Skip to main navigation menu Skip to main content Skip to site footer

Exploitation-exploration balance and its performance outcomes: A study of FDI portfolio decisions of new multinationals



Objective: The objective of the article is to explore how new multinationals construct their FDI location portfolios and what the performance outcomes of these decisions are.

Research Design & Methods: Building our conceptual framework on the organisational learning theory, we conduct regression analysis based on data from 394 subsidiaries of new Polish multinationals.

Findings: We find that the possession of superior capabilities by new multinationals enhances their ability to reap benefits from investing in more advanced markets in their portfolios and hence engaging in higher ambidexterity, i.e. the combination of exploration and exploitation. This effect is further reinforced by experience with foreign investment.

Implications & Recommendations: Investment in more advanced economies as compared to the home country entails the possession of higher-order capabilities, as it requires higher ambidexterity from new multinationals.

Contribution & Value Added: A lot of existing IB research focused on discrete location choices in internationalisation, remaining oblivious of the broader strategic logic. Moreover, it has been assumed that – particularly for new multinationals from emerging countries – entries into advanced host countries are related to exploration rather than exploitation, whereby the latter is the domain of similar or less developed markets.



new multinationals, location choices, portfolio perspective, firm capabilities, firm performance, Central and Eastern Europe

(PDF) Save

Author Biography

Piotr Trąpczyński

Associate Professor at the Poznań University of Economics and Business, Department of International Competitiveness at the Institute of International Business and Economics. His research interests include foreign direct investments and divestments, export performance and export exits, along with business models. Correspondence to: dr hab. Piotr Trąpczyński, prof. UEP, Department of International Competitiveness, Poznań University of Economics and Business, al. Niepodległości 1, 61-875 Poznań, Poland.

Tilo Halaszovich

Professor of Global Markets and Firms at the Jacobs University Bremen, Germany. His research is mostly focused on quantitative analysis in entrepreneurship and international business. He is especially interested in the competitiveness of foreign and domestic firms in developing countries. Correspondence to: Prof. Dr. Tilo Halaszovich, Jacobs University Bremen, Business Studies & Economics, Campus Ring 1, Research IV, 28759 Bremen, Germany.


