the regional and global competitiveness of multinational...

The regional and global competitivenessof multinational firms

Alan M. Rugman & Chang Hoon Oh & Dominic S. K. Lim

Received: 24 February 2011 /Accepted: 15 June 2011 /Published online: 10 July 2011# Academy of Marketing Science 2011

Abstract International competitiveness ultimately dependsupon the linkages between a firm’s unique, idiosyncraticcapabilities (firm-specific advantages, FSAs) and its homecountry assets (country-specific advantages, CSAs). In thispaper, we present a modified FSA/CSA matrix buildingupon the FSA/CSA matrix (Rugman 1981). We relate thisto the diamond framework for national competitiveness(Porter 1990), and the double diamond model (Rugman andD’Cruz 1993). We provide empirical evidence to demon-strate the merits and usefulness of the modifiedFSA/CSA matrix using the Fortune Global 500 firms.We examine the FSAs based on the geographic scope ofsales and CSAs that can lead to national, home region,and global competitiveness. Our empirical analysissuggests that the world’s largest 500 firms have increasedtheir firm-level international competitiveness. However,much of this is still being achieved within their homeregion. In other words, international competitiveness is aregional not a global phenomenon. Our findings havesignificant implications for research and practice. Future

research in international marketing should take intoaccount the multi-faceted nature of FSAs and CSAsacross different levels. For MNE managers, our studyprovides useful insights for strategic marketing planningand implementation.

Keywords International competitiveness . Regional .

Global . Diamond . Double diamond . Internationalmarketing strategy . Firm-specific advantages (FSAs) .

Country-specific advantages (CSAs)

Introduction

The collaboration between scholarly disciplines (e.g., psy-chology and marketing; marketing and international business)has been the driver of some major advancements in academicfields. International competitiveness is a subject that drawsupon perspectives from international business, strategy,international economics, as well as international marketing.In this paper, we provide a broad yet refined perspective ofinternational competitiveness by building on the internationalbusiness and strategy literature. In doing so, our purpose is tofacilitate further collaboration between academic disciplines,which is essential if we are to examine finer-grained researchquestions concerning the concept of international competi-tiveness. Specifically, we adopt a multiple perspectivesapproach to present a new conceptualization of internationalcompetitiveness. We further demonstrate the merit of ourapproach by analyzing and testing the nature and extent ofinternational competitiveness of the world’s 500 largest firms.These firms account for over half the world’s trade (on anintra-firm basis as well as with arm’s length customers) andover 90% of the world’s foreign direct investment (FDI)(Rugman 2005).

A. M. Rugman (*)School of Management, Henley Business School,University of Reading,Henley-on-Thames, Oxon RG9 3AU, UKe-mail: [email protected]

C. H. Oh :D. S. K. LimBrock University,500 Glenridge Avenue,St. Catharines, ON L2S 3A1, Canada

C. H. Ohe-mail: [email protected]

D. S. K. Lime-mail: [email protected]

J. of the Acad. Mark. Sci. (2012) 40:218–235DOI 10.1007/s11747-011-0270-5

International competition has brought dramatically in-creased pressure to cut costs in order to compete withforeign companies, to satisfy to domestic and foreigncustomer needs, and to improve business processes.However the role of marketing in enhancing competitive-ness has been neglected in the literature (Doyle and Wong1998). In addition, most of the literature measuringinternational competitiveness focuses on firms from acountry or region (e.g., Buckley et al. 1990; Coviello etal. 1998; Doyle and Wong 1998; Özçelik and Taymaz 2004;Traill and da Silva 1996) and thus ignores country (region)specific factors. As an initial step toward addressing thisgap, we focus on the location specificity of internationalcompetitiveness by comparing firms from differentcountries and regions. That is, we investigate the extent towhich the domestic, home region, and global activities ofthe largest 500 firms are determined by internationalcompetitiveness, which, in turn, comprises national, re-gional, and global competitiveness.

A critical insight from this approach is that internationalcompetitiveness occurs at the intersection between country-level and firm-level advantages. In short, internationalcompetitiveness relates country-specific advantages (CSAs)to firm-specific advantages (FSAs). In turn, these linkagesbetween CSAs and FSAs can be analyzed both theoreticallyand empirically. Here we develop a framework relatingCSAs to FSAs building upon Rugman’s (1981) FSA/CSAmatrix and examine the linkages between CSAs in thehome country, home region, and the globe (foreign regions)and the potentially related FSAs of those home countryfirms; the framework is based on the concept of interna-tional competitiveness and the new perspective of regionalmultinational enterprise (MNE) (Rugman and Verbeke2004). This analysis of international competitiveness alsoembeds the findings of the nature and extent of FSAs andCSAs within the classic diamond framework of Porter(1990) as extended by Rugman and D’Cruz (1993) into thedouble diamond.

We believe that our integrative consideration of firm-specific and country-specific determinants can addsignificantly to international marketing research oninternational competitiveness. As MNEs play increasing-ly important roles in the integrated world economy, asophisticated perspective about how these MNEs lever-age their FSAs, derived from CSAs—both their homecountries and host countries—should be useful as weseek to better understand their international marketingstrategies and implementation.

This paper proceeds as follows. We first illuminate theregional reality by examining the nexus between country-level and firm-level factors. Next, we expand our perspec-tive beyond the country level to incorporate regional andglobal levels of analysis. We then describe our data and

method and present our empirical findings on the interna-tional competitiveness of the world’s 500 largest firms.Finally, we discuss the implications of this empiricalevidence for international marketing researchers as well asmanagers.

Theories and literature

A firm’s international activity is a complex phenomenon,influenced by a myriad of country- and firm-specificfactors. For example, Vernon’s (1966) work on the productcycle (e.g., new product, maturing product, and standard-ized product stages) links the success of U.S. MNEs tostrong U.S. CSAs in technology. He shows that U.S. MNEsexpand U.S. national competitiveness through internationaltrade and foreign direct investment. These MNEs havemarketable products based on technology, knowledge, andresources. Their success is determined by the ease ofcommunication, which is a function of geographicalproximity, even if we assume that MNEs in differentcountries can have access to identical knowledge andresources. In a similar vein, from an internationalmarketing perspective, Wells (1968) notes that the exportsuccess of U.S. MNEs was determined by a great deal ofknowledge based on a very high-income, consumer-basedCSA in the U.S.

In addition, MNEs differ in their level of capabilities toaccess and utilize CSAs in knowledge and resources, andthus firm-specific characteristics, FSAs, also determinemarketability. Marketing capability does not work inisolation from the firm’s other capabilities and processes(Doyle and Wong 1998). In fact, internalization theory(Rugman 1981) considers FSAs and CSAs as the twobuilding blocks to analyze international competitiveness.

The next wave of international business research focusedon the FSAs of international activity. For example, literatureidentified such FSAs as: firm size (Levitt 1983), managerialcapability (Bartlett and Ghoshal 1989; Kogut 1985; Porter1986), R&D and marketing capabilities (Buckley andCasson 2010; Porter 1986), and financial capability(Agarwal and Ramaswami 1992; Grosse 1992). RecentlyJohanson and Vehlne (2010) have underlined businessrelationships and networks within a company and betweencompanies. Thus these FSAs lead to superior performanceby MNEs in international markets (Kirca et al. 2011).However, focusing only on firm-specific determinants canbe misleading if we do not take into account the contextwithin which these firm-level factors are embedded. Assuch, there has been a renewed need to look at country-specific determinants and how these two determinantsaffect the competitiveness of firms in international business(Dunning 1998).

