Transnationalization through country-of-origin clusters: Drivers and challenges in China

Urzelai, Berrbizne

Abstract

The objective of this research is to analyse the role that country-of-origin (COO) clusters have on the transnationalization of firms.

We adopt the view of the COO cluster as location mode in distant markets like China. To this end, the empirical research framework seeks to address the following research question:

1. Which challenges are the subsidiaries facing in China as a result of the business environment and practices there? Do they differ among subsidiaries?

This question takes a macro level point of view where the general environment where the subsidiaries are doing business is analysed. This part of the research provides information about the business liabilities in China.

To answer this question related to the IB approach, there is a perspective that complement that of IB, i.e. the economic geography (EG) view, which analyses the territories, its organizational models and its participants. We may think that FDI agglomeration can act as a mechanism to reduce those challenges. In this sense, we propose the second research question:

2. Which externalities do COO FDI agglomerations provide? Do they differ among subsidiaries?

This research question analyses the reasons why firms locate in FDI cluster and the advantages they obtain from this kind of geographical agglomerations. For that it analyses the perceptions that the subsidiary managers have about their localization and the positive value that this location mode provides (as a mean to access market, resources or others.

Country-of-origin clusters provide a net effect on the but not much is known about the conditions in which that net effect is positive. This is linked to the strategic asset that emerges from the actors of the cluster and their relationships, i.e., the social capital. There is a heterogeneity and internal diversity among the participants.

That is, although companies depart from the same place (country and region or origin) and come together and establish themselves in the same city in China, not all the participants follow the same model of co-location, neither those who follow the same model perceive the reality in the same way. We thus propose the following third research question:

3. How is the role that geographic expatriates´ communities of practice have in COO clusters? How do they develop and build the social capital of the subsidiary network?

Given the scarcity of theory in this area, addressing these questions warrants an in-depth qualitative study that allows to analyse how subsidiary managers build and exploit social capital internationally. This research question aims to understand how the international social capital of expatriates in a COO cluster is constructed, used and distributed among the members and how this configuration help the members in their internationalization process.

This research combines qualitative and quantitative methodologies and is composed of 7 chapters. The context of the research is Kunshan, Jiangsu province, China. The sample used for the analysis of the first two research questions consists of 24 subsidiaries: 12 subsidiaries in Mondragón Kunshan Industrial Park- MKIP, 4 subsidiaries in Kunshan German Industrial Park- KGIP, 3 subsidiaries that planned to enter MKIP in 2013 and 5 isolated Basque subsidiaries (but located in Kunshan). For the research question related to social capital, the case study of Mondragon industrial park (MKIP) is analyzed.

In general, networks and, in particular, country-of-origin clusters are an appropriate entry and location strategy that facilitate transnationalization of the firms and their landing in distant markets by generating knowledge advantages and reducing their liabilities abroad.

Our work contributes to the agglomeration and network theories on IB by evidencing the potential that internationalization through geographical networks has. From this perspective, it also contributes to explain the formation of communities of practice and social capital at the host country level. Another theoretical implication is
the linkage of the literature in Economic Geography and IB, which contributes to disentangle the space and the place of MNEs. From a practical point of view this research help companies take better localization decisions as there is an heterogeneity on the challenges faced, externalities gained and use of social capital from different location modes. At a political level, the research can enlighten the design and implementation of strategies that support enterprises in the internationalization process. Institutions should consider and promote these platforms as a viable tool that facilitates the internationalization process of the firms.

• Thesis Type: Thesis
• Keywords: country-of-origin clusters, China, Mondragon, communities of practice, social capital, internationalization, transnationalization
• Public URL: https://uwe-repository.worktribe.com/output/888536
• Award Date: May 1, 2017