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CAUSES OF DIFFICULTIES IN

INTERNATIONALIZATIONReviewed by:

Ammara Yasmin

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INTRODUCTIONAuthors

Alvaro CUERVO-CAZURRA

Mary M. MALONEY

Shalini MANRAKHAN

Publication

Journal of International Business Studies,2007

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THEORYwhen a firm, operating very successfully, obtains maturity in its country, it explores new international markets for further growth. But going international requires a lot of research and information of the new market as it poses many challenges to operate in a foreign country. There are various causes of difficulties that firms face when they internationalize

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The literature on these difficulties has developed inthree streams

Studies based in economics label the concept ‘the cost of doing business abroad.Organizational studies label the concept

‘the liability of foreignness’Strategic management analyses it, as the difficulties of managing dispersed operations in multiple countries.

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Existing studies have focused mainly on analyzing the

consequences of difficulties in internationalization but

this study explains the causes of these difficulties. Based on RBT, it answers following question,

What causes the difficulties faced byfirms when they internationalize in search of

new markets?

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Boundary Conditions of conceptual framework1. Market seeking motivation

2. Internationalize to only one country

3. Exclude firm advantages (only difficulties are discussed)

4. Firm is able to transfer resources across national borders

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This study is build on the resource-based theory to argue that the difficulties in internationalization can be separated into three main sets based on their relationship to advantage:

loss of an advantage of resourcescreation of a disadvantage by resources transferred abroad lack of complementary resources

In each set, authors have further distinguished difficulties into

specific to a firm common to a set of firms.

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Model and type of researchThis is a qualitative study. This essay starts with a practical example of a company which was very successful in its home market but gets into difficulties when internationalized. By giving such an example, the writers have emphasized the importance and value of the study. The study is conducting by having some assumptions. Then writers have illustrated their point of view about different aspects of the problems by referring to real examples and ideas of other scholars.

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ORIGIN AND HISTORYMultinational Enterprise

There is a dispute as to which was the first MNC. Some have argued that the Knights Templar , founded in 1118 , became a multinational when it stumbled into banking in 1135. However, others claim that the Dutch East India Company was the first proper multinational.

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RBT Wernerfelt in his article has given “A Resource-

Based View of the Firm” (1984).The origins of the resource-based view can be traced back to earlier research. Retrospectively, elements can be found in works by Coase (1937), Selznick (1957), Penrose (1959), Stigler (1961), Chandler (1962, 1977), and Williamson (1975), where emphasis is put on the importance of resources and its implications for firm performance.

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Resource According to Daft (1983) : "...firm resources

include all assets, capabilities, organizational processes, firm attributes, information, knowledge, etc; controlled by a firm that enable the firm to conceive of all implement strategies that improve its efficiency and effectiveness."

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liability of foreignness

Stephen Hymer introduced the concept of disadvantages of foreignness in 1960, it has received scholarly attention from various fields. Although Hymer's definition of the liability of foreignness (i.e., costs of doing business abroad) seems rudimentary, the concept has helped to better understand the behavior, decisions, and performance of MNEs during international expansion. Zaheer has done a lot on this topic.

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FOUNDERS, PROPONENT CRITICSFOUNDERS

Penrose

Coase

Wernerfelt

Daft

Hymer

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PROPONENT

Hastings

Buckley and Casson

Hitt, Hoskisson, and

Kim

Rugman

Verbeke

Tallman

Amit and Schoemaker

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RESEARCH PROPOSAL Causes of difficulties faced by employees

working abroad.

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VariablesCountry specific discriminations

Religion specific discriminations

Racial specific discriminations

General discriminations

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MODEL

Country specific Discriminations

Religion specific Discriminations

General Discriminations

Employee working abroad

Racial Discriminations

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RESEARCH METHODOLOGYSECONDARY DATA COLLECTION

Newspapers

Journals

Books

Internet

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PRIMARY DATA COLLECTION Interviews of the employees working abroad

face to face and through emails

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Compilation Introduction and definitions

Practical examples of employees working abroad in different countries

Explanation of variables with illustrations

Conclusion