J. of the Acad. Mark. Sci. (2012) 40:218–235 219

International competitiveness and international marketing

The need for consideration of CSAs in both home andhost countries has been emphasized in the literature onthe strategy and performance of MNEs and theirsubsidiaries (Dunning 1998; Grewal et al. 2009; Rugman1981; Rugman and Verbeke 2001). In marketing, earlystage research tended to focus on a simple dichotomousview of foreign versus domestic products, or, in a similarvein, “nationality” itself as a factor (e.g., Kotabe 1990).The marketing literature also highlighted the role ofnational culture, more specifically, cultural distance orsimilarity between the host country and home country (i.e.,country of origin effects). The main finding is that consumersprefer products from the countries with a relatively similarculture (e.g., Johansson et al. 1985; Heslop et al. 1998; Wangand Lamb 1983).

However, the increasingly important role of MNEs inthe world economy calls for a more sophisticatedperspective about how these MNEs leverage competitiveadvantages conferred or affected by country-specificfactors. These home country factors include competitive-ness and regulatory frameworks that may affect homecountry–level operations (e.g., Carpano et al. 1994;Grewal et al. 2009; Porter 1986). For example, a country’seconomic competitiveness may determine the sophistica-tion with which a country’s firms develop FSAs inmarketing, production technology, physical capital, andmanagerial skills (Balabanis and Diamantopoulos 2004).This view on the relevance of home CSAs is consistentwith Porter’s perspective as he argues that a firm’scompetitive performance within world markets is influ-enced by a variety of home country factors (Porter 1990).

The home country national environment (represented bythe Porter home country diamond) has significant influenceon a firm’s competitive advantage and therefore its strategyformulation. Grant (1991) further argues that factor con-ditions and the related and supporting industries mayinfluence a firm’s resource strengths, while rivalry andhome demand conditions mainly influence key successfactors within the market. Scholars in international businesshave explored other dimensions of international competi-tiveness such as government conditions and macro-economic policy that Porter originally considered asexogenous factors (Cho and Moon 2000; Moon et al.1998; Rugman and Verbeke 1990).

Despite the intuitive appeal of this perspective on therole of the firm as an agent for international competi-tiveness, the extant marketing literature has not foundstrong and consistent support for the influence ofnational competitiveness on firm performance and mar-keting strategy. For example, Balabanis andDiamantopoulos(2004) could not confirm the hypothesized relationship

between economic competitiveness and consumer ethno-centrism, and they conclude that this viewpoint does notprovide significant value to managers. Tellis et al.(2009) investigation of radical innovation in 17 majoreconomies in the world also suggests that widelyrecognized country-level metrics of labor, capital, gov-ernment regulation, and culture do not have a directimpact on radical innovation.

This lack of empirical support for the application ofthe Porter home country diamond to internationalmarketing could be due to the methodology and framingadopted in some of these works. For example, someresearchers focus only on host country market character-istics in terms of demand potential and similarity of legaland regulatory frameworks (e.g., Cavusgil et al. 1993;Cavusgil and Zou 1994), while some others focus onhome country characteristics (e.g., Tellis et al. 2009). Inaddition, the literature suggests that Porter’s diamondframework can apply to large economies but not to smallnon-triad nations such as Austria, Australia, Canada,Finland, the Netherlands, and New Zealand (Davis andEllis 2000; Rugman and D’Cruz 1993). As previouslydiscussed, this has led to the logic of the double diamondframework, whereby a small economy’s diamond isexamined along with the diamond of its largest tradingpartner (Rugman and D’Cruz 1991, 1993). Another sourceof the inconsistent findings in marketing about interna-tional competitiveness could be the simplistic metrics thatsome of these studies use to test national competitivenessor its distance between home country and host country. Forexample, Balabanis and Diamantopoulos (2004) use thenational competitiveness rankings based on WEF CurrentCompetitiveness Index (CCI), and Johnson and Tellis(2008) measure economic distance between two countriesbased on per capita GNP.

To overcome these potential shortfalls, research shouldtake into account not only home country factors but alsohost country factors and, in doing so, take into consider-ation the multi-faceted nature of a country’s economicenvironment, both conceptually and empirically. To thisend, we propose in what follows a modified FSA/CSAmatrix building upon the double diamond model (Rugmanand D’Cruz 1991, 1993).

The FSA/CSA matrix—an extension to internationalcompetitiveness

The relevant literature explaining the international compet-itiveness of firms builds upon the FSA/CSA matrix firstdeveloped by Rugman (1981). This basic matrix is widelyused in the international business literature. It comprisestwo building blocks, which can be particularly useful inanalyzing international competitiveness of large MNEs.

220 J. of the Acad. Mark. Sci. (2012) 40:218–235

First, firm-specific advantages refer to a set of firm-levelfactors that confer competitive advantage. The FSAs can beviewed as a firm’s unique, proprietary capabilities, whichmay be built upon product or process technology, market-ing, or distribution skills. Ultimately, the FSAs are based onthe firm’s internalization of an asset, such as productionknowledge and managerial or marketing capabilities overwhich the firm has proprietary control. There are alsovarious factors unique to each country, which are calledcountry-specific advantages. These CSAs include naturalresource endowments (minerals, energy, forests, etc.), thequality and quantity of labor force, and associated culturalfactors.

Managers of MNEs take into account both CSAs andFSAs as they develop strategies to position their firms ina unique international strategic space. On the one hand,the managers need to consider the quantity, quality, andcost of the major factor endowment of a nation, that is,CSAs. On the other hand, they must develop andcoordinate FSAs in production, marketing, or thecustomization of services. As such, a clear understandingof the relative strengths and weaknesses of the firm’sCSAs and FSAs is critical as the managers formulate thestrategic options of the MNE. Rugman’s (1981) FSA/CSA matrix (shown in Fig. 1) provides a useful frame-work for evaluation of these issues.

In Fig. 1 on the vertical axis we place CSAs either lowor high. On the horizontal axis we place FSAs either low orhigh. This leads to four quadrants for analysis. First,quadrant 1 represents a situation in which only CSAs areimportant. This quadrant can be explained through theliterature on international economics and internationalfinance. Comparative advantage explains movements ofgoods and factors across nations. Financial capital depends

upon interest rate differentials between countries. Thecompetitiveness of the MNEs in this quadrant dependsupon natural endowments of minerals, oil wells, forestproducts, hydro-electric power, and other natural resourcesin their home country as well as cheap labor or cheapskilled labor.

In contrast, quadrant 4 is a pure managementexplanation for the success of MNEs. Here, only FSAsmatter: the FSAs stand alone and are not influenced byCSAs. This is a quadrant reflecting the resource basedview. The firms have strong FSAs that are unique andproprietary, which in turn are protected by isolatingmechanisms (entry barriers) which prevent rival firmsfrom acquiring the similar FSAs. These isolating mech-anisms are often due to aspects of the organizationalstructure and the nature of the top management team, atype of Penrosean effect. Thus, it is necessary to examinethe internal network of the firms when the resource basedview is applied to MNEs. There will be codification ofinternal knowledge FSAs and routines for its use withinthe internal network of the firm.

