The impact of internationalization degree on cash levels: Evidence from Latin America

Although cash management has been extensively studied, the cash policies of multinational corporations (MNCs) outside of the U.S. market have been underexplored. We fill this gap in the literature by comparing the cash policies of MNCs to those of non-MNCs in a Latin American setting (Argentina, Brazil, Chile, Colombia, Mexico and Peru). Using different proxies for multinationality, we find evidence that the cash holdings of multilatinas are significantly higher than those of their domestic counterparts. Overall, given that foreign markets may offer the best investment opportunities for many MNCs, our results are consistent with the argument that multilatinas maintain higher cash levels to take advantage of the greater growth opportunities abroad. We contribute to the literature on cash management and international business by expanding knowledge regarding the efforts of MNCs in emerging markets. Our results hold following a series of robustness checks and endogeneity concerns.     

Portfolio characteristics of outward foreign direct investment and dynamic performance of emerging economy firms: An option portfolio perspective

In recent decades, emerging economy (EE) firms have taken an aggressive approach to international expansion. Drawing upon option portfolio theory, this study develops the characteristics of the OFDI portfolio based on two attributes of a portfolio and two dimensions of host environments. We examine how the characteristics of the OFDI portfolio dynamically influence the OFDI?performance linkage. Using a sample of 545 Chