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Discussion Paper Series

The Regional and Global Competitiveness of Multinational Firms



A.Rugman
University of Reading, UK
Chang Hoon Oh
Brock University, Canada
Dominic S.K. Lim
Brock University, Canada



The aim of this series is to disseminate new research of academic distinction in the fields of international business and strategy. Papers are
preliminary drafts, circulated to stimulate discussion and critical comment. Publication in the series does not imply that the content of
the paper reflects the views of Henley Business School, the John H. Dunning Centre or the University of Reading.



John H. Dunning Centre for International Business
Discussion Paper No. 2011-003 June 2011










dunning@henley.reading.ac.uk
www.henley.reading.ac.uk/dunning

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The Regional and Global Competitiveness of Multinational Firms

By

Alan M. Rugman*, Chang Hoon Oh**, and Dominic S.K. Lim***


Forthcoming: Journal of the Academy of Marketing Science


* Alan M. Rugman
(Corresponding Author)
Director of Research and Professor
School of Management
Henley Business School, University of Reading
Henley-on-Thames, Oxon
RG9 3AU, United Kingdom
Email: a.rugman@henley.reading.ac.uk
Tel: +44 (0)1491 418 801
Fax: +44 (0) 1491 418 751


** Chang Hoon Oh
Faculty of Business
Brock University
500 Glenridge Avenue
St. Catharines, ON L2S 3A1, Canada
Email: coh@brocku.ca
Tel: +1 905 688 5550 x5592


*** Dominic S.K. Lim
Faculty of Business
Brock University
500 Glenridge Avenue
St. Catharines, ON L2S 3A1, Canada
Email: dlim@brocku.ca
Tel: +1 905 688 5550 x5595

Keywords: international competitiveness; regional; global; diamond; double diamond; international
marketing strategy; firm-specific advantages (FSAs); country-specific advantages (CSAs) (Version:
dated June 9, 2011)

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The Regional and Global Competitiveness of Multinational Firms

Abstract


International competitiveness ultimately depends upon the linkages between a firms unique,
idiosyncratic capabilities (firm-specific advantages, FSAs) and its home country assets (country-
specific advantages, CSAs). In this paper, we present a modified FSA/CSA matrix building upon the
FSA/CSA matrix (Rugman 1981). We relate this to the diamond framework for national
competitiveness (Porter 1990), and the double diamond model (Rugman and DCruz 1993). We
provide empirical evidence to demonstrate the merits and usefulness of the modified FSA/CSA
matrix using the Fortune Global 500 firms. We examine the FSAs based on the geographic scope of
sales and CSAs that can lead to national, home region, and global competitiveness. Our empirical
analysis suggests that the worlds largest 500 firms have increased their firm-level international
competitiveness. However, much of this is still being achieved within their home region. In other
words, international competitiveness is a regional not a global phenomenon. Our findings have
significant implications for research and practice. Future research in international marketing should
take into account the multi-faceted nature of FSAs and CSAs across different levels. For MNE
managers, our study provides useful insights for strategic marketing planning and implementation.
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Introduction
The collaboration between scholarly disciplines (e.g., psychology and marketing; marketing
and international business) has been the driver of some major advancements in academic fields.
International competitiveness is a subject that draws upon perspectives from international business,
strategy, international economics, as well as international marketing. In this paper, we provide a
broad yet refined perspective of international competitiveness by building on the international
business and strategy literature. In doing so, our purpose is to facilitate further collaboration
between academic disciplines, which is essential if we are to examine finer-grained research
questions concerning the concept of international competitiveness. Specifically, we adopt a
multiple perspectives approach to present a new conceptualization of international
competitiveness. We further demonstrate the merit of our approach by analyzing and testing the
nature and extent of international competitiveness of the worlds 500 largest firms. These firms
account for over half the worlds trade (on an intra-firm basis as well as with arms length customers)
and over 90% of the worlds foreign direct investment (FDI) (Rugman 2005).
International competition has brought dramatically increased pressure to cut costs in order
to compete with foreign companies, to satisfy to domestic and foreign customer needs, and to
improve business processes. However the role of marketing in enhancing competitiveness has been
neglected in the literature (Doyle and Wong 1998). In addition, most of the literature measuring
international competitiveness focuses on firms from a country or region (e.g., Buckley, Pass, and
Prescott 1990; Coviello, Ghauri, and Martin 1998; Doyle and Wong 1998; zelik and Taymaz 2004;
Traill and da Silva 1996) and thus ignores country (region) specific factors. As an initial step toward
addressing this gap, we focus on the location specificity of international competitiveness by
comparing firms from different countries and regions. That is, we investigate the extent to which
the domestic, home region, and global activities of the largest 500 firms are determined by
international competitiveness, which, in turn, comprises national, regional, and global
competitiveness.
A critical insight from this approach is that international competitiveness occurs at the
intersection between country-level and firm-level advantages. In short, international
competitiveness relates country-specific advantages (CSAs) to firm-specific advantages (FSAs). In
turn, these linkages between CSAs and FSAs can be analyzed both theoretically and empirically.
Here we develop a framework relating CSAs to FSAs building upon Rugmans (1981) FSA/CSA matrix
and examine the linkages between CSAs in the home country, home region, and the globe (foreign
regions) and the potentially related FSAs of those home country firms; the framework is based on
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the concept of international competitiveness and the new perspective of regional multinational
enterprise (MNE) (Rugman and Verbeke 2004). This analysis of international competitiveness also
embeds the findings of the nature and extent of FSAs and CSAs within the classic diamond
framework of Porter (1990) as extended by Rugman and DCruz (1993) into the double diamond.
We believe that our integrative consideration of firm-specific and country-specific
determinants can add significantly to international marketing research on international
competitiveness. As MNEs play increasingly important roles in the integrated world economy, a
sophisticated perspective about how these MNEs leverage their FSAs, derived from CSAsboth
their home countries and host countriesshould be useful as we seek to better understand their
international marketing strategies and implementation.
This paper proceeds as follows. We first illuminate the regional reality by examining the
nexus between country-level and firm-level factors. Next, we expand our perspective beyond the
country level to incorporate regional and global levels of analysis. We then describe our data and
method and present our empirical findings on the international competitiveness of the worlds 500
largest firms. Finally, we discuss the implications of this empirical evidence for international
marketing researchers as well as managers.

