Journal of Business Research 66 (2013) 2479–2484

Contents lists available at ScienceDirect

Journal of Business Research

Internationalization performance of Chinese multinational companies in thedeveloped markets☆

Weiguo Zhong a, Jisheng Peng b,⁎, Chunlin Liu b

a City University of Hong Kong, Chinab Nanjing University, China

☆ The authors gratefully acknowledge a grant fromFoundation of Department of Education (Project No. 0from theNationalNatural Science Foundation of China (ProjNo. 71072038, and No. 71272108) for financial supports.⁎ Corresponding author at: Nanjing University, Scho

Building, 22 Hankou Road, Gulou, Nanjing, China.E-mail address: jspeng@nju.edu.cn (J. Peng).

0148-2963/$ – see front matter © 2013 Elsevier Inc. Allhttp://dx.doi.org/10.1016/j.jbusres.2013.05.038

a b s t r a c t

a r t i c l e i n f o

Article history:Received 1 October 2011Received in revised form 1 December 2012Accepted 1 January 2013Available online 22 June 2013

Keywords:Cooperation experienceOrganizational learningKnowledge acquisitionInternationalization performanceEmerging multinational companies

This study investigates the relationship between prior cooperation experience with partners from the devel-oped markets and internationalization performance of emerging multinational companies. Based on theknowledge-based view, this study sheds light on the crucial role of knowledge base, organizational learningin the home country, and acquisition possibility of knowledge in the host country. Employing a sample ofChinese international firms, this study demonstrates that international experience accumulated by learningthrough linkage with partners from the developed markets improves the performance of companies fromthe emerging market. Organizational learning in the home country and acquisition possibility of knowledgein the host country moderate the effect of international experience. The implications of these findings for the-oretical development and future research are discussed.

© 2013 Elsevier Inc. All rights reserved.

1. Introduction

In the recent years people have witnessed an unprecedented risein outward foreign direct investment (outward FDI) from emergingeconomies. However, we still have little understanding of thesemultinationals from emerging economies (hereafter referred to asEMNCs, Contessi & El-Ghazaly, 2010). Theories that are used to ex-plain activities of multinationals from advanced economies, may beinsufficient to explain the EMNCs (Gammeltoft, Barnard, & Madhok,2010; Peng, Wang, & Jiang, 2008). For example, an important corol-lary of the stages model of internationalization is that firms expandabroad only as fast as its experience and knowledge allow (Johanson &Vahlne, 1977). However, perhaps the most startling feature of theEMNCs is the accelerated pace of internationalization, which definitelyoverthrows the corollary (Mathews, 2006).

The internationalization literature offers several key insights intounderstanding why EMNCs internationalize. For example, the ex-panded ownership–location–internalization framework (Dunning &Lundan, 2008) argues that internationalization occurs when firmsseek to leverage their firm-specific ownership advantages. On thecontrary, the resource-based view (Barney, 1991) asserts that EMNCsuse internationalization to seek, rather than exploit, strategic assets

Humanity and Social Science9YJA630061), and four grantsectNo. 70972036,No. 71272097,

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because EMNCs face the liability and competitive disadvantages whichstem from being latecomers lacking the required resources and ad-vanced capabilities (Child & Rodrigues, 2005; Luo & Tung, 2007;Makino, Lau, & Yeh, 2002; Mathews, 2006). However, few studies haveexamined the performance aspect of EMNCs after their entry to the in-ternational markets, especially the developed market (Brouthers &Hennart, 2007; Lu, Zhou, Bruton, & Li, 2010; Zhou, Wu, & Luo, 2007).

