Abstract Research summaryThe strategic management and international business fields have followed, in some respects, quite similar intellectual trajectories, as reflected in the push for a field of “global strategy.” However, a key distinction in the strategy literature—namely, Williamson's distinction between “strategizing” and “economizing”—has not been explicitly recognized in the international business/global strategy fields. We argue that progress can be made in global strategy by recognizing this distinction and exploring the interaction between “strategizing” and “economizing.” To lend credence to this claim, we offer a simple model of the entry decision which highlights both economizing and strategizing aspects of this decision. We also offer recommendations on economizing‐strategizing research in global strategy.Managerial summaryMultinational enterprises gain competitive advantage either by improving the efficiency with which they operate (by having unique resources, lowering costs, or improving managerial practices) or by exercising their market and bargaining power. Most research has emphasized the former source of competitive advantage. However, in actuality, the two sources are intertwined. We detail how they are intertwined by means of a simple numerical example of the entry decision facing a company that can choose between competing or collaborating with the local firm. We show that strategizing plays into the entry decision in this case.

Abstract Research SummaryWe respond to calls in the strategy and international business literature for elucidating how multinational subsidiaries develop contextual intelligence in host countries and how they use the local context as a source of valuable opportunities for learning. Applying the theoretical lens of subsidiary absorptive capacity and building on a gravity model, we propose an approach that can distinguish and compare the influences of the host country context and headquarters over the subsidiary knowledge production. Some subsidiaries may become global second headquarters and innovation hubs, as evidenced qualitatively in the paper with the case of Cisco. Essentially, subsidiaries, characterized by higher stocks of knowledge and greater number of locally hired employees are likely to absorb relatively more knowledge from the local host country context.Managerial SummaryManagers at multinational companies have to carefully balance acquiring knowledge from the headquarters, vis‐a‐vis acquiring knowledge from the local context of countries where the firm has subsidiaries. In contrast to a “headquarter‐centric” approach where most of the knowledge management activities are centered around the MNC headquarters, we argue that larger subsidiaries, often characterized by a large presence of local R&D workers, might disproportionately draw knowledge from the local context, rather than from the headquarters. In addition to developing theoretical propositions along these lines, we provide an illustrative example of how Cisco opened a “second headquarters” in India, to learn from the rich local context.

Abstract Research SummaryWhile much of the literature on complex global environments builds on studies of multinationals from mature markets, little is known about how firms from emerging markets understand and cope with complexity. This paper builds on a longitudinal case study of Zhejiang Geely Holding Group (ZGH) in the post‐acquisition process of Volvo Car Group (VCG) and its efforts to learn how to learn in order to catch up with the internationalization process as means for developing capabilities and compete in the global automotive industry. Building on the Uppsala model, we contribute with insights how an emerging market multinational understands complexity and organize the post‐acquisition process to explicitly emphasize the importance of mutual learning to develop and exploit opportunities to improve the business.Managerial SummaryA key finding is that ZGH does not understand complexity only as a risk that should be coped with, managed and controlled—following the western idea of risk management—but also as an opportunity for learning. While the importance of knowledge management and organizational learning is often emphasized as a means to achieve competitive advantage, it is seldom as easily managed in practice. Building on insights from ZGH we illustrate that to enable knowledge development and mutual learning, top‐management from the acquiring firm needs to emphasize learning and trust the acquired firm rather than controlling it. It is equally important that the acquired firm trust the intentions of the new owner and reflect on the interest in learning—not least to improve and remain valuable.

Abstract Research SummaryInitial public offering (IPO) underpricing reflects the inability of early investors to capture the full value of an entrepreneurial firm. IPO firms can potentially limit underpricing by signaling wealth protection through lower chief executive officer (CEO) power. Such signaling is particularly challenging for many IPO firms, though, because for those doing business in high‐power‐distance cultures, CEO power can also signal wealth creation, making CEO power a mixed signal for IPO investors. Drawing on signaling theory, we argue that CEO power is positively associated with IPO underpricing, but this relationship weakens for IPO firms doing business in countries with high cultural power distance because the information signaled becomes less clear. The signaling impact of both CEO power and demand‐side cultural power distance weakens, however, when underwriter reputation offers a substitute signal.Managerial SummaryThis research offers new knowledge for IPO corporate governance practitioners, such as entrepreneurs, venture capitalists, underwriters, and regulators. Specifically, our research demonstrates that the power dynamic in the upper echelons has implications for demand‐side legitimacy or making U.S.‐listed firms more legitimate with international customers. As a result, stockholders and securities analysts who balk at the consolidation of CEO power should consider the potential benefits that such consolidation of power might grant the firm when competing in different cultural environments associated with foreign markets.

Abstract Research SummaryLiterature that compares the advantages of financial hedging and operational flexibility as instruments to manage exchange‐rate uncertainty presents inconsistent results. This study addresses such inconsistencies in two ways. First, it clarifies that the effects of financial hedging and operational flexibility are asymmetric. Financial hedging helps an MNC to reduce a negative effect of exchange‐rate uncertainty on firm value, whereas operational flexibility allows an MNC to enhance a positive effect of exchange‐rate uncertainty on firm value. Second, the study demonstrates that these effects are contextual to the MNC's subsidiary network. Depending on whether exchange‐rate correlation in the subsidiary network is positive or negative, either financial hedging or operational flexibility is more effective than the other. Regressions on a sample of U.S. manufacturing firms support the predictions.Managerial SummaryMultinational corporations face exchange‐rate fluctuations in their subsidiary networks as a source of substantial uncertainty. MNCs can manage this uncertainty using financial hedging and operational flexibility. However, the literature is inconclusive on whether MNCs can use both instruments in equal measure. This study clarifies that financial hedging allows MNCs to limit negative consequences of exchange‐rate uncertainty on their stock‐market valuations. Operational flexibility, by contrast, gives MNCs the opportunity to exploit exchange‐rate uncertainty and thereby to enhance their firm value. In addition, the study proposes that the effectiveness of financial hedging and operational flexibility depends on the individual MNC's subsidiary network configuration. Based on these findings, MNCs can identify the effective instrument for managing exchange‐rate uncertainty.

