Global and Regional Strategies of Multinational Enterprises: A Behavioral Theory Perspective

Abstract

Multinational enterprises (MNEs) tend to focus their international activities within their home region, which has been explained through internalization theory. We provide a different perspective on this regional/global discussion by relying on behavioral theory to explore the firm-level contextual factors that influence internationalization activities. The behavioral theory lens allows to understand under what conditions firms may tend to favor their home region, but also when firms may be motivated to break out of this tendency and pursue a global orientation. Following behavioral theory fundamental arguments, we contend that performance relative to aspirations can motivate either a home region orientation or a global orientation depending on whether the firm is performing above or below the aspiration level, respectively. Distance from bankruptcy will motivate a global orientation. We contend that organizational slack will have varying effects depending on the type of slack, as well as the level of slack. Available slack will be associated with a home region orientation, particularly at low to moderate levels. Recoverable slack is likely to motivate expanding outside of the home region, with moderation at higher levels of slack. Empirical analysis of our sample of 1,135 U.S. firms from 2003-2014 indicates support for our arguments related to distance from bankruptcy, and recoverable slack, as well as available slack at low to moderate levels. Our findings offer important insights into the internationalization of firms, highlighting a set of boundary conditions that help us to understand the pursuit of regional versus global strategies.