Thus, this study tries to examine the following question: How canEMNCs achieve better performance through knowledge learning bothin the home country and host country. Taking the Chinese firmsinternationalizing in the developed countries as research sample,this study employs the knowledge-based view (Grant, 1996; Kogut& Zander, 1992; Nonaka, 1994) in answering the question, by positingthat EMNCs have to form certain unique and at least sustainableadvantages in the home country (Dunning, 2006; Nachum, 2003),and overcome the liability of foreignness and latecomers (Mathews,2006) in the developed countries. Specifically, the experience of co-operation with MNCs from developed market is proposed to be posi-tively associated with the internationalization performance (INP).Furthermore, higher levels of knowledge integration and routiniza-tion strengthen the knowledge base and the capability of EMNCsand hence increase the benefits of EMNCs' cooperation experience.On the other hand, the knowledge available on the developed marketallows EMNCs to benefit from their presence in a munificent locationand thus enhances the benefits of EMNCs' cooperation experience.

The study contributes to the literature in three ways. First, whilemost of the current studies emphasize the determinants or motivationsof the internationalization of EMNCs, we shift the focus to amore impor-tant topic: the internationalization performance of EMNCs after their

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entry to the developed country. Second, although prior studies recog-nize that EMNCs internationalize because they possess certain capabili-ties or advantages (Dunning, 2006), they do not examine where theseadvantages come from by studying the process of advantages develop-ment of EMNCs in their home country. To fill this gap, we investigatethe contributions of cooperation with MNCs from developed marketsand EMNCs' knowledge management to developing these advantages.Finally, we extend the implication of the transaction-approach to under-standing the internationalization of EMNCs by verifying that the pur-chase of knowledge is an accessible mechanism for overcoming theliabilities of foreignness and latecomers.

2. Theoretical development and hypotheses

2.1. Knowledge-based view

Knowledge-based view posits that what firms do better thanmarkets is the creation and transfer of knowledge within the organi-zation (Kogut & Zander, 1992) and argues that heterogeneous knowl-edge bases and capabilities, especially the tacit knowledge (Polanyi,1962), among firms are the main determinants of sustained compet-itive advantage (Gupta & Govindarajan, 2000). Further, knowledge isalso a creative activity of constructing reality (Von Krogh, Roos, &Slocum, 1994). Thus, the knowledge creation process is more impor-tant than the characteristic of knowledge (e.g., explicit vs. tacit).

Organizational learning, the process by which new information isincorporated into the behavior of agents, is viewed as a key process inthe adaptation of organizations to the environment (Argote, 1999).Penrose (1959) argues that the recombination of existing resourcesforms the basis of the growth of organizations. Instead of exploringthe dynamics of a largely static world (Porter, 1991), dynamiccapability view argues that competitive advantage is dependent onthe firm's ability to integrate, build and reconfigure internal and ex-ternal competencies to address rapidly changing environments(Teece, Pisano, & Shuen, 1997). We propose that performance ofEMNCs in the developed market depends on the knowledge baseand knowledge management in the home country and the knowledgeavailability in the developed market.

2.2. Cooperation experience with MNCs

Experience of cooperation with partners from the developed mar-ket has been identified as the unique and critical resource of EMNCsto internationalize (Thomas, Eden, Hitt, & Miller, 2002). For example,van Hoesel (1999) observes that most EMNCs investing in developedmarket havemade extensive OEM contracts or alliances with partnersfrom the developed market prior to their internationalization. Previ-ous studies also suggest that such experience is a source of sustain-able advantage for investing firms, and is associated with positivereturns and INP (Aybar & Ficici, 2009; Barkema & Drogendijk, 2007;Yang, Su, & Fam, 2012).

Cooperation experience can affect the entry mode of EMNCs in thedeveloped market, the employees' international perspectives and ca-pabilities, the familiarity with the developed market, and the capabil-ities of dealing with problems and seizing opportunities, all of whichcan influence the INP of EMNCs. As firms gain international experi-ence through early OEM or other partnerships, they increase their in-ternational commitments gradually (Johanson & Vahlne, 1977). Forexample, with their expertise in international operations and betterbusiness information system, the new foreign business orientedChinese corporations prefer to invest in advanced technologicalfirms, advanced markets, and large projects of resource extractionthrough mergers and acquisitions, while the small and medium-sized manufacturing companies tend to establish greenfield invest-ment projects (Cai, 1999). The more cooperation experience an

EMNC has, the higher profit mode it may choose and the higher INPit might get.

