Attention-based approach to multinationals' failures: new challenges and opportunities in the global marketplace

New challenges and opportunities in the global marketplace:
learning from developed-country multinationals’failures
Joseph Amankwah-Amoaha and Ellis L.C. Osabuteyb
aKent Business School,University of Kent,Canterbury,UK;bRoehampton Business School,University of
Roehampton,London,UK
ABSTRACT
In this article,we integrate the attention-based view ofthe firm and the
organizationalambidexterity literature to develop a perspective on the
effects ofunbalanced attention to both domestic and foreign expansion.
We utilize the case ofBritish supermarketTesco’s expansions in the UK
and USA to demonstrate divestment as an unintended outcome ofunbal-
anced attention to both domestic and foreign markets.We demonstrate
how emerging-marketmultinationalscould learn from historicalinter-
nationalexpansion strategic failures by developed-country multinationals.
KEYWORDS
Attention-based view;
divestment;expansion;
markets;Tesco
Over the pastfew decades,one ofthe recurring themes in managementliterature has been the
need for organizationalambidexterity(OA), i.e., the concurrentpursuitof exploitation and
exploration activities to achieve sustainable competitive advantage (Lavine 2014).Indeed,some
scholarshave asserted thatsuch a strategy isessentialfor firms competing in multiple inter-
nationalmarkets (see Raisch and Birkinshaw 2008).At the same time,the attention-based view
(ABV) of the firm has cautions potentialeffects of such activities and the unbalanced attention to
markets (see Ocasio 1997).That is the scenario where paying too much attention to activities in a
new market may take away some attention and resources from existing markets.
The ambidexterity and ABV concepts have largely been treated in isolation despite clear poten-
tialbenefits of cross-fertilization.The existing literature has failed to adequately explore the pos-
sible linkages and potentialintegration ofthe two concepts.Although organizationalexpansion,
exploitation and exploration activities entailthe allocation oftime and resources to more than
one competitive arena,e.g.,home and overseas markets (Jones and Coviello 2005),scholars have
surprisingly devoted little attention to how unbalanced attention and resource allocation to both
domestic and internationalexpansion could potentially lead to competitive disadvantage or in the
worst case scenario business failure.
Although attention allocation is notnew to strategy and managementscholars (Simon 1947),
it remains unclear how unbalanced attention to two or multiple markets can play a role leading
to divestment or business failure.Divestment may be prompted by poor performance of a subsid-
iary (Boddewyn 1979).This meansthattransnationalcorporationswould considerdivestment
when a subsidiary continuously postsfinanciallosses.It is not uncommon forhuge financial
investments in a new market to drain financialresources from existing markets.Declining finan-
cial capitalfor the subsidiaryor the group givesfirms the incentiveto divest(Nyuur,
Amankwah-Amoah,and Osabutey 2017).These financiallosses could be due to attention deficits
or poor understanding of the markets concerned.It could also be as a result of poor strategic fit.
CONTACTJoseph Amankwah-Amoah [e-mail] BusinessSchool,Universityof Kent,
Chatham,Kent,Canterbury,ME4 4TE.
ß 2019 Taylor & Francis Group,LLC
INTERNATIONAL STUDIES OF MANAGEMENT & ORGANIZATION
2020,VOL.50,NO.1, 43–56
https://doi.org/10.1080/00208825.2019.1703377

Indeed,firms are likely to divestforeign operations when they observe incongruentstrategic
directionsleading to difficultcoordination between headquartersand subsidiaries(Boddewyn
1979).These often cause misallocation and misapplication of corporate resources and create stra-
tegic overlaps (Capron,Mitchell,and Swaminathan 2001).When entry into a new international
market continue to drain firm resources without the necessary short- to long-term returns divest-
ment becomes a strategic option for firms.
The primary purpose of this article is to examine how unbalanced attention and resource allo-
cation to both domestic and internationalexpansion could lead to divestmentor business exit.
Specifically,we examine how environmentaland management-related factorsinteractto create
conditions for unbalanced attention and resource allocation leading to divestment.While early
internationalbusinessresearch concentrated on investmentsby developed-country MNEsinto
othercountries(Aharoni,Tihanyi,and Connelly 2011),emerging marketmultinationalenter-
prises(EMMNEs) are increasingly finding internationalopportunitiesin developed countries.