Quadrant 3 is a special quadrant only applicable forinternational business. In quadrant 3 both FSAs and CSAsmatter. The FSAs of the firm are enhanced and facilitatedthrough home country CSAs. In general, there may beinternal managerial tensions in reconciling CSAs and FSAs.The better managed MNEs successfully combine FSAs andCSAs (Rugman 1996). On the other hand, in quadrant 2,neither CSAs nor FSAs are important. Firms in thisquadrant need to move to either quadrant 1 (building uponCSAs) or to quadrant 4 (by improving FSAs). Otherwisefirms in quadrant 2 are not sustainable.

The FSA/CSA matrix can be related to Porter’s (1990)diamond framework for national competitiveness.According to Porter (1990), there are four factors thatdetermine a nation’s competitiveness in the internationalarena—factor costs, aggregate demand, related and sup-porting industries, and the amount of rivalry—also knownas the four corners of the diamond. Each of thesedeterminants of competitiveness is exogenously influ-enced by government policy and the role of chance and, inturn, constitutes a component of an interactive system thataffects firms in the home economy. Porter assumes that thehome country firm exports its products and services, andhe measures international competitiveness in terms ofindustries having world export shares greater than thehome country average of their world export share. Itshould be noted that Porter examines only exports, so hisdiamond does not, strictly speaking, extend to FDI and theactivities of MNEs in having foreign subsidiaries. Thisdeficiency has been corrected by international businessscholars such as Dunning (1993, 1997) and Rugman andD’Cruz (1993).

Country-SpecificAdvantages

Firm-Specific Advantages

Weak Strong

Strong

Strong

Weak

Weak

1

2

3

4

Fig. 1 The CSA and FSA matrix. This is developed from the analysisof Chapter 8 in Rugman (1981)


Using Porter’s terminology, the strong CSAs inquadrant 1 of Fig. 1 form the basis of the global platformthat are the ingredients for firms to build FSAs and export—the essence of international competitiveness. Using thehome country diamond as a staging ground, the exportsof firms represent the home-base “diamond” advantage ininternational competitiveness (Porter 1990). The homecountry CSAs are also influenced by various tariff andnon-tariff barriers to trade as well as government regu-lations. In reality, MNEs must also make strategicdecisions to attain efficient global configuration and thecoordination of value chain activities (operations, market-ing, R&D, and logistics), building upon these homecountry CSAs. The managerial capabilities to make suchdecisions, in turn, represent a strong FSA. As such,Porter’s (1990) diamond framework can be extended torefine the analysis of CSAs and their interaction withFSAs in the FSA/CSA matrix.

A key limitation of Porter’s (1990) diamond model is itssole focus on home country conditions: the applicability ofa single diamond model for the study of international tradeis questionable (Davis and Ellis 2000). The double diamondframework developed by Rugman and D’Cruz (1993)addresses such concerns. Initially developed in a U.S.-Canada context, the double diamond framework relates thefour home country conditions to an equivalent set of fourconditions in the major host country trading partner ofCanada, as shown in Fig. 2.

Rugman and D’Cruz (1993) suggest that the interna-tional competitiveness of Canadian firms depends not onlyon their home country diamond conditions but also onthose of their major trading partner, the United States.While some Canadian firms derive FSAs from CSAs innatural resources, many others rely on the development ofmarket-based FSAs and successful brands as they achievesuccess in U.S. market. In short, the sources of a firm’scompetitive advantage are not limited to the home countryadvantage determined by Porter’s single diamond model.These can also be achieved by sensing and developing hostcountry CSAs. As such, the double diamond frameworkprovides a foundation to investigate the internationalcompetitiveness of MNEs from small open economiessuch as Korea, New Zealand, Austria, and Singapore andmany other non-triad countries, as their firms interactwith traditional triad countries such as the United Statesand Japan.

In summary, we believe that Porter’s (1990) diamondframework and Rugman and D’Cruz’s (1993) doublediamond framework provide a useful perspective to extendthe original FSA/CSA matrix (Rugman 1981). Thisapproach considers both the home country and the leadinghost country partner’s diamond for international businessstrategy. Further, as recent findings show that MNEsoperate more regionally than globally (Rugman 2005;Rugman and Verbeke 2004) we need to add this empiricaldimension to a study of international competitiveness.

Business outsideHome region

Business outsideHome region

Demand condition(Customers)

Factor condition (Resources)

Government condition

Home country Diamond

Supporting industries(Supply chains)

Supporting industries(Supply chains)

Factor condition (Resources)

Demand condition(Customers)

Government conditionBusiness

in Home region

Host country Diamond

Fig. 2 Double diamond framework in international competitiveness. This is developed from the analysis in Rugman and D’Cruz (1993)


Therefore we analyze how the home country diamond andthe home “triad region” diamond together determine theinternationalization of MNEs and lead to a new multidi-mensional measure of international competitiveness. Inwhat follows, we provide empirical evidence to demon-strate the merits and usefulness of the modified FSA/CSAmatrix using the Fortune Global 500 firms.

Data and method

Firm geographic sales and assets

To examine the recent trends in the geographic scope offirm competitiveness, geographic sales and assets dataare hand-collected from the annual reports of each firmand supplemented by the Compustat Segment of Stan-dard and Poor’s and the OSIRIS of Bureau van Dijk. Weuse the set of large 500 companies listed in the FortuneGlobal 500 in 1999 and 2008 (published in 2000 and 2009respectively). Most of these very large firms are MNEs(Rugman 2005). For 1999, 192 North American firms, 164European firms, 139 Asia Pacific firms, and five non-triadfirms are listed, and for 2008 160 North American firms,186 European firms, 145 Asia Pacific firms, and nine non-triad firms are listed. The United States has about 30% ofthese large 500 companies and Japan has about 15%, yetthe importance of these two countries relative to the E.U.is decreasing due to the rise of MNEs from emergingeconomies.

From the information regarding geographic sales andassets, we calculate foreign (F) to total (T) (F/T) salesand foreign to total assets as measures of the geographicscope of firm competitiveness (FSAs). For the regionalnature of firm competitiveness we calculate home region(R) sales to total (intra-regional; R/T) sales and homeregion assets to total assets. Following Rugman andVerbeke (2004) and Rugman (2005), the home region isdefined as a broad triad region (i.e., North America,Europe, and Asia Pacific). These measures can capture thegeographic reach of downstream (sales; marketing side)and upstream (assets; production side) FSAs (Rugman etal. 2009). We use the geographic scope of sales and assets,which is an outcome measure of FSA, instead ofcorporate-level resources (i.e., input measures) such asfirm sales, marketing and R&D intensities, and managerialcapability because these resources and capabilities cannotbe separated into domestic and foreign nor into homeregion and foreign region. In addition, these resources arealmost exclusively developed at headquarters, and only afew foreign subsidiaries develop new resources (Doz et al.2002; Hennart 2007).

