Traces of foreign retailers – local knowledge-spillovers and strategy adaption within retail internationalization

ABSTRACT

Since the 1990s certain retail companies have evolved into some of the largest and most dispersed transnational corporations worldwide. However, within the ‘new era of retail distribution’ retailers are increasingly divesting from foreign markets. This study addresses these recent and under-explored dynamics by revealing the traces transnational retail corporations leave after divesting from a country. It explores the aspect of learning of host market retailers from entering transnational corporations (TNCs) and examines how foreign knowledge is adjusted in the business strategies of these local actors. It takes a fresh empirical slant using qualitative interviews with host market retail managers including former TNCs’ subsidiaries operating under domestic ownership. The emerging economy of Turkey serves as an empirical example. The paper finds that foreign retailers transfer firm-specific resources to the local retail through (1) demonstration and imitation, (2) vertical linkages with suppliers, (3) joint ventures and acquisitions, and (4) labor turnover of TNC trained staff. Certain successful local companies adjust the foreign knowledge based on their local knowledge and strengths, their high level of flexibility and deep territorial embeddedness, and create ‘hybrid’ business strategies. These findings suggest that dynamic capabilities are crucial to successful retailing in an international competitive environment. TNC managers should work with local staff in partnerships of equals and managers of locally operating companies should incorporate new knowledge by hiring TNC trained staff.

KEYWORDS:

• Retail internationalization
• service sector
• knowledge spillovers
• foreign direct investment
• turkey

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. For the sake of completeness, Jacobs Spillovers (Jacobs 1969) should be mentioned. Jacobs noted that the most important knowledge transfers come from outside a company’s core industry. Despite the importance of interindustry spillovers, Jacobs Spillovers are not discussed in this study as this study concentrates on dynamics within the grocery retail sector.

2. Due to its very early in- and divestment (1954–1975) Migros is a very particular case among the retail TNCs and will not be analyzed as part of the recent divestment wave but as a local competitor of the transnational retailers.

3. Further evidence includes the CEO of Bizim Toptan (the biggest Turkish wholesaler) and the purchasing director of Migros who were trainees in Real. Turkish Şok hired a Turkish CEO and sales and operational director formerly working in French Carrefour and its current buying manager was trained at the Spanish DIA. The new CarrefourSA director was the CEO of Metro Cash and Carry (interview ex-manager TNC 1). The current dry food group manager of BİM was educated at Metro Cash and Carry. This list could be continued.

Additional information

Notes on contributors

Inka Gersch

Inka Gersch holds a diploma in Region Studies and is currently employed as a Research Associate in the Working Group on Economic Geography at the University of Osnabrück.