Based on this,we demonstrate how EMMNEs could learn from developed country multinationals
to improve their resilience and survivability.In developing the arguments,it is contended that
expansion into multiple marketscould lead to unbalanced attention and resource deployment
leading to overallunderperformance ofboth the focaland othermarket(s).Such a situation
could,inadvertently,result in the neglect of existing markets (Amankwah-Amoah 2014,2016).
To illustrate the theoreticalanalysis,we examine the expansion ofBritish supermarketTesco
in both the UK and US markets.We selected this case partly because it provides unique insights
into the processes and outcomes ofthe expansion ofthe operations ofMNEs. We also examine
how the firm-leveland environmentalfactors eventually contributed to divestmentfrom the US
market.In attempting to resolve this theoreticaldeficit,we integrate insights from the dynamic
capabilities perspectives (Teece,Pisano,and Shuen 1997),the ABV of the firm (Barnett 2008) and
OA (Tushman and O’Reilly 1996)to develop a perspective ofhow unbalanced attention and
resource allocation to both domestic and internationalexpansion could lead to
underperformance.
We presentour arguments in four sections.First,we provide a briefreview ofthe literature
on the ABV and OA.Second,we discuss the research methodology.Third,we utilize the caution-
ary tale ofexpansion by Tesco in the both the UK and US markets to illustrate the theoretical
analysis.Finally,we set out the implications of the analysis for theory and practice.
An ABV and OA: a conceptual integration
Our argumentsare grounded in the ABV,dynamic capabilitiesand OA literatures.Following
Ocasio (1997,189)we define organizationalattention as“the noticing,encoding,interpreting,
and focusing oftime and effortby organizationaldecision-makers.” Attention isviewed asa
scarcestrategicresourcethat can be deployed toattend to eventsand develop solutions
(Hilgartnerand Bosk 1988).However,organizationalattention isdispersed acrossdecision-
makers within the firm’s context and activities (Hoffman and Ocasio 2001).Anchored within the
attention-based perspective (ABP) is the principle of selective attention which contends that firms
and industries “willselectively attend to some externalevents while ignoring others” (Hoffman
and Ocasio 2001,415;Ocasio 1997).Existing theories ofinternationalbusiness can be advanced
by integrating choices made by decision makers with bounded rationality (Aharoni,Tihanyi,and
Connelly 2011).It has been suggested that decision-makers’ability to act is often constrained by
limited information processing capacity and information overload,which leads to some changes
in the externalenvironment going unheeded (see Barnett 2008).
Prior research has demonstrated thatdivided attention is more likely to result in limited and
inadequate attention to opportunities in two or more markets (see Hoffman and Ocasio 2001).
Under conditions ofexpansion into multiple markets and arenas,some events may attractthe
44 J. AMANKWAH-AMOAH AND E.L. C. OSABUTEY

full attention oftop executives,whereasothersmay go unheeded (McMullen,Shepherd,and
Patzelt2009;Hoffman and Ocasio 2001).Managers may also be blind-sighted to market(s) as a
result of inadequate attention.Strategic decision-makers may consequently and inadvertently end
up ignoring pertinentnationalor culturaldifferences thatcould eventually lead to business exit
(McMullen,Shepherd,and Patzelt 2009).Inadequate attention to each market may stem from the
firm overstretching its competences and capabilities into new geographicalspheres where ithad
limited knowledge and expertise (see Ocasio 1997).Nationalculturaldifferencesinfluence the
managementprocess necessary for organizationalsuccess.Managers can use culturalprofiles to
understand the motivations of consumers in a given country.A supermarket,for example,needs
to conduct adequate research about the culture and shopping habits in a country in order to be
successful(Deresky 2014).
A stream ofresearch has also indicated thatcross-culturalmisunderstanding is likely to stem
from inadequateattentionthat could hamperresourceallocation(Cavusgil,Knight, and
Riesenberger 2012).In essence,motivations and expectations may be misconstrued.This could lead
incongruentmarketing and merchandizing efforts.Such misallocation offinancialresources could
lead to operations at home suffering from attention deficits because executives,inadvertently,focus
on foreign growth and new market expansion.Therefore,the pursuits of both domestic and foreign
expansion require a high level of expertise to achieve the right balance (see Amankwah-Amoah and
Debrah 2017;Ocasio and Joseph 2005).This requires in-depth understanding of how culturaldif-
ferences could influence consumer motivations and expectations.
