Multinational expansion of ASEAN firms

Abstract

Purpose– The purpose of this study is to investigate the type of resources that firms draw on to expand internationally within the Association of Southeast Asian Nations (ASEAN) context. The authors seek to understand the impact of technological, political and knowledge resources on ASEAN firms’ multinationality, moderated by labor intensity, the type of ownership and the stage of economic development.Design/methodology/approach– The hypotheses are tested on a sample that comprises 4,056 manufacturing firms in five ASEAN countries: Indonesia, Lao PDR, Philippines, Vietnam and Timor-Leste.Findings– The authors found that technology resource is not positively associated with multinationality. However, this relationship is moderated by labor intensity and type of firm ownership. Political resources, such as lobbying activities and informal payment to government, are important for ASEAN firms for foreign expansion. However, excessive informal payment may prove to be counterproductive. The authors also found that local firms tend to exploit more political resources than foreign counterparts and firms operating in the lower stage of economic development tend to spend more on lobbying activities, but pay less informal contribution. Finally, for the manager industry experience, they found an inverted U-shaped relationship with respect to multinationality, but for manager education, the association was unexpectedly negative.Practical implications– From a practical perspective, the findings have three important implications for management of ASEAN multinationals. First, multinationals can systematically exploit and internalize political ties by carefully integrating political activities, through informal contribution and lobbying, into their strategic planning or corporate structure. The findings suggest that political networking will offset weak technological resources, particularly for local firms. Second, managers of multinationals operating in ASEAN should not rely excessively on political actors, as the extra costs associated with the above optimum political resources exceed its marginal benefit. Moreover, excessive reliance on political actors will expose the firm to the threat of opportunism. Even though political resources are important managers need to maintain the utilization of political resources at the optimal level. Third, besides technological and political resources, managers’ knowledge is also crucial for ASEAN firms’ internationalization. The authors provide evidence showing that the positive effect of managerial experience is limited only to a certain level, even though tmanagers’ education has positive linear relationship with multinationality. This implies that at the early stage of international activities, both manager’s experience and education will have positive impact on the firm. However, when international activities are getting more complicated, the manager’s education takes over the manager’s experience. Above its optimum point, the manager’s experience will limit the manager’s capability to create innovative solutions for international expansion, and therefore it is the manager’s education that is able to stimulate revolutionary solution.Originality/value– In this paper, the authors examine the resource impact on multinationality or the extent to which business activities span across national boundaries to shed light on the antecedents of foreign expansion in ASEAN. They discuss three types of resources (i.e. technological, political and knowledge resources) and seek to understand the impact of these resources on multinationality. Political resources are highlighted in addition to technological and knowledge resources in this paper because ASEAN firms are generally situated in a weak institutional environment in which the political resource is crucial for firms’ entry, operation and exit in international markets (Boddewyn and Brewer, 1994; Hillman and Keim, 1995; Rodriguezet al., 2005).