Explaining Outcomes in Competition Among Foreign Multinationals in a Focal Host Market

Multinational enterprises (MNEs) from different home regions now routinely confront one another in third markets. There is, however, little conceptual or theoretical literature on the determinants of outcome patterns in these contests. This paper offers a first attempt at systematic and parsimonious conceptualization of the issue. In Brazil, for instance, while US-based MNEs such as Coca-Cola and IBM lead in their sectors, other leading US MNEs including Citibank, GE, and Pfizer are outsold by European rivals that appear less competitive globally. Extending theory on the liability of foreignness and firm-specific advantages, the authors contend that (i) the MNE whose home nation has greater ties to the focal host nation (along geographic, colonial, immigration, linguistic, and institutional dimensions) will lead in that host nation; and (ii) ties notwithstanding, if an MNE's firm-specific advantages are so superior that it outsells a rival MNE in that rival's home market, then it will outsell that rival as well in the focal host market. Based on this they develop a conceptual framework, statistical analysis pertaining to MNE competition in Brazil, and three avenues for fruitful new research.