Internationalization of Digitalization
The Global Presence of North American MNEs in the
ICT Industry
Master Thesis
MSc. Business Studies – International Management
Supervisor: Dr Johan Lindeque
Second reader: Dhr Daniel van den Buuse MSc
Student: Willem Baesjou
Student ID: 10463577
I Abstract
Globalization implies that the world has become smaller and that the Multinational firms have global strategies and has their business all over the world. This idea that Multinationals are truly global is discussed by Rugman & Verbeke (2004), and they state that Multinational firms have a regional orientation. In their research there were 9 fully global and almost all of the firms were from the hi-tech sector. This study examines the internationalization strategy of North American Multinationals in the ICT industry and does a cross sectorial multiple case study. These firms are expanding internationally and are in a innovative and rapidly changing environment. It aims to compare the intra- and inter-regional liability of foreignness of the different sectors in the ICT industry. In the data analysis annual reports and newspapers are used from the time period from 2009 – 2014. The mergers & acquisitions of the firms are used to make a overview of the international orientations of the firms. The transferability of the tangible and intangible assets with the pressures of the formal and informal institutional environment will indicate the liability of foreignness of the Multinationals in the different sectors.
Keywords: international strategy, regionalization, ICT industry, service and manufacturing
II Statement of originality
This document is written by Student Willem Baesjou who declares to take full responsibility for the contents of this document. I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it. The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
III Acknowledgements
First and foremost I want to thank my thesis supervisor Dr. Johan Lindeque for his help and patience during the process of writing of my thesis. His expertise in the theories and in the specified industry were of great help for finishing this project.
I also want to thank the family and friends who helped me with the process of my thesis. The discussions and their critical eyes helped me to improve the quality of this thesis. I would like to thank my parents for making it possible for me to study at the University.
IV “Innovation distinguishes between a leader and a follower”
V Table of Contents 1. Introduction ... 1 2. Literature review ... 5 2.1 Regionalization ... 5 2.2.1 Asset Specificity ... 8 2.2.2 Sector Specificity ... 10
2.3 Formal & informal IBV pressures ... 12
2.3.1 Product vs. Service in the institutional environment ... 13
2.4 IBV & FSA drivers of Intra- and Inter-regional LOF ... 14
2.4.1 Intra- and Inter- regional LOF in the ICT industry ... 16
2.4.2 Hardware (Tangible - Product) ... 17
2.4.3 Software (Intangible – Service) ... 18
2.4.4 Telecom Operators (Tangible - Service) ... 19
3. Methodology ... 20
3.1.1 Ontology ... 20
3.1.2 Epistemology ... 20
3.2 Multiple Case Study ... 21
3.2.1 Inductive and deductive approach ... 21
3.2.2 Triangulation ... 21
3.2.3 Validity and reliability ... 22
3.3 Theoretical sampling of cases ... 23
3.4 Data Collection ... 27 3.5 Analytical Strategy ... 29 4. Results ... 31 4.1 Within-case analysis ... 31 4.1.1 Hardware ... 31 4.1.2 Software ... 39 4.1.3 Telecommunications ... 48 5. Discussion ... 56 5.1 Asset Specificity ... 56 5.2 Sector Specificity ... 58
5.3 Formal IBV Pressures ... 58
5.4 Informal IBV Pressures ... 59
5.5 Diversification ... 60
6. Conclusion ... 63
6.1 Limitations of the research ... 64
6.2 Managerial implications ... 65
6.3 Further research suggestions ... 65
7. References ... 66
Financial Times Articles ... 73
New York Times Articles ... 76
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Index of Tables and Figures
Table 1 Definition of the ICT sectors………...p.16 Table 2 The three sectors related to different degrees of intra-/inter LOF………p.17 Table 3 Overview of selected North America MNEs in this study………..p.25-26 Table 4 Use of different sources for data collection………..p.27 Table 5 Data available for each deal of the companies of the multiple cases………….p.28 Table 6 Regional orientation and M&A of Dell………p.32 Table 6a Quotes Dell………p.34 Table 7 Regional orientation and M&A of Hewlett Packard………..p.36 Table 7a Quotes Hewlett Packard………...…p.38 Table 8 Regional orientation and M&A of Microsoft………..p.40
Table 8a Quotes Microsoft………p.42
Table 9 Regional orientation and M&A of Google………...p.45
Table 9a Quotes Google….………p.47
Table 10 Regional orientation and M&A of AT&T……….p.49
Table 10a Quotes AT&T...………p.51
Table 11 Regional orientation and M&A of Verizon Communications……….p.53
Table 11a Quotes Verizon Communications………p.55
Table 12 Results of the working propositions………p.61
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1. Introduction
The world is transforming rapidly, driven by consumer demand and the development of new information and communication technology (ICT). With the arrival of the first computer 60 years ago this process started, but it has accelerated rapidly in the past few years. Now it influences people’s everyday life. In a society with usage of ubiquitous handheld devices, “big data” analytics, digital search engines, social networks and interconnected real-time digital infrastructure, ICT is becoming essential and has caused a shift to what is called digitalization (Acker et al., 2012). Both consumers and companies are in this race to digitalize and the ICT industry is a key sector that makes this digitalization possible. Companies want to seamlessly incorporate communications technologies, new computing and collaboration technologies, to streamline and integrate their operations. This all to have a closer connection with customers, partners and suppliers. To provide the services and products that make digitalization possible, there must be a continuous evolving ecosystem of hardware, software services and telecom operators (Acker et al., 2013). Therefore the connection between digitalization and globalization can be made and both significantly influence the evolutionary patterns and competitiveness in developed countries. Because of digitalization, companies could do business everywhere around the world and the assumption could be made that multinational enterprises (MNEs) who are doing business in multiple countries could expand easier (Biggeiro, 2006). In their internationalization strategy MNEs are trying to exploit their firm specific advantages (FSAs) to host regions. There are two types of FSAs: asset advantage and transaction advantages. These are the skills and knowledge that MNEs have (Dunning, 1980).