  1. Anand, J., Mesquita, L.F., & Vassolo, R.S. (2009). The dynamics of multimarket competition in exploration and exploitation activities. Academy of Management Journal, 52(4), 802-821.
  2. Armstrong, J., & Overton, T. (1977). Estimating nonresponse bias in mail surveys. Journal of Marketing Re-search, 14, 396-402.
  3. Asgari, N., Singh, K., & Mitchell, W. (2017). Alliance portfolio reconfiguration following a technological dis-continuity. Strategic Management Journal, 38(5), 1062-1081.
  4. Banalieva, E., & Dhanaraj, C. (2013). Home-region orientation in international expansion strategies. Journal of International Business Studies, 44(2), 89-116.
  5. Barłożewski, K., & Trąpczyński, P. (2021a). Internationalisation motives and the multinationality-performance relationship: The case of Polish firms. Entrepreneurial Business and Economics Review, 9(2), 85-104.
  6. Barłożewski, K., & Trąpczyński, P. (2021b). Is internationalisation beneficial for novice internationalisers? The performance effects of firm-specific advantages, internationalisation degree and firm size revisited. Oeconomia Copernicana, 12(1), 53-75.
  7. Benner, M.J., & Tushman, M.L. (2003). Exploitation, exploration, and process management: The productivity dilemma revisited. Academy of Management Review, 28(2), 238-256.
  8. Bilan, Y., Mishchuk, H., Samoliuk, N., & Mishchuk, V. (2020). Gender discrimination and its links with com-pensations and benefits practices in enterprises. Entrepreneurial Business and Economics Review, 8(3), 189-204.
  9. Braja, M., & Gemzik-Salwach, A. (2020). Competitiveness of high-tech exports in the EU countries. Journal of International Studies, 13(1), 359-372. doi:10.14254/2071-8330.2020/13-1/23
  10. Brouthers, K.D., Brouthers, L.E., & Werner, S. (2008). Resource-based advantages in an international con-text?. Journal of Management, 34, 189-217.
  11. Brouthers, L.E., Nakos, G., Hadjimarcou, J., & Brouthers, K.D. (2009). Key factors for successful export per-formance for small firms. Journal of International Marketing, 17(3), 21-38.
  12. Carlsson, J., Nordegren, A., & Sjoholm, F. (2005). International experience and the performance of Scandina-vian firms in China. International Business Review, 14, 21-40.
  13. Chacar, A., Newburry, B., & Vissa, B. (2010). Bringing institutions into performance persistence research: exploring the impact of product, financial, and labor market institutions. Journal of International Busi-ness Studies, 41, 1119-1140.
  14. Chan, C., Isobe, T., & Makino S. (2008). Which country matters? Institutional development and foreign affili-ate performance. Strategic Management Journal, 29, 1179-1205.
  15. Cieślik, A., & Hien Tran, G. (2019). Determinants of outward FDI from emerging economies. Equilibrium. Quarterly Journal of Economics and Economic Policy, 14(2), 209-231.
  16. Cieślik, A., Michałek, J. J., & Szczygielski, K. (2019). What matters for firms? participation in Global Value Chains in Central and East European countries?. Equilibrium. Quarterly Journal of Economics and Econom-ic Policy, 14(3), 481-502.
  17. Cuervo-Cazurra, A., & Genc, M. (2008). Transforming disadvantages into advantages: developing-country MNEs in the least developed countries. Journal of International Business Studies, 39, 957-979.
  18. Crescenzi, R., Pietrobelli, C., & Rabellotti, R. (2015). Location strategies of multinationals from emerging countries in the EU regions. LEQS Paper, 93. Retrieved from on April 22, 2021.
  19. Del Sol, P., & Kogan, J. (2007). Regional competitive advantage based on pioneering economic reforms: The case of Chilean FDI. Journal of International Business Studies, 38(6), 901-927.
  20. Demirbag, M., Glaister, K.W., & Tatoglu, E. (2007). Institutional and transaction cost influences on MNEs’ ownership strategies of their affiliates: Evidence from an emerging market. Journal of World Business, 42(4), 418-434. 11575-010-0055-у
  21. Dikova, D. (2009). Performance of foreign subsidiaries: does psychic distance matter?. International Business Review, 18, 38-49.
  22. Dunning, J. (1988). The eclectic paradigm of international production: a restatement and some possible extensions. Journal of International Business Studies, 19(1), 1-31.
  23. Galan, J., González-Benito, J., & Zuñga-Vincente, J. (2007). Factors determining the location decisions of Spanish MNEs: an analysis based on the investment development path. Journal of International Business Studies, 38(6), 975-997.
  24. García-Canal, E., Guillén, M.F., Fernández, P., & Puig, N. (2018). Imprinting and early exposure to developed international markets: The case of the new multinationals. BRQ Business Research Quarterly, 21(3), 141-152.
  25. Głodowska, A., Pera, B., & Wach, K. (2019). International strategy as the facilitator of the speed, scope, and scale of firms’ internationalization. Central European Management Journal, 27(3), 55-84.
  26. Guillen, M., & Garcia-Canal, E. (2009). The American model of the multinational firm and the “new” multinationals from emerging markets. Academy of Management Perspectives, 23-35.
