One area of study that looks at multinational corporations' (MNEs) foreign direct investment looks at how learning from past mistakes affects the chance of investing more in the future. The IB literature has mostly used examples from the target country and the foreign setting to show how these things work. When everything else stays the same, the Uppsala Internationalization method says that foreign investors who have a lot of experience with the target country will probably choose wholly-owned subsidiaries (WOSs) over joint ventures (JVs) (Johanson and Vahlne, 1977). MNEs would learn a lot from their own past mistakes about how to best use local resources like workers and channels of marketing. Because they already have a lot of knowledge, MNEs won't have to buy local businesses when they first start expanding in a new area. Local owners of related assets don't seem to play a big part in any of these situations where a foreign investor decides to expand in a certain order. The models above are MNE-centered entry models that assume that the strategic advantages and local assets of host countries are always available and can be easily negotiated in the local markets. The Hennart Bundling Model (Hennart, 2009), on the other hand, says that the local asset market might not work well, especially in emerging countries. As a result, the expansion mode may take into account the tastes of local complementary inputs owners.
The amount of suppliers and the concentration ratio of an industry have been used as stand-ins to figure out how hard it is to get to local complementary assets (Hennart, Sheng, and Pimenta, 2015)
For foreign investors deciding on a local sequential growth, access to complementary assets may become even more important if the target country is a big continental country with big differences between regions. So, the goal of this paper is to look at how access to local complementary inputs affects the growth of foreign investors in the same target country and how that affects the choice of MNEs to expand in stages. The longitudinal method was used to look at deals made in Brazil by the 10 biggest US groups from 2004 to 2013. There are a lot of "Brazis" in Brazil, so we think that big changes between regions will help us figure out if Hennart's Bundling Model is needed. This study adds to what's already been written by looking at differences between regions within the same country. The goal is to make the regional imperfect market, which could be dominated by local firms, more concrete. The study also adds to the conversation about theories that aren't focused on multinational corporations (MNEs) and instead look at the problems that come up when markets aren't working well. Traditional ideas say that MNEs would be more likely to invest in companies that help them gain foreign experience, going from being entities that only need to carry out contracts (like licensing and exporting) to WOS. MNEs would learn more about the specifics of the local market if they had access to local experts. This would help prevent problems that come up during expansion. Anderson and Gatignon (1986) and Barkema and Vermeulen (1998) say that MNEs would learn the best ways to access local assets, like workers, with experience. This would make MNEs better prepared to look for better acquisition options.
Other earlier theoretical works have seen foreign sequential growth
As a type of evolutionary movement where foreign firms use their competitive edge over local firms to lower the risk of failure (Chang, 1995). The companies will first do their main business when they go abroad. After that, they can go into non-core businesses or areas where they don't have as much of a competitive edge by learning from their early mistakes. Delios and Beamish (1999) also said that foreign investors usually start out with small stakes in a company. This is especially true when they need complementary assets to do business abroad, like natural resources that may be owned by local companies and with which MNEs would form joint ventures. This kind of interest would grow because the assets that are transferred to subsidiaries will be more specific, the MNE will have more foreign experience, and the environment where they work will have stronger institutions.Harzing (2002), on the other hand, added an important factor to studies on how companies go global: the international strategy of the MNE. He did this by dividing the strategies into two groups: "global" (global operations and standardized global production) and "multi-domestic" (mainly competing in the domestic market of each host country). For the author, the approach used would affect how MNEs choose to enter new markets and grow. Hennart (2009) has shown that MNE-centric theories are wrong because they assume that local complementary assets are always available and can be freely negotiated in host markets. Instead, he says that MNE entry and expansion strategies also depend on local assets being easy to get to and trade. The author made it clear that local complementary assets are owned by people, and that getting access to them comes with business costs that affect how MNEs choose to enter or grow in a market.
Hennart gave the following examples of local assets that help MNEs make decisions
Location, using Wal-Mart as an example, Walmart had trouble in Germany because it wasn't allowed to buy large plots of land that it needed to build its stores; (ii) distribution, where companies may not be able to get what they need because of a lack of distributors or bad service; (iii) workforce, pointing out that it can be harder to get workers in markets with a lot of companies; (iv) regulatory licenses and permits, which can be obtained directly from local government agencies or negotiated among sector companies; and (v) local consumer market and how customers feel about certain companies. The author says that one problem MNEs will have to deal with is how customers feel about certain brands. One way to solve this problem would be for new companies to buy those brands. The writer also said that (i) acquisition is the best way to go when you can't buy local complementary assets separately and the market for firms is working well; and (ii) multinational companies that do a lot of different things choose to do acquisitions over greenfields because they can combine their different ways of doing things with the widest range of companies and activities without having to change how they do things. Hennart's theory about how foreign investors enter a market was tested in Brazil by Hennart, Sheng, and Pimenta (2015). They found that the number of suppliers and the concentration of the industry have a big impact on how MNEs enter the market, whether it's through greenfields, acquisitions, JVs, or WOSs. Hennart (2009) says that the way MNEs choose to grow in host countries is also affected by the knowledge they have (and how much it costs to trade) and their access to local complementary assets.
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