Internationalization and Network Strategies: Taiwanese Firms’ Foreign Direct Investment in China and the USA
| DOI | https://doi.org/10.1108/15587890880000488 |
| Pages | 23-32 |
| Published date | 01 September 2008 |
| Date | 01 September 2008 |
| Author | Chi‐Hsing Tseng,Hsin‐Chih Kuo |
| Subject Matter | Strategy |
Journal of Asia Business Studies FALL 2008 23
INTRODUCTION
Conventional theories view foreign direct investment (FDI) as an
incremental progress model. However, over the last decade, several
studies have focused on firms with such labels as International New
Ventures (INVs), or Born Globals. Such firms engage in significant
international activity soon after they are established, rather than
incrementally. Some researchers consider this trend offers a strong
opposition to the traditional models of internationalization. Some
studies conclude that the stage models fail to provide an appropriate
explanation as to why such firms operate on the international mar-
ket rather than just their home markets (e.g., Aspelund and Moen,
2001; McDougall, Shane, and Oviatt, 1994; Oviatt and McDougall,
1997). Furthermore, some empirical studies indicate that the trend
of gradual development among the small and medium-sized export-
ing firms may also be questioned (Moen, 2002; Moen and Servais,
2002). However, by applying the Johanson and Mattsson’s (1988)
network approach, Madsen and Servais (1997) suggest that the
Born Globals trend does not represent any revolutionary pattern of
internationalization and may behave according to an evolutionary
framework. Similarly, Coviello and Munro (1997) claim that the in-
ternationalization process of firms is just an accelerated version of the
stage model perspective, and is driven by a set of formal and informal
network relationships. Formal network relationships include those
co-operative business relationships with partners, such as strategic
alliances and joint ventures. Informal network relationships include
those social relationships with relevant organizations, such as infor-
mal connections and friendships. These network relationships will
impact on the selection of a foreign market and mode of entry. There
are an increasing number of researchers who apply the network the-
ory to explore the FDI of small and medium-sized firms, and the
internationalization process of Born Globals, from their inception. It
becomes important to explore the relationship between internation-
alization models and network strategies.
Tracing the path of Taiwan’s economic development reveals that
the amount of FDI by Taiwanese corporations has grown enormously
over the last decade. Among these foreign investment countries, Chi-
na and the U.S.A. represent the most popular host countries. How-
ever, these international firms often possess limited capabilities and
management resources. Furthermore, many small and medium-sized
firms have gone abroad and played significant roles in foreign invest-
ments. On the other hand, an increasing number of Taiwanese firms
are international from the outset. For instance, many Hi-tech firms
in Taiwan start out with a pro-active international strategy. Therefore,
it is worthwhile to focus on cases of Taiwanese FDI to investigate the
phenomenon of Born Globals, and their corresponding international
network strategies.
Drawing from the concept of internationalization networks, this
study explores the relationship between the internationalization pro-
cess and the adoption of network strategies. The study also attempts
to determine whether there is a difference in the network strategies
adopted when firms invest in China or the U.S.A. This study com-
pares the two types of internationalization process - Born Global and
Incremental - and then proposes two kinds of network strategies. A
survey was conducted, to examine the influence of the international-
ization process in association with a foreign investment country, on
the adopted network strategies.
Internationalization and Network Strategies: Taiwanese Firms’
Foreign Direct Investment in China and the U.S.A.
Chi-Hsing Tseng
National Pingtung Institute of Commerce, Taiwan
Hsin-Chih Kuo
I-Shou University, Taiwan
absTRaCT
By applying a network theory, this study explores the relationships between internationalization models and the adoption of net-
work strategies. Based on the time period between a firm’s inception and its first year of investing abroad, this study compares
firms with two different types of internationalization process: “Born Global” and “Incremental.” This study also proposes two
kinds of network strategies: business and social. After investigating 138 foreign direct investment (FDI) cases of Taiwanese firms in
China or the U.S.A., we find that compared to Incrementals, Born Globals are more likely to adopt social network strategies with the
local community. This research also finds there is a strong relationship between the foreign investment country and network strategies.
Compared to firms with FDI in the U.S.A., firms investing in China rely more on co-operative production systems and are more likely
to utilize social relationships with the local community and government authorities.
Keywords: Internationalization Theory, Network Theory, Born Global, International New Ventures, Foreign Direct Investment
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