The earlier these EMNCs are exposed to the advanced internation-al business standards, the more they can collect up-to-date informa-tion on technological development abroad, learn the locally specificmarket knowledge, and adapt the personnel training system in an in-ternational pattern (Cai, 1999; Zollo & Winter, 2002). Some overlapbetween the EMNCs' knowledge base and the knowledge requiredfor operating in the new cultural bloc is needed for the EMNCs to beable to interpret the local experience, assimilate it, and put it to com-mercial ends (Barkema & Drogendijk, 2007). Reuber and Fischer(1997) find that internationally experienced management teamslead to a greater likelihood of developing foreign strategic partnersas well as in obtaining foreign sales after start-up. Such cooperationalso benefits the firms with accumulation of local market knowledgeand legitimacy, local networks, and reputation (Yang et al., 2012; Yiu,Lau, & Bruton, 2007). It may be easier for them to reduce costs andrisks through experience on large-scale production facilities, rigorousprocess improvements, cost control, and cost minimization. They arealso more competent to deal with foreign business problems and aremore aware of international business opportunities (Reuber & Fischer,1997; Sambharya, 1996).

On the contrary, lacking such cooperation experience makes thepost-entry performance suffer. For example, although EMNCs aggres-sively merge with or acquire firms in the developed markets, most ofthemmeet with the challenge in post-acquisition integration becauseof their inexperience (Luo & Tung, 2007; Weber & Camerer, 2003). In-experience can make the performance of the acquiring firm suffer be-cause it biases the assessment of the acquired target. For example, theacquiring firm may misidentify the degree of complementarities andthus pay higher premiums for the targets (Aybar & Ficici, 2009).Therefore, we hypothesize that,

H1. themore the EMNCs experience cooperationwith partners from thedeveloped market, the higher their internationalization performance.

2.3. Knowledge integration and routinization

Knowledge integration, defined as the process through whichEMNCs transfer, combine, absorb, and share the experience of cooper-ation with partners from the developed market, reflects the extent towhich EMNCs have successfully transferred between tacit and explicitknowledge across the individual, team, and organizational levels(Frost & Zhou, 2005; McEvily, Eisenhardt, & Prescott, 2004). Knowl-edge routinization, defined as the process to make the knowledgelearned by the EMNCs in response to selective pressures become a re-petitive and recognizable pattern of interdependent actions (Feldman& Pentland, 2003), makes the knowledge learned and integrated inthe home country transferable across foreign markets (Blomstermo,Eriksson, Lindstrand, & Sharma, 2004).

The international cooperation experience is rooted in the relatedemployees. In other words, knowledge is stored at the individuallevel in a tacit form. If EMNCs use the knowledge to create interna-tional value, they must transfer and integrate the knowledge at theorganizational level, and then form it into organizational capabilities.Knowledge integration and routinization can achieve such objective(Nelson & Winter, 1982; Nonaka, 1994). First, knowledge integrationenables EMNCs to convert tacit knowledge rooted in the employees,who are boundary-spanners between EMNCs and foreign partners,into explicit knowledge through interaction between individuals.Then, knowledge integration reconfigures existing explicit knowledgethrough the sorting, adding, recategorizing, and recontextualizing,which in turn leads to new normative knowledge. During this process,the new knowledge may be documented and thus routinized at the or-ganizational level. Afterwards, the explicit knowledge can be taught toand shared among organizational members and finally disseminated

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widely in the organization. When EMNCs internationalize in the devel-oped market, boundary-spanners armed with learned international ex-perience can further “learn by doing” through an iterative process of trialand error, a process initiating thenext cycle of the accumulation of inter-national experience and constituting a continuous knowledge spiral(Nonaka, 1994).

To sum up, as the level of EMNCs' knowledge integration and rou-tinization grows higher, firms can extract more tacit individual inter-national experience and transfer it more efficiently and effectively tothe organizational level, which can contribute to building higher levelof organizational capabilities (Teece, Pisano & Shuen, 1997). In turn,it is easier to transfer the knowledge learned to the developed marketand reduce wasteful explorations (Luo & Tung, 2007; Sheremata,2000), and enable more effective cross-functional collaboration(e.g., marketing, technical, operation) to satisfy customer needs(Madhavan & Grove, 1998). Thus, we hypothesize that,

H2. the higher the level of EMNCs' knowledge integration and routin-ization, the stronger the effect of international cooperation experi-ence on the internationalization performance.