The past few decades have shown that MNEs are doing business all over the world and that there is more activity in the world economy. The world has become ‘smaller’ and the often-used term ‘globalization’ appears. Rugman & Verbeke (2004) study the degree to which MNEs are operating globally or in one or more of the three extended triad regions, classifying MNEs as either home region oriented; host region oriented; bi-regional oriented or oriented globally. In the results of their study most of the MNEs are having their sales in their home region and very few MNEs are operating globally. This low percentage of sales in markets outside of their home region implies that MNEs are having difficulties when they expand to other regions than their own, this is called liabilities of foreignness (Zaheer,1995). Remarkably almost all of the 9 ‘fully’ global MNEs in the Rugman and Verbeke (2004) article are those in the computer, telecom and hi-tech sectors. Having the results of the data from the Rugman & Verbeke (2004) article, that not many MNEs are truly operating globally,
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it is interesting to see what causes the liability of foreignness for the MNEs when operating in a foreign country. Because the companies in the ICT industry are internationally very active (many mergers and acquisitions) and because of the influence that this industry has in the digitalization and globalization and the result that many of the 9 global MNEs are from this industry, it is interesting to study this industry and the differences between the three different sectors, Hardware, Software and Telecom operators, argued by Acker et al. (2012; 2013; 2014). The phenomenon’s that will be studied in this paper are the regionalization level, consisting intra-and inter-region liability of foreigners of MNEs in the ICT industry.
Therefore the research question is:
“To what degree does intra- and inter-regional liability of foreignness influence the internationalization strategies of the different sectors in the ICT Industry?”
In literature there are many thoughts about what the definition of globalization is. That is why Rugman & Verbeke (2004) came up with the idea for their article: “A perspective on regional and global strategies of multinational enterprises”. They state that the phenomenon globalization is poorly understood and that they focus on the key actors of this process. The key actors of the globalization process in their view are the organizations that drive this process, the MNEs. The biggest companies of the world, namely the MNEs of the Fortune 500 exploit about half of the world’s international trade (Rugman, 2000; Rugman & Verbeke, 2004). To test how global these MNEs actually are, Rugman & Verbeke (2004) created the triad power concept. They divided the world into the following three regions: North America; Europe and Asia-Pacific. A company is defined as a triad-power when they have equal penetration and exploitation capabilities and are present in the three triad-regions. To strengthen the institutional ties within the regions, there are trade agreements, such as the NAFTA, the EU and the ASEAN and these agreements enhance the trade that is done intra-regionally and facilitate a deeper intra-regional market penetration. For the more global integration of trade and to increase the trade between the regions (inter-regional) the World Trade Organisation (WTO) was founded. Some authors say that term globalization has become overused. Fisch and Oesterle (2003) replaced it for ‘internationalization’. Fastoso & Whitelock (2010) state that in the past few decades, international management studies have taken a more regional rather than an international focus of analysis. This is supported in the Rugman & Verbeke (2004) article because the majority of trade is done intra-regionally (Rugman, 2000). When a MNE is expanding their business to a foreign market it is assumed that it is different from in their home country and that the MNE has to adapt with the
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associated costs. “The costs of doing business abroad that result in a competitive disadvantage for a MNE subunit” is called liability of foreignness (Zaheer 1995, p.342).
This research aims to fill this gap in the IB literature by investigating to what extent the internationalization process of MNEs relates to the regionalization theory, elaborating on pioneering research, on regionalization and the region as a relevant unit for international operations by Rugman and Verbeke (2004). More specifically this research aims to investigate how the Hardware firms, Software firms and Telecom operators of the ICT industry face similar and different pressures with respect to the intra- and inter- region liability of foreignness (LOF) in a cross sector comparative case study. In this industry, even the wealthiest, most successful ICT providers, like Microsoft in the 1990s, Google in the 2000s, and Apple today, cannot be certain of sustaining their success. It is expected to see more aggressive investment and acquisition activities by these companies, which will increasingly compete (or form strategic partnerships) with regional IT service providers. The industry is very competitive but the competitors often need each other. An Apple computer user wants to use Microsoft programs and vice versa (Aker et al., 2012).
Looking at previous studies, there is a lack of comparison approach across sectors. These seem to be featured by similarity and difference of their FSAs and the influence of their institutional environment. This study is one of the first multi-sector studies within an industry. Such a comparative approach has not been taken to my knowledge, and will therefore contribute to our understanding of the internationalization strategies of MNEs in the ICT industry. Across these sectors tangible and intangible FSAs and the institutional environment matter to different degrees to different firms. The subsectors of the ICT industry are unique because they are highly related to each other, especially when we move to an online way of life, a mobile internet life and the mobile way of accessing the internet. As we go into a world where online services are important, mobile computing is increasing the way people go online. The Hardware, the Software firms and Telecom Operators are all part of an eco-system (Acker et al., 2012; 2013; 2014) in which firms face similar and different pressures with respect to the intra-and inter-region LOF in a cross sector comparative case study.
To do this in a structured way, the research is presented as follows. The next section will consist of a review of regionalization literature and outline the characteristics that are typical for the focal industry sectors. Further the FSAs and the IBV pressures will be defined and
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their influence on the intra-regional and inter-regional LOF explained (Rugman & Verbeke, 2007; Zaheer, 1995). At the end of the literature review a number of working proposition will be constructed. In the methodological chapter the methodological foundations of this research will be clarified. In this section theoretical boundaries will be made and how the research is structured. The analytical chapter provides both the within-case analysis and the cross-case analysis tests the validity of the working proposition. This will be discussed in the discussion chapter. Finally, the conclusion will summarize the research key findings and reflects the limitations. The scientific relevance, managerial implication and recommendations for further research will be discussed as well.
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2. Literature review
The literature review will be an overview of former studies and will be divided in the general regionalization theory, FSA driven asset and sector specificities, the institutional based view (IBV) formal and informal pressures, and these IBV and FSA drivers of the intra- and inter-regional liability of foreignness. The statement in Rugman & Verbeke (2003 p.409), “The controversy over globalization and its implications for strategies of MNEs would disappear if authors would look at the evidence. Both aggregate data and firm-level data indicate that globalization is a myth however defined”, sounds exaggerated because they state it does not exist at all. But in the last decades of the International Business (IB) literature there has been an ongoing debate between regionalization vs. globalization (Garret, 2000, Fastoso & Whitelock, 2010).
2.1 Regionalization
Regionalization theory states the opposite of globalization theory, which means that each region has its own market demands and the firm must design its own strategy for each region. In the late 1980s, globalization was a very popular subject amongst scholars (Birkinshaw, Morrison, & Hulland, 1995) and in the 1990s the focus shifted towards international management. The international management theory suggests that markets are becoming borderless and that it is misguided and short sighted when strategies did not include the global integration of markets (Li and Li 2007). But after Rugman’s 2000 article “The End of Globalization” (Rugman, 2000), the academic debate between scholars about globalization and regionalization sparked again. The main logic that this puts forward is that regionalization is the opposite of globalization. Rugman & Verbeke (2004) empower this trend against globalization in their article. Despite the often-used terms global market and global strategies, most MNEs simply are not capable of exploiting their FSAs globally. FSAs are the ownership advantages of MNEs to compensate for the natural disadvantage in competition with the established companies in the foreign country (Hymer, 1976). How MNEs exploit their FSAs and under what conditions depends on the transferability of the FSAs. Where the specificity of the assets and the nature of the institutional environment are big influencers. Only a handful of firms are capable of having an IB with balanced sales in all the three regions mentioned. Therefore the most MNEs are having a more regionalized approach for their IB (Rugman & Verbeke 2004; 2007).
