Western Financial Services Multinationals Differential Pathways to Commitment to Internationalisation in Asia: The Impact of Administrative Structures on Reverse Knowledge Transfer and Absorptive Capacity

Abstract

Over the past fifty years, the greater proportion of empirical research on internationalisation has investigated the multinational corporation’s (MNC) ongoing commitment outward to increasingly distant countries. This thesis contrasts with previous studies by investigating not only commitment but concurrently partial and full de-commitment to internationalisation by MNCs in the financial services sector (rather than manufacturing) between highly distant Western - Asian markets (rather than among more narrowly distant Western markets). The research draws extensively from primary data comprising interviews with corporate, regional, and country Chairpersons and CEOs to get ‘inside the box’ of the MNC. Together with secondary data, this enabled process tracing across a longitudinal history of up to two centuries for twelve case studies headquartered in four Western countries around the world.«br /» «br /» Using analytical methods informed by a critical realist epistemology there emerged three unique combinations of causation factors representing internationalisation pathways. The longitudinal data showed that the vast majority of Western financial services MNCs regularly vacillate between commitment and de-commitment in their internationalisation towards Asia. What emerged from the data was that headquarters’ conceptualisation of the role of Asia relative to the overall corporation determined the type of investments made in the components of its Administrative Structure that operationalised their internationalisation. Where headquarters’ conceptualisation was Opportunistic, the organisation structures, leadership models, and operating practices of the MNC would negatively mediate reverse knowledge transfer and limit the absorptive capacity of headquarters. As a result, Western headquarters would have bounded rationality (ignorance) with respect to experiential knowledge of the environment in highly distant Asian markets causing uncertainty about the timing of returns on the capital employed. This uncertainty inevitably led to partial or full de-commitment -- often shortly after the succession of a new Group CEO.«br /» «br /» The longitudinal data showed that sustained commitment to internationalisation is much less common than existing theory would suggest. Sustained commitment presented itself amongst an outlier MNC that conceptualised Asian markets as a Strategic Imperative. Sustained commitment also arose where circumstances promoted a composite conceptualisation being established across multiple countries shortly after incorporation -- the so called Born Global, except that these Western MNCs emerged during the 19th and early 20th century. It was the character of the components of their Administrative Structures that positively mediated reverse knowledge transfer and the absorptive capacity of foreign experiential knowledge by headquarters that sustained their commitment to internationalisation towards Asia.«br /» «br /» Limitations of the thesis relate to the situated context of the financial services industry. The non-physical nature of its production and products reduces the barriers to de-commitment compared to an industry such as manufacturing. Further research with reference to other industry sectors, home country of origin, and host region contexts is necessary to determine the extent of the transferability of findings. As a qualitative research project, this thesis has developed a proposed Internationalisation Pathways Theory. However, the propositions and models will need to be subject to further empirical testing by the author and the broader academic community.