Country competitiveness and CSAs

We derive international competitiveness scores based onthe Porter diamond factors from the World EconomicForum’s Global Competitiveness Reports (WEF GCR)published in 1999 and 2008 (World Economic Forum1999, 2008). The WEF publishes the reports based on theresponses from their own annual survey of executives aswell as the data compiled from various secondary sourcessuch as World Bank’s World Development Indicators. TheGCR for 1999 includes 59 countries, accounting for 88%of the gross world product in 1998, and the GCR for 2008includes 134 countries, accounting for approximately 97%of the gross world product in 2007. The WEF GCR datahave been widely used in international business andmarketing research (e.g., Balabanis and Diamantopoulos2004; Delmas and Toffel 2008; Goerzen and Beamish2003; Solleiro and Castanon 2005).

The national competitiveness scores are derivedthrough a two-stage principal component analysis. Theprincipal component analysis is known to provide robustfactor scores and is a commonly used dimensionreduction method (Velicer and Jackson 1990). In the firststage, we categorize the first-order variables commonlyavailable in the 1999 and 2008 GCRs into four micro-economic business environment factors based on thePorter’s “diamond” model (Porter 1990; Porter et al.2008; Grant 1991). They are: factor (input) conditions;demand conditions; related and supporting industries; andfirm strategy and rivalry. In addition, we also include twoexogenous macroeconomic factors suggested by Porter(1990), and Rugman and D’Cruz (1993), that is, macro-economic policies and social infrastructure and politicalinstitutions. These factors correspond to the “governmentcondition” in the double diamond framework (Rugmanand D’Cruz 1993: see Fig. 2). After we standardizedvariables, we conduct a series of principal componentanalysis on each of these variable groups and extractfactors with the Eigenvalue over 1 for each group (Zwickand Velicer 1986). After dropping some variables withextremely low loading or cross-loading, single factors withthe Eigenvalue over 1 were extracted for each variablegroup. Appendix 1 shows the list of first-order variablesincluded and their loadings, along with the extract factorsand the reliability scores.

In the second stage, we extract an overarching factor(that is, the national competitiveness score) and its factorscore from the second-order factors that were extracted inthe first stage. At this stage, the second-order factorsconverge on one overarching factor with an eigenvalueover 1. While the loading factor of macroeconomicpolicy is relatively low (0.69), we include all these


factors in the calculation based on the reasonableassumption that national competitiveness is a multidi-mensional construct. In such a composite latent variablemodel specification, the (formative) indicators all have animpact on a single construct (i.e., international compet-itiveness) and should not be excluded based on lowloading factors (Jarvis et al. 2003). We note, however, thehigh reliability score (Cronbach’s alpha=0.925). Thesesecond-order factors and their loadings in the focal factor(national competitiveness) are shown in Appendix 2.Appendix 2 also reports the national competitivenessscores of key countries that have MNEs on the list ofFortune Global 500 in 2008. The ranking of nationalcompetitiveness based on Appendix 2 is largely consistentwith that reported in the WEF GCR 2008 calculated usinga different methodology (Sala-i-Martin et al. 2008), thusdemonstrating the face validity of our national competi-tiveness scores.

Our findings from the two-stage principal componentanalysis indicate that a major CSA is factor conditionsfor Canada, the United States, the United Kingdom,South Korea, and Malaysia; demand condition forIreland, China, Taiwan and Thailand; supporting indus-tries for many European countries (such as Austria,Belgium, France, Germany, Italy, Spain, and Switzer-land), Turkey, India, and Japan; macroeconomic policyfor Mexico and Russia; social infrastructure and politicalinstitution for Luxembourg, the Netherlands, Portugal,Australia and Northern European countries such asDenmark, Finland, and Norway. Thus the key driver ofnational competitiveness varies by country. Thus onlylooking at a sub-component of CSAs will lead to biasedresults regarding a country’s relative competitivenesscompared to other countries. Overall, considering multi-faceted dimensions of national competitiveness, Den-mark, Germany, Sweden, and Switzerland have verystrong national competitiveness whereas Russia, Mexico,Hungary, and Poland have very low national competi-tiveness among key countries in 2008.

Using the national competitiveness values obtained fromthe above we calculate home region competitiveness andglobal competitiveness by key countries. Home regioncompetitiveness and global competitiveness represent thepossible source of location specific advantages that MNEscan exploit in the rest of their home region or in a foreignregion, respectively. The home region competitiveness ismeasured by the GDP weighted average of home regioncountries, except for the home country. Global competi-tiveness is measured by the GDP weighted average of allcountries except for the home region countries. Thereforeglobal competitiveness varies only by region. Countries inthe same home region share the same global competitive-

ness. We present our results and discuss key findings in thenext section.

Results

Table 1 shows geographic sales of large firms by country.To improve internal validity, we limit our discussion tocountries that have more than five firms on the list ofGlobal 500 firms. Regarding F/T sales, there are largevariations by country. In general, European firms aremore internationalized than Asia Pacific firms. German,Dutch, Swedish and Swiss firms have more than 60% oftheir sales in foreign countries, while Australian, Chinese,and Indian firms have less than 30% of their sales inforeign countries, on average. However the variations bycountry are smaller when we look at intra-regional sales(i.e., R/T). Most firms have more than 70% of sales intheir home region. Swiss and U.K. firms are somewhatdifferent from others and have less than 60% of sales inthe home region.

When we examine the changes over ten years, NorthAmerican and Asia Pacific firms increase their foreignsales, while European firms reduce their foreign sales. YetEuropean firms are more internationalized than others.North American firms reduce their home region sales by7%, while European and Asia Pacific firms increase theirhome region sales by 7% and 2% respectively. Theeconomic downturn and lowered national and home regioncompetitiveness in North America lead these firms to focusmore on a foreign region, while the enlargement of theEuropean Union and the rise of the Chinese and Indianeconomy make European and Asia Pacific firms focus ontheir home region. However these changes are very minor(less than 1% per year) and stable over time. On average,large firms have more than 70% of their sales in their homeregion. This finding is consistent with Rugman and Verbeke(2004).

In Table 2, we report F/T assets and intra-regional assets.The findings for assets are largely consistent with those forsales, but assets (upstream activities) are somewhat lessinternationalized than sales (downstream activity). Thismeans that downstream capability likely drives firminternationalization.

Table 3 shows national, home region, and globalcompetitiveness by country for 1999 and 2008. In general,developed countries have high national competitiveness,while developing countries have low national competitive-ness. Thus developing country MNEs may tap intodeveloped country competitiveness in their triad region.For example, Mexican MNEs can access U.S. competitive-ness, Central and Eastern European MNEs can access


Western European competitiveness, and South East AsianMNEs can access Japan and South Korean competitivenessthrough different modes of entry such as trade, FDI, licensing,and joint venture. On the other hand, developed countryMNEs may limit their activities in developing countries tooperationalize a specific competitiveness such as naturalresources, low wage labor, and market size and potential.