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The strategy of MNEs to have full integration yields large benefits of scope and economies of scale and exploitation of national differences. National responsiveness is the required strategy for firms that focus on their home nation and which are operating quasi-autonomously in each individual home country (Rugman & Verbeke, 2007). Fastoso & Whitelock (2010) make the connection between the regionalization vs. globalization and standardization vs. localization debates. The authors state that the study of regional standardization is also necessary because of the intrinsic regional nature of most international business operations. MNEs are in most of their exploitation of their FSAs dependent on the local demand and institutional environment.
Rugman & Verbeke’s (2007) regionalization theory hypothesizes that most international business action is characterized by what Ghemawat (2003) calls semi-globalization. Rugman & Verbeke (2003) conceptualize the extended triad regions. They see the world market as divided into three regions: North America (NAFTA), Europa and Asia. According to Rugman & Verbeke (2003, 2007) most of the top 500 MNEs have one of the three extended triad regions (NAFTA, EU and Asia) as their home region and most of their business innovation comes from these areas. This kind of company knowledge can be seen as upstream FSAs and can be gained from research and development (R&D) investments. Many of the FSAs that MNEs have are home region-bound, despite the fact that FSAs are non-location bound in principle, they do not have the potential to be deployed globally and have a global exploitation potential. So MNEs can face difficulties when they want to transfer their FSAs internationally (Rugman & Verbeke, 2001, 2004, 2005).
Rugman and Verbeke (2004) divide MNEs into four types: Home region oriented; Bi-regional; Host region oriented and Global. The Home regions oriented MNEs have more that 50% of their sales in their home region. The Bi-regional companies have more than 20% in two of the regions but less than 50% in one of the regions. Host region oriented firms have more than 50% of their sales in a triad market other than their home region. Global companies have more than 20% but less than 50% of their sales in each of the triad regions. The distance mix of cultural, administrative, geographic and economic roots is also an obstacle in an MNE network (Ghemawat, 2001). This distance mix becomes bigger among different regions, so the distance is bigger between the regions (inter-regional), than within the regions (intra-regional), especially for downstream FSAs such as products and services that need to be marketed and sold to buyers (Ghemawat, 2001, 2005). Dunning et al. (2007) take the home sales of the firm into account for their measurement of the regionalization vs. globalization
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comparison. Home sales are important because they reflect the nature of the FSAs and national and international expansion opportunities. The data of Dunning et al. (2007) show that most of the firms have their majority of sales in their respective home country, known as the home country effect, and that sales in the rest of the region and in the rest of the world are considerably smaller.
Another theory that strengthens the regionalization theory is the transaction cost theory, which argues that the alignment of the FSAs and country specific advantages (CSAs) of a firm works better in their home region than in foreign regions. If the MNE expands intra-regionally, it will have lower adaptation costs than when they expand inter-regionally (Rugman & Verbeke, 2005). By staying within the home region of the MNE, there is a higher regional coherence in their institutional environment (of political harmonization and economic integration), which can reduce the adaptation costs. While Rugman and other scholars have shown prevalence of regional focus among MNEs (Delios & Beamish, 2005; Grosse, 2005; Rugman, 2005; Rugman & Hodgetts, 2001; Rugman & Verbeke, 2004), little is known as to how this regional orientation varies from industry to industry. According to Li & Li (2007), the international strategies and performance implications haves to be viewed in terms of the industry/sectorial specificity. Li & Li (2007) address industry differences in terms of the motives of internationalization and the internationalization process due to differences in asset seeking in upstream and downstream FSAs such as, marketing intensity, economy of scale, industrial concentration, capital intensity and technological intensity. Adopting a specific international strategy can potentially cause a different value creation. Another reason why international strategy must be addressed to the industry, is, that there can be a difference in terms of existing global integration, configuration of assets and business activities (Kobrin, 1991). For example, a firm in an industry that is more globally integrated tends to have fewer challenges in the coordination of its cross-border activities. This is because there are more internationalization examples to follow and it can easier establish international linkages. (Kobrin, 1991, Li and Li, 2007).
This study will adapt the classification of MNEs offered by Rugman & Verbeke (2004) as discussed above, and will focus on the regionalization strategies of home-region oriented, bi-regional, host-region oriented, and global MNEs in the product and service sector. For example, looking at the FSAs of a MNE that are focused on the customer end of the business (downstream FSAs), such as the sales and the marketing of products. Than linking these
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downstream FSAs to the standardized or the non-standardized nature of the products, which are dependent of, the local demands, mentioned by Fastoso & Whitelock (2010).
2.2.1 Asset Specificity
In the 1970s there was a shift in the IB field, when researchers went from focussing on national competitiveness to focussing on foreign direct investment (FDI) and the cross-border strategies of MNEs. This was in the level of higher-order capabilities and stand-alone competences, brand names and patented R&D knowledge (Rugman, Verbeke and Nguyen, 2011). With asset specificity the extent to which the investment is specific to one transaction is meant. Is the investment made to support one particular transaction and gives it a higher value or is this value the same when they redeploy it to other transactions (Williamson, 1981).