Theories and literature
A firms international activity is a complex phenomenon, influenced by a myriad of country-
and firm-specific factors. For example, Vernons (1966) work on the product cycle (e.g., new
product, maturing product, and standardized product stages) links the success of U.S. MNEs to
strong U.S. CSAs in technology. He shows that U.S. MNEs expand U.S. national competitiveness
through international trade and foreign direct investment. These MNEs have marketable products
based on technology, knowledge, and resources. Their success is determined by the ease of
communication, which is a function of geographical proximity, even if we assume that MNEs in
different countries can have access to identical knowledge and resources. In a similar vein, from an
international marketing perspective, Wells (1968) notes that the export success of U.S. MNEs was
determined by a great deal of knowledge based on a very high-income, consumer-based CSA in the
U.S.
In addition, MNEs differ in their level of capabilities to access and utilize CSAs in knowledge
and resources, and thus firm-specific characteristics, FSAs, also determine marketability. Marketing
capability does not work in isolation from the firms other capabilities and processes (Doyle and
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Wong 1998). In fact, internalization theory (Rugman 1981) considers FSAs and CSAs as the two
building blocks to analyze international competitiveness.
The next wave of international business research focused on the FSAs of international
activity. For example, literature identified such FSAs as: firm size (Levitt 1983), managerial capability
(Bartlett and Ghoshal 1989; Kogut 1985; Porter 1986), R&D and marketing capabilities (Buckley and
Casson 2010; Porter 1986), and financial capability (Agarwal and Ramaswamy 1992; Grosse 1992).
Recently Johanson and Vahlne (2010) have underlined business relationships and networks within a
company and between companies. Thus these FSAs lead to superior performance by MNEs in
international markets (Kirca et al. 2011). However, focusing only on firm-specific determinants can
be misleading if we do not take into account the context within which these firm-level factors are
embedded. As such, there has been a renewed need to look at country-specific determinants and
how these two determinants affect the competitiveness of firms in international business (Dunning
1998).

International competitiveness and international marketing
The need for consideration of CSAs in both home and host countries has been emphasized
in the literature on the strategy and performance of MNEs and their subsidiaries (Dunning 1998;
Grewal et al. 2009; Rugman 1981; Rugman and Verbeke 2001). In marketing, early stage research
tended to focus on a simple dichotomous view of foreign versus domestic products, or, in a similar
vein, nationality itself as a factor (e.g., Kotabe 1990). The marketing literature also highlighted the
role of national culture, more specifically, cultural distance or similarity between the host country
and home country (i.e., country of origin effects). The main finding is that consumers prefer
products from the countries with a relatively similar culture (e.g., Johansson, Douglas, and Nonaka
1985; Heslop, Papadopoulos, and Bourke 1998; Wang and Lamb 1983).
However, the increasingly important role of MNEs in the world economy calls for a more
sophisticated perspective about how these MNEs leverage competitive advantages conferred or
affected by country-specific factors. These home country factors include competitiveness and
regulatory frameworks that may affect home countrylevel operations (e.g., Carpano, Chrisman, and
Roth 1994; Grewal et al. 2009; Porter 1986). For example, a countrys economic competitiveness
may determine the sophistication with which a countrys firms develop FSAs in marketing,
production technology, physical capital, and managerial skills (Balabanis and Diamantopoulos
2004). This view on the relevance of home CSAs is consistent with Porters perspective as he argues
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that a firms competitive performance within world markets is influenced by a variety of home
country factors (Porter 1990).
The home country national environment (represented by the Porter home country diamond)
has significant influence on a firms competitive advantage and therefore its strategy formulation.
Grant (1991) further argues that factor conditions and the related and supporting industries may
influence a firms resource strengths, while rivalry and home demand conditions mainly influence
key success factors within the market. Scholars in international business have explored other
dimensions of international competitiveness such as government conditions and macro-economic
policy that Porter originally considered as exogenous factors (Cho and Moon 2000; Moon, Rugman,
and Verbeke 1998; Rugman and Verbeke 1990).
Despite the intuitive appeal of this perspective on the role of the firm as an agent for
international competitiveness, the extant marketing literature has not found strong and consistent
support for the influence of national competitiveness on firm performance and marketing strategy.
For example, Balabanis and Diamantopoulos (2004) could not confirm the hypothesized
relationship between economic competitiveness and consumer ethnocentrism, and they conclude
that this viewpoint does not provide significant value to managers. Tellis, Prabhu, and Chandys
(2009) investigation of radical innovation in 17 major economies in the world also suggests that
widely recognized country-level metrics of labor, capital, government regulation, and culture do not
have a direct impact on radical innovation.
This lack of empirical support for the application of the Porter home country diamond to
international marketing could be due to the methodology and framing adopted in some of these
works. For example, some researchers focus only on host country market characteristics in terms of
demand potential and similarity of legal and regulatory frameworks (e.g., Cavusgil, Zou, and Naidu
1993; Cavusgil and Zou 1994), while some others focus on home country characteristics (e.g., Tellis
et al. 2009). In addition, the literature suggests that Porters diamond framework can apply to large
economies but not to small non-triad nations such as Austria, Australia, Canada, Finland, the
Netherlands, and New Zealand (Davis and Ellis 2000; Rugman and DCruz 1993). As previously
discussed, this has led to the logic of the double diamond framework, whereby a small economys
diamond is examined along with the diamond of its largest trading partner (Rugman and DCruz
1991, 1993). Another source of the inconsistent findings in marketing about international
competitiveness could be the simplistic metrics that some of these studies use to test national
competitiveness or its distance between home country and host country. For example, Balabanis
and Diamantopoulos (2004) use the national competitiveness rankings based on WEF Current
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Competitiveness Index (CCI), and Johnson and Tellis (2008) measure economic distance between
two countries based on per capita GNP.
To overcome these potential shortfalls, research should take into account not only home
country factors but also host country factors and, in doing so, take into consideration the multi-
faceted nature of a countrys economic environment, both conceptually and empirically. To this
end, we propose in what follows a modified FSA/CSA matrix building upon the double diamond
model (Rugman and DCruz 1991, 1993).