2.4. Knowledge availability in the host country

Knowledge availability refers to the extent to which the knowl-edge needed by EMNCs in a developed market is munificent andeasy to purchase (Barnard, 2010). For example, high knowledge avail-ability in a developed market and the open trade market may be fea-tured with strong scientific capability (e.g., number of universities,research institutes or PhDs, Almeida, Song, & Grant, 2002). Knowl-edge availability can serve as the knowledge source of these EMNCsin the developed market. The knowledge may be supplied by profes-sional employees (Almeida & Kogut, 1999), excellent suppliers (Kale& Singh, 2007), or involved customers (Nambisan, 2002). The liabilityof foreignness and latecomer is also less likely to affect the process ofacquiring market-based assets (Barnard, 2010). Knowledge obtaineddirectly in the developed market interacts with the experience accu-mulated in the home country to produce the new capabilities espe-cially for the developed market (Patel & Vega, 1999; Pearce, 1999).Thus, EMNCs benefit from their own experience-based pre-existingcapabilities to the extent that they are in a knowledge munificentlocation.

Knowledge availability also makes the EMNCs more likely to enjoytheir comparative ownership advantages. EMNCs' comparative own-ership advantages refer to their possession and leverage of assetsthat are relatively valuable, rare, hard-to-imitate, and organizational-ly embedded in comparison with MNCs from other countries (Sun,Peng, Ren, & Yan, 2012). For example, Chinese state-owned enter-prises may enjoy the unique advantages in financing OFDI, particular-ly in large-scale M&A deals because of the increased power of statecapitalism in China (Bremmer, 2009). Chinese EMNCs also enjoy thebenefits of organizing assembly lines with low labor costs and build-ing brands to satisfy a great demand in the domestic market. Thus,EMNCs may prefer to dynamically absorb the knowledge rooted inlocation and factor endowments, integrating them into their firm-specific advantages via learning. The location and factor endowmentsbring in the available knowledge,which in turn enhances thepositive ef-fect of cooperation experience. For example, Lenovo's acquisition ofIBM's PC department speeds up its learning process in the globalmarket,makes its cooperation experience transfer to the developed market eas-ier, and enhances its internationalization performance (Deng, 2009).

It will be a great challenge if the EMNCs' experience is either inap-propriate or too weak to be of use in a given host country. Knowledgeavailable on the market is an effective way of overcoming the liabilityof foreignness if firms are “outsiders” and have few capabilities thatare useful in the host country (Barnard, 2010). In a developed market,it is difficult for EMNCs to transfer their networking capabilities and

political capabilities, typical strategies used by EMNCs (Dunning &Narula, 2004; Guillén & Garcıía-Canal, 2009). However, funds andother capital assets can transfer easily between EMNCs' home countryand the host country. Therefore, if the knowledge availability is high,then EMNCs can easily gain the needed knowledge in the developedmarket. In line with such logic, Barnard (2008) has found that themost important predictor of performance of EMNCs in the USA is in-vestment in capital assets. Taken together, we hypothesize that:

H3. the higher the level of knowledge availability in the host country,the stronger the effect of international cooperation experience on theinternationalization performance.

3. Method

3.1. Sample and data collection

We tested our hypotheses with a sample of the outward foreigndirect investment firms focusing on the developed market (such asAmerica, Canada, Australia, and Europe) collected in Jiangsu Province,China. Jiangsu province is one of the most economically developedareas in China. In 2010, Jiangsu province ranked second in the foreigntrade volume in China, which is suitable for our research purposes.

Based on the list of Chinese Import and Export Firms provided byNanjing Customs, we randomly selected 1000 manufacturing firmsconducting outward foreign direct investment in the developedmarket. Then we contacted them by telephone and sent question-naires to those that agreed to accept our investigation. Finally, weobtained 159 usable questionnaires. The top four developed marketsinvested by these firms include Europe (17.0%), Canada (15.7%),Australia (12.6%), and America (11.3%).

