A study of five global companies identified tactics to maintain a competitive edge.
September 19, 2024
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When multinational firms enter new markets, they have to choose how to manage the formal and informal local rules that can vary greatly. Local institutions and rules matter, and there are clear risks for top executives at headquarters who don’t take them seriously. But constantly adapting to local practices could jeopardize a company’s ability to integrate operations across markets. A study of five globally successful Scandinavian companies identified six tactics that firms can use to address local rules while maintaining competitive advantage: Avoid, alter, adapt, imitate, influence, and innovate.
Multinational companies seeking growth opportunities often find them when they enter new countries. Previous research has emphasized the liabilities of foreignness, i.e., the many disadvantages foreign companies face as they do business in new markets. To overcome these liabilities, corporations are often recommended to adapt to local rules. However, as they adapt their strategies and practices to local ones, they risk losing the very basis for their internationalization and advantage over local competitors: the integration of operations across markets.
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Patrick Regnér is professor of strategic management at Stockholm School of Economics and the director of the Center for Strategy and Competitiveness. His current research centers on how diverse types of managerial activities and practices shape strategy development and creation in distinct ways. Another research stream focuses on how multinational corporations can respond strategically to institutions.
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Ivar Padrón-Hernández is an assistant professor at the Institute of Innovation Research at Hitotsubashi University. His research focuses on how firms change societies as they introduce innovative products, services and ideas across national borders.
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