The FSA/CSA matrixan extension to international competitiveness
The relevant literature explaining the international competitiveness of firms builds upon the
FSA/CSA matrix first developed by Rugman (1981). This basic matrix is widely used in the
international business literature. It comprises two building blocks, which can be particularly useful
in analyzing international competitiveness of large MNEs. First, firm-specific advantages refer to a
set of firm-level factors that confer competitive advantage. The FSAs can be viewed as a firms
unique, proprietary capabilities, which may be built upon product or process technology, marketing,
or distribution skills. Ultimately, the FSAs are based on the firms internalization of an asset, such as
production knowledge and managerial or marketing capabilities over which the firm has proprietary
control. There are also various factors unique to each country, which are called country-specific
advantages. These CSAs include natural resource endowments (minerals, energy, forests, etc.), the
quality and quantity of labor force, and associated cultural factors.
Managers of MNEs take into account both CSAs and FSAs as they develop strategies to
position their firms in a unique international strategic space. On the one hand, the managers need
to consider the quantity, quality, and cost of the major factor endowment of a nation, that is, CSAs.
On the other hand, they must develop and coordinate FSAs in production, marketing, or the
customization of services. As such, a clear understanding of the relative strengths and weaknesses
of the firms CSAs and FSAs is critical as the managers formulate the strategic options of the MNE.
Rugmans (1981) FSA/CSA matrix (shown in Figure 1) provides a useful framework for evaluation of
these issues.
---------------------------------
Insert Figure 1 about here
---------------------------------
In Figure 1 on the vertical axis we place CSAs either low or high. On the horizontal axis we
place FSAs either low or high. This leads to four quadrants for analysis. First, quadrant 1 represents a
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situation in which only CSAs are important. This quadrant can be explained through the literature
on international economics and international finance. Comparative advantage explains movements
of goods and factors across nations. Financial capital depends upon interest rate differentials
between countries. The competitiveness of the MNEs in this quadrant depends upon natural
endowments of minerals, oil wells, forest products, hydro-electric power, and other natural
resources in their home country as well as cheap labor or cheap skilled labor.
In contrast, quadrant 4 is a pure management explanation for the success of MNEs. Here,
only FSAs matter: the FSAs stand alone and are not influenced by CSAs. This is a quadrant reflecting
the resource based view. The firms have strong FSAs that are unique and proprietary, which in turn
are protected by isolating mechanisms (entry barriers) which prevent rival firms from acquiring the
similar FSAs. These isolating mechanisms are often due to aspects of the organizational structure
and the nature of the top management team, a type of Penrosean effect. Thus, it is necessary to
examine the internal network of the firms when the resource based view is applied to MNEs. There
will be codification of internal knowledge FSAs and routines for its use within the internal network
of the firm.
Quadrant 3 is a special quadrant only applicable for international business. In quadrant 3
both FSAs and CSAs matter. The FSAs of the firm are enhanced and facilitated through home
country CSAs. In general, there may be internal managerial tensions in reconciling CSAs and FSAs.
The better managed MNEs successfully combine FSAs and CSAs (Rugman 1996). On the other hand,
in quadrant 2, neither CSAs nor FSAs are important. Firms in this quadrant need to move to either
quadrant 1 (building upon CSAs) or to quadrant 4 (by improving FSAs). Otherwise firms in quadrant
2 are not sustainable.
The FSA/CSA matrix can be related to Porters (1990) diamond framework for national
competitiveness. According to Porter (1990), there are four factors that determine a nations
competitiveness in the international arenafactor costs, aggregate demand, related and
supporting industries, and the amount of rivalryalso known as the four corners of the diamond.
Each of these determinants of competitiveness is exogenously influenced by government policy and
the role of chance and, in turn, constitutes a component of an interactive system that affects firms in
the home economy. Porter assumes that the home country firm exports its products and services,
and he measures international competitiveness in terms of industries having world export shares
greater than the home country average of their world export share. It should be noted that Porter
examines only exports, so his diamond does not, strictly speaking, extend to FDI and the activities of
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MNEs in having foreign subsidiaries. This deficiency has been corrected by international business
scholars such as Dunning (1993, 1997) and Rugman and DCruz (1993).
Using Porters terminology, the strong CSAs in quadrant 1 of Figure 1 form the basis of the
global platform that are the ingredients for firms to build FSAs and exportthe essence of
international competitiveness. Using the home country diamond as a staging ground, the exports of
firms represent the home-base diamond advantage in international competitiveness (Porter
1990). The home country CSAs are also influenced by various tariff and non-tariff barriers to trade
as well as government regulations. In reality, MNEs must also make strategic decisions to attain
efficient global configuration and the coordination of value chain activities (operations, marketing,
R&D, and logistics), building upon these home country CSAs. The managerial capabilities to make
such decisions, in turn, represent a strong FSA. As such, Porters (1990) diamond framework can be
extended to refine the analysis of CSAs and their interaction with FSAs in the FSA/CSA matrix.
A key limitation of Porters (1990) diamond model is its sole focus on home country conditions:
the applicability of a single diamond model for the study of international trade is questionable
(Davis and Ellis 2000). The double diamond framework developed by Rugman and DCruz (1993)
addresses such concerns. Initially developed in a U.S.-Canada context, the double diamond
framework relates the four home country conditions to an equivalent set of four conditions in the
major host country trading partner of Canada, as shown in Figure 2.
---------------------------------
Insert Figure 2 about here
---------------------------------
Rugman and DCruz (1993) suggest that the international competitiveness of Canadian
firms depends not only on their home country diamond conditions but also on those of their major
trading partner, the United States. While some Canadian firms derive FSAs from CSAs in natural
resources, many others rely on the development of market-based FSAs and successful brands as they
achieve success in U.S. market. In short, the sources of a firms competitive advantage are not
limited to the home country advantage determined by Porters single diamond model. These can
also be achieved by sensing and developing host country CSAs. As such, the double diamond
framework provides a foundation to investigate the international competitiveness of MNEs from
small open economies such as Korea, New Zealand, Austria, and Singapore and many other non-
triad countries, as their firms interact with traditional triad countries such as the United States and
Japan.
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In summary, we believe that Porters (1990) diamond framework and Rugman and DCruzs
(1993) double diamond framework provide a useful perspective to extend the original FSA/CSA
matrix (Rugman 1981). This approach considers both the home country and the leading host
country partners diamond for international business strategy. Further, as recent findings show that
MNEs operate more regionally than globally (Rugman 2005; Rugman and Verbeke 2004) we need to
add this empirical dimension to a study of international competitiveness. Therefore we analyze how
the home country diamond and the home triad region diamond together determine the
internationalization of MNEs and lead to a new multidimensional measure of international
competitiveness. In what follows, we provide empirical evidence to demonstrate the merits and
usefulness of the modified FSA/CSA matrix using the Fortune Global 500 firms.

