IS COMPETITIVE ADVANTAGE A NECESSARY CONDITION FOR THE EMERGENCE OF THE MULTINATIONAL ENTERPRISE?

This article challenges the view that competitive advantage is a necessary condition for the emergence of the multinational enterprise. It formally derives the conditions under which multinational enterprises may emerge without possessing a competitive advantage vis‐a‐vis their rivals. This counterintuitive argument is based on three insights: (1) the ability of a larger number of disadvantaged home country entrepreneurs to enroll workers in the host country more efficiently than a smaller number of advantaged host country entrepreneurs; (2) asymmetric liability of foreignness for home and host country entrepreneurs; and (3) the ability of location and internalization advantages to substitute for ownership advantage.