This article examines how different international diversification strategies impact the legitimacy challenges multinationals face and the way they manage their corporate and social responsibilities. Analyzing these questions in a sample of companies in extractive industries, we find that those who pursue resource-seeking investments that involve locating extraction operations overseas respond with the largest improvement in their corporate-level social performance (CSP). Those pursuing efficiency-seeking by establishing processing subsidiaries abroad increase their CSP less, with the smallest increase for those pursuing market-seeking through marketing and sales operations overseas. For each type of activity established overseas, the increase in CSP becomes greater the more developed the company's home country and the larger its international footprint, but is not dependent on the host country's level of development. These findings suggest that, in today's globalized world, the legitimacy challenges that result from subsidiaries' activities increasingly need to be managed at a global, corporate level.

Abstract Research SummaryThe purpose of the article is to explain the mechanisms underlying the internationalization springboard strategies of China's emerging multinationals in the automobile industry. Using a unique combination of location bound (country‐specific) and non‐location bound (firm‐specific) advantages, companies in this industry have overcome their latecomer disadvantages by exploring knowledge from mature markets through backward and forward integration of the value chain, and exploiting this knowledge to enhance their competitive position, first at home, then in emerging markets and later in developed countries. We test and refine springboarding theory and propose the learning portal model. The learning portal model can be used as a new theory of emerging markets multinationals beyond China and the automobile industry.Management SummaryThe globalization of Chinese enterprises is upon us. Chinese enterprises have not only successfully internationalized to other emerging markets, but also to advanced economies. To do so, these firms used springboard strategies to leapfrog certain technological development stages and accelerate their catch‐up trajectory with incumbent firms from the advanced economies. This article investigates the catch‐up strategies of China's leading automotive companies. We find that Chinese enterprises establish learning portals in mature markets to acquire knowledge and assets, which they first exploit in their home market, before seeking to expand their market share in other emerging markets and finally advanced economies.

Abstract Research SummaryStarting from the premise that firms need dynamic capabilities to adapt to changing environments, we discuss how multinational enterprises (MNEs) develop dynamic capabilities from internationalization. Unlike domestic firms that develop dynamic capabilities within one organizational system, MNEs are inherently multi‐level systems with the headquarters and subsidiaries. In this paper, we focus on how internationalization depth and breadth function as sources of learning and unlearning in the headquarters and subsidiaries, and how this serves as the antecedent for routine reconfiguration and dynamic capability development in the MNE. We theorize that the headquarters' and subsidiaries' brokering capabilities are critical for reconciling routine reconfiguration at the two levels so that dynamic capability development can occur, and the MNE can adapt to environmental changes.Managerial SummaryOur model of dynamic capability development in multinational enterprises (MNEs) via internationalization makes dynamic capabilities actionable for managers in three main ways. First, we emphasize both learning and unlearning from internationalization as important for both the subsidiaries and headquarters to reconfigure routines to adapt to changing environments. Second, the routine reconfiguration that occurs from the subsidiaries or the headquarters serves as the impetus for dynamic capability development in the MNE. Third, for dynamic capability development to occur in the MNE, both the headquarters and the subsidiaries must be able to reconcile routine reconfigurations via the headquarters' and the subsidiaries' brokering capabilities.

Abstract Research SummaryUpgrading and governance in global value chains (GVCs) have been understood mainly through studying the buyer–supplier transaction, where the supplier is typically an independent contractor from a developing economy. Little is known about how subsidiaries of multinational enterprises (MNEs) can upgrade in a GVC, whose core activities are coordinated through the “hierarchy” governance model. Using an in‐depth longitudinal single case study in the medical devices industry, we explain how a subsidiary can accomplish upgrading in an intra‐MNE GVC and, over time, increase its control of this GVC reaching a joint coordinator role for its governance. Our findings show that partaking in innovation may not be the final stage of a subsidiary's upgrading but can represent the start of a new phase that culminates with joint coordination of the GVC.Managerial SummaryThe competitiveness of a global subsidiary is determined by its capacity to upgrade in a GVC and engage in higher value‐adding activities. Moving from production to innovation is generally viewed as the pinnacle for subsidiaries in the accomplishment of upgrading within a GVC, thereby ensuring long‐term survival. We show however that specializing in innovation is not the highest peak a subsidiary can reach. Innovation is in fact a necessary condition for a strategic role for the coordination of a GVC. A subsidiary's management team can deliberately strategize to ascend to such a position in the multi‐business MNE as a GVC joint coordinator for a product category. It can achieve this prominent position by leveraging its innovation capabilities to assume a greater proportion of control over the business's GVC governance. This position of greater prominence for the subsidiary within the MNE advances its internal advantage and strengthens its survival prospects.