Theme 5: New MNEs
Traditional Types of MNEs
● Historically, many MNEs developed from large, mature domestic firms & take
incremental steps of internationalization
New Types of MNEs
● Not following the Uppsala internationalization process model
○ Timing: Fast internationalization
○ Speed: Rapid process
○ Destination: No stages in the entry order
○ Method: JVs, alliances and acquisition more common
International new ventures and born globals
Oviatt and McDougall (2005) - Toward a Theory of International New Ventures
Main idea: Illustrates a new framework that relies on TC analysis, market imperfections and
internalization to explain the existence of MNE, combined with how ventures gain influence
over vital sources without owning them and how competitive advantage is developed and
sustained
International New Ventures
→ Business organization that, from , inception seeks to derive significant competitive
advantage from the use of resources and the sale of outputs in multiple countries
● INVs are almost always small organizations
Changing international Environment
Technological change in ICT
● Reduction of TC of multinational interchange: Transport & Communication
● Homogenization of some markets: Regionalization & globalization
● Efficient & affordable logistics
● More business people have been exposed to IB
● International finance & mobile human capital
● RBV of competitive advantage gaining in explanatory power
MNE theory & INVs
Stages theory of MNE evolution
● MNEs develop after a period of domestic maturation
● Incremental, risk averse and reluctant steps
● Process preserves home market routines
International New ventures
● Observe firms skipping stages (radical change)
● Observe very quick internationalization
● Managers’ knowledge and beliefs not aligned with stage of internationalization
, Scale & Internationalization
Scale & MNE argument
● Large size often argued to be key to internationalization
● Economies of scale in R&D, production, marketing etc.
● Efficiently manage international communication, transport & info exchange
● Oligopolistic market power
Characteristics of INVs
● High activity in international markets from or near the founding
● Relatively small in scale
● Limited in financial & tangible resources
● Endowed with distinctive intangible resource & capabilities
● Origins & fundamental orientation are strongly international
● Emphasis on differentiation strategies
4 Elements for sustainable INVs
A new framework that leads both theoretical development & empirical investigation toward
greater understanding of INV:
● Reliance on :
○ TC analysis
○ Market imperfections
○ Internalization to explain the existence of the MNE
INV: 4 Conditions
1. Internalization of some transactions
○ Low transaction costs
○ Best performance
2. Alternative governance structures
○ Hybrid structures (licensing & franchising)
○ Network structure is more based on trust & moral obligation
3. Foreign location advantages
○ Private (mobile knowledge
Traditional Types of MNEs
● Historically, many MNEs developed from large, mature domestic firms & take
incremental steps of internationalization
New Types of MNEs
● Not following the Uppsala internationalization process model
○ Timing: Fast internationalization
○ Speed: Rapid process
○ Destination: No stages in the entry order
○ Method: JVs, alliances and acquisition more common
International new ventures and born globals
Oviatt and McDougall (2005) - Toward a Theory of International New Ventures
Main idea: Illustrates a new framework that relies on TC analysis, market imperfections and
internalization to explain the existence of MNE, combined with how ventures gain influence
over vital sources without owning them and how competitive advantage is developed and
sustained
International New Ventures
→ Business organization that, from , inception seeks to derive significant competitive
advantage from the use of resources and the sale of outputs in multiple countries
● INVs are almost always small organizations
Changing international Environment
Technological change in ICT
● Reduction of TC of multinational interchange: Transport & Communication
● Homogenization of some markets: Regionalization & globalization
● Efficient & affordable logistics
● More business people have been exposed to IB
● International finance & mobile human capital
● RBV of competitive advantage gaining in explanatory power
MNE theory & INVs
Stages theory of MNE evolution
● MNEs develop after a period of domestic maturation
● Incremental, risk averse and reluctant steps
● Process preserves home market routines
International New ventures
● Observe firms skipping stages (radical change)
● Observe very quick internationalization
● Managers’ knowledge and beliefs not aligned with stage of internationalization
, Scale & Internationalization
Scale & MNE argument
● Large size often argued to be key to internationalization
● Economies of scale in R&D, production, marketing etc.
● Efficiently manage international communication, transport & info exchange
● Oligopolistic market power
Characteristics of INVs
● High activity in international markets from or near the founding
● Relatively small in scale
● Limited in financial & tangible resources
● Endowed with distinctive intangible resource & capabilities
● Origins & fundamental orientation are strongly international
● Emphasis on differentiation strategies
4 Elements for sustainable INVs
A new framework that leads both theoretical development & empirical investigation toward
greater understanding of INV:
● Reliance on :
○ TC analysis
○ Market imperfections
○ Internalization to explain the existence of the MNE
INV: 4 Conditions
1. Internalization of some transactions
○ Low transaction costs
○ Best performance
2. Alternative governance structures
○ Hybrid structures (licensing & franchising)
○ Network structure is more based on trust & moral obligation
3. Foreign location advantages
○ Private (mobile knowledge
