Exploring the internationalization strategies of Turkish multinationals: A multi-perspective analysis

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Abstract

Drawing on a multi-perspective framework integrating the dynamic capabilities view, the resource-based view, and the industry-based view, we study the internationalization process of emerging country multinational enterprises (EC MNEs). A multiple-case study research method was adopted to explore the internationalization strategies of a set of EC MNEs from Turkey with a specific focus on the enabling role of dynamic capabilities (i.e., sensing, seizing, reconfiguring) in their international expansion. The findings identify four non-mutually exclusive internationalization strategies (infiltration, catch-up, extender, and challenger), representing trajectories that EC MNEs pursue to expand their foreign operations. We contribute to research on the internationalization of EC MNEs by illustrating and comparing the variations in respect to their strategic behaviors.

Introduction

The rise of emerging country multinational enterprises (EC MNEs) in the last two decades has attracted a great deal of scholarly interest (Alon et al., 2018; Buckley, 2018; Hernandez and Guillén, 2018; Luo and Zhang, 2016; Paul and Benito, 2018). International business (IB) researchers view EC MNEs as suitable and interesting laboratories to enhance knowledge about firm behavior in the IB context (Li et al., 2018; Liu et al., 2018; Ramamurti, 2012; Surdu et al., 2018). In particular, from a strategy perspective, despite their so-called latecomer disadvantages and increased global competition, the successful internationalization of EC MNEs and their strategies have been one of the central themes of research in IB (e.g., Cuervo-Cazurra and Genc, 2008; Luo and Tung, 2007, Luo and Tung, 2018; Mathews, 2006; Tsai and Eisingerich, 2010; Yaprak et al., 2018a).

Traditionally, researchers have focused on EC MNEs' location choices (Makino et al., 2002; Piperopoulos et al., 2018), entry and ownership strategies (Demirbag et al., 2009; Surdu et al., 2018) as well as the determinants of their cross-border investments (Buckley et al., 2007) while some studies also attempt to develop typologies based on EC MNEs' strategic activities such as marketing and R&D investments (Tsai and Eisingerich, 2010) or exploitation and exploration learning types (Deng et al., 2018). This literature has identified a range of strategic behaviors of EC MNEs driving their international expansion including their aggressive mergers and acquisitions (Kumar et al., 2019), asset-seeking investments (Cui et al., 2014; Luo and Tung, 2007), resource upgrading via cross-border partnerships (Mathews, 2006; Thite et al., 2016) and post-acquisition integration (Yaprak et al., 2018a).

Despite this growing literature on the internationalization strategies of EC MNEs, our understanding of their strategic behaviors as well as their competitive advantages and disadvantages remains fragmented and inadequate (Luo and Bu, 2018; Luo and Tung, 2018). Findings from studies that mainly focus on a salient behavior of EC MNEs such as asset-seeking investments (Cui et al., 2014; Elia and Santangelo, 2017) or a specific stage of their internationalization processes such as post-entry strategy (Khan and Lew, 2018) do not fully portray the divergences in and evolutionary nature of EC MNE internationalization. As is highlighted in recent studies, further research is required to reveal the plurality and diversity of EC MNEs' behaviors by acknowledging the heterogeneity among them (Luo and Tung, 2018; Luo and Zhang, 2016). In this regard, exploring the internationalization process of EC MNEs will enhance our knowledge of the strategic trajectories available for latecomer MNEs to compete globally (Hernandez and Guillén, 2018). The recent literature also emphasizes that MNEs transform as they internationalize in a dynamic and evolutionary process which necessitates building dynamic capabilities to adapt firm resources to changing market conditions (Deng et al., 2018; Matysiak et al., 2018; Teece, 2014a; Vahlne and Johanson, 2017). Although strategies and dynamic capabilities operate in tandem (Teece, 2014b) and EC MNEs provide a suitable context for such research, as they typically transform themselves while expanding in cross-border markets, there is little in the literature on the dynamism associated with their strategies and resource orchestration capabilities leading to their evolution (Buckley et al., 2017; Luo and Tung, 2018; Luo and Zhang, 2016).