Regarding changes in the past ten years, Table 3 showsthat national competitiveness of European countries did notchange much. The national competitiveness of NorthAmerican countries has deteriorated in relative terms, whileAsia Pacific countries have improved national competitive-ness. Yet the national competitiveness of European andNorth American countries is stronger than that of Asia

Table 1 Geographic sales of large firms by country

N. of firms Foreign to total sales (F/T; %) Intra-regional sales (R/T; %)

1999 2008 1999 2008 1999 2008

North America 192 160 24.0 32.6 80.9 73.0

Canada 12 14 41.5 45.3 86.9 80.0

Mexico 2 4 7.0 60.9 n/a 64.0

United States 178 142 23.0 30.3 80.6 71.9

Europe 164 186 57.4 45.5 67.1 73.6

Austria – 2 – 66.0 – 95.0

Belgium 3 5 n/a 81.1 n/a 42.6

Denmark – 2 – 59.6 – 70.4

Finland 2 2 93.1 78.2 82.6 62.5

France 37 40 69.2 56.0 67.0 68.6

Germany 37 39 49.6 66.4 73.5 64.2

Hungary – 1 – 62.6 – 99.2

Ireland – 1 – 94.7 – 53.6

Italy 10 10 46.9 48.9 89.4 86.2

Luxembourg 1 1 n/a n/a n/a 53.9

Netherlands 9 10 75.5 67.8 56.6 66.9

Norway 2 1 42.4 24.4 72.1 85.0

Poland – 1 – 55.7 – 100.0

Portugal – 2 – 36.0 – 86.7

Russia 2 8 60.2 30.9 100.0 88.9

Spain 5 12 47.4 43.1 57.2 70.8

Sweden 4 6 93.5 80.0 53.0 76.9

Switzerland 11 13 73.3 70.9 59.9 54.3

Turkey – 1 – n/a – n/a

United Kingdom 41 29 45.3 49.4 64.5 59.5

Asia Pacific 139 145 26.9 30.8 77.4 79.7

Australia 7 9 18.9 26.8 67.2 89.6

China 10 37 n/a 22.2 n/a 88.1

India 1 7 < 10.0 28.9 > 90.0 74.7

Japan 107 68 25.1 30.1 78.5 76.9

Malaysia 1 1 n/a 79.2 n/a n/a

Singapore – 2 – n/a – 64.0

South Korea 12 14 51.3 48.5 73.6 75.6

Taiwan 1 6 n/a 39.3 n/a 89.0

Thailand – 1 – n/a – n/a

Total 495 491 33.1 40.8 76.4 74.6

Authors’ calculations based on annual reports. Non-triad firms are excluded (i.e., five firms in 1999 and nine firms in 2008)


Pacific countries. Home region competitiveness does notvary much within a triad region, neither across regions.Only North American countries show a significant drop inhome region competitiveness. However, North Americancountries still have stronger home region competitivenessthan European countries and Asia Pacific countries. Therehas been a fall in global competitiveness. Asia Pacific and

European firms have somewhat better global competitive-ness than North American firms.

It is noteworthy that six countries, namely, the UnitedStates, Italy, Russia, China, India, and Japan reportsomewhat different results from other countries. The UnitedStates and Japan have very strong national competitiveness,but their home region competitiveness is one of the lowest.

Table 2 Geographic assets of large firms by country

N. of firms Foreign to total assets (F/T; %) Intra-regional assets (R/T; %)

1999 2008 1999 2008 1999 2008

North America 192 160 23.2 30.5 80.6 75.5

Canada 12 14 43.5 45.3 87.1 80.7

Mexico 2 4 n.a 60.7 n.a 70.5

United States 178 142 22.1 27.7 80.3 74.9

Europe 164 186 49.0 50.6 70.9 71.0

Austria – 2 – 69.9 – 88.5

Belgium 3 5 n.a 61.2 n.a 56.9

Denmark – 2 – 59.6 – 84.8

Finland 2 2 65.1 53.9 87.3 95.3

France 37 40 56.8 54.6 67.7 69.9

Germany 37 39 46.8 45.6 75.3 78.9

Hungary – 1 – n.a – n.a

Ireland – 1 – 94.5 – 52.2

Italy 10 10 51.6 44.3 85.9 83.1

Luxembourg 1 1 n.a n.a n.a 59.6

Netherlands 9 10 76.8 63.9 68.7 72.7

Norway 2 1 28.4 46.0 92.4 59.3

Poland – 1 – 44.4 – 99.2

Portugal – 2 – n.a – n.a

Russia 2 8 8.8 14.1 100.0 94.8

Spain 5 12 n.a 45.5 n.a 74.5

Sweden 4 6 93.9 61.6 n.a 80.0

Switzerland 11 13 81.7 91.7 58.3 49.3

Turkey – 1 – n.a – n.a

United Kingdom 41 29 36.5 47.6 68.1 59.4

Asia Pacific 139 145 19.7 24.7 83.1 82.7

Australia 7 9 18.2 22.2 87.8 87.8

China 10 37 n.a 21.9 n.a 88.1

India 1 7 <10.0 22.4 >90.0 >90.0

Japan 107 68 19.2 26.5 82.7 79.9

South Korea 12 14 30.5 20.9 80.4 85.6

Malaysia 1 1 n.a n.a n.a n.a

Singapore – 2 – – 74.5

Taiwan 1 6 n.a 30.7 n.a 73.8

Thailand – 1 – n.a – n.a

Total 495 491 28.4 36.0 78.7 75.5

Authors’ calculations based on annual reports. Non-triad firms are excluded (i.e., five firms in 1999 and nine firms in 2008)


The national competitiveness of the United States andJapan always outperforms their regional counterparts, thusthe United States and Japan likely develop their FSAsbased on national competitiveness. This logic also applies,albeit weakly, to Australia and some European countriessuch as France, Germany, Netherlands, and Switzerland. Onthe other hand, Italy, Russia, China, and India have weaknational competitiveness, but their home region competi-

tiveness is very strong. In particular, Italy does not havestrong national competitiveness in factor condition, strategyand rivalry, and macro-conditions; Russia shows lownational competitiveness in factor condition, demandcondition, supporting industries, strategy and rivalry, andsocial infrastructure and political institution; the weaknessis in strategy and rivalry in the case of China, and for India,it is the macro-conditions.

Table 3 National, home region and global competitiveness by country

National Home region Global

1999 2008 1999 2008 1999 2008

North America

Canada 1.72 1.30 1.86 1.37 0.86 0.71

Mexico −0.08 −0.33 1.94 1.46

United States 1.96 1.48 0.97 0.67

Europe

Austria n/a 1.65 n/a 0.86 1.26 0.92

Belgium 1.18 1.32 1.10 0.86

Denmark 1.66 1.81 1.09 0.86

Finland 1.82 1.68 1.09 0.86

France 1.54 1.31 1.02 0.81

Germany 1.56 1.70 0.97 0.70

Hungary −0.09 −0.31 1.11 0.88

Ireland 0.99 1.05 1.10 0.87

Italy 0.52 −0.15 1.18 1.00

Luxembourg n/a 1.05 n/a 0.87

Netherlands 1.82 1.62 1.07 0.84

Norway 0.96 1.43 1.10 0.86

Poland −0.41 −0.29 1.12 0.90

Portugal 0.25 0.36 1.11 0.88

Russia −1.44 −0.60 1.18 0.98

Spain 0.72 0.65 1.12 0.89

Sweden 1.72 1.78 1.09 0.85

Switzerland 1.67 1.80 1.08 0.85

Turkey n/a −0.20 n/a 0.91

United Kingdom 1.48 1.06 1.04 0.84

Asia Pacific

Australia 1.37 1.30 0.74 0.75 1.35 0.94

China −0.58 0.13 1.00 1.01

India −0.51 0.38 0.86 0.83

Japan 1.30 1.35 0.10 0.49

Malaysia 0.18 0.83 0.78 0.79

Singapore 1.39 1.61 0.77 0.78

South Korea 0.19 1.13 0.80 0.76

Taiwan 0.93 1.13 0.77 0.78

Thailand −0.24 0.12 0.79 0.80

Authors’ calculation based on Global Competitiveness Report by National Economic Forum (1998, 2008)


The key finding from Table 3 is that companies that haveweak national competitiveness can tap into their strongerhome region competitiveness. Therefore companies do not

necessarily venture themselves to access global competi-tiveness because costs associated with accessibility are anincreasing function of physical distance (Vernon 1966),

Geographic scope of firm specific advantage (sales)National Home region Global

Sour

ce o

f lo

cati

on s

peci

fic

adva

ntag

e(C

ompe

titi

vene

ss)

Glo

bal India

(4 firms)(75%)Bharat Petroleum; Hindustan Petroleum; Indian Oil.

