Cluster linkages in the global production networks: Exploring the impacts on the expansion of emerging market multinationals

Abstract

The past two decades have witnessed the rapid penetration of emerging market multinational enterprises (EMNEs) into global production networks. Although existing literature documents the agglomeration effect of industrial clusters in affecting firms’ strategic decisions, less is known about how the heterogeneous cluster linkages at the national level affect the foreign market expansion of EMNEs. Based on a supply chain perspective, this study investigates the different cluster linkages between countries based on their upstream/downstream relations. We find that upstream–downstream (U-D) cluster linkages reduce the EMNEs’ expansionary entries into a foreign country, while the downstream-upstream (D-U) linkages lead to an increase in expansionary entries. These relationships are adversely moderated by firm-cluster relatedness. We also find that the expansionary entries of EMNEs positively affect their performance, and the relationship is moderated by the institutional environments in host countries. In summary, this study informs a more holistic understanding of the complexity of global production networks, considering the interplay between firms, clusters, and institutions.