Domestic firms competing with multinational enterprises: The relevance of resource-accessing alliance formations

The literature includes several papers that compare multinational enterprises (MNEs) to local firms along several dimensions such as financial strength or production capacity. Nevertheless, the focus on how latter firms compete against the former is often missing in the literature; local firms are typically seen as inferior in terms of resources and thus, unable to compete against MNEs. This paper aims at revisiting this competitive ‘battle’. Through a case-based design in a ‘multinational’ domestic market that seems to favour MNEs, we explore how local firms respond to MNEs’ purported superiority. Findings indicate that local firms respond through alliance formations that enable them to access fitting resources and counter ownership advantages of MNEs. Therefore, resource-accessing strategies spearheaded by local firms suggest that ownership advantages should not be inherently translated into competitive advantages for the MNEs. Implications for international business are discussed and avenues for further research are suggested.

► The more fitting the ownership advantages with the context, the higher the competitive advantages for the MNE subsidiary. ► Local firms can counter the advantage of multinationality through an alliance-based, resource-accessing strategy which widens the scope of fitting resources available to them. ► The market and competitive context is what actually determines the beneficial or less beneficial impact of MNEs’ ownership advantages. ► The alliance formation activities open to local firms is a significant element shaping the context in which ownership advantages may or may not translate into competitive advantage for the MNE.