There are multiple ways and reasons for MNEs to have subsidiaries abroad, Dunning (2000) identifies four main types of foreign based MNE activities: (1) MNEs designed to satisfy a particular foreign market, or markets (demand oriented FDI market seeking); (2) Gaining access to natural resources e.g. unskilled labour, minerals, agricultural products (supply oriented FDI resource seeking); (3) promoting a more efficient division of specialization or labour of the existing portfolio of domestic and foreign assets by MNEs (efficiency seeking FDI rationalized); (4) protecting the existing ownership specific advantages of the investment firms and to reduce ownership specific advantages of their competitors (strategic asses seeking FDI). Location has lost importance for MNEs. Bartlett (1986) also sees an increase of what he names “the transnational solution”. This is both, global integration, where scale is the key factor of success, and local responsiveness, where the institutional environment (domestic conditions and governments) is dealt with. The FSAs of MNEs are mostly creating value. The transaction cost economics state that asset specificity is responsible for the difference in the transaction costs. These transaction costs may consist of non-specific (re-deployable) investments or investments where asset specificity deepens because of adapting of contracts to the circumstances, and where autonomous market contracting ensures more complex forms of governance (Riordan & Williamson, 1985). There is a distinction in terms of what kind of offering they provide which can be a product or a service, sector specificity. The assets will also differ if a company manufactures a product or provides a service. The degree of asset specificity can differ between the two sectors. Where manufacturing companies will have a more upstream asset specificity, such as investment in specialized machines, the service companies will have the specificity more downstream to customized to their customers
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(Zeithalm et al., 1985). This asset and sector specificity are influenced by pressures of the formal and informal institutional environment (Aharoni, 1996). Dyer (1996) links inter-firm asset specificity to performance. He states that when the asset specificity specialization increases, this will result in a higher productivity, but that transaction costs increase as well. He argues that there must be a shift in the emphasis from the competitive advantages of firms to the competitive advantages of the value chain or network (Dyer 1996). This will be elaborated further in chapter 2.3.
Oh & Rugman (2012) also make the distinction between the upstream and downstream international activities of MNEs. Global production, economy of scale and R&D are integrations of upstream activities on a global level, whereas global sales and marketing are integrations on a downstream global level. Integrating both upstream and downstream activities on a global level is pure global integration. Oh & Rugman (2012) argue that the upstream activities can be globally dispersed, but looking at the data from Rugman & Verbeke (2004), MNEs have most of their sales in the home region. This implies that MNEs experience difficulties at the consumer end of the value chain, they do not have a balanced sales distribution. This implies that MNEs are experiencing LOF outside their home region. These different combinations of product & service and upstream & downstream create different types of asset specificity. This means that firms have different FSAs, which leads them to experience different types of inter-and intra-regional LOF.
Tangibility and intangibility are the two different natures of the FSAs. Examples are resources for tangible FSAs and patents are intangible FSAs. These types of FSAs implies the kind of asset specificity that that is created within firms. Tangibles conceptually should be easier to transfer, because of the standardized nature of the manufacturing products. Intangible upstream assets are associated with knowledge and product innovations of MNEs. For example R&D investments (upstream) are more transferrable within and across regions, this is because knowledge is not location bound. Intangible downstream FSAs, such as marketing and brand names, are there for reaching the customer who is influenced by their informal institutional environment. These downstream activities are argued to be more difficult to transfer inter-regionally: they hold a more localized approach to the market and their customers (Oh & Rugman, 2012). Fastoso & Whitelock (2010) also see in their standardization vs. localization the tangible vs. intangible internal struggle. If an MNE relies on a tangible standardized product they are going to face a very low intra- and inter-regional
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LOF because of manufacturing internationalization. But the intangible brand activity is going to limited to their market, so this internationalization activity must be more localized.
Aharoni (1996) sees in the different industries of the U.S. MNEs that there is a trend to spend a huge amount on R&D to become leaders in brainpower and innovation. This is an upstream asset that can well be internationalized because knowledge is not location bound. Asset specificity drives expectations about the different things that are important in determining if an MNE can be successful internationally. In the past few decades, the world economy has transformed to a knowledge-based economy. Due to stimulation of electronic networks there is a deeper-integration of financial and international economic activity, the emergence of several new countries as new important players in the world economy and the liberalization of cross-border markets and the flotation of the world’s major currencies (Dunning, 1997, 2000; Kobrin, 1999). Arguments in literature are to what degree upstream and downstream assets can be transferred internationally. Mentioned before are the standardized products vs. adaptive products to the local environment. Standardization vs. adaptation or standardization vs. localization not only depends on asset specificity; as mentioned in chapter 2.1, sector specificity (product vs. service) also has its influence.
2.2.2 Sector Specificity
In this section the two types of sector will further elaborated on and the influence of sector specificity on the international strategies of MNEs will be clarified. In regional strategy analysis the extension is in two ways, the parameter asset dispersion is added and by constructing a focus on the differences between the manufacturing (product) and the service industry (Rugman & Verbeke, 2004, 2007a). Rugman & Verbeke (2004) do not take the industry fully into account, and especially the contrast between a product, by nature tangible and a service, by nature intangible. This distinction of these industries and the difference between the international expansion of the product firms and the service firms will be made in this section.
The distinction between MNEs in the product sector and MNEs in the service sector is important, because of the differences between them and therefore possible different regionalization strategies. Rugman & Verbeke (2008a p.309) state the following hypothesis: ”Services MNEs are likely to have a higher degree of globalization (in terms of sales and asset dispersion across the Triad) than manufacturing MNEs because of lower required capital investments, more easily transferable intangible firm specific advantages, and more
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The authors show that large MNEs in the service sector have a stronger home-region orientation than manufacturing MNEs. A possible reason for this relative lack of globalization of the service MNEs are that they find it difficult to adept separate downstream activities in host environments with a high distance. According to Rugman & Verbeke (2008a), low sales dispersion can be accompanied by high asset dispersion in production activities. Substantial off-shoring of MNEs is an example. MNEs may want to find attractive (low costs) markets in their host regions to import their products in order to sell them in the home region. Service providers can use host regions for their off-shored call-centres or software development. “High asset dispersion, covering both the upstream and downstream segments of the value chain, reflects the capability to manage a network of assets across border” (Rugman & Verbeke, 2008a p.398). This high level of upstream FSA asset dispersion creates an effective performance in providing value to their customers. The downside of having a single value chain activity performed in multiple locations is that it may result in challenges on the level of internal coordination and that there will be a loss in economies of scale (Rugman & Verbeke, 2008a).
Genuine services are more difficult to evaluate than products, because they are intangible. In other words a service has no physical substance (Rugman & Verbeke, 2008a). Where manufacturing a product is mostly homogeneous and associated with standardization, on the contrary is providing services associated with non-standardization and heterogeneity, where the human element stays important and which cannot be fully captured in routines. With services there can be a big variation in quality from the providers, the experience of the consumers and it can vary across time. It can therefore be expected that services differ across geographic space (Zeithaml et. al., 1985). Expanding to what Ghemawat (2004) calls high distance (cultural, economic and institutional distance) host regions can ensure problems. Adaptation of the service quality to each host environment must be done to prevent potential cost increasing or service-provision delay requirements (Rugman & Verbeke, 2008a).
