Investment Facilitators and the Sequential Growth of Multinational Enterprises

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2025-11-24

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Abstract

This dissertation examines how investment facilitators – targeted host-country policy instruments such as R&D tax incentives – shape the sequential growth of multinational enterprises (MNEs). Sequential growth refers to the post-entry expansion of established MNEs. Drawing on the firm-specific and country-specific advantages (FSA/CSA) framework, Penrosean growth theory, and internalization theory, this dissertation conceptualizes sequential growth as three interrelated forms: subsequent investment in host countries, the growth trajectories of established subsidiaries, and strategic shifts in governance choices. Essay 1 focuses on MNEs’ subsequent investment decisions. It develops an attention-based FSA/CSA framework by integrating the attention-based view with the FSA/CSA matrix. It proposes that managerial attention evolves with experience, shifting from general environmental conditions at initial entry to specific policy instruments during subsequent investments. In this later stage, MNEs with strong FSAs are more likely to pursue policy-aligned investments, and those with weak FSAs tend to pursue policy-enabled investments. The essay further proposes that government agencies act as curators that can influence these patterns by directing managerial attention. Essay 2 integrates Penrosean growth theory and the location-advantages literature to assess how R&D tax incentives affect the growth trajectories of MNE R&D subsidiaries. The findings uncover the dual role of R&D tax incentives: they complement productive resources by amplifying the growth potential of well-funded subsidiaries and compensate for constraints in managerial resources and capabilities by reducing barriers to expansion. Essay 3 extends internalization theory by showing how R&D tax incentives shift MNEs’ R&D governance from full internalization to quasi-internalization, conceptualized as relational R&D outsourcing. It argues that R&D tax incentives positively influence MNEs’ relational R&D outsourcing and that this effect is strengthened by MNEs’ external relationship capabilities shaped by their home-country intellectual property (IP) regulations and their absorptive capacity in host country. Collectively, the three essays demonstrate that MNEs’ post-entry expansion is shaped not only by internal capabilities but also by investment facilitators that direct managerial attention, interact with subsidiary resources, and recalibrate governance costs. This dissertation therefore advances international business scholarship by integrating institutional interventions into models of firm growth and offers actionable insights for policymakers seeking to steer the long-term contributions of MNEs.

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This dissertation explores how investment facilitators – targeted government policy tools – shape the sequential growth of multinational enterprises (MNEs). Sequential growth refers to the steps an MNE takes after its initial entry into a foreign country. Drawing on three international business theories – the firm-specific and country-specific advantages (FSA/CSA) framework, Penrosean growth theory, and internalization theory – it describes sequential growth as three linked processes: follow-up investment, subsidiary growth, and governance shifts in R&D operations. Essay 1 examines how MNEs decide on follow-up investments. It develops an attention-based FSA/CSA framework, showing that managers’ attention shifts as investment unfolds. At market entry, MNEs assess general economic conditions, whereas at the follow-up stage they focus on specific policy instruments such as tax incentives or procurement programs. In this later stage, MNEs with strong internal capabilities are more likely to pursue policy-aligned investments, while those with weaker capabilities tend toward policy-enabled investments. The essay further proposes that government agencies can shape these patterns by designing programs that guide managerial attention. Essay 2 investigates whether R&D tax incentives – a key form of investment facilitator – foster the growth of MNE R&D subsidiaries. It argues that such incentives lower the cost of innovation and strengthen resource bundles, enabling sustained expansion. Using Canadian longitudinal data, it finds that incentives both amplify growth for well-resourced subsidiaries and compensate for limited managerial experience and weaker technological capabilities. Essay 3 analyzes how R&D tax incentives influence R&D governance. While MNEs typically keep most R&D in-house to protect proprietary knowledge, generous incentives encourage a middle path – long-term, trust-based partnerships with external partners, described as quasi-internalization or relational outsourcing. This effect is stronger when the home country provides weak intellectual property protection and when MNEs have strong absorptive capacity for managing relationship-based outsourcing. Together, the three essays show that MNEs’ sequential growth depends not only on their own resources and capabilities but also on investment facilitators that guide managerial attention, interact with subsidiary resources, and change the costs of alternative governance choices. The dissertation contributes to the international business literature and offers practical guidance for policymakers seeking to sustain the long-term contributions of foreign investors.

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Keywords

Sequential growth, post-entry growth, subsequent investment, MNEs expansions, subsidiary growth, reinvestment, investment facilitators, enabling institutions, orienting institutions, investment incentives, investment promotion agencies, public procurement contracts, FDI attraction policies, R&D tax incentives, location advantages, internalization theory, quasi-internalization, R&D outsourcing, R&D internalization, transaction costs, qualitative content analysis, longitudinal analysis, mixed-methods, fixed-effect models

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https://hdl.handle.net/20.500.14721/39302

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