  27. Gupta, A.K., Smith, K.G., & Shalley, C.E. (2006). The interplay between exploration and exploitation. Acade-my of Management Journal, 49(4), 693-706.
  28. Hamzaoui, L., & Merunka, D. (2006). The impact of country of design and country of manufacture on con-sumer perceptions of bi‐national products’ quality: an empirical model based on the concept of fit. Journal of Consumer Marketing, 23(3), 145-155.
  29. He, Z., & Wong, P. (2004). Exploration vs. exploitation: An empirical test of the ambidexterity hypothesis. Organization Science, 15(4), 481-494.
  30. Hennart, J.-F. (2012). Emerging market multinationals and the theory of the multinational enterprise. Global Strategy Journal, 2(3), 168-187.
  31. Hernandez, V., & Nieto, M. (2015). The effect of the magnitude and direction of institutional distance on the choice of international entry modes. Journal of World Business, 50(1), 122-132.
  32. Hernandez, E., & Guillén, M.F. (2018). What’s theoretically novel about emerging-market multinationals?. Journal of International Business Studies, 49(1), 24-33.
  33. Hoskisson, R., Wright, M., Filatotchev, I., & Peng, M. (2013). Emerging multinationals from mid-range econ-omies: the influence of institutions and factor markets. Journal of Management Studies, 50(7), 1295-1321.
  34. Hymer, S. (1976). The International Operations of National Firms: A Study of Direct Foreign Investment. Cam-bridge, Massachussets: MIT Press.
  35. Khan, H. (2020). Is marketing agility important for emerging market firms in advanced markets?. Internation-al Business Review, 29(5), 101733.
  36. Kim, H., Hoskisson, R., & Lee, S. (2015). Why strategic factor markets matter: “New” multinationals’ geo-graphic diversification and firm profitability. Strategic Management Journal, 36(4), 518-536.
  37. Kim, M., Mahoney, J., & Tan, D. (2015). Re-conceptualising exploitative and explorative FDI: a balancing-process approach to firm internationalisation. European Journal of International Management, 9(5), 537-565.
  38. Kogut, B., & Singh, H. (1988). The effect of national culture on the choice of entry mode. Journal of Interna-tional Business Studies 19(3), 411-432.
  39. Kohli, A.K., & Jaworski, B.J. (1990). Market orientation: the construct, research propositions, and managerial implications. Journal of Marketing, 54, 1-18.
  40. Kriauciunas, A., Parmigiani, A., & Rivera-Santos, M. (2011). Leaving our comfort zone: integrating established practices with unique adaptations to conduct survey-based strategy research in nontraditional contexts. Strategic Management Journal, 32, 994-1010.
  41. Kumar, N. (2001). Determinants of location of overseas R&D activity of multinational enterprises: The case of US and Japanese corporations. Research Policy 30(1), 159-174.
  42. Kumar, V., Singh, D., Purkayastha, A., Popli, M., & Gaur, A. (2020). Springboard internationalization by emerging market firms: Speed of first cross-border acquisition. Journal of International Business Studies, 51(2), 172-193.
  43. Lavie, D., & Rosenkopf, L. (2006). Balancing exploration and exploitation in alliance formation. Academy of Management Journal, 49(4), 797-818.
  44. Lee, C. W., & Fernando, A. (2020). Can internally generated FDI impact export performance? The study on Indonesia in the years 1980-2018. International Entrepreneurship Review, 6(1), 29-45.
  45. Levinthal, D.A., & March, J.G. (1993). The myopia of learning. Strategic Management Journal, 14(S2), 95-112.
  46. Liu, X., Gao, L., Lu, J., & Lioliou, E. (2016). Does learning at home and from abroad boost the foreign subsidi-ary performance of emerging economy multinational enterprises?. International Business Review, 25(1A), 141-151.
  47. Li, L. (2007). Multinationality and performance: A synthetic review and research agenda. International Jour-nal of Management Reviews, 9(2), 117-139.
  48. Luo, Y., & Tung, R.L. (2007). International expansion of emerging market enterprises: A springboard perspec-tive. Journal of International Business Studies, 38, 481-498.
  49. Maciejewski, M., & Wach, K. (2019). International Startups from Poland: Born Global or Born Regional?. Journal of Management and Business Administration Central Europe, 27(1), 60-83.
  50. Makino, S., Lau, C., & Yeh, R. (2002). Asset-expoitation versus asset-seeking: implications for location choice of foreign direct investment from newly industrialized economies. Journal of International Business Stud-ies, 38, 481-498.
  51. March, J. (1991). Exploration and exploitation in organizational learning. Organization Science, 2(1), 71-87.
  52. Mayer, T., & Zignano, S. (2005). Notes on CEPII’s distances measures: The GeoDist database. CEPII, WP No 2011 - 25. Retrieved from on April 22, 2021.
  53. McMillan, J., & Woodruff, C. (2002). The central role of entrepreneurs in transitional economies. Journal of Economic Perspectives, 16(3), 153-170.
  54. Miller, K.D., Zhao, M., & Calantone, R.J. (2006). Adding interpersonal learning and tacit knowledge to March’s exploration-exploitation model. Academy of Management Journal, 49(4), 709-722.
  55. Mishchuk, H., Bilan, S., Yurchyk, H., Akimova, L., & Navickas, M. (2020). Impact of the shadow economy on social safety: The experience of Ukraine. Economics and Sociology, 13(2), 284-298.doi:10.14254/2071-789X.2020/13-2/19