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Two classifications of services can be made. The first is equipment based and the second is people based. Equipment based services are those which can be largely automated, as in vending machines that can be monitored by people like dry cleaning services, or those which are operated by people like airplanes. People services can differ from labour as security services to IT support or highly qualified professionals like management consulting (Thomas, 1978).
The distinction has been made between different kinds of asset specificity, where the difference in upstream and downstream FSAs are important and the tangible or intangible type of assets is of influence of the transferability of the FSAs. Furthermore the sector specificity, is also of influence of the transferability of the upstream and downstream FSAs of the MNEs. Manufacturing firms produce standardized products and therefore these are transferred more easy inter-regional. Where the service firms provide a non-standardized product. Service MNEs can face difficulties customizing their services to the local demand of host regions and therefore face a higher degree of inter-regional LOF. These different types of MNEs with their different types of FSAs operating in multiple institutional environments of the home-region and the host-region. These formal and informal institutional environments are also of influence and IBV pressures on the internationalization strategy of the MNEs.
2.3 Formal & informal IBV pressures
In the following part, the institutional-based view (IBV) will be reviewed, alongside the formal and informal pressures that will arise in the institutional context. This section provides a clearer view of the regional context of the institutional environment of the MNEs when expanding into host regions (Oh & Rugman, 2012).
The IBV of firm strategy has acknowledged that performance and strategic choices are a response to a specific institutional framework (Lee, Peng & Barney, 2007; Peng et al., 2009). Institutions increasingly influence organizations and markets, according to North (1990) institutions are establishing the “rules of the game” in market competition, consumer protection, the environment, and public safety and health. This IBV can be divided into two types of institutions: formal and informal institutions (North, 1990). These formal and informal dimensions influence the institutional context of the MNEs strategy. Where informal institutions relate on traditions and customs reliance on network-based strategies depending on informal relationships that change very slowly (Peng, 2003). Formal institutions include
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laws, licenced relationships with governments and the economy that change more quickly (North, 1990; 1993; Williamson, 2000). According to North (1993), the institutional framework of the formal rules and informal constraints (norms of behaviour and conventions) must be complemented by each other to work effectively in order to reduce the costs and ensuring that there is no increase in political instability.
The emergence of information technologies has allowed many new forms of organizations, which gives the organization more vague boundaries. The institutional environment also changes. Legal boundaries will remain the same in each country, but will mean an extensive expansion of the management and information boundaries (Aharoni, 1996). Peng et al. (2009) state that one of the core propositions of IBV is that strategic choices have a rational nature, but are bounded by the institutional framework. According to Santangelo & Meyer (2011) this results in strategic choices of firms and managers, who are assumed to rationally pursue their interests, that are limited by formal and informal constraints within their institutional framework. When formal and informal institution are combined to manage the firm’s behaviour, informal constraint can play a large role in providing guidance, reducing uncertainty and grant legitimacy and rewards to firms and managers (Peng et al., 2009)
2.3.1 Product vs. Service in the institutional environment
Regulation (formal institution) in manufacturing sectors is light, resulting in firms that can freely select and efficiently evaluate their business partners, such as suppliers and customers. Pfeffer (1987) explains that the reliance on service input increases and that this affects the firm’s relationship with the customers and their final product. This creates a competitive dynamic of the service sector which has an influence on the incentives of subsidiaries in the value chain manufacturing partners (customers and suppliers) and subsidiaries that operate in the downstream markets to rely on their relationships in order to acquire and access critical information and resources (Pfeffer and Salancik, 1978).
Dyer (1996) sees governance as a big influential factor in the performance of the firm’s value chain. It has effect on the level of relation-specific investments, the transaction costs and the strategic use of information. The optimal mix of governance structures for certain activities differs from country to country and from industry to industry. For example, U.S. firms, due to a lack of an institutional environment that creates trust and cooperation, have to integrate more vertically (Dyer, 1996). Lovelock & Yip (1996) examined the global strategy for service
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businesses and find that what drives globalization of service firms results in four types of global strategies: the service offering, the location and configuration of the value-adding chain, the nature of the marketing strategy and in terms of market participation. They make a distinction between the manufacturing and service firms. They formulate eight characteristics in which service firms differ from production based firms: consultation and advice, hospitality; taking care of the customer, information, order-taking, exceptions, safekeeping; looking after the customer/possessions, payment and billing. Due to the emergence of modern global telecommunications, information based services can be delivered to almost any location from a single hub, using the electronic channels (Lovelock & Yip, 1996).
Informal connections will be important for MNEs in the downstream sectors and will result in better performance (Oliver and Holzinger, 2008). According to Aharoni (1996) organizations are information-processing entities. The required information depends on the technology, the environment and other variables such as complexity and size. Most of the advantages that firms have are assumed to be intangible and firm specific and that they are based on specific knowledge, scale and product innovation (upstream) or brand names and sales & marketing (downstream). Intangibles matter more for downstream activities, for example in how to reach the customer. Intangibles are quite often associated with some kind of informal institution environment in the sense of culture, which creates a different dynamic for them. The further upstream, the further it goes to B2B business activity or to actual manufacturing activity. The intangibles become less important. How does the institutional environment determine the intra- and inter-LOF for a product and service firm? How does the institutional environment determine the inter- and intra-LOF if you are a service firm reliant on intangible and intangible FSAs? How does it either reduce or increase that intra- and inter-region LOF?
2.4 IBV & FSA drivers of Intra- and Inter-regional LOF
This section explains how to understand the degree of intra- and inter-regional LOF for this kind of categories and a set of working propositions will be developed as a result of that. In most of the literature it is assumed that FSAs are non-location bound and that they can be used as easily in the home region as well as in the host regions. According to Rugman & Verbeke (2004, 2005), FSAs, especially in the downstream of the value chain, have trouble being implemented in the host regions. If there is a lack of complementary FSAs, this will result in the firm not being able to operate successfully in the host region. Not using complementary FSAs will result in an increase of transaction costs (e.g. reputation building and investment in
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location-bound brand name development) and therefore distance increases (Ghemawat, 2004, Rugman & Verbeke, 2007). MNEs that operate in the host regions will use a FSA bundle that is significantly different from the FSAs deployed in the home region. For the downstream FSAs it is possible for the MNEs to keep the brand name of the acquired company, so that it feel less of the informal IBV pressures and it will have lower inter-regional LOF. This difference in usage of FSAs reflects the liability of inter-regional foreignness. According to Peng et al. (2008) it is frequently perceived that governments of host countries design institutions to intentionally increase the transaction costs for foreign firms who want to enter their market: “foreign firms are often discriminated against by the formal rules of the game in many countries” (Peng et. al., 2008 p. 925). Zaheer (1995) states that the main reason for governments to raise these so-called entry barriers for protection. This is a key source of the LOF that MNEs face in host region countries.