(25%) Tata Steel.

(0%)H

ome

regi

on

Australia(8 firms)

(38%)Telstra; Woolworths; Caltex Australia.

(50%) Australia & New Zealand Bank; Commonwealth Bank of Australia; National Australia Bank; Westpac Banking.

(12%) BHP.

Canada(13 firms)

(8%)George Weston.

(70%) Bank of Montreal; Bank of Nova Scotia; EnCana; Manulife; and five others.

(23%) Bombardier; Magna; Onex.

China(16 firms)

(75%)Agricultural Bank of China; China Construction Bank; China Life Insurance; and eight others.

(19%) Bank of China; Jardine Matheson; China Communication Construction.

(13%) Hutchison Whampoa; Noble Group.

France(35 firms)

(0%) (66%) Air France-KLM; Bouygues; Carrefour; CNP Assurances; Crédit Agricole; Électricité de France; Foncière Euris; and 17 others.

(34%) Alcatel-Lucent; Alstrom; AREVA; Sanofi-Aventis; AXA; Christian Dior; Lafarge; L'Oréal; and four others.

Germany(33 firms)

(3%)Energie Baden-Württemberg.

(76%) Allianz; BASF; Bertelsmann; BMW; Commerzbank; Continental; Deutsche Bahn; Deutsche Bank; DHL; and 16 others.

(21%) Bayer; Daimler; Heraeus; Hochtierf; Siemens; Evonik; Heidelberg Cement.

Italy(8 firms)

(0%) (100%)Assicurazioni Generali; Intesa Sanpaolo; Enel; ENI; Fiat; Finmeccanica; Telecom Italy; UniCredit Group.

(0%)

Netherlands(9 firms)

(0%) (56%) Gas Terra; Heineken; Rabobank; Royal KPN; Randstad Holding.

(44%) Akzo Nobel; EADS; ING; Royal Ahold.

Russia(7 firms)

(57%)Rosneft Oil; Surgutneftegas; Sberbank; TNK-BP Holding.

(29%) SeverStal; Gazprom.

(14%) Evraz Group.

Spain(11 firms)

(0%) (82%) Cepsa; Group Ferrovial; Iberdrola; Santander; Telefonia; Fomento; Mapfre; Acciona; Gas Natural SDG.

(18%) BBVA; Repsol YPF.

South Korea(8 firms)

(13%)Korea Electric Power.

(63%) Hyundai Motor; POSCO; Samsung C&T; SK; Doosan.

(25%) Samsung Elec.; LG Elec.

Switzerland(11 firms)

(0%) (36%) Adecco; Credit Suisse; Petroplus Holdings; UBS.

(64%) ABB; Holcim; Nestlé; Novartis; Roche; Swiss Reinsurance; Xstrata.

Taiwan(4 firms)

(25%) Cathay Financial.

(50%) Asustek Computer; Formosa Petrochemical.

(25%) Hon Hai Precision Industry.

U.K.(25 firms)

(16%) J. Sainsbury; Lloyds TSB; Scottish & Southern Energy; William Morrison Supermarkets.

(32%) Aviva; Barclays; BT; Centrica; Royal Bank of Scotland; Tesco; Vodafone; Imperial Tobacco Group.

(52%) Anglo American; AstraZeneca; BAE Systems; BP; British American Tobacco; and 8 others.

Dom

esti

c

Japan(54 firms)

(24%) East Japan Railway; Idemitsu Kosan; JFE Holdings; Kansai Electric Power; KDDI; and 8 others.

(56%) AEON; Aisin Seiki; Dai-ichi Mutual; Denso; Fujifilm; Fujitsu; Hitachi; Itochu; Seven & I Holdings; Japan Airlines; and 20 others.

(20%) Bridgestone; Canon; Honda Motor; Mazda Motor; Nissan Motor; Ricoh; Sony; Toyota Motor; and three others.

U.S.(118 firms)

(29%) Aetna; Allstate; AmerisourceBergen; Bank of America Corp.; Cardinal Health; CVS Caremark; Comcast; Constellation Energy; and 25 others.

(35%) Hess; American Express; Berkshire Hathaway; Best Buy; Boeing; Bristol-Myers Squibb; Cigna; Cisco Systems; Coca-Cola Enterprises; ConocoPhillips; and 30 others.

(36%) 3M; Abbott Laboratories; Accenture; Alcoa; Archer Daniels Midland; Bunge; Caterpillar; Citigroup; Coca-Cola; Dell; Delphi; and 31 others.

Note: Values in parentheses under country names are number of firms used in the analysis.

Fig. 3 Firm geographic scope and competitiveness, 2008. Values in parentheses under country names are number of firms used in the analysis


psychic distance (Johanson and Vehlne 1977), and otherdistances (Ghemawat 2007; Berry et al. 2010). In additionsome FSAs are location bound and cannot be transferred toutilize global competitiveness (Rugman and Verbeke 2001).Indeed Rugman and Verbeke (2007) note that transferringFSAs to foreign regions of the triad is particularly difficultbecause incremental costs arise from the liability of inter-regional foreignness.

We integrate the findings from Tables 1 and 3 into anextended FSA/CSA matrix shown in Fig. 3. The verticalaxis denotes the (potential) source of location specificadvantage (CSAs), and we divide it into national, homeregion, and global. The horizontal axis represents thegeographic scope of FSAs. Theoretically, the firm cantransfer its FSAs from domestic to home region to globalmarket based on a firm’s downstream (marketing) capabil-ity. We divide firms into three categories: domestic firms(firms that have less than 10% F/T sales); home regionfirms (firms that have more than 60% intra-regional salesand more than 10% F/T sales); and global firms (firms thathave less than 60% intra-regional sales). The 10% thresholdfor domestic firms and the 60% threshold for home regionfirms are now widely used in literature and are robust (Gomesand Ramaswamy 1999; Osegowitsch and Sammartino 2008;Qian et al. 2010).

India is the only country which has relatively strongerglobal competitiveness than its national and home regioncompetitiveness. This implies that Indian companies havepotential benefits to exploit global (foreign region) CSAswhen they have FSAs. Otherwise they remain local. ThreeIndian firms, Bharat Petroleum, Hindustan Petroleum, andIndian Oil stay local and Tata Steel operates regionally.Although these firms can possibly exploit global compet-itiveness, they still remain focused mainly on their localmarkets. This implies that these Indian companies shouldimprove their FSAs to better align these FSAs withfavourable global CSAs. As an example, Khanna andPalepu (2004) show that capable Indian software firmsoften access global capital markets, because of insufficientcapital market in India.

