Paper info: The role of host country nationals and their cultural background in shaping MNCs’ competitiveness
The role of host country nationals and their cultural background in shaping MNCs’ competitiveness
Place of Publication
The paper was published at the 34th IMP-conference in Sri Lanka in 2018.
The aim of this research to explore how employees in a host country and their culture affects MNCs value creation processes. Although there has been extensive research into firms’ internationalization, much focus has been on how firms exploit their technological and knowledge-based advantages abroad, and little attention has been paid to the role of the host country employees and their culture in shaping MNCs’ value creation processes in a distant cultural environment. It can be observed that a number of MNCs have performed superior abroad than in their home country and also their home country performance is somewhat linked to their gains in foreign country. This study argues that technological superiority and knowledge based competencies may not automatically give a MNC advantages in foreign market. To be able to successfully compete in foreign markets, MNCs need to recognise the value of new information, assimilate it and apply it to commercial ends (Sharkie, 2003). Building upon the work of Vance, Vaiman, and Andersen, (2009) , this study asserts the role of host country employees and their culture, and suggests that host country employees role is highly important in understanding how firms’ overcome the challenges of internationalisation, ‘liabilities of foreignness’, in a foreign country and create value for their customers and the firm. Most international firms rely upon local workforce whose cultural values may not be similar to the employees in the home country of the firm, this would mean that international firms can be seen as a globally dispersed body of cultural entities. This also implies that local employees can help firms understand the unique requirements and circumstances of local customers, and create superior value to the customers. Thus, there is a need for deeper study of the role of host country employees and their culture on the value creation process in MNCs. This study contributes to this line of research by identifying different roles that local employees play and that effects the value creation process of firms in the host country. Based on case study conducted at three multinationals in India, and abductively analysed the material, this study argues that within a multinational firm different culture settings emerge and exits, that the firm leverages for creating value for the customers and consequently for the firm. And consequently this provides a sustainable advantage in the foreign market. In this view, the role of local employees become increasingly important in understanding the innovation process in MNCs.