Biblio service.

Yadong Luo: Entry and Co-operative Strategies in International Business Expansion, Quorum: Westport, Connecticut & London 1999.

A Capsule Summary of the Book and its Review

Yadong Luo's book covers both classical and more contemporary issues of international management with its discussion of entry and co-operative strategies. The book is divided into three chapters "Theoretical perspectives of international expansion" "Entry strategies" and "Co-operative strategies", although Chapter 1 can be considered to encapsulate the topics discussed. The information contained in each chapter is divided in a similar way according to conceptual backgrounds, comments based on empirical studies and suggestions for an integration of different perspectives. This book is suitable to appeal to different interest groups as it covers theoretical, empirical and conceptual aspects. However, in its character it is not a typical textbook. References for specific sections, also covering further reading, are a positive feature. The contents of the individual chapters are summarized below in greater detail for the Biblo Service, whereas recommendations and critique are consciously selective and intended more to provide specific ideas for possible future editions of the book.

Objective and Targeted Audience

The aim of the book is described by the author in the preface: "This book is written for international executives who are actively pursuing international market opportunities or want to do so and for scholars and students of international business or global management. It is intended to provide conceptual backgrounds, analytical frameworks, managerial insights, business guidance, and practical evidence for managers active or interested in international expansion. The grand theme is the need for international managers to formulate appropriate international expansion strategies that aim to achieve a sustainable and successful presence in the global marketplace." (p. 1)

Structures and Contents

The book is arranged very clearly in three chapters of approximately equal length and with a total of eleven sections.

Chapter I covers the theoretical perspectives of international expansion (pp. 3-103).

As is often the case, the author sets the scene with a discussion on the concept and importance of globalization, including some statistics for the years up to 1995.

Within the context of the position taken on dynamic capability perspective, in addition to the basic conceptual background the significance of organizational learning and manifestation of critical capabilities have been covered as topics, as have technological, strategic, organizational, financial capabilities and their transferability.

The third section provides an evolutionary perspective of the internationalization that is approached in the three process models: product life cycle model, the behavioral theory of the firm and sequential stages of internationalization, and the Uppsala model. This last model sets the tone for the book. Appropriate models -- but Levitt/March in particular -- establish a certain framework for the book in the form of organizational leaning in general and co-operative aspects. Environmental dynamics and the evolutionary process are discussed briefly in the summary.

The global integrative perspective discussed in the fourth section assumes that increasing global integration is required yet at the same time centrifugal forces are also relevant. Internationalization is thus understood as an interaction between global integration and local responsiveness. The author takes account of this through his structural and strategic perspective and a discussion of the factors that favor global integration and local responsiveness, respectively. The section on the role of subsidiaries, which -- among other topics -- covers a three-factor contingency model of subsidiary strategies and a formulation of the right strategies, seems to be somewhat out on a limb. The section on maintaining global integration with the process variables of control, coordination and orientation undertakes an integrating role.

Chapter II (Entry Strategies, pp. 107-220) has a conventional structure of location selection, entry mode selection, timing of entry and further industry selection. At the start of this section the procedure and the basic theoretical aspects in each case precede the conceptual and empirical description.

At a theoretical level, the local selection decisions focus on aspects such as local theoretical trading advantages and Dunning's market imperfections. The author enters into an in-depth discussion of location determinants, which leads up to a factor synthesis of determinants of the micro-context and macro-context, based on previous studies. An integrated model stylizes their relationships to location decisions (objectives, market orientation, competence, integration) and performance.

The OLI paradigm, transaction cost, bargaining power, organizational capability, the evolutionary process and managerial considerations provide a comprehensive conceptual background for the entry mode selection. A brief description is provided of each of the entry mode choices, including areas such as exports, subcontracts, countertrade, representative or branch office, international leasing and franchising, contractual and equity joint ventures (the latter illustrated by examples), wholly owned subsidiaries und umbrella companies. There then follows a description of the factors that affect entry mode selection and thus firm-, country-, industry- and project-specific factors. Finally, the author again attempts integration in the sense of the critical implications of various entry modes.

The depth accorded to the conceptual backgrounds for the timing decision is comparatively less generous. Consideration is given both to population ecology and the early mover advantages and timing strategy formulation. Some evidence for an emerging market relate to China and this is augmented by some empirical findings -- with an extraordinarily high regression clarification of different success measurements with only five determining variables. Implications for first movers, late entrants and an overall consideration draw this section to a close.

The discussion of industry selection is based on the industry organization theory, corresponding structural imperfection arguments, Porter's five forces model -- which can be applied to industry selection in a foreign context --, industry life cycle models and a structural attributes model. An integrated framework incorporates the fit-approach in the considerations.

Chapter III deals with co-operative strategies (pp. 223-312) and, in particular, partners selection, sharing arrangement and control, the joint venture negotiation, co-operation and termination.