Most countries have either strong national and homeregion competitiveness (developed countries) or weaknational but strong home region competitiveness (devel-oping countries). This implies that these firms shouldfocus on their home region (and domestic market forthose developed country firms) CSAs to develop theirFSAs. If a firm can transfer any of its FSAs developedfrom the home region CSAs, to a foreign region, then thefirm can operate on a global basis. When its FSAs arelocation bound, the firm focuses on home region

countries. Indeed, most firms stay in the home region,but some Swiss and U.K. firms successfully extend theirdownstream FSAs to global.

Most formerly state-owned Chinese and Russian utilityfirms and banks stay in domestic markets because theyhave weak FSAs based on government protection. Theseare not transferable to other countries even within theirhome region. Although these firms have access to favour-able home region competitiveness, they are unable tocompete with their home region rivals because of weakFSAs. Like China and Russia, Italy provides one of theweakest national competitiveness scores. However Italianfirms develop their FSAs in design, marketing, andtechnology that can be developed from and transferred tohome region markets. Therefore Italian firms successfullyoperate within the home region.

As mentioned earlier, the United States and Japan aretwo countries that have strong national competitiveness, butrelatively weak home region and global competitiveness.Australia, France, Germany, Netherlands, and Switzerlandalso show the same tendency with the United States andJapan, but their home region competitiveness is notsignificantly lower than their home region counterparts.This implies that American and Japanese firms can leveragetheir superior national CSAs to internationalize theiractivities when they have strong FSAs. Otherwise thesefirms focus on their domestic markets. Some American andJapanese firms focus on their home countries (24% and29% respectively), whereas others focus either on thehome region (56% and 35% respectively) or a foreignregion (20% and 36% respectively). Different companiesin the same country can have different levels ofmarketing capability that determine the geographic reachof their sales.

Conclusions

In this paper, we analyze international competitiveness byusing a modified FSA/CSA matrix. This is an extension ofRugman (1981)’s FSA/CSA matrix and Rugman andD’Cruz’s (1993) double diamond model. We also provideempirical evidence to demonstrate the merits and usefulnessof the FSA/CSA matrix by calculating aspects of the CSAsand FSAs of these as they determine international compet-itiveness. In doing so, we focus on the FSAs of the FortuneGlobal 500 firms based on the geographic scope of sales,and the CSAs based on the locational competitiveness atthree different levels: country (national), home region(region), and global. Our empirical analysis provides a


number of interesting findings about the nature and extenton international competitiveness

First, our investigation of the FSAs of the set of 500large firms across their home countries within each of thebroad regions of the triad reveals some interesting trends ininternational competitiveness at firm-level. The changes inthe ratio of foreign (F) to total (T) sales (F/T) and the intra-regional (R) sales (R/T) from 1999 to 2008 indicate that theworld’s 500 firms became more international over this ten-year period, as their average F/T increased 33% to 40.8%.A major driver here is the importance of the 142 U.S. firmswith an F/T in 2008 of 30.3%, a significant increase fromthe F/T of 23% for 178 U.S. firms in 1999. We also find thatthe average intra-regional sales of the 500 firms remainhigh at 74.6% in 2008, compared with that in 1999(76.4%). Changes in the international assets of these MNEsalso point to similar trends. Again, F/T for assets increasedfrom 28.4% in 1999 up to 36% in 2008. Intra-regionalassets were at 75.5% in 2008, as compared to 78.7% in1999. Together, these results imply that the world’s largest500 firms have increased their firm-level internationalcompetitiveness. However, much of this is still beingachieved within their home region.

We also look at the CSAs at country, home region, andglobal-level, based on the various aspects of diamonddeterminants and their relative importance. We find thatcountries have different sources of CSAs in their interna-tional competitiveness: indeed it is very important to look atthe multi-faceted nature of national, home region, andglobal competitiveness because MNEs seek not onlymarkets but also resources, efficiency, and strategic-assets(Dunning 1993). One of our key findings is that homeregion competitiveness and global competitiveness do notvary much by country although national competitivenessdoes. Since many MNEs can find favorable diamondconditions in the home region, they may not be motivatedto take risks in foreign regions under the presence of theliability of inter-regional foreignness (Rugman and Verbeke2007). In short, international competitiveness is a multi-faceted concept that brings together firm and country levelfactors that need to be analyzed carefully in order tounderstand the complexities of the interactions of CSAs andFSAs.

Finally, our modified FSA/CSA matrix (Fig. 3) shows thatthe majority of large firms do not have global dimension intheir international competitiveness in sales. Despite themagnitude of their international sales and presence, thecompetitiveness of these MNEs is mainly achieved withinthe home region of the firm. Most firms develop the sourceof location specific advantages from their home region and

operate within their home region. Except for a few firms, itseems that most MNEs cannot transfer national or homeregion competitiveness to foreign region.

Limitations and future research

Although this study provides a new analysis for national,home region, and global competitiveness that broadens ourperspective on international competitiveness, it is notwithout its limitations. We could not investigate factorsthat enable or disable MNEs from transferring theircompetitiveness to other countries or regions. The literaturesuggests that the factors are either firm specific such as firmsize, marketing capability, technological knowhow, mana-gerial capability, and financial capability, or country specificsuch as physical distance, cultural distance, institutionaldistance, and economic distance. Future research shouldlook inside firm- and country- specificities as well as atregional and global ones such as regional institutions, theworld financial crisis, and political relations. In addition, adynamic view of international competitiveness should beadded to the static view of competitiveness (Narula 1993).In particular, if some MNEs could improve their FSAs on aglobal dimension, then it is a very important theoretical andempirical question to ask how precisely such MNEs canachieve global FSAs and whether such global FSAsimprove performance or not.

Implications to international marketing research

These limitations notwithstanding, we believe that ourfindings offer useful insights for future research on interna-tional marketing activities of MNEs. An integrative consider-ation of FSAs and CSAs is necessary because, as our resultsindicate, MNEs leverage not only their FSAs, but alsocompetitive advantages derived from the CSAs across levels,as they internationally market their products/services. Themodified FSA/CSA matrix based on Rugman and D’Cruz’s(1993) double diamond model provides a more sophisticatedperspective for such a holistic investigation, taking intoaccount the multi-faceted nature of international competi-tiveness. As such, we suggest that the modified FSA/CSAmatrix proposed herein will facilitate future marketingresearch based on international competitiveness.

Specifically, we propose three research streams ininternational competitiveness and international marketing.First, market entry research should consider the regionalaspect of international competitiveness. Countries within aregion usually share similar CSAs, therefore MNEs arelikely to decide a region to enter first, and then find a


specific country or location. A nested logit model withregion and country would be suitable in order to capture theentry decision process of MNEs. The locational costbenefits provided by countries in a region are correlated(Head and Mayer 2004). Likewise entry mode research canalso accommodate international competitiveness at subsid-iary level. Although an MNE may not have strong FSAs,high regional competitiveness enables the MNE to use anownership entry mode into a home region country.