Data and method
Firm geographic sales and assets
To examine the recent trends in the geographic scope of firm competitiveness, geographic
sales and assets data are hand-collected from the annual reports of each firm and supplemented by
the Compustat Segment of Standard and Poors and the OSIRIS of Bureau van Dijk. We use the set of
large 500 companies listed in the Fortune Global 500 in 1999 and 2008 (published in 2000 and 2009
respectively). Most of these very large firms are MNEs (Rugman 2005). For 1999, 192 North
American firms, 164 European firms, 139 Asia Pacific firms, and five non-triad firms 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% of these large 500 companies and Japan has about 15%,
yet the importance of these two countries relative to the E.U. is decreasing due to the rise of MNEs
from emerging economies.
From the information regarding geographic sales and assets, we calculate foreign (F) to total
(T) (F/T) sales and foreign to total assets as measures of the geographic scope of firm
competitiveness (FSAs). For the regional nature of firm competitiveness we calculate home region
(R) sales to total (intra-regional; R/T) sales and home region assets to total assets. Following Rugman
and Verbeke (2004) and Rugman (2005), the home region is defined as a broad triad region (i.e.,
North America, Europe, and Asia Pacific). These measures can capture the geographic reach of
downstream (sales; marketing side) and upstream (assets; production side) FSAs (Rugman, Li, and
Oh 2009). We use the geographic scope of sales and assets, which is an outcome measure of FSA,
instead of corporate-level resources (i.e., input measures) such as firm sales, marketing and R&D
intensities, and managerial capability because these resources and capabilities cannot be separated
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into domestic and foreign nor into home region and foreign region. In addition, these resources are
almost exclusively developed at headquarters, and only a few foreign subsidiaries develop new
resources (Doz, Santos, and Williamson 2002; Hennart, 2007).

