The relationship between location-bound advantages and international strategy: An empirical investigation

This paper examines the impact of location-bound advantage on the internationalisation strategy of Multinational Enterprises (MNEs). The extant research literature suggests that an advantage’s location boundedness may be driven by the nature of the advantage itself, organisational embeddedness and environmental embeddedness. We posit that these different drivers of location boundedness exert different impacts on internationalisation strategies. Our empirical results reveal that organisational embeddedness lowers the breadth of internationalisation of MNEs and increases the tendency of these firms to employ a global strategy. We also find that MNEs whose advantages are tacit and complex have a lower depth of internationalisation and are more likely to expand into culturally similar countries. Finally, our results show that MNEs whose advantages are highly embedded in the home environment tend to adopt a multi-domestic strategy and decentralised organisational structures.