International Business Review 30 (2021) 101797

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International Business Review

journal homepage: www.elsevier.com/locate/ibusrev

New OLI advantages in digital globalization

Yadong Luo
Department of Management, Miami Herbert Business School, University of Miami, Coral Gables, FL 3346, United States

A R T I C L E I N F O A B S T R A C T

Keywords: Digitization and globalization have converged to create a new normal of digital globalization, fortifying deeper,
Digital globalization broader, and more intricate connections between nations, businesses, and individuals. This connectivity has
IB theory redefined who participates in globalization and how international expansion unfolds. This new reality raises a
New OLI advantages
series of complex issues that challenge existing IB theories and conclusions. I submit a new lens toward inter­
nationalization advantages for multinationals: new O (open resource advantage), L (linkage advantage), and I
(integration advantage). While these new OLI advantages are complementary and coupled with traditional OLI
(ownership, location, and internalization) advantages, digital globalization slackens conventional OLI benefits
and solidifies the new ones. This article offers insights into how multinationals leverage new OLI advantages and
manage global business with digital connectivity in order to improve speed, flexibility, orchestration, and effi­
ciency for both interfirm and intrafirm activities.

1. Introduction global normal poses myriads of complex questions within existing IB

International business (IB) is now fundamentally shaped by new
realities and uncertainties, such as a global supply chain breakdown, the
coronavirus pandemic, and climate change. But the two particularly
profound yet dichotomous forces impacting the IB world are digital
globalization and geopolitical nationalism. These two seemingly con­
flicting narratives of the world – geopolitical and digital – fundamentally
change global business in a contradicting way. Political conversation
about trade and investment among previous champions of open borders
and global trade and investment, notably the United States and the
United Kingdom, has shifted from a focus on economic benefits to
concerns about job loss, dislocation, protectionism, national security,
and inequality. The negative geopolitical narrative of growing protec­
tionism is reflected in ‘old’ metrics that has caused slowdown in global
trade, capital flow, and FDI.
But today’s globalization is being driven more significantly than ever
before by digitization. While trade predicated on global supply chains
that take advantage of cheap labor is slowing, new digital technologies
mean that more actors can participate in cross-border transactions than
ever before, from small businesses to multinational enterprises (MNEs).
Globalization is entering a new epoch defined not only by cross-border
flows of goods, capital, services, and investment but increasingly by
flows of data, information, and knowledge. As digitization and global­
ization continue to converge in shaping world business, the challenges
for international companies mount, but so do opportunities. This new
theories and research. Digital globalization requires an important
paradigmatic shift regarding some most fundamental issues in interna­
tional business, from the definition of MNEs to the internationalization
process, from organizing cross-border activities to managing global
talent and knowledge, to name a few.
We define digital globalization as the state of a digital form of
globalization that connects nations, industries, companies, and in­
dividuals around the world through flows of data, information, ideas
and knowledge, and through flows of goods, services, investment, and
capital that are digitally enabled or supported. ICT, internet, cloud
services, and data analytics are common technologies that support such
flows, while digitization-enabled platforms such as e-commerce and
online marketplaces abundantly prompt flows of trade and transactions
in a digital way. MNEs, nascent or established, are not merely a passive
force responding to digital globalization. They actively contribute to
connectivity by investing in digital technologies that facilitate the
diffusion of innovation, technology, and ideas across nations, and sub­
sequently fortify interconnections between developing and developed
markets. At the same time, MNEs are monumentally affected by digital
globalization in a multitude of ways and with a multitude of outcomes.
Digital globalization changes who participates in globalization, how
cross-border business is conducted, and where profits generate and
concentrate.
This study emphasizes a critical issue in IB research: internationali­
zation advantages in the digital era. Do Join Dunning’s classical OLI

E-mail address: yadong@miami.edu.