Country competitiveness and CSAs
We derive international competitiveness scores based on the Porter diamond factors from
the World Economic Forums Global Competitiveness Reports (WEF GCR) published in 1999 and 2008
(World Economic Forum 1999, 2008). The WEF publishes the reports based on the responses from
their own annual survey of executives as well as the data compiled from various secondary sources
such as World Banks World Development Indicators. The GCR for 1999 includes 59 countries,
accounting for 88% of the gross world product in 1998, and the GCR for 2008 includes 134 countries,
accounting for approximately 97% of the gross world product in 2007. The WEF GCR data have been
widely used in international business and marketing research (e.g., Balabanis and Diamantopoulos
2004; Delmas and Toffel 2008; Goerzen and Beamish 2003; Solleiro and Castanon 2005).
The national competitiveness scores are derived through a two-stage principal component
analysis. The principal component analysis is known to provide robust factor scores and is a
commonly used dimension reduction method (Velicer and Jackson 1990). In the first stage, we
categorize the first-order variables commonly available in the 1999 and 2008 GCRs into four
microeconomic business environment factors based on the Porters diamond model (Porter 1990;
Porter et al. 2008; Grant 1991). They are: factor (input) conditions; demand conditions; related and
supporting industries; and firm strategy and rivalry. In addition, we also include two exogenous
macroeconomic factors suggested by Porter (1990), and Rugman and DCruz (1993), that is,
macroeconomic policies and social infrastructure and political institutions. These factors
correspond to the government condition in the double diamond framework (Rugman and DCruz
1993: see Figure 2). After we standardized variables, we conduct a series of principal component
analysis on each of these variable groups and extract factors with the Eigenvalue over 1 for each
group (Zwick and Velicer 1986). After dropping some variables with extremely low loading or cross-
loading, single factors with the Eigenvalue over 1 were extracted for each variable group. Appendix
1 shows the list of first-order variables included and their loadings, along with the extract factors
and the reliability scores.
In the second stage, we extract an overarching factor (that is, the national competitiveness
score) and its factor score from the second-order factors that were extracted in the first stage. At
this stage, the second-order factors converge on one overarching factor with an eigenvalue over 1.
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While the loading factor of macroeconomic policy is relatively low (0.69), we include all these
factors in the calculation based on the reasonable assumption that national competitiveness is a
multidimensional construct. In such a composite latent variable model specification, the (formative)
indicators all have an impact on a single construct (i.e., international competitiveness) and should
not be excluded based on low loading factors (Jarvis, MacKenzie, and Podsakoff 2002). We note,
however, the high reliability score (Cronbachs alpha = 0.925). These second-order factors and their
loadings in the focal factor (national competitiveness) are shown in Appendix 2. Appendix 2 also
reports the national competitiveness scores of key countries that have MNEs on the list of Fortune
Global 500 in 2008. The ranking of national competitiveness based on Appendix 2 is largely
consistent with that reported in the WEF GCR 2008 calculated using a different methodology (Sala-
i-Martin et al. 2008), thus demonstrating the face validity of our national competitiveness scores.
Our findings from the two-stage principal component analysis indicate that a major CSA is
factor conditions for Canada, the United States, the United Kingdom, South Korea, and Malaysia;
demand condition for Ireland, China, Taiwan and Thailand; supporting industries for many European
countries (such as Austria, Belgium, France, Germany, Italy, Spain, and Switzerland), Turkey, India,
and Japan; macroeconomic policy for Mexico and Russia; social infrastructure and political
institution for Luxembourg, the Netherlands, Portugal, Australia and Northern European countries
such as Denmark, Finland, and Norway. Thus the key driver of national competitiveness varies by
country. Thus only looking at a sub-component of CSAs will lead to biased results regarding a
countrys relative competitiveness compared to other countries. Overall, considering multi-faceted
dimensions of national competitiveness, Denmark, Germany, Sweden, and Switzerland have very
strong national competitiveness whereas Russia, Mexico, Hungary, and Poland have very low
national competitiveness among key countries in 2008.
Using the national competitiveness values obtained from the above we calculate home
region competitiveness and global competitiveness by key countries. Home region competitiveness
and global competitiveness represent the possible source of location specific advantages that MNEs
can exploit in the rest of their home region or in a foreign region, respectively. The home region
competitiveness is measured by the GDP weighted average of home region countries, except for the
home country. Global competitiveness is measured by the GDP weighted average of all countries
except for the home region countries. Therefore global competitiveness varies only by region.
Countries in the same home region share the same global competitiveness. We present our results
and discuss key findings in the next section.

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Results
Table 1 shows geographic sales of large firms by country. To improve internal validity, we
limit our discussion to countries that have more than five firms on the list of Global 500 firms.
Regarding F/T sales, there are large variations by country. In general, European firms are more
internationalized than Asia Pacific firms. German, Dutch, Swedish and Swiss firms have more than 60%
of their sales in foreign countries, while Australian, Chinese, and Indian firms have less than 30% of
their sales in foreign countries, on average. However the variations by country are smaller when we
look at intra-regional sales (i.e., R/T). Most firms have more than 70% of sales in their home region.
Swiss and U.K. firms are somewhat different from others and have less than 60% of sales in the home
region.
---------------------------------
Insert Table 1 about here
---------------------------------
When we examine the changes over ten years, North American and Asia Pacific firms
increase their foreign sales, while European firms reduce their foreign sales. Yet European firms are
more internationalized than others. North American firms reduce their home region sales by 7%,
while European and Asia Pacific firms increase their home region sales by 7% and 2% respectively.
The economic downturn and lowered national and home region competitiveness in North America
lead these firms to focus more on a foreign region, while the enlargement of the European Union
and the rise of the Chinese and Indian economy make European and Asia Pacific firms focus on their
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 home region. 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 for sales, but assets (upstream activities) are somewhat less internationalized
than sales (downstream activity). This means that downstream capability likely drives firm
internationalization.
---------------------------------
Insert Table 2 about here
---------------------------------
Table 3 shows national, home region, and global competitiveness by country for 1999 and
2008. In general, developed countries have high national competitiveness, while developing
countries have low national competitiveness. Thus developing country MNEs may tap into
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developed country competitiveness in their triad region. For example, Mexican MNEs can access U.S.
competitiveness, Central and Eastern European MNEs can access Western European
competitiveness, and South East Asian MNEs can access Japan and South Korean competitiveness
through different modes of entry such as trade, FDI, licensing, and joint venture. On the other hand,
developed country MNEs may limit their activities in developing countries to operationalize a
specific competitiveness such as natural resources, low wage labor, and market size and potential.
---------------------------------
Insert Table 3 about here
---------------------------------
Regarding changes in the past ten years, Table 3 shows that national competitiveness of
European countries did not change much. The national competitiveness of North American
countries has deteriorated in relative terms, while Asia Pacific countries have improved national
competitiveness. Yet the national competitiveness of European and North American countries is
stronger than that of Asia Pacific countries. Home region competitiveness does not vary much
within a triad region, neither across regions. Only North American countries show a significant drop
in home region competitiveness. However, North American countries still have stronger home
region competitiveness than European countries and Asia Pacific countries. There has been a fall in
global competitiveness. Asia Pacific and European firms have somewhat better global
competitiveness than North American firms.
It is noteworthy that six countries, namely, the United States, Italy, Russia, China, India, and
Japan report somewhat different results from other countries. The United States and Japan have
very strong national competitiveness, but their home region competitiveness is one of the lowest.
The national competitiveness of the United States and Japan always outperforms their regional
counterparts, thus the United States and Japan likely develop their FSAs based on national
competitiveness. This logic also applies, albeit weakly, to Australia and some European countries
such as France, Germany, Netherlands, and Switzerland. On the other hand, Italy, Russia, China, and
India have weak national competitiveness, but their home region competitiveness is very strong. In
particular, Italy does not have strong national competitiveness in factor condition, strategy and
rivalry, and macro-conditions; Russia shows low national competitiveness in factor condition,
demand condition, supporting industries, strategy and rivalry, and social infrastructure and political
institution; the weakness is in strategy and rivalry in the case of China, and for India, it is the macro-
conditions.
16

