Transfer of home-country status in international expansion
A firm's home-market status has been shown to affect performance improvements in prior work. While home-country status advantages may be transferrable internationally, the limits to such transferability have not yet been fully documented. The EU-funded project STATUS (The limits to the transfer of firms' status advantages in cross-border investments) aimed to provide more information on the subject. The four-year study addressed three major questions related to cross-border venture capital (VC) investments and the influence that status has across national borders. Researchers sought to understand the role that physical, cultural and institutional distances play on the transfer of status-based advantages between home and destination countries. They also examined the influence that transnational migration and trade relationships exert on the transferability of such advantages. Finally, they looked at the differences in country-level status influencing cross-border trade. Researching the processes of status transfer across international markets is also useful for practical reasons. The increasingly common international expansion meant that in 2010, inward foreign direct investment accounted for 30 % of the world gross domestic product while international trade amounted to 56 %. However, organisational status is still being overlooked in international management literature. While it shares several characteristics with intangible firm resources, it is also fundamentally different from them due to its relational nature. Preliminary findings indicate that at least some interconnectedness is required for the successful transfer of status. Also, the status of a firm can be replaced by the proximity of a VC firm's home market to the core world trade system, reducing its impact on performance. Research results suggest that cultural and economic distances reduce the impacts of home-country status on foreign market entry. Secondly, regulatory distance reduces the connection between home-country status and investment performance. It would also seem that high-status firms may be more likely to succeed in countries institutionally similar to their home base. Results to date add to the literature on organisational theory and strategy by illustrating certain limitations to status advantages in transfers. The outcomes will help businesses plan their expansions and also help governments encourage foreign investment.
Keywords
Market status, status advantages, cross-border investments, international markets