Zaheer (1995 p. 342), defines LOF as “the costs of doing business abroad that result in a competitive disadvantage for an MNE subunit”. These costs have at least four different sources: 1) as a result of unfamiliarity with the host-country environment, 2) costs resulting from spatial distance (cost of transportation, travel and coordination over distance), 3) costs as a result of the host-country environment and 4) as a result of the home country environment (US owned MNEs restrictions on high technology sales to certain countries). The industry, the nature of the firm, the home country and the host country will all have their influence on the relative importance of the costs of the MNE and how the MNEs deal with the institutional environment (Zaheer 1995).
The international activity of MNEs takes place more at the intra-regional level than on the inter-regional level (Rugman & Verbeke, 2007, p. 204), as “the liability of intra-regional expansion appears to be much lower than the liability of inter-regional expansion: the additional costs of doing business abroad are often much higher when venturing into other regions of the world than when expanding intra-regionally, in the home triad region. They state that LOF only plays a role outside the home region and is absent within the home region or LOF is significantly lower in the home region than outside the home region (Asmussen, 2008, Rugman & Verbeke, 2004). Only 9 of the 365 MNEs that were studied in the empirical evidence of Rugman & Verbeke (2003) are ‘fully global’, spread over the three regions and most are active in the computer, telecom and hi-tech sectors. This means that the MNEs have
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20% of their sales or more in each of the three regions of the triad but not more than 50% of their sales in one of the regions in the triad.
2.4.1 Intra and Inter regional LOF in the ICT industry
The ICT industry is an ecosystem of hardware, software and telecommunication providers. In table 2 the different sectors within the ICT industry are defined.
Sector Definition
Hardware Companies that manufacture products such as: PCs, tablets, routers and network infrastructure equipment that underpin our digital world.
Software Companies that make software on which both companies and consumers depend. They increasingly provide their wares as cloud based services using an
commoditized connectivity layer.
Telecom Companies that offer a wide variety of communications services, including fixed and mobile voice and broadband, and even television.
Table 1: Definition of the ICT sectors
Source: Aker et al. 2014 ‘Battle for the Cloud’ the 2014 Strategy& Global ICT 50 study
In the three sectors each of the different type of companies has its own combination of qualities, with their different competitive strengths and weaknesses. Where the hardware companies have their focus more on the manufacturing sales and delivery performance, software companies invest the most in innovation (R&D) of their services and the telecom operators focus more on the business to business product and services. Despite their differences, the companies in the different sectors have experienced the same changes. The most prominent one is that their industry grew and shifted in the last few years. The two critical infrastructure elements required for the new digital media are computer power and especially the major shift in need of internet access (Acker et al., 2012). Another common factor is the reliance on intangible upstream and downstream investment. Upstream investments are made to increase company knowledge, economies of scale and product innovation, such as R&D investments. Downstream investments are made to get knowledge about how to reach the customer, through sales & marketing. The distinction of what kind of firm the MNEs are can be made in what type investments they invest the most (Aharoni, 1996; Rugman & Verbeke, 2004). The three sectors can be described as follows: (1) hardware companies manufacture a product that is tangible (like PCs); (2) software companies provide a service that is intangible (like software/internet products); (3) telecom operators provide an intangible service but on a tangible network (phone connections on antenna’s/mobile phones).
! 17 Key FSAs Importance of Institutional Environment to FSA Transferability Tangible Intangible
Service Telecom Software
Product Hardware
Table 2: The three sectors related to different degrees of intra-/inter LOF.
In the interaction with their institutional environment, because of the unique nature of the FSAs, the individual business units of the firm will experience different degrees of intra-and inter-regional LOF or, because firms have such different FSA combinations, they will experience different degrees of intra-and inter-regional LOF.
2.4.2 Hardware (Tangible - Product)
Hardware firms manufacture tangible products. These standardized products can easily be transferred internationally. The manufacturing upstream and downstream FSAs of these firms can be transferred internationally and therefore face low intra- and inter- regional LOF (Fastoso & Whitelock 2010). It is assumed that manufacturing firms upstream focus to achieve economy of scale and therefore are associated with the formal institutional environment, licensing and governmental regulations for their production. The nature of the product plays no role. It is plausible that the main difference is that the ICT manufacturing MNEs are more selling ‘one size fits all’ products. In each region they will sell the same product (Aharoni, 1996; Rugman and Verbeke, 2004). They will seek in their internationalization strategy in foreign countries for upstream assets for increasing knowledge, economy of scale and product innovation such as R&D investments (Oh & Rugman, 2012), but also access to cheaper resources, better technology, cheaper labour, or other country-specific resource (Dunning, 2000; Porter, 1990; Jung, 1991). The sales are downstream FSAs and are associated with the informal institutional environment, where their intangible brand activity is very important. Because manufacturing firms produce standardized products, the products of their competitors in that same industry will not be very different. To distinguish
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themselves their brand name crucial. The experience and feeling that consumers have with the brand is therefore important for what product they buy (Whitelock & Fastoso, 2007). That is contrary to the upstream production and therefore it would be less internationally transferrable (Oh & Rugman, 2012). The question for hardware firms is: “How does the institutional environment shape product provision that relies significantly on tangible FSAs, the degree of inter and intra LOF. How does it either reduce or increase that intra and inter region LOF?” The first three working propositions are therefore:
WP1a: Hardware firms are expected to experience lower intra- and inter-regional LOF as a result of the international transferability of manufacturing FSAs
WP1b: Hardware manufacturing firms are expected to experience lower intra- and inter LOF as a result of the standardized nature of the product
WP1c: For hardware MNEs intangible brand FSAs have lower international transferability and will result in higher inter-regional LOF in host region markets
2.4.3 Software (Intangible – Service)
Service firms differ from manufacturing firms in terms of simultaneity of production and consumption, intangibility and customization (Boddewyn et al., 1986). This customization, or adaptation, results in a focus on downstream intangibles, such as downstream FSAs, sales & marketing (Aharoni, 1996). Intangibles are quite often associated with some kind of informal institution environment in the sense of culture, which then creates a different dynamic for the companies that are active in these markets. So the informal institutional environment is important as well. The adaptation of the service to the different host regions will result in higher inter-region LOF for the service firms. Adapting to the customer gives services firms a non-standardized nature. So the nature of the service does have influence on the inter-region LOF. Those are mostly associated with the downstream, customer-based side of the business activities. This creates difficulties for the firm to internationalize (Rugman & Verbeke, 2007). The intangible upstream assets such as product innovation and R&D are more easily transferred internationally. Because service firm depend on intangible FSAs and have a non-standardized nature, it is expected that they will have high inter-regional LOF. The informal IBV pressures will ensure that the service firms will experience higher inter-regional LOF on their downstream FSAs, than the intangible upstream FSAs.