The key finding from Table 3 is that companies that have weak national competitiveness can
tap into their stronger home region competitiveness. Therefore companies do not necessarily
venture themselves to access global competitiveness because costs associated with accessibility are
an increasing function of physical distance (Vernon 1966), psychic distance (Johanson and Vahlne
1977), and other distances (Ghemawat 2007; Berry, Guillen, and Zhou 2010). In addition some FSAs
are location bound and cannot be transferred to utilize global competitiveness (Rugman and
Verbeke 2001). Indeed Rugman and Verbeke (2007) note that transferring FSAs to foreign regions
of the triad is particularly difficult because incremental costs arise from the liability of inter-regional
foreignness.
We integrate the findings from Tables 1 and 3 into an extended FSA/CSA matrix shown in
Figure 3. The vertical axis denotes the (potential) source of location specific advantage (CSAs), and
we divide it into national, home region, and global. The horizontal axis represents the geographic
scope of FSAs. Theoretically, the firm can transfer its FSAs from domestic to home region to global
market based on a firms downstream (marketing) capability. We divide firms into three categories:
domestic firms (firms that have less than 10% F/T sales); home region firms (firms that have more
than 60% intra-regional sales and more than 10% F/T sales); and global firms (firms that have less
than 60% intra-regional sales). The 10% threshold for domestic firms and the 60% threshold for
home region firms are now widely used in literature and are robust (Gomes and Ramaswamy 1999;
Osegowitsch and Sammartino 2008; Qian et al. 2010).
---------------------------------
Insert Figure 3 about here
---------------------------------
India is the only country which has relatively stronger global competitiveness than its
national and home region competitiveness. This implies that Indian companies have potential
benefits to exploit global (foreign region) CSAs when they have FSAs. Otherwise they remain local.
Three Indian firms, Bharat Petroleum, Hindustan Petroleum, and Indian Oil stay local and Tata Steel
operates regionally. Although these firms can possibly exploit global competitiveness, they still
remain focused mainly on their local markets. This implies that these Indian companies should
improve their FSAs to better align these FSAs with favourable global CSAs. As an example, Khanna
and Palepu (2004) show that capable Indian software firms often access global capital markets,
because of insufficient capital market in India.
Most countries have either strong national and home region competitiveness (developed
countries) or weak national but strong home region competitiveness (developing countries). This
17

implies that these firms should focus on their home region (and domestic market for those
developed country firms) CSAs to develop their FSAs. If a firm can transfer any of its FSAs developed
from the home region CSAs, to a foreign region, then the firm can operate on a global basis. When
its FSAs are location 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 their downstream FSAs to global.
Most formerly state-owned Chinese and Russian utility firms and banks stay in domestic
markets because they have weak FSAs based on government protection. These are not transferable
to other countries even within their home region. Although these firms have access to favourable
home region competitiveness, they are unable to compete with their home region rivals because of
weak FSAs. Like China and Russia, Italy provides one of the weakest national competitiveness scores.
However Italian firms develop their FSAs in design, marketing, and technology that can be
developed from and transferred to home region markets. Therefore Italian firms successfully
operate within the home region.
As mentioned earlier, the United States and Japan are two countries that have strong
national competitiveness, but relatively weak home region and global competitiveness. Australia,
France, Germany, Netherlands, and Switzerland also show the same tendency with the United States
and Japan, but their home region competitiveness is not significantly lower than their home region
counterparts. This implies that American and Japanese firms can leverage their superior national
CSAs to internationalize their activities when they have strong FSAs. Otherwise these firms focus on
their domestic markets. Some American and Japanese firms focus on their home countries (24%
and 29% respectively), whereas others focus either on the home region (56% and 35% respectively)
or a foreign region (20% and 36% respectively). Different companies in the same country can have
different levels of marketing capability that determine the geographic reach of their sales.

Conclusions
In this paper, we analyze international competitiveness by using a modified FSA/CSA matrix.
This is an extension of Rugman (1981)s FSA/CSA matrix and Rugman and DCruzs (1993) double
diamond model. We also provide empirical evidence to demonstrate the merits and usefulness of
the FSA/CSA matrix by calculating aspects of the CSAs and FSAs of these as they determine
international competitiveness. In doing so, we focus on the FSAs of the Fortune Global 500 firms
based on the geographic scope of sales, and the CSAs based on the locational competitiveness at
three different levels: country (national), home region (region), and global. Our empirical analysis
18

