Relational embeddedness in home-based network and dynamic capabilities: evidence from Chinese MNCs

Abstract

PurposePrior studies have argued that multinational firms with dynamic capabilities can reconfigure and upgrade their internal and external resources and adapt to an ever-changing competitive global environment. The impact of home country networks exerting on multinational corporations’ (MNCs) dynamic capabilities has been rarely discussed in extant research. This paper aims to explore how two types of home country networks’ relational embeddedness (from domestic firms and foreign firms) affect Chinese MNCs’ dynamic capabilities.Design/methodology/approachSeveral hypotheses were tested by analyzing the survey data from 204 multinational companies in china.FindingsThe results reveal the impact mechanism of the home country network on dynamic capabilities. Embeddedness in domestic networks positively affects embeddedness in the foreign network; embeddedness in foreign firms exerts positive effects on the three dimensions of MNC’s dynamic capabilities. Additionally, the effect of domestic firms’ relational embeddedness on resource reconfiguring capability is mediated by foreign firms’ embeddedness. Consequently, this study provides a theoretical introduction for MNCs from emerging economies.Practical implicationsThis study has several managerial implications for emerging MNCs’ international operations. For MNCs from emerging economies, close cooperation with domestic firms helps firms to develop a close relationship with foreign firms; meanwhile, developing a close relationship with foreign firms can obtain spillover about technology and management experience better, improving dynamic capability. Specifically, domestic embeddedness, through foreign embeddedness, can extend the impact to focal firms in developing resource reconfiguring capability.Originality/valueThis study provides an alternate view of how home country networks influence the dynamic capabilities of Chinese MNCs and outlines its impact mechanism. Therefore, the study contributes both to the international business literature and social network literature.