Based on the above discussion, this study has two primary objectives. First, we aim to identify the types of strategic trajectories EC MNEs follow to compete globally under different market conditions with varying resource positions. Second, we seek to show how EC MNEs exercise their dynamic capabilities at different stages of internationalization to achieve a high level of congruency vis-à-vis competition within the target markets while pursuing various expansion routes. To do so, we develop a multi-perspective framework integrating the dynamic capabilities view (DCV) (Teece, 2007; Teece et al., 1997), the resource-based view (RBV) (Barney, 1991), and the industry-based view (IBV) (Porter, 1980). Building on this conceptual framework, we study eight MNEs from Turkey, with a specific focus on their strategic behaviors and activities as well as the role of dynamic capabilities (i.e., sensing, seizing, reconfiguring) in their internationalization in conjunction with their strategies. Turkey provides a suitable context for such research as Turkish firms engage in international operations in both advanced European markets and nearby emerging countries (countries in the Middle East, North Africa, and Central Asia). They establish network forms of relationships via partnerships with developed country multinational enterprises (DC MNEs) as original equipment manufacturing (OEM) and original design manufacturing (ODM) concerns, while also exporting to and investing in Europe, the Middle East, North Africa, and the Commonwealth of Independent States (CIS) countries by using the strategic location of their home country as a base and utilizing its historical and cultural links with this distinct geography (Ayden et al., 2018; Demirbag et al., 2010; Yaprak et al., 2018b; Yaprak and Karademir, 2010; Yavan, 2012). Our findings advance the discussion on the internationalization process by contributing from a unique context which simultaneously illustrates the characteristics of a western and an eastern country.

Our findings indicate that EC MNEs can pursue four non-mutually exclusive internationalization strategies, namely infiltration, catch-up, extender, challenger, depending on the perceived competitive intensity in target markets and the strategic motives for internationalization. Although EC MNEs are often perceived as struggling to develop strong footholds in foreign markets, we provide case-based evidence that shows some EC MNEs may have strong financial positions, scale and scope advantages which allow them to act like DC MNEs. This implies that internationalization is an evolutionary process leading firms to transform into successful MNEs regardless of their country of origin (Hernandez and Guillén, 2018; Ramamurti, 2012). We also show that while EC MNEs build and exercise dynamic capabilities to operationalize their internationalization strategies, the underlying behaviors and activities for building such capabilities vary for each strategic trajectory followed. By providing empirical evidence related to how dynamic capabilities play a pivotal role in the international expansion of EC MNEs and how their different forms (i.e., sensing, seizing, reconfiguring) are exercised at various stages of the internationalization process our findings contribute to the recent theorizing in the IB literature utilizing the DCV to study MNEs (Arikan et al., 2019; Deng et al., 2018; Khan and Lew, 2018; Matysiak et al., 2018). The paper is structured as follows. First, we provide a review of the literature on the internationalization strategies of EC MNEs. Next, we provide the theoretical background of the study by discussing the three prominent views of strategic management – the RBV, the IBV, and the DCV - in the context of internationalization of EC MNEs. We then describe our research method and present our findings from the case studies. This is followed by a discussion of the theoretical and managerial implications of our research. The paper ends with a conclusion section summarizing the overall research as well as its limitations and further research opportunities.

Section snippets

Internationalization of EC MNEs

The internationalization of EC MNEs has long been studied in the IB field as firms from various emerging economies have become prominent in the global business environment. The increasing number of studies of EC MNEs has initiated a discussion in IB research about whether these firms represent a new kind of MNE and whether mainstream IB theories, such as the OLI paradigm (Dunning, 1988) and the Uppsala model (Johanson and Vahlne, 1977, Johanson and Vahlne, 2009), are adequate to explain their

Theoretical background

Internationalization is a strategic decision that engenders the mobilization of resources to create and capture value through cross-border business activities (Santangelo and Meyer, 2017; Welch and Paavilainen-Mäntymäki, 2014). It is a process of resource commitments to capture opportunities in international markets where industry conditions may diverge from those the firm has been used to operating in at home (Teece, 2006). This strategic process is, therefore, affected by the existing

Research methods

The study investigates how industry conditions and firm resources shape EC MNEs' internationalization strategies and how EC MNEs' dynamic capabilities are exercised at the different stages of their internationalization. More specifically, the study is designed to explore the internationalization process of EC MNEs from Turkey. To do so, we conducted an exploratory multiple-case study. This research method is suitable when (i) the research questions are “how” or “why” questions, (ii) the

Findings

Our analysis reveals that the case study firms' internationalization activities are influenced by the interaction between their resource positions and host country market conditions. We observe that firms' internationalization behaviors vary depending on the perceived competitiveness in foreign markets. When firms target less or moderately competitive markets where they experience favorable market conditions, they expand to exploit their assets, which are able to meet market expectations and

Discussion

This study contributes to the ongoing debate on the competitive advantages and disadvantages of EC MNEs and their foreign expansion strategies as well as their evolution as latecomer MNEs in the IB literature in several ways. In this regard, our findings related to each identified strategic trajectory provide different implications.

First, infiltration is an internationalization strategy that EC MNEs can follow to secure small market shares in highly competitive markets while avoiding direct

Conclusion

This study identifies four non-mutually exclusive internationalization strategies representing trajectories that EC MNEs pursue to expand their operations. Although they are different, these internationalization strategies, if they are successfully adopted, drive EC MNEs to transform into more advanced forms of MNEs. Findings from this study demonstrate that the dynamic capabilities of EC MNEs play a pivotal role by providing EC MNEs with the ability to adjust their resources, market offerings

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