provides a number of interesting findings about the nature and extent on international
competitiveness
First, our investigation of the FSAs of the set of 500 large firms across their home countries
within each of the broad regions of the triad reveals some interesting trends in international
competitiveness at firm-level. The changes in the ratio of foreign (F) to total (T) sales (F/T) and the
intra-regional (R) sales (R/T) from 1999 to 2008 indicate that the worlds 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. firms with an F/T in 2008 of 30.3%, a significant increase from
the F/T of 23% for 178 U.S. firms in 1999. We also find that the average intra-regional sales of the
500 firms remain high at 74.6% in 2008, compared with that in 1999 (76.4%). Changes in the
international assets of these MNEs also point to similar trends. Again, F/T for assets increased from
28.4% in 1999 up to 36% in 2008. Intra-regional assets were at 75.5% in 2008, as compared to 78.7%
in 1999. Together, these results imply that the worlds largest 500 firms have increased their firm-
level international competitiveness. However, much of this is still being achieved within their home
region.
We also look at the CSAs at country, home region, and global-level, based on the various
aspects of diamond determinants and their relative importance. We find that countries have
different sources of CSAs in their international competitiveness: indeed it is very important to look
at the multi-faceted nature of national, home region, and global competitiveness because MNEs
seek not only markets but also resources, efficiency, and strategic-assets (Dunning 1993). One of
our key findings is that home region competitiveness and global competitiveness do not vary much
by country although national competitiveness does. Since many MNEs can find favorable diamond
conditions in the home region, they may not be motivated to take risks in foreign regions under the
presence of the liability of inter-regional foreignness (Rugman and Verbeke 2007). In short,
international competitiveness is a multi-faceted concept that brings together firm and country level
factors that need to be analyzed carefully in order to understand the complexities of the
interactions of CSAs and FSAs.
Finally, our modified FSA/CSA matrix (Figure 3) shows that the majority of large firms do not
have global dimension in their international competitiveness in sales. Despite the magnitude of
their international sales and presence, the competitiveness of these MNEs is mainly achieved within
the home region of the firm. Most firms develop the source of location specific advantages from
their home region and operate within their home region. Except for a few firms, it seems that most
MNEs cannot transfer national or home region competitiveness to foreign region.
19


Limitations and future research
Although this study provides a new analysis for national, home region, and global
competitiveness that broadens our perspective on international competitiveness, it is not without
its limitations. We could not investigate factors that enable or disable MNEs from transferring their
competitiveness to other countries or regions. The literature suggests that the factors are either
firm specific such as firm size, marketing capability, technological knowhow, managerial capability,
and financial capability, or country specific such as physical distance, cultural distance, institutional
distance, and economic distance. Future research should look inside firm- and country- specificities
as well as at regional and global ones such as regional institutions, the world financial crisis, and
political relations. In addition, a dynamic view of international competitiveness should be added to
the static view of competitiveness (Narula 1993). In particular, if some MNEs could improve their
FSAs on a global dimension, then it is a very important theoretical and empirical question to ask
how precisely such MNEs can achieve global FSAs and whether such global FSAs improve
performance or not.

Implications to international marketing research
These limitations notwithstanding, we believe that our findings offer useful insights for
future research on international marketing activities of MNEs. An integrative consideration of FSAs
and CSAs is necessary because, as our results indicate, MNEs leverage not only their FSAs, but also
competitive advantages derived from the CSAs across levels, as they internationally market their
products/services. The modified FSA/CSA matrix based on Rugman and DCruzs (1993) double
diamond model provides a more sophisticated perspective for such a holistic investigation, taking
into account the multi-faceted nature of international competitiveness. As such, we suggest that
the modified FSA/CSA matrix proposed herein will facilitate future marketing research based on
international competitiveness.
Specifically, we propose three research streams in international competitiveness and
international marketing. First, market entry research should consider the regional aspect of
international competitiveness. Countries within a region usually share similar CSAs, therefore MNEs
are likely to decide a region to enter first, and then find a specific country or location. A nested logit
model with region and country would be suitable in order to capture the entry decision process of
MNEs. The locational cost benefits provided by countries in a region are correlated (Head and
Mayer 2004). Likewise entry mode research can also accommodate international competitiveness
20

at subsidiary level. Although an MNE may not have strong FSAs, high regional competitiveness
enables the MNE to use an ownership entry mode into a home region country.
Second, it would be important to discover the benefits of a regional marketing program in
the presence of regional integration and regional competitiveness. The benefits are not only limited
to the cost savings by utilizing scale and standardization. The role of regional marketing or a
regional headquarters is in connecting the standardized strategy of corporate headquarters with
diverse country environments and local responsiveness in the region (Daniel 1987; Halliburton and
Hnerberg 1993; Yeung, Poon, and Perry 2011).
Third, as an extension of the second stream, the evolutionary view of marketing strategy
along with changes in international competitiveness deserves more scholarly attention. Literature
on international marketing tends to focus on the entry stage into international markets. However, it
is very likely that marketing strategy shifts at the expansion stage, from identifying markets overseas
for existing products and services to leveraging potential economies of scale in developing local
markets and increasing potential synergies across subsidiaries within an MNE (Douglas and Craig
1989). This concept can be readily applied to regional and global strategies (e.g. , Chetty and
Campbell-Hunt 2003). It is expected that a regional MNE does not need to differentiate its
marketing strategy in the entry and expansion stages because of the homogeneity of consumers and
integration of regional economy, whereas a global MNE needs to.
In so doing, future studies may conceptualize and operationalize international
competitiveness based on the proposed FSA/CSA matrix. Our study also suggests possible data
sources and variables to measure the FSA (the geographic scope of firm sales and assets) and the
CSA (variables from the World Economic Forums Global Competitiveness Reports). International
marketing researchers should further validate and adopt specific measures in the context of their
own research problems and setting. As our empirical analysis has demonstrated, the nature and
specificity of international competitiveness evolve over time, so the availability of longitudinal
datasets (e.g., WEF GCR) should facilitate the future investigation of the dynamic perspective of
international competitiveness. In the meantime, the multidimensionality of the international
competitiveness construct suggests that researchers should take into account each dimension in
their study even if their focus is on a specific subset of the international competitiveness dimensions.