Second, it would be important to discover the benefits of aregional marketing program in the presence of regionalintegration and regional competitiveness. The benefits arenot only limited to the cost savings by utilizing scale andstandardization. The role of regional marketing or a regionalheadquarters is in connecting the standardized strategy ofcorporate headquarters with diverse country environmentsand local responsiveness in the region (Daniel 1987;Halliburton and Hünerberg 1993; Yeung et al. 2001).

Third, as an extension of the second stream, the evolution-ary view of marketing strategy along with changes ininternational competitiveness deserves more scholarly atten-tion. Literature on international marketing tends to focus onthe entry stage into international markets. However, it is verylikely that marketing strategy shifts at the expansion stage,from identifying markets overseas for existing products andservices to leveraging potential economies of scale indeveloping local markets and increasing potential synergiesacross subsidiaries within anMNE (Douglas and Craig 1989).This concept can be readily applied to regional and globalstrategies (e.g., Chetty and Campbell-Hunt 2003). It isexpected that a regional MNE does not need to differentiateits marketing strategy in the entry and expansion stagesbecause of the homogeneity of consumers and integration ofregional economy, whereas a global MNE needs to.

In so doing, future studies may conceptualize andoperationalize international competitiveness based on theproposed FSA/CSA matrix. Our study also suggestspossible data sources and variables to measure the FSA(the geographic scope of firm sales and assets) and the CSA(variables from the World Economic Forum’s GlobalCompetitiveness Reports). International marketing research-ers should further validate and adopt specific measures inthe context of their own research problems and setting. Asour empirical analysis has demonstrated, the nature andspecificity of international competitiveness evolve overtime, so the availability of longitudinal datasets (e.g.,

WEF GCR) should facilitate the future investigation ofthe dynamic perspective of international competitiveness.In the meantime, the multidimensionality of the interna-tional competitiveness construct suggests that researchersshould take into account each dimension in their study evenif their focus is on a specific subset of the internationalcompetitiveness dimensions.

Implications to managers

Our findings also have some significant implications formanagers. In addition to the need for consideration of themulti-faceted nature of various FSAs and CSAs, a newinsight emerges for strategic marketing planning andimplementation in international markets. An MNE canimprove its economies of scale and scope by integrating itsactivities in home region countries to achieve cost-effectiveness in the application of its marketing strategy.The MNE may promote standardized product and service inthe same way within its home region because home regioncustomers are likely ready to access its products andservices without significant modifications. The MNE’s costinvolved in transferring and utilizing its strategy and FSAsis likely an increasing function of geographic, psychic,institutional, and economic distances (Theodosiou andKatsikeas 2001). Managers should understand the realityand liability of being a global firm.

Being a global firm demands strong FSAs. On the onehand, a firm can develop superior products or very low costproducts, which can be readily accepted by globalcustomers. However such products rarely exist due torapidly changing business environments in competition,technology and customer taste. On the other hand, a firmmay develop its localization strategy by adapting to differ-ences in each country. However incremental coordinationcosts and the liability of foreignness make firms unable topursue a localization strategy exclusively. Thus the rhetoric‘think global, and act local’ is not the best strategy for firmsin business. A regional solution can be a more manageablealternative to a global strategy (Morrison et al. 1992). Inother words, international competitiveness depends to agreat extent on a firm’s capability to build FSAs based uponnational and home region CSAs, and to exploit these FSAsregionally. As such, the development of internationalcompetitiveness should not be confused with recklessglobalization.


Appendix 1 Components of national competitiveness

Components Sub-components Loading factor

Factor conditions (α=0.976) Ease of access to loan 0.816

Financing through local equity market 0.780

Financial market sophistication 0.864

Venture capital availability 0.888

Staff training 0.908

Quality of management school 0.793

Tertiary school enrollment 0.633

Quality of infrastructure 0.920

Quality of port infrastructure 0.854

Quality of railroads 0.826

Quality of roads 0.856

Computers per 100 population 0.696

Quality of telephone infrastructure 0.844

Company spending on R&D 0.915

Capacity of Innovation 0.900

University-industry research collaboration 0.940

Quality of scientific research institutions 0.889

Firm-level technology absorption 0.855

Demand conditions (α=0.874) Buyer sophistication 0.942

Degree of customer orientation 0.942

Supporting industries (α=0.928) Control of international distribution 0.883

Production process sophistication 0.908

Local supplier quality 0.930

Local supplier quantity 0.909

Strategy, structure, rivalry (α=0.915) Effectiveness of anti-monopoly policy 0.903

Efficacy of corporate board 0.809

Intensity of local competition 0.852

Strength of auditing and reporting standards 0.917

Restriction of capital flows 0.713

Prevalence of trade barriers 0.836

Macroeconomic policy (α=0.694) Government surplus/deficit 0.589

Inflation (reverse-coded) 0.864

Interest rate spread (reverse-coded) 0.878

Social infra & political institutions (α=0.955) Judicial independence 0.904

Favoritism in decisions of government officials 0.909

Wastefulness of government spending 0.839

Public trust of politicians 0.952

Organized crime 0.785

Intellectual property protection 0.890

Reliability of police services 0.925


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Appendix 2 Components of national competitiveness by country in 2008

Total Micro-conditions (Diamond) Macro-conditions

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Demandcondition (0.874)

Supportingindustries (0.928)

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North America

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Germany 1.718 1.646 1.179 2.219 1.805 0.335 1.491

Hungary −0.315 −0.112 −1.045 −0.361 0.379 0.066 −0.409Ireland 1.050 0.839 1.029 0.848 1.371 0.192 1.032

Italy −0.152 −0.247 0.188 0.793 −0.718 −0.122 −0.688Luxembourg 1.047 0.907 0.862 0.461 1.226 0.387 1.585

Netherlands 1.617 1.547 1.235 1.653 1.714 0.203 1.759

Norway 1.435 1.319 1.160 1.292 1.075 1.158 1.792

Poland −0.279 −0.405 −0.185 0.084 −0.145 0.191 −0.773Portugal 0.359 0.472 −0.055 0.238 0.511 0.070 0.609

Russia −0.596 −0.294 −0.372 −0.610 −0.905 0.405 −0.895Spain 0.652 0.594 0.506 0.919 0.649 0.204 0.487

Sweden 1.784 1.856 1.422 1.525 1.943 0.480 1.860

Switzerland 1.803 1.920 1.740 2.081 1.082 0.514 1.870

Turkey −0.201 −0.283 −0.298 0.236 −0.115 0.139 −0.554United Kingdom 1.064 1.348 0.749 1.039 1.347 0.225 0.667

Asia Pacific

Australia 1.295 1.183 1.104 0.891 1.530 0.180 1.629

China 0.127 0.087 0.432 0.291 −0.328 0.293 0.058

India 0.376 0.188 0.394 0.865 0.605 −0.160 −0.115Japan 1.354 1.194 1.908 2.098 0.769 0.244 0.606

Malaysia 0.832 0.974 0.843 0.928 0.538 0.123 0.788

Singapore 1.614 1.663 1.422 0.805 1.608 0.632 2.228

South Korea 1.127 1.423 1.291 1.104 0.727 0.512 0.802

Taiwan 1.127 1.308 1.627 1.360 0.639 0.378 0.463

Thailand 0.120 0.116 0.431 0.203 −0.182 0.099 0.014

Values in parentheses under column titles are the second-order loading factors from the two-stage principal component analysis


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