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Does country matters? …
Does country matters?
National institutions and the country effect
Institutions put the rules of the game, and this rules influent the foreign affiliates performance
Exists two types of rules
Formal
Property Rights
Contracts
Polity
Informal
Rules of behavior
Codes of conducts
Conventions
Those rules affect the firm's depending where the affiliate there are
Industry effect vs. country effect
theory of comparative advantage
countries differ in the availability of factors of production such as land, labor, and capital.
The prices vary acording to the abundance of the diffrent countries.
Countries differ in the intensity of the different factors of production that are used
Production costs (goods)
a country can produce cheaper goods in a certain industry in which the country has an abundance
theory of the competitive advantage of nations
productivity varies across countries
countries have different capabilities to create, upgrade, and sustain the innovation and technology that enhance the competitive advantages of locals firms over foreign firms in an industry.
Parent firm effect vs. country effect
Parent firms are the major sources of the
variation in foreign affiliates’ performance
The Firm Specific Advantage (FSA)
The firm is be able to transfer unique resources to the foreign affiliates located in hosts countries
this resources generate value and competitive barriers
Cannot be easily replicated by its locals rivals
foreign affiliates established by parent firms with the FSA attain a better performance compared to indigenous rivals in a host country
Host countries are the major determinant in the affiliates performance, stand out the economic outcomes from the exploitation.
Explotation of location-specific advantage (LSA)
Comes to the diffrences of costs in the countries
Labor
Land
Capital
This generate for the firms more advantages and especially more profitability
location-bound firm-specific advantage (LFSA)
Comes from firm-specific resources owned by firms operating in a particular location
What is a foreign affiliate?
A foreign affiliate can be considered as an integrated part of its parent firm in that its core resources are transferred from the parent firm
Is not completely independent of Parent firm
Can be considerated as a local firm, because uses local resources such as local human and physical resources
foreign affiliates can achieve a superior performance by capitalizing on a parent firm’s FSA, LSA, and LFSA