Implications to managers
Our findings also have some significant implications for managers. In addition to the need
for consideration of the multi-faceted nature of various FSAs and CSAs, a new insight emerges for
21

strategic marketing planning and implementation in international markets. An MNE can improve its
economies of scale and scope by integrating its activities in home region countries to achieve cost-
effectiveness in the application of its marketing strategy. The MNE may promote standardized
product and service in the same way within its home region because home region customers are
likely ready to access its products and services without significant modifications. The MNEs cost
involved in transferring and utilizing its strategy and FSAs is likely an increasing function of
geographic, psychic, institutional, and economic distances (Theodosiou and Katsikeas 2001).
Managers should understand the reality and liability of being a global firm.
Being a global firm demands strong FSAs. On the one hand, a firm can develop superior
products or very low cost products, which can be readily accepted by global customers. However
such products rarely exist due to rapidly changing business environments in competition,
technology and customer taste. On the other hand, a firm may develop its localization strategy by
adapting to differences in each country. However incremental coordination costs and the liability of
foreignness make firms unable to pursue a localization strategy exclusively. Thus the rhetoric think
global, and act local is not the best strategy for firms in business. A regional solution can be a more
manageable alternative to a global strategy (Morrison, Rick, and Roth 1992). In other words,
international competitiveness depends to a great extent on a firms capability to build FSAs based
upon national and home region CSAs, and to exploit these FSAs regionally. As such, the
development of international competitiveness should not be confused with reckless globalization.

22

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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

29

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
30


Total 495 491 33.1 40.8 76.4 74.6
Source: Authors calculations based on annual reports. Non-triad firms are excluded (i.e., five firms
in 1999 and nine firms in 2008).
31

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
32

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
Source: Authors calculations based on annual reports. Non-triad firms are excluded (i.e., five firms
in 1999 and nine firms in 2008).
33

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
34

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

Source: Authors calculation based on Global Competitiveness Report by National Economic Forum
(1998, 2008).
35

Figure 1
The CSA and FSA matrix
Country-
Specific
Advantages
Firm-Specific Advantages
Weak Strong
Weak
Strong
1
2
3
4
Weak Strong

Sources: This is developed from the analysis of Chapter 8 in Rugman (1981).
36

Figure 2
Double diamond framework in international competitiveness




Business outside
Home region

Business outside
Home 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 condition
Business
in Home region
Host country
Diamond
37


Sources: This is developed from the analysis in Rugman and DCruz (1993).
38

Figure 3
Firm geographic scope and competitiveness, 2008


Geographic scope of firm specific advantage (sales)

National Home region Global
S
o
u
r
c
e

o
f

l
o
c
a
t
i
o
n

s
p
e
c
i
f
i
c

a
d
v
a
n
t
a
g
e

(
C
o
m
p
e
t
i
t
i
v
e
n
e
s
s
)

G
l
o
b
a
l

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

(25%)
Tata Steel.
(0%)
H
o
m
e

r
e
g
i
o
n

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.
39

France
(35 firms)
(0%)

(66%)
Air France-KLM; Bouygues; Carrefour; CNP
Assurances; Crdit Agricole; lectricit de
France; Foncire Euris; and 17 others.
(34%)
Alcatel-Lucent; Alstrom; AREVA;
Sanofi-Aventis; AXA; Christian Dior;
Lafarge; L'Oral; and four others.
Germany
(33 firms)

(3%)
Energie Baden-Wrttemberg.

(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%)
Netherland
s
(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.

40

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; Nestl; 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.
D
o
m
e
s
t
i
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.
41

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

42

Appendix 1
Components of national competitiveness

Components Sub-components Loading
factor
Factor Conditions Ease of access to loan 0.816
( = 0.976)
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 Buyer sophistication 0.942
( = 0.874)
Degree of customer orientation 0.942
Supporting Industries Control of international distribution 0.883
( = 0.928)
Production process sophistication 0.908

Local supplier quality 0.930

Local supplier quantity 0.909
Strategy, Structure, Rivalry Effectiveness of anti-monopoly policy 0.903
43

( = 0.915)
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 Government surplus/deficit 0.589
( = 0.694)
Inflation (reverse-coded) 0.864

Interest rate spread (reverse-coded) 0.878
Social Infra & Political Judicial independence 0.904
Institutions Favoritism in decisions of government officials 0.909
( = 0.955)
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

44

Appendix 2
Components of national competitiveness by country in 2008

Micro-conditions (Diamond) Macro-conditions

Total
Factor
Conditio
n
(0.976)
Demand
Conditio
n
(0.874)
Supportin
g
Industries
(0.928)
Strategy
& Rivalry
(.915)
Macroeconomi
c Policy
(0.694)
Social Infra. &
Political Inst.
(.955)


North America
Canada 1.303 1.431 1.235 1.202 1.265 0.271 1.187
Mexico -0.334 -0.556 0.020 -0.014 -0.195 0.198 -0.954
United States 1.481 1.938 1.497 1.763 1.410 0.180 0.593

Europe
Austria 1.653 1.297 1.646 1.885 1.736 0.285 1.486
Belgium 1.320 1.400 1.254 1.422 1.380 0.275 0.941
Denmark 1.806 1.874 1.497 1.603 1.613 0.486 2.139
Finland 1.681 1.747 1.086 1.409 1.699 0.629 2.112
France 1.311 1.394 0.955 1.820 1.243 0.142 0.998
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 -0.409
Ireland 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 -0.688
Luxembourg 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 -0.773
Portugal 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 -0.895
Spain 0.652 0.594 0.506 0.919 0.649 0.204 0.487
45

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 -0.554
United
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 -0.115
Japan 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

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













46



The John H. Dunning Centre Discussion Paper Series in International Business

2011
2011-001 Rajneesh Narula and Quyen Nguyen Emerging country MNEs and the role of home
countries: separating fact from irrational expectations
2011-002 Alan M. Rugman, Alain Verbeke and
Quyen T.K. Nguyen
Fifty Years Of International Business Theory
and Beyond

2011-003 Alan Rugman, Chang Hoon Oh and
Dominic S.K. Lim
The Regional and Global Competitiveness of
Multinational Firms