https://doi.org/10.1016/j.ibusrev.2021.101797

Available online 15 January 2021

0969-5931/© 2021 Published by Elsevier Ltd.
Y. Luo
(ownership, location, and internalization) advantages still hold? Are
these traditional advantages weakening? If so, in what ways? What are
the new advantages resulting from digital globalization? How can MNEs
sense and seize such new advantages in the new digital world? These are
big and challenging questions for IB scholars, policy makers, and prac­
titioners alike. To explore them, this article delivers a new perspective –
new OLI advantages (digitization-enabled Open resource access,
digitization-enabled Linkages, and digitization-enabled Integration).
Digital globalization enables MNEs to quickly gain access to global open
resources, seamlessly work with global suppliers, extensively connect to
worldwide customers, and virtually nourish internal communication
and knowledge sharing for a global workforce. The digital architecture,
such as global ERP (enterprise resource planning), HCM (human capital
management), CRM (customer relationship management), DMP (data
management platform), cloud computing, and social marketing plat­
form, among others, fosters better management of worldwide resources
and relationships. This study tackles not only what new OLI advantages
are but how international businesses achieve these advantages. It also
suggests several key areas for the IB community to further advance this
new line of inquiry.
2. New digital realities in international business
Dunning’s eclectic paradigm (1981; 1988) was based on the old re­
alities of the seventies and eighties of the 20th century. Such realities
and assumptions behind them have largely shifted. For instance, we
witness changes from tangible flows of physical goods to intangible
flows of knowledge and data; from big MNEs to a sheer number of small
or mini-MNEs, from restricted global business networks to prevalent
platforms and ecosystems, and from weak power of consumers to strong
participation of global consumers. In particular, the following forces
have dramatically changed the assumptions behind the conventional
OLI advantages:
2.1. Intangible flows of knowledge, data, and information prevails
Flows of physical goods and finance were the hallmarks of the 20th-
century global economy, but today those flows have flattened or
declined. Global business in the 21 st century is increasingly defined by
flows of data, information, and knowledge. This phenomenon now un­
derpins virtually all cross-border transactions within traditional flows
while simultaneously transmitting a valuable stream of ideas and
innovation around the world. Through digitization, global economic
connections are growing deeper, broader, and more intricate. Digital
connectivity changes the economics of doing business across borders,
bringing down the cost of international interactions and transactions.
They create markets and user communities with global scale, providing
businesses with a huge base of potential customers and effective ways to
reach them. According to the McKinsey Global Institute’s report in 2016,
digital globalization in terms of cross-border data flows has grown over
50 times between 2005 and 2019 as digital flows of commerce, infor­
mation, searches, video, communication, and intracompany traffic
continue to surge, far greater than global flows of trade and finance.
2.2. Quickened access to and diffusion of knowledge and information
Digitization is a step change even greater than the internet. In the
20th century, information, knowledge, ideas, and innovation diffused
very slowly in the absence of pervasive digital connectivity. But today,
most businesses and customers can gain instant global access to some
critical information, enabling virtually every other kind of cross-border
flow. Globalization and digitization immensely reinforce and facilitate
each other. Globalization accelerates the change and diffusion of tech­
nology while digitization pushes globalization to occur faster, more
broadly, and in many cases cheaper. Accordingly, an imperative need for
digital innovation and engagement has emerged. With much faster
International Business Review 30 (2021) 101797
diffusion of ideas, information, and knowledge, international companies
must use digital channels to engage with key stakeholders and pursue
sustained innovation. To succeed in digital globalization requires
embracing innovation and identifying, as well as tapping into, new
opportunities. For instance, companies must grasp new opportunities
that exist outside traditional markets (home and host) and implement
working measures that differentiate them from global rivals in product
offering and innovation. Companies must also achieve greater collabo­
rative competitive advantages from a growing number of partners in the
global business eco-system of the digital age.
2.3. Central role of digital infrastructure
As physical infrastructure conditions, such as communications,
transportation and utility, were the key determinants for location se­
lection in the past century, a digital infrastructure is equally becoming
essential for international business in the 21 st century. The latter affects
the growth of not only firm competitiveness in global competition but
also country competitiveness and connectivity, as well as consumer
wellbeing and experience. Digital infrastructure pertains to foundational
services necessary to the information technology capabilities of a nation,
region, city, or organization. At the national level, digital infrastructure
is necessary to the economy and quality of life of a modern nation. For
global business, digital infrastructure matters within the company, too,
such as by affecting business agility and user experiences worldwide. As
an example, the accelerated use of cloud services in both home and
foreign markets typifies the change towards this modern form of infra­
structure. Whilst cost savings is often touted as a key motivation for
cloud migration, many new digital leaders find that the levels of busi­
ness agility required for rapid delivery of the new class of experience-
focused services heavily favor a cloud-native approach. The ability to
rapidly enable such services is a key element in both national- (macro)
and company (micro)-level digital infrastructure, which, when suc­
cessfully established, brings benefits in the realms of cost, reliability,
and speed in global competition.
2.4. A remarkable rise of digitally enabled small MNEs
Globalization was once driven principally by large MNEs (and major
financial institutions and powerful governments). Today, a much larger
number of new ventures, entrepreneurial businesses, and small and
medium enterprises (SMEs) more actively participate in globalization,
especially through digital platforms with global reach. Small businesses
worldwide are becoming “micro-multinationals” by using digital plat­
forms such as eBay, Amazon, Facebook, and Alibaba to connect with
customers and suppliers in other countries. Many digital startups are
born global. Small and medium-sized enterprises worldwide are using
the “plug-and-play” infrastructure of internet platforms to put them­
selves in front of an enormous global customer base and become ex­
porters. Amazon, for instance, now hosts about two million third-party
sellers. In countries around the world, the share of exporting SMEs is
sharply higher on eBay than among offline businesses of comparable
size. PayPal enables cross-border transactions by acting as an interme­
diary for SMEs and their customers. Digital globalization fosters the
remarkable growth of international new ventures, which establish
global connections and market to international customers from their
inception.
2.5. A huge change of consumer power in shaping global business
Thanks to social media and other internet platforms, individuals and
consumers are shaping global business and forming their own cross-
border connections. Digital platforms provide a huge built-in base of
potential customers and effective ways to market to them directly. As
social media exposes consumers from around the world to what is
available, products can go viral on a scale that has never been seen