The conceptual background for partner selection can be found in the inter partner fit and in the six-cs scheme for partner selection (compatible goals, complementary skills, commensurate risk, co-operative culture, commitment, capability). If the six-cs are condensed into a classification scheme, it covers strategic, organizational and financial attributes. The approach as regards handling the implications for international managers is amazingly practical, applying a checklist of partner criteria in the general context.

The section on "sharing arrangement and control" only has brief recourse to theory in the conceptual background (this time with one resource dependency model). The author views environmental uncertainty, complexity and hostility as the antecedents of sharing arrangements. Host government regulations, local partners' bargaining power, strategic objectives, protection of proprietary competencies etc. be discussed separately. The end of this section features a discussion on equity sharing and control as well as control-performance relations (a dual parent perspective).

In the eleventh section of the book the author initially presents the negotiation of joint ventures, taking as basis negotiation specificity, integrated models and the major terms and clauses during international equity joint venture negotiations. The discussion of co-operative ventures between foreign and local parent firms and between parent firms and international equity joint ventures management is covered as part of joint venture co-operations. This is followed by an examination of co-operation and ownership, co-operation, trust and commitment, co-operation and knowledge acquisition. Questions relating to "why terminate" and "how to terminate" are covered at the end of the book.

Recommendation and Critique

An assessment can begin by taking up the objectives expressed by the author in the preface. There is no doubt that the book is suitable for giving international executives, scholars and students of international business or global management a deep insight into the theoretical backgrounds and decision-making aspects of entry and co-operative strategies. The various options offer fundamental conceptual backgrounds, a discussion of empirical criteria and proposals for the integration of different perspectives. Obviously, the readers in each of the target groups must assess for themselves to what extent the integration of conceptual backgrounds, analytical frameworks, managerial insights and business guidance increases their own knowledge base. From a reviewer's point of view, the book offers appropriate potential, even if some further amplification and greater depth would be desirable in individual areas.

For instance, a series of case studies or empirical findings provide practical evidence for managers active or interested in international expansion; at one point it contains a practical checklist. It would certainly be possible to expand on both. Secondly, the conceptual backgrounds und integrative perspectives that accompany each section give managers who are considering international market opportunities access to the results of high-order academic research. This fulfils the basic objective of providing a decision-making aid for international managers to formulate appropriate international expansion strategies.

For scholars the book provides a compilation of well-known theories and approaches, which can be adopted in more extensive discussions. The reader will, however, notice that the author has not maintained a certain critical distance to the approaches and thus the importance attached to their explanation perspectives. It would be useful to extend the scope of the references for this purpose, in particular to cover more recent and empirical findings. Chapter III contains original thinking that covers the increasing significance of international co-operation separately.

The book appears to be well-suited for students of international business or global management. In each case, the content definitely seems to be presented in a demanding form for students. Although the form of the book cannot necessarily be compared with conventional American-style textbooks -- the way in which it is structured is not very deep -- this is an interesting point in itself. Students who are nearing the end of their studies find in this work a wealth of aspects that will promote discussion.

Subsequent editions of the book should pay heed to individual considerations in respect of additions and/or clarifications. A few suggestions can be listed for specific chapters.

In Chapter I it would be worth giving consideration to critical capabilities for integration using the resourced based view. As is so often the case, three perspectives are taken in respect of dynamic and evolutionary internationalization. Yadong Luo bases his work -- as so many others have done -- on the Uppsala model but without observing the clarification limits of this model, which have been outlined by Vahlne/Nordstrom (1992), for instance, in a working paper of the Institute of International Business at the Stockholm School of Economics. The model is primarily suitable for explaining the first step towards internationalization, for small companies and economies, for "non-dynamic" sectors of industry, etc. The application of the model for MNCs appears to be limited. Instead of this, it would be worth looking at other approaches, such as those in the GAINS-Approach (Macharzina/Engelhard, Special Issue 1991) and the Three-Es-Approach (Kutschker/Baurle 1997 and Kutschker/Baurle/Schmid, Special Issue 1997) described in the Management International Review. Both approaches seem suitable for bridging the gap to explain the transition from companies with minimum international involvement to MNCs.

Chapter II takes up the conventional questions of international marketing. This lacks the fundamental work on social distances (by, say, Bogardus), which was later used by Johanson/Wiedersheim-Paul and others for the specification of cultural-psychological distance to countries. Weighting or evaluation of the limits of theoretical approaches to the entry strategy is lacking. In contrast to their practical relevance -- as is so often the case -- export strategies are only touched on briefly. In the section on timing, it would be interesting to discuss the views of Ohme and the increasing dynamism of perspectives associated with these. As appears to be the view in international management, the section on industry selection covers the producing sector and only pays very scant attention to service and retail companies.

Chapter III focuses on joint ventures as co-operative strategies. Other co-operation strategies such as licenses and franchising are covered in Chapter II. Here it would be desirable to make a closer link between both perspectives, as it would also be to have more detailed information on the methodology of the empirical studies mentioned. Critical aspects on dynamic successes of joint ventures should be covered in greater detail.

PD Dr. Bernhard S. Swoboda, Institute for Commerce and International Marketing at the Saarland University, Saarbruecken, Germany.