Competing with multinational enterprises’ entry: Search strategy, environmental complexity, and survival of local firms

Jie Wu; Ka Fai Lao; Feng Wan; Jiatao Li

doi:10.1016/j.ibusrev.2019.02.002

Competing with multinational enterprises’ entry: Search strategy, environmental complexity, and survival of local firms

Jie Wu, Ka Fai Lao, Feng Wan, Jiatao Li^*

^*Corresponding author for this work

Business Management

Research output: Contribution to journal › Article › peer-review

15 Citations (Scopus)

Abstract

This study examines the competitive dynamics between foreign and local firms. We posit that multinational enterprises (MNEs)’s entry in foreign markets significantly reduces the survival rate of local firms in the short term, but that this effect gradually diminishes over time. The proposed conceptual framework is operationalized through the combination of the widely used agent-based model and the economic model of competition. The agent-based model allows us to study the behavior of firms under the context of different markets and the environmental complexity while the competition model determines the competition between firms as well as the entry and exit of firms. Our results obtained from the simulation study reveal that the negative effect of foreign entry is heightened as environmental complexity increases. However, local firms with a broader knowledge search are better able to confront the negative impact of foreign entry over time. We also find that the negative effect of foreign entry on the survival of local firms is weaker for local firms with a strong retrieval capacity.

Original language	English
Pages (from-to)	727-738
Number of pages	12
Journal	International Business Review
Volume	28
Issue number	4
Early online date	22 Feb 2019
DOIs	https://doi.org/10.1016/j.ibusrev.2019.02.002
Publication status	Published - 31 Aug 2019

Bibliographical note

Acknowledgements:
The research is supported in part by the Research Grants Council of Hong Kong (#16505817), National Natural Science Foundation of China (No. 71728003), the University of Macau Research Committee under MYRG projects (No. MYRG 2016-00207-FBA/MYRG2018-00171-FBA), Macau Science and Technology Development Fund (FDCT) under project 055/2015/A2, the University of Macau Research Committee under MYRG projects 2016-00240-FST and 2017-00207-FST.The authors appreciate the comments from Strategic Management Society Special Issue in Rome and also Academy of International Business in Dubai in 2017.

Keywords

Environmental complexity
Foreign entry
NK model
Retrieval capacity
Search strategy

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10.1016/j.ibusrev.2019.02.002Licence: Unspecified

Cite this

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title = "Competing with multinational enterprises{\textquoteright} entry: Search strategy, environmental complexity, and survival of local firms",

abstract = "This study examines the competitive dynamics between foreign and local firms. We posit that multinational enterprises (MNEs){\textquoteright}s entry in foreign markets significantly reduces the survival rate of local firms in the short term, but that this effect gradually diminishes over time. The proposed conceptual framework is operationalized through the combination of the widely used agent-based model and the economic model of competition. The agent-based model allows us to study the behavior of firms under the context of different markets and the environmental complexity while the competition model determines the competition between firms as well as the entry and exit of firms. Our results obtained from the simulation study reveal that the negative effect of foreign entry is heightened as environmental complexity increases. However, local firms with a broader knowledge search are better able to confront the negative impact of foreign entry over time. We also find that the negative effect of foreign entry on the survival of local firms is weaker for local firms with a strong retrieval capacity.",

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author = "Jie Wu and Lao, {Ka Fai} and Feng Wan and Jiatao Li",

note = "Acknowledgements: The research is supported in part by the Research Grants Council of Hong Kong (#16505817), National Natural Science Foundation of China (No. 71728003), the University of Macau Research Committee under MYRG projects (No. MYRG 2016-00207-FBA/MYRG2018-00171-FBA), Macau Science and Technology Development Fund (FDCT) under project 055/2015/A2, the University of Macau Research Committee under MYRG projects 2016-00240-FST and 2017-00207-FST.The authors appreciate the comments from Strategic Management Society Special Issue in Rome and also Academy of International Business in Dubai in 2017.",

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AU - Wu, Jie

AU - Lao, Ka Fai

AU - Wan, Feng

AU - Li, Jiatao

N1 - Acknowledgements: The research is supported in part by the Research Grants Council of Hong Kong (#16505817), National Natural Science Foundation of China (No. 71728003), the University of Macau Research Committee under MYRG projects (No. MYRG 2016-00207-FBA/MYRG2018-00171-FBA), Macau Science and Technology Development Fund (FDCT) under project 055/2015/A2, the University of Macau Research Committee under MYRG projects 2016-00240-FST and 2017-00207-FST.The authors appreciate the comments from Strategic Management Society Special Issue in Rome and also Academy of International Business in Dubai in 2017.

PY - 2019/8/31

Y1 - 2019/8/31

N2 - This study examines the competitive dynamics between foreign and local firms. We posit that multinational enterprises (MNEs)’s entry in foreign markets significantly reduces the survival rate of local firms in the short term, but that this effect gradually diminishes over time. The proposed conceptual framework is operationalized through the combination of the widely used agent-based model and the economic model of competition. The agent-based model allows us to study the behavior of firms under the context of different markets and the environmental complexity while the competition model determines the competition between firms as well as the entry and exit of firms. Our results obtained from the simulation study reveal that the negative effect of foreign entry is heightened as environmental complexity increases. However, local firms with a broader knowledge search are better able to confront the negative impact of foreign entry over time. We also find that the negative effect of foreign entry on the survival of local firms is weaker for local firms with a strong retrieval capacity.

AB - This study examines the competitive dynamics between foreign and local firms. We posit that multinational enterprises (MNEs)’s entry in foreign markets significantly reduces the survival rate of local firms in the short term, but that this effect gradually diminishes over time. The proposed conceptual framework is operationalized through the combination of the widely used agent-based model and the economic model of competition. The agent-based model allows us to study the behavior of firms under the context of different markets and the environmental complexity while the competition model determines the competition between firms as well as the entry and exit of firms. Our results obtained from the simulation study reveal that the negative effect of foreign entry is heightened as environmental complexity increases. However, local firms with a broader knowledge search are better able to confront the negative impact of foreign entry over time. We also find that the negative effect of foreign entry on the survival of local firms is weaker for local firms with a strong retrieval capacity.

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Competing with multinational enterprises’ entry: Search strategy, environmental complexity, and survival of local firms

Abstract

Bibliographical note

Keywords

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Jie Wu

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Competing with multinational enterprises’ entry: Search strategy, environmental complexity, and survival of local firms

Abstract

Bibliographical note

Keywords

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Jie Wu

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