Internationalization of Enterprise Resource Planning Vendors

Abstract

International business theory suggests that multinational corporations are usually disadvantaged compared to local firms when competing in a host market. However, we find that foreign enterprise resource planning (ERP) vendors in the Chinese high-end ERP market perform significantly better than local vendors. To understand this gap, the authors first analyze the ERP business model and its four characteristics as a service and use Dunning's OLI paradigm to specify the ownership-specific, internalization-incentive, and location-specific advantages (O-, I-, and L-advantages) required for foreign ERP vendors to compete in the host country's high-end market. Then, after conducting case studies of the two foreign vendors with the highest share in the Chinese high-end ERP market, SAP and Oracle, they confirm that the O-advantages from strong brand and reputation, high research and development capabilities, professional partners, I-advantages from wholly owned subsidiaries, and L-advantages from economically developed regions cause SAP and Oracle to excel in the Chinese high-end ERP market.