Competitive Advantages in a Hostile, Regulated Environment: Four Multinational Banks in India

Paul Caussat

doi:10.1007/s11575-021-00459-6

Abstract

International business literature has historically been divided between scholars exploring the local obstacles foreign firms face (thereby overlooking foreign firms’ capacity to deploy advantages locally) and those examining the internationalisation of firm-specific advantages (thereby overlooking the peculiarities of the local context in which foreign firms deploy their advantages). We still do not completely understand the process by which multinational enterprises (MNEs) – especially service MNEs – develop competitive advantages in relation to the host environment. Using a multiple-case study of four multinational banking subsidiaries in India, this research aims to explore the variety of competitive advantages deployed by foreign multinational banks (MNBs) in a hostile, competitive environment: the Indian banking industry. This article’s main contribution is to bridge the gap between the obstacle-oriented internationalisation literature and the advantage-oriented literature through an exploration and comparison of a comprehensive set of locally relevant advantages deployed by the four MNBs studied. We introduce the concepts of global anchoring and local anchoring to make sense of the directionality of subsidiaries’ competitive advantages, and we explore their broad associations with subsidiaries’ commercial and financial performance. We conclude by discussing three theoretical lenses, situated at the intersection of the obstacle-oriented and advantage-oriented literatures, which can potentially account for the origins of competitive advantages in our sample, and we develop a series of propositions for future research.

Highlights

In spite of the increasing centrality of service multinational enterprises (MNEs) in the world economy (Greenwood et al, 2010), international business theory has engaged with these actors to a lesser extent than with traditional manufacturing MNEs – in particular, their international expansion and the relevance of traditional competitive advantages to service MNEs (Bai et al, 2019; Chidlow et al, 2019)
We report here findings on the competitive advantages tentatively developed by each multinational banks (MNBs) vis-à-vis domestic banks as well as, more importantly, other foreign MNB subsidiaries in India
As we explore in the literature review, studies show four broad categories of competitive advantages: (1) host-country experience and knowledge; (2) specific ownership advantages developed at home and in India leading to Assets of foreignness (AOFs); (3) AOM and (4) advantages due to externalities

Summary

Introduction

In spite of the increasing centrality of service multinational enterprises (MNEs) in the world economy (Greenwood et al, 2010), international business theory has engaged with these actors to a lesser extent than with traditional manufacturing MNEs – in particular, their international expansion and the relevance of traditional competitive advantages to service MNEs (Bai et al, 2019; Chidlow et al, 2019). Scholars still do not completely understand the process by which foreign multinational banks (MNBs) develop competitive advantages in relation to the host environment (vis-à-vis domestic and other foreign firms), especially in a non-Western, emerging economy context characterised by both institutional voids (Khanna and Palepu, 2000) and hostile regulations. While a narrow economics-inspired literature stream tentatively addresses this topic (Berger et al, 2000; Jones, 1993; Williams, 1997; Yannopoulos, 1983), to the best of our knowledge no studies provide a comprehensive analysis and comparison of the variety of competitive advantages in a specific industry (here: Multinational banking) and host environment, and our article is aimed to fill this gap. Our research question is as follows: What advantages do MNBs develop in a competitive and hostile environment? The subsidiaries vary in terms of organisational characteristics (origin, age, local experience and/or knowledge and international presence), which allows us to pinpoint variations in the nature of competitive advantages developed in the host environment

Methods

Results

Discussion

Conclusion