Our comparisons between responding and nonresponding firmsdid not reveal nonresponse bias. A knowledge test based on aseven-point Likert scale indicated adequate knowledge levels for in-formants (mean = 6.05; s.d. = 1.66).

3.2. Measures

3.2.1. Cooperation experience with partners from developed marketCooperation experience is measured by the log of the number of

years that a firm had engaged in international activities such asexporting, joint venture, alliance, and other partnerships with firmsfrom developed market.

3.2.2. Internationalization performanceWe used perceptual measures of internationalization performance

(Brouthers & Xu, 2002; Lu et al., 2010), which correlate well with ob-jective measures of performance (Geringer & Hebert, 1991; Ketokivi& Schroeder, 2004). We ask the respondents to rate the extent towhich they are satisfied with: growth, market shares, profitability,and return on investment in the developed overseas markets (Hultet al., 2008). Cronbach α for the four items is 0.77.

3.2.3. Knowledge integration and routinizationKnowledge integration and routinizationmainly refers to the formal

processes and structures that ensure the capture, analysis, interpreta-tion, integration, and codification of international knowledge. Thescale captured the firm's knowledge activities in cross-functional inte-gration, cross-temporal integration, and cross-organizational integra-tion. All the items were adapted from the existing literatures (Luigi &Kwaku, 2007; Luo, Slotegraaf, & Pan, 2006; Marsh & Stock, 2006).Cronbach α for the fourteen items is 0.92.

3.2.4. Knowledge availabilityThree kinds of market-based knowledge are likely to be particu-

larly valuable for EMNCs in the developed market: the employees,

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the suppliers, and the customers (Barnard, 2010). We measureknowledge availability by asking the respondents to assess the extentto which they can gain professional and competent employees, skilledand embedded suppliers, and involved customers in the developedmarket. Cronbach α for the three items is 0.70.

3.2.5. Control variablesWe control four control variables: firm size (number of employees),

firm ownership (state-owned = 0, non-state-owned = 1), technologi-cal uncertainty, and market uncertainty. The six-item scale of environ-mental uncertainty is adapted from Jaworski and Kohli (1993).

3.3. Construct validation

This study uses confirmatory factor analysis with LISREL 8.7 to as-sess the convergent and discriminant validity of the focal constructs.A five-factor confirmatory measurement model that includes allfocal constructs results in a satisfactory fit: χ2 (314) = 544.35, rootmean squared error of approximation (RMSEA) = .07, comparative fitindex (CFI) = .91, incremental fit index (IFI) = .91, and non-normedfit index (NNFI) = .89. Furthermore, all factor loadings for each con-struct are significant (p b .001), and the composite reliability of allfocal constructs exceeds the .60 benchmark, indicating good convergentvalidity (Bagozzi & Yi, 1988). A series of chi-square difference tests of allthe scales in pairs assesses discriminant validity by determining wheth-er the freely estimatedmodel is significantly superior to the constrainedmodel (Anderson & Gerbing, 1988). In all cases, the chi-square differ-ences are significant, suggesting acceptable discriminant validity be-tween the constructs.

3.4. Common method bias

We try to eliminate common method variance (CMV) by havingmore than one person answer the questionnaire as much as possibleand combing first-hand data with the archive data to estimate themodel. To further ensure CMV bias is not a serious concern for thestudy, we added a first-order factor (a single unmeasured latentmethod factor) to all the measurements (Podsakoff, MacKenzie, Lee,& Podsakoff, 2003). The models proposed based on our theoretical ar-gument all fit the data well, which further confirms that the effect ofCMV bias is insignificant in this study.

4. Analysis and results

We first summarized the correlations for all variables (as shown inTable 1), and then used multiple regression techniques to test ourhypotheses.

From Table 1, we gain some interesting findings related to the co-operation experience and knowledge availability of non-state-ownedfirms. Ownership is negatively related to the cooperation experience(r = − .19, p b .05) while is positively related to knowledge availability

Table 1Correlations between variables.