One relevanttheoreticallens is the dynamic capabilities perspective.By dynamic capabilities,
we are referring to “the capacity ofan organization to purposefully extend,create,or modify its
resource base” (Helfatet al. 2007,1). Dynamic capabilities also relates to the capacity to adapt
through well-developed internalknowledge transmission,socialization and motivationalmecha-
nisms (Gooderham 2007).To an extent,dynamic capabilities can be viewed as a firm’s ability to
develop and managea network ofvaluechain activitiesin differentmarketsand locations
(Prange and Verdier 2011).
It has been suggested that a firm’s ability to compete and succeed in a foreign market is predi-
cated on itsability to acquire and utilize marketknowledge (Osabutey,Williams,and Debrah
2014;Sapienza etal. 2006).Thus,dynamic capabilities can equip firms with knowledge making
the firms resilient.By resilient,we are referring to firms’ability to design robust systems to learn
and withstand environmentalupheavals,setback and failure in new markets (Lengnick-Hall,Beck,
and Lengnick-Hall2011).Becominga resilientorganization requiresstrategicresponsesto
changes in the business environment (Hameland Valikangas 2003).
Following Gibson and Birkinshaw (2004,375) we define OA as “an organization’s ability to be
aligned and efficientin its management oftoday’s business demands while simultaneously being
adaptive to changesin the environment.” Partly rooted in the notion ofambidexterity isthat
internationalization entails the ability to concurrently explore and exploit markets to deliver sus-
tainable competitiveness at home and abroad (He and Wong 2004).A centraltenet of this theory
is thatan ambidextrous firm should be able to engage,competitively,in both exploitation and
exploration activities in multiple markets (Amankwah-Amoah etal. 2019;Cao,Gedajlovic,and
Zhang 2009).Although there are competing demands for firms to spread risks,increase market
share and tap into opportunitiesin foreign markets,there isalso a need to ensure thatsuch
expansions do notdivertattention from domestic operations.Poorly strategized and/or imple-
mented internationalexpansion is likely to weaken competitive position athome (see Duhaime
and Grant1984).It is worth noting thatdeploymentof resources and capabilities to domestic
and internationaloperations are often inextricably linked to outcomes.Failure in one arena can
have devastating effects on the other.
The crux of our arguments is that expansion entails resource deployment and attention alloca-
tion to both the home and hostcountries.Inability to strike the rightbalance is more likely to
INTERNATIONAL STUDIES OF MANAGEMENT & ORGANIZATION45

affectthe business as a whole,ultimately,contributing to divestmentor exitfrom the market.
Figure 1 demonstrates the concurrentpursuitof domestic and foreign expansions and the pos-
sible effects for firms.We seek to fillthis gap in the literature by using the contrasting cases of
Tesco’s expansion in the UK and the USA.
Research methods
We adopted ahistoricalapproach which hasbeen found to beparticularlyeffectivewhen
exploring such complex internationalbusiness activities thathave transcended pastperiods with
antecedentsthathave effectson presentand future activities(Kotabe and Kothari2016).The
study relies on archivalrecords which refer to “documents made or received and accumulated by
a person or organization in the course ofthe conductof affairs and preserved because oftheir
continuing value” (Ellis1993,2). Indeed,archivaldata often representsa “criticaland under-
utilized research resource”which can beutilized byresearchersto develop and advancea
perspective on past events (Forbes and Kirsch 2011,589).The primary aim ofthis study was to
develop a new perspective on the subject rather than test theory and,as such,a single case firm
was considered suitable for producing a deep and rich understanding (Eisenhardtand Graebner
2007).The case ofTesco’sexpansion providesan opportunity to examine the firm’sstrategy,
decisions and processes.
Following Augier,March,and Marshall(2015),a rangeof sourceswereutilized to help
establish the evolution of the firm’s expansion,attention and resource deployments,motives and
consequences.The presentresearch drawsmainly from detailed examination ofTesco’sPLC’s
AnnualReportfrom 2007 to 2013,websites and statements.In addition,we examined historical
data,such as the press releases,investors’reports,online databases,newspaper reports and state-
mentsmadeby top executivesincludingthe CEO.To identify additionalinformation,we
Figure 1.A process model of ambidexterity in expansion.
46 J. AMANKWAH-AMOAH AND E.L. C. OSABUTEY