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FSAs, the higher the expected inter-regional LOF will be in host regions
WP2b: Software service firms are expected to experience higher intra- and inter-region LOF as a result of the customized nature of the product
WP2c: Service firms will experience lower intra- and inter-region LOF for their intangible upstream asset investments
2.4.4 Telecom Operators (Tangible - Service)
Finally, the telecom operators remain bound to their home markets to some extent. Though many operate businesses outside their home countries (for example, Telefónica in Latin America, SoftBank in the U.S.), the operators are also tied to their physical networks, in which they have invested heavily and which are constrained to a large extent by national and
local boundaries (Acker et al., 2012). They use hardware for the service that they buy from
vendors and depend on their institutional environment (licenses to operate). Assuming that the tangibles (for Telco’s: infrastructure) are less subject to the informal institutional environment creating pressure on them, they are more subject to the formal institutional environment (government). The nature of service goes through tangible hardware that telecom operator do not produce but buy. Therefore, to provide the service it is standardized, so they will expect to have lower inter- and intra- region LOF.
WP3a: Telecommunication firms are expected to experience low intra- and inter-regional LOF for upstream operational service quality tangible FSAs
WP3b: Telecom service firms are expected to have higher intra- and inter-regional LOF as a result of the non-standardized nature of the service
WP3c: The downstream FSAs create higher inter-regional LOF and are harder to transfer internationally because of the need for local adaptation
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3. Methodology
This study adopts a qualitative multiple-case study design (Yin, 1994). Additionally, the research instrument and procedures will be discussed. A case selection will be made where the factors that influence the firms’ internationalization process are assessed. Finally the strengths and limitations of the research design will be discussed. In accordance with Yin (1994), the choices for the research approach of the study will be justified. The design of the study that addresses the research question will be explained. According to Guba & Lincoln (1985), the basic beliefs of qualitative research in business studies are ontology, epistemology and the methodology. In this order of basic beliefs, the research design is written.
3.1.1 Ontology
Ontology looks at the question: “What is the nature and form of reality and, therefore, what is there that can be known about it?” (Guba & Lincoln 1985, p.108). The main concept is how reality and assumptions about the world are viewed. There are two perspectives in ontology, the subjective and the objective perspective. The objectivist view assumes that there is an independent existence of social and natural reality before human cognition. The subjectivist ontology assumes that reality is an output of human cognitive process (Brannick and Goghlan, 2007). In objectivism, the influence of perceptions of social actors is excluded from the research (‘the world is as it is’), where subjectivism does include the influence of the perception of the social actors (‘the world is as one sees it’) (Saunders et al., 2009). This multiple-case study research will be used, in line with the objective perspective.
3.1.2 Epistemology
Epistemology looks at the nature of the relationship of knowledge and how researchers can acquire this knowledge. In other words, what is acceptable knowledge for the study? (Brannick and Goghlan, 2007; Guba & Lincoln, 1985). To explain this, Sauders et al. (2009) give an example by making the distinction between two types of researchers: the resource and the feelings researcher. The resource researcher bases his search more on hard data and facts, whereas the feelings researcher bases it more on attitudes and feelings (Saunders et al., 2009). Adopting an objective ontology, it is logical to assume that the nature of the knowledge (epistemological) is independent from the human mind as well. The knowledge, what can be known, is objective and is free from different perceptions and interpretations (Brannick and Coghlan, 2007).
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According to Yin (1994), the multiple case study research design will use empirical data to answer the research question. Yin (2003) states that a multiple case study is suitable for studying a specific phenomenon and patterns in a real-life context. This is to explain the phenomenon; the boundaries are within the lining of the research. According to Eisenhardt (1989) a researcher tries to develop a theory by studying patterns in a multiple-case study. Using the multiple case study method allows that the differences and similarities within and between the cases can be explored (Baxter and Jack, 2008; Yin, 2003). The research will be a cross sectional study for intra- and inter-regional liability of foreignness. This has not been done in earlier research for related industry subsectors and therefore will be a contribution to the literature.
3.2.1 Inductive and deductive approach
To draw theoretical conclusions from the data there are two types of research approaches: the inductive and the deductive approach. Induction is related to building a theory, whereas deduction is based on testing a theory (Saunders et al., 2009). In the multiple case study both approaches can be present within this research, there is no clear distinction between the inductive or deductive approach. Formulating hypothesises from the existing regionalization theory is seen as deductive (Rugman & Verbeke, 2004). There is also a possibility that the combination of theories can lead to new theoretical models which is an inductive approach (Saunders et al. 2009). The working propositions that are abstracted from the regionalization theory literature through standardization vs. localization (product vs. service) objective, from the regionalization profiles of the cases. These propositions provide the guidelines for the boundaries of the data-collection process (Fastoso & Whitelock, 2010; Rugman& Verbeke, 2004; Saunders et al., 2009). Eisenhardt (1989) gives an additional view of case studies with the inductive approach. When the aim of the research is to discover specific patterns from the data, the inductive approach can be very useful. It will allow interpretation of new theoretical insights that is acquired from researching relevant data that is collected from the multiple sources and his will be compared and validated by the existing theories (Eisenhardt, 1989).
3.2.2 Triangulation
For the social sciences, triangulation is the combination of multiple methods, theories or data sources (Yeasmin and Rahman, 2012). Using multiple data sources in the same study ensures improved validation because of data triangulation (Hussein, 2009). According to Denzin (1970), data triangulation retrieves data from multiple different sources to form one body of
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data. In this research, the following idea of data triangulation will be used: “the use of two or more independent sources of data-collection methods within one study in order to help ensure that the data are telling you what they think they are telling you” (Saunders et al., 2009 p. 602) Yin (2004) argues that it is also used to enhance the validity and the reliability of the case study research. Especially within the case studies, using multiple methods for studying the same phenomenon reduces possible errors and biases in the data. This has the objective to increase the research credibility (Hussein, 2009). In this research the following different data sources will be used: secondary data; annual reports, that are published by the companies; M&A information list, of the Orbis database, and primary data; newspaper articles, found in the LexisNexis database.