  56. Nielsen, B., Asmussen, C., & Weatherall, C. (2017). The location choice of foreign direct investments: empiri-cal evidence and methodological challenges. Journal of World Business, 52, 62-82.
  57. Ozmel, U., & Guler, I. (2015). Small fish, big fish: The performance effects of the relative standing in partners’ affiliate portfolios. Strategic Management Journal, 36(13), 2039-2057.
  58. Padmanabhan, P., & Cho, K. (1999). Decision specific experience in foreign ownership and establishment strategies: Evidence from Japanese firms. Journal of International Business Studies, 30(1), 25-41.
  59. Paliokaite, A. (2019). An innovation policy framework for upgrading firm absorptive capacities in the context of catching-up economies. Journal of Entrepreneurship, Management and Innovation, 15(3), 103-130.
  60. Pattnaik, C., Choe, S., & Singh, D. (2015). Impact of host country institutional context on subsidiary perfor-mance. Management Decision, 53(1), 198-220.
  61. Perkins, S.E. (2014). When does prior experience pay? Institutional experience and the multinational corpo-ration. Administrative Science Quarterly, 59(1), 145-181.
  62. Podsakoff, P., & Organ, D. (1986). Self-reports in organizational research: problems and prospects. Journal of Management, 12(4), 531-544.
  63. Pollard, D., & Simberova, I. (2014). The internationalization of SMEs in the Czech Republic: strategic and knowledge development issues. In E. Turkina, & M.T.T. Thai (Eds.), Internationalization of firms from economies in-transition: the effects of politico-economic paradigm shift (pp. 90-108). Cheltenham: Edward Elgar Publishing.
  64. Polowczyk, J., Zaks, O., & Trąpczyński, P. (2021). On the role of communication and management engage-ment for acquisition success: A Study of Israeli Start-Ups. International Entrepreneurship Review, 7(4).
  65. Raisch, S., & Birkinshaw, J. (2008). Organizational ambidexterity: Antecedents, outcomes, and moderators. Journal of Management, 34(3), 375-409.
  66. Ramamurti, R. (2012). What is really different about emerging market multinationals?. Global Strategy Jour-nal, 2, 41-47.
  67. Ramaswamy, B., Yeung, M., & Laforet, S. (2012). China’s outward foreign direct investment: location choice and firm ownership. Journal of World Business, 47(1), 17-25.
  68. Rivkin, J., & Siggelkow, N. (2003). Balancing search and stability: Interdependencies among elements of or-ganizational design. Management Science, 49(3), 290-311.
  69. Rudawska, E., Frąckiewicz, E., & Wiścicka-Fernando, M. (2018). Socio-ecological innovations in marketing strategy – a comparative analysis of companies operating in Western European countries and Central-Eastern European countries. Economics and Business Review, 18(3), 51-68.
  70. Rugman, A.M., & Verbeke, A. (2001). Subsidiary‐specific advantages in multinational enterprises. Strategic Management Journal, 22(3), 237-250.
  71. Siggelkow, N., & Rivkin, J. (2006). When exploration backfires: unintended consequences of multilevel organ-izational search. Academy of Management Journal, 49(4), 779-795.
  72. Sousa, C., Ruzo, E., & Losada, F. (2010). The key role of managers’ values in exporting: influence on customer responsiveness and export performance. Journal of International Marketing, 18(2), 1-19.
  73. Stjepić, A.M., Ivančić, L., & Suša Vugec, D. (2020). Mastering digital transformation through business process management: Investigating alignments, goals, orchestration, and roles. Journal of Entrepreneurship, Man-agement and Innovation, 16(1), 41-74.
  74. Thomas, D.E., Eden, L., Hitt, M.A., & Miller, S.R. (2007). Experience of emerging market firms: The role of cognitive bias in developed market entry and survival. Management International Review, 47(6), 845-867.
  75. Trąpczyński, P., & Banalieva, E.R. (2016). Institutional difference, organizational learning, and foreign affili-ate performance: Evidence from Polish firms. Journal of World Business, 51(5), 826-842.
  76. Tsang, E., & Yip, P. (2007). Economic distance and the survival of foreign direct investments. Academy of Management Journal, 50(5), 1156-1168.
  77. Verbeke, A., & Brugman, P. (2009). Triple-testing the quality of multinationality–performance research: An internalization theory perspective. International Business Review, 18(3), 265-275.
  78. Verbeke, A., Li, L., & Goerzen, A. (2009). Toward more effective research on the multinationality-performance relationship. Management International Review, 49(2), 149-161.
  79. Wu, J., & Ang, S.H. (2020). Network complementaries in the international expansion of emerging market firms. Journal of World Business, 55(2), 101045.
  80. Yang, Y., Martins, P.S., & Driffield, N. (2013). Multinational performance and the geography of FDI. Manage-ment International Review, 53(6), 763-794.
  81. Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38(2), 341-363.
  82. Zahra, S.A., Ireland, R.D., & Hitt, M.A. (2000). International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance. Academy of Management Journal, 43(5), 925-950.


Download data is not yet available.