Extending the Environment–Strategy– Performance Framework: the Roles of Multinational Corporation Network Strength, Market Responsiveness, and Product Innovation

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Extending the Environment–Strategy–
Performance Framework: The Roles
of Multinational Corporation Network
Strength, Market Responsiveness, and
Product Innovation
Ruby P Lee
.

ABSTRACT
The purpose of this study is to extend the traditional environment–strategy–performance framework by including network theory to examine when a foreign firm can use its multinational corporation (MNC) network strength to buffer market turbulence and technological turbulence and when the foreign firm can deploy it to support the influences of marketing strategic postures (i.e., market responsiveness and product innovation) on firm performance. The author tests the hypotheses on data collected from 140 foreign firms in China. Although prior research has demonstrated that firms often use multiple strategies and resources to cope with environmental forces, the findings illustrate that different environmental segments have unequal bearings on market responsiveness, product innovation, and MNC network strength. In addition, despite the direct positive influences of individual marketing strategic postures and MNC network strength on firm performance, their combined effects are mixed. The author concludes with a discussion of the implications of these results for research and practice. Keywords: network strength, market responsiveness, product innovation, environmental forces, China

ncreasingly, multinational corporations (MNCs) no
longer simply view emerging countries as manufacturing bases; instead, they recognize their market potential and have begun to develop firm strategies that suit these unfamiliar and turbulent host country environments (Luo and Park 2001; Tan and Litschert 1994). This conjecture is consistent with the traditional

environment–strategy–performance framework, which
suggests that a firm must be able to scan and make sense
of its external environments and then identify strategy
to align with such external conditions for success (e.g.,
Child 1972; Miller and Friesen 1983). Previous research

I

Ruby P. Lee is Associate Professor of Marketing, College of
Business, The Florida State University (e-mail rlee3@fsu.edu).

58 Journal of International Marketing

has demonstrated that different strategies (e.g., technology transfer) are required for MNC subsidiaries to overcome a wide range of external pressures arising
from host country markets (Cui, Griffith, and Cavusgil
2005; Cui et al. 2006).
Despite the significant contributions of prior research
with regard to the environment–strategy–performance
framework (e.g., Luo and Park 2001), studies examining marketing strategy that foreign firms can deploy in their host countries are inadequate. Although the literaJournal of International Marketing ©2010, American Marketing Association

Vol. 18, No. 4, 2010, pp. 58–73
ISSN 1069-0031X (print) 1547-7215 (electronic)

ture suggests that market responsiveness and product
innovation are two particularly critical strategic postures in international marketing, research has not examined these simultaneously in one study. A foreign firm that reacts in a timely manner to local customer needs

and develops new markets faster than its competitors in
a host country (defined as market responsiveness) has a
vital marketing strategy for survival (Lee, Chen, and Lu
2009; Luo 2001). Furthermore, because emerging markets such as China are likely the central battlefields of MNCs across the globe, the foreign firm must adopt a
more proactive marketing strategic posture (i.e., product innovation). By introducing more novel and distinguishable products than its rivals, through product innovation strategy, the foreign firm should stay

competitive in its host country (Li and Atuahene-Gima
2001; Zhang, Di Benedetto, and Hoenig 2009). Thus,
foreign firms should concurrently examine these two
marketing strategic postures along with their performance implications and further investigate the effectiveness of each in coping...
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