3.2.3 Validity and reliability
The credibility of the findings is also a very important facet of the research study. This credibility can be measured in validity and reliability. Yin (1994) states that validity and reliability, by using several criteria, can assess the quality of the multiple case research. The four types are: construct validity, internal validity, external validity and reliability. These tests must be applied throughout the whole research study process (Yin 1994). General validity is “the extent to which data collection method or methods accurately measure what they were intended to measure” (Saunders et al., 2009 p. 603). With reliability the analysis procedures or data collecting techniques are tested of producing consistent findings (Saunders et al., 2009).
For construct validity, the choice of the appropriate measurements for research are important. For the case study this test can be very challenging: not using the right types of measurements in the case study can lead to data being collected with a subjective judgement (Yin, 1994). Establishing a chain of evidence, the usage of multiple sources of evidence and the usage of key informants to review the research are three different tactics that can be used are described by Yin (1994). Establishing a chain of evidence and the usage of multiple sources are very important for this study.
Internal validity, according to Yin (1994), does not apply to descriptive and exploratory case studies, as it is only of concern when conducting an explanatory case study. It tests the casual relationship between the concepts. In this case study the casual relationship, between the regionalization profiles of the companies in the cases and the concepts of the internationalization patterns wanted to be shown, and therefore it is important the research is
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built on theoretical propositions, the working propositions, which are founded on existing literature (Yin 1994).
External validity is about whether the findings of the study can be generalized to other research settings (Saunders et al., 2009). Because this is a multiple case study where the same phenomenon is studied in different settings it is hard to generalize this to a bigger environment. The companies that are analysed are chosen specifically in a regionalization profile. This study will only be generalizable for companies who have the same regionalization profile and will not try to generalize it to a larger population. This study strives to generalize a particular set of results to broader theory (Yin, 1994). Yin (1994) argues that there are two types of generalization: statistical and analytical generalization. This case study only relies on the analytical generalization, because data from multiple cases will be studied and then the results will try to be generalized for the whole industry.
Reliability of the study exists when the study is replicable. To ensure this, it is important that the research procedure is documented. Tools that can be used are: documenting the actions and steps of the research progress and process and having a case study database and protocol (Yin, 1994).
3.3 Theoretical sampling of cases
In the ICT industry three sectors with different companies are defined, namely hardware companies, software companies and telecom operators. Therefore the cases will all be from the same home-region. There will be three case studies with each case having two MNEs from the Fortune Global 500 from the North America region as embedded units of analysis. The cases make a comparison between the sectors to find similarities and differences, so that the theory can build and refine them on the topic of regionalization, resulting in a parallel case study (Eisenhardt, 1989). The first case study will be about two companies from the hardware and infrastructure sector, region North America (Dell – HP), the second will be two MNEs from the software sector, region North America (Microsoft – Google). The third case will be two telecom operators MNEs, region North America (AT&T – Verizon Communications). All these companies are listed on the Global Fortune 500 list and data is available for these companies. The research will focus on the internationalization process model as in rationale for the different intra-and inter-regional liability of foreigners’ profiles of the different cases. The aim is to explore and describe the data of the multiple case study
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of the influence of LOF on the internationalization strategy of the MNEs between the different sectors (Eisenhardt, 1989). The cases will give an insight in the differences on inter- and intra-liability of foreigners between the sectors. The MNEs are placed in the table 2, by their assets and sector, see figure 1
Tangible Key FSAs Intangible Key FSAs
Service Product Telecom: Antenna/Mobile phones (AT&T/Verizon) Hardware (Dell/HP) Software (Microsoft) Internet (Google)
Figure 1: Sectors with the MNEs, related to different degrees of intra-/inter LOF
The annual reports of the MNEs are published public so the access is easy. These annual report are used to create a company profile for each of the six companies of the case study (see table 3a and 3b).
! 25 D ell AT & T M ic ro so ft H om e C oun tr y U nit ed S ta te s U nit ed S ta te s U nit ed S ta te s R an kin gs: Fo rtun e 50 0 G lob al IC T 5 0 #51 #20 #34 #35 #1 04 #3 T ri ad R eg io n N ort h-A me ri ca (H om e re gion ) N ort h-A me ri ca (-) N ort h-A me ri ca (-) S ec to r H ar dw ar e T ele co m O per ato rs So ftw ar e T ota l S ale s 20 13 - 12 8,7 52 ,0 00 ,0 00 77 ,8 49 ,0 00 ,0 00 S ale s D is tr ibu tio n N -A 61 % EU 2 5% A si a 14 % N -A -EU -A si a - N -A -EU - A si a - T ota l A ss ets 201 3 - 27 7,7 87 ,0 00 ,0 00 A ss ets N -A -EU - A si a - N -A -EU -A si a - N -A -EU -A si a - T ota l R ev enu es in 2 01 3 - 12 8,7 52 ,0 00 ,0 00 77 ,8 49 ,0 00 ,0 00 R & D sp end in g i n 2 01 3 - 1,4 88 ,0 00 ,0 00 10 ,4 11 ,0 00 ,0 00 M ar ke tin g & S ale s s pe nd in g i n 20 13 - - 15 ,2 76 ,0 00 ,0 00 D es cri ptio n D ell In c. is an A m eri ca n c om pu te r- ha rd w are c om pa ny w hic h p ro vid es a br oa d r an ge of c om pu te r p ro du cts fo r t he con su m er a nd e nte rp ri se ma rke ts (G lob al Fo rt un e 500 ) A T & T In c. th ro ug h i ts su bsi dia rie s an d af fil ia te s, p ro vid es w ire le ss a nd wi re lin e te lec om m un ic atio ns se rv ic es in th e U nit ed S ta te s an d i nte rn ati on all y. T he C om pa ny h as th re e re po rt ab le s eg m en ts : W ir ele ss , W ir eli ne , a nd O th er (G lob al Fo rtu ne 500 ) M ic ro so ft C orp . is e nga ge d in de si gn in g, ma nu fac tu ri ng , s ell in g dev ic es, a nd on lin e ad ve rt isi ng to a glob al cu sto m er aud ie nce . It s p ro du cts in clu de op er atin g sy st em s fo r co m pu tin g d ev ic es, se rve rs , ph on es, an d oth er in te ll ige nt dev ic es (G lob al Fo rtu ne 500 ). T ab le 3 a: O ve rv ie w o f s ele cte d N ort h A m eri ca M NE s i n th is st ud y S ou rc e: A n n u al rep ort s of M NE s. G lob al F ort u n e 50 0 l ist a n d T h e glob al IC T 5 0 b y S tr ate gy &
