur l’offre, notre étude attire l’attention sur les influences de la demande, notamment en termes d’hétérogénéité de la demande globale. Nous proposons que l’hétérogénéité de la demande globale crée des pressions et des opportunités pour les EMN à apprendre et à s’adapter et, de ce fait, contribue positivement au développement des capacités dynamiques des EMN. Cependant, les sources externes en elles-mêmes peuvent être insuffisantes. Les avantages spécifiques des firmes (ASF), en particulier le capital humain (aux niveaux de la direction et des employés), facilitent l’internalisation des connaissances externes et font pression pour le développement de capacités dynamiques. Une étude empirique portant sur des firmes multinationales de services chinoises appuie fortement ces arguments.

Resumen

Conceptualizamos las capacidades dinámicas de las empresas multinacionales (EMN) como aprendizaje y capacidades de adaptación que enfatizan la presión de la integración global y la respuesta local. Complementando la literatura existente en capacidades dinámicas, la cual se enfoca en el lado de la oferta, nuestro estudio llama la atención sobre la influencia en el lado de la demanda, especialmente en términos de heterogeneidad de la demanda global. Proponemos que la heterogeneidad de la demanda global proporciona presiones y oportunidades de aprender y adaptarse para las EMN, por ende, se relacionen positivamente al desarrollo de capacidades dinámicas de las EMN. Sin embargo, fuentes externas per se pueden ser insuficientes. Las ventajas específicas de la empresa, particularmente el capital humano (a los niveles gerencial y de empleados), facilita la internalización de conocimiento externo y la presión en el desarrollo de capacidades dinámicas. Un estudio empírico de empresas de servicio multinacionales chinas apoya firmemente estos argumentos.

Resumo

Conceituamos as capacidades dinâmicas de empresas multinacionais (MNEs) como capacidades de aprendizagem e adaptação que abordam a pressão da integração global e capacidade de resposta local. Complementando a literatura existente a respeito de capacidades dinâmicas, que é focada no lado da oferta, nosso estudo chama a atenção para as influências do lado da demanda, especialmente em termos de heterogeneidade da demanda global. Propomos que heterogeneidade da demanda global fornece pressões e oportunidades para que MNEs aprendam e se adaptem e, portanto, se relacionem positivamente com o desenvolvimento de capacidades dinâmicas de MNE. No entanto, as fontes externas, por si, podem ser insuficientes. Vantagens específicas da empresa (FSAs), especialmente capital humano (nos níveis gerencial e de funcionário), facilitam a internalização do conhecimento externo e pressionam o desenvolvimento de capacidades dinâmicas. Um estudo empírico de empresas multinacionais chinesas de serviços apoia fortemente esses argumentos.

摘要

我们将跨国企业(MNEs)的动态能力概念化为应对全球整合与本地响应的压力的学习和适应能力。作为对供应方动态能力的现有文献的补充, 我们的研究关注需求方的影响, 尤其是在全球需求异质性方面。我们提出, 全球需求异质性为跨国企业的学习和适应提供了压力和机会, 因此与跨国企业动态能力的发展成正相关。但是, 外部资源本身可能还不够。企业特定优势(FSA), 特别是人力资本(在管理层和员工层面), 促进外部知识和压力的内部化, 带动了动态能力的发展。对中国跨国服务公司的实证研究强力支持这些论点。

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ACKNOWLEDGEMENTS

The first three authors share the first equal authorship of this paper. The authors gratefully acknowledged the grants from the Major Project of National Social Science Fund of China (Project No. 16ZDA015).

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Authors and Affiliations

  1. Department of Business Administration, School of Business, Nanjing University, Nanjing, Jiangsu, China

    Xiao Zhang & Li Cheng

  2. Department of Innovation and Strategy, Antai College of Economics and Management, Shanghai Jiaotong University, Shanghai, China

    Luqun Xie

  3. Department of Management, School of Business and Management, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong

    Jiatao Li

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Appendix: key construct and measurement

Appendix: key construct and measurement

Construct

Measurement

Respondents

Dynamic capabilities

Combination of innovation capability and strategic flexibility

 

Innovative capability

In terms of the following aspects, please indicate the extent to which your firm makes an effort

CEO

 

To spend heavily (well above your industry average) on research and development (R&D)

 

1 = “none at all”

7 = “to an extreme extent”

To introduce numerous new products/services to the market

 

To lead the development of breakthrough innovations in its industry

 

Strategic flexibility

In terms of the following aspects, please indicate the extent to which your firm is capable of adjusting itself

CEO

1 = “not capable at all”

7 = “completely capable”

Capability of redirecting strategic positioning quickly and effectively

 

Capability of redeploying strategic resources

 

Capability of responding to environmental changes, such as customers’ demands and competitors’ actions

 

Global demand heterogeneity

In terms of the following aspects, please indicate the extent to which your firm is equipped with the feature

CEO

Senior manager

1 = “not at all”

7 = “to an extreme extent”

Great difference in global customer demands

 

Managerial international experience

In terms of the following aspects, please indicate the extent to which your firm is equipped with the feature

Senior manager

1 = “not at all”

7 = “to an extreme extent”

The top management team has abundant international experience

 

Employee

Human capital

In terms of the following aspects, please indicate the extent to which your firm is equipped with the feature relative to competitors

Senior manager

1 = “not at all”

7 = “to an extreme extent”

Spending more money per employee on training

 
 

Spending more hours annually training employees

 
 

Hiring employees with high levels of prior experience

 
 

Hiring employees with high levels of prior training

 
 

Hiring employees with high levels of education

 

Internationalization performance

This market is too competitive; price wars frequently occur.

CEO

CFO

1 = “not satisfied at all”

7 = “completely satisfied”

Overseas market share

 

Overseas sales growth

 

Overseas profitability

 
 

Overseas return on investment

 

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Zhang, X., Xie, L., Li, J. et al. “Outside in”: Global demand heterogeneity and dynamic capabilities of multinational enterprises. J Int Bus Stud 53, 709–722 (2022). https://doi.org/10.1057/s41267-019-00252-6

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