1 2 3

1. Firm size 12. Ownership .14 13. Technology uncertainty − .07 − .10 14. Market uncertainty − .06 − .10 .135. Cooperation experience .00 − .19⁎ − .096. Knowledge management .10 − .03 .027. Knowledge availability .12 .22⁎⁎ − .028. Internationalization performance .10 − .06 − .08Mean 574.82 0.45 3.09Standard deviation 1492.53 0.50 1.30

Notes: ⁎⁎p b 0.01, ⁎p b 0.05; 2-tailed; N = 159; NA = not applicable.

in the developedmarket (r = .22, p b .01). The results show that duringthe economic reform of China, state-owned firms accumulate more co-operation experience, but in the current “going abroad” national cam-paign, the non-state-owned firms may find more knowledge availablein thedevelopedmarket (Luo, Xue, &Han, 2010). Besides,market uncer-tainty is negatively related to knowledge availability (r = − .24,p b .01) in the host country.

Results for the multiple regression analysis are shown in theTable 2. To mitigate the potential threat of multicollinearity, wemean-centered all the independent variables that constituted interac-tion terms (e.g., cooperation experience, knowledge management andknowledge availability). The variance inflation factor values in themodels range from 1.03 to 1.25, well below the usual 10.0 benchmark(Hair, Anderson, Tatham, & Black, 1998). Therefore, multicollinearityis not a concern in the analysis.

As Table 2 (M1–3) shows, when we introduce the interaction termbetween cooperation experience and knowledge management to theM2, cooperation experience still has a positive and significant effecton internationalization performance (b = .23, p b .01), in support ofH1. And the interaction term is also positive and significant (b = .23,p b .01), and thus H2 is supported.

M4 and M5 further indicate that the main effect of cooperation ex-perience with partners in the developed market on internationaliza-tion performance is positive and significant. When we introduce theinteraction term between cooperation experience and knowledgeavailability to the M4, both cooperation experience and knowledgeavailability have a positive and significant effect on internationaliza-tion performance (b = .32, p b .01; b = .17, p b .05, respectively).The interaction term is also positive and significant (b = .23, p b .01),and thus H2 is supported.

5. Discussion

Compared with prior literature, this study shifts the focus to amore important topic in the area of EMNCs' internationalization: theinternationalization performance of these firms from emerging coun-tries after their entry to the developed country. Employing theknowledge-based view, we empirically examine how the cooperationexperience with partners from developed markets influences EMNCs'internationalization performance. We also explore the boundary con-ditions of such effect, including knowledge integration and routiniza-tion in the home country and the knowledge availability in the hostcountry. The findings contribute to the literature by answering sever-al important theoretical questions.

Our findings demonstrate that EMNCs internationalize armed withcertain potential or implicit capabilities. In the research on the outwardFDI of firms from emerging economies, lots of recent studies still rely ontheories that base their logic on the underlying assumption that EMNCslack superior resources and/or capabilities (e.g., Cuervo-Cazurra & Genc,2008; Dunning, 1981, 1988). However, we empirically find that EMNCsaccumulate internationalization experience through cooperation with

4 5 6 7 8

1− .11 1− .04 .25⁎⁎ 1− .24⁎⁎ .31⁎⁎ .07 1− .13 .40⁎⁎ .42⁎⁎ .28⁎⁎ 12.27 4.21 4.05 3.57 4.100.83 0.61 0.57 0.58 0.51

Table 2Results of multiple regressions.

Internationalization performance

M1 M2 M3 M4 M5

Size .10 .06 .05 .08 .09Ownership − .09 − .01 .01 − .06 − .07Technology uncertainty − .06 − .05 − .06 − .04 − .04Market uncertainty − .13 − .08 − .09 − .05 − .05Cooperation experience (CE) .30⁎⁎⁎ .23⁎⁎ .32⁎⁎⁎ .32⁎⁎⁎

Knowledge management (KM) .34⁎⁎⁎ .33⁎⁎⁎

Knowledge availability (KA) .18⁎ .17⁎

CE ∗ KM .23⁎⁎

CE ∗ KA .19⁎

R2 change .04 .25 .04 .16 .03Adjusted R2 .01 .25 .30 .17 .20Overall F 1.51 9.98⁎⁎⁎ 10.47⁎⁎⁎ 6.30⁎⁎⁎ 5.65⁎⁎⁎

Notes: ***p b 0.001,**p b 0.01, *p b0.05; 2-tailed; N = 159.

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partners from the developed markets and that such experience contrib-utes to the EMNCs' internationalization performance.

To our best knowledge, the confirmed effect of cooperation expe-rience on internationalization performance serves as the first todirectly lend empirical support to the linkage–leverage–learningframework (LLL framework, Mathews, 2006). LLL framework arguesthat the EMNCs' sources of international advantage are first the re-sources accessed through linkage with external firms, then the extentto which partners' resources can be leveraged, and finally organiza-tional learning through repeated application of linkage and leverageprocesses which allows the EMNCs to internationalize more effective-ly. Our finding thus lends empirical support to the logic. Through link-age with partners from the developed markets and leverage in theirpartners' resources, EMNCs learn and accumulate related experienceand thus have prepared well for internationalization.

The effect of cooperation experience on internationalization iscontingent on the EMNCs' knowledge management strategy. Ourfinding shows that the better the EMNCs integrate and routinize theinternal and external knowledge related to internationalization, thehigher the positive effect of cooperation experience with partnersfrom the developed market on the internationalization performance.To spread the knowledge within the firm and to gain some kinds ofcapabilities suitable for the developed market, the firm must use theknowledge integration and routinization strategy to transfer, com-bine, absorb, and share the international experience across functionalunits (Grant, 1996; Kale & Singh, 2007). It would be better to usedocuments and formal platforms to routinize such knowledge, so asto make the tacit knowledge change to explicit knowledge. We fur-ther anticipate that knowledge management makes the experiencechange into certain technological or marketing capabilities, whichare especially useful for EMNCs to compete in the developed markets.For example, Lenovo, globalizing in a well-publicized merger with theIBM PC business, conducts very well knowledge management strate-gy to take full use of its technological andmarket knowledge accumu-lated through its earlier role as the commission agent for partnersfrom developed markets (Child & Rodrigues, 2005).

The implication of the significant interaction effect of knowledgeavailability in the host country is that by drawing on more professionalemployees, more competent suppliers, and highly involved customers,EMNCs can transfer their experience more effectively in the developedmarket. Thus, largely market-based resources in the host country, rath-er than firm capabilities, are also important to help EMNCs overcomethe liability of foreignness and latecomer (Barnard, 2010). The signifi-cant interaction also explains why EMNCs have to expand quickly, usu-ally through the aggressive M&As, which is obviously contrary to thetraditional internationalization theory. For these experienced EMNCs,they may be eager to seize the opportunities and to occupy the market.M&A serving as the most efficient way to obtain knowledge thus

becomes a dominant method during the internationalization processof EMNCs (Nayyar, 2008).

We acknowledge several limitations of this study, which suggestdirections for future research. First, to reduce common method vari-ance, we use the secondary data to measure EMNCs' cooperation ex-perience with partners from the developed markets. Future researchcan use survey data to measure the separate experience on market,technology, and culture. It will be meaningful to examine whichkind of experience predict better on the internationalization perfor-mance. Second, we just speculate the EMNCs have used the knowledgemanagement strategy to form certain capabilities but we do not directlytest it. So, future research can examinewhether capabilities mediate therelationship between cooperation experience and internationalizationperformance. Third, knowledge integration and knowledge routiniza-tion may have differential effects on the experience–performancerelationship and hence future research can explore the process ofknowledge management. Finally, we mainly focus on the knowledgeavailability on the market, which can be directly purchased by moneyor financial capital. We do not consider the implicit knowledge poten-tially shared between partners in the developedmarkets and the effectsof different kinds of knowledge. A promising area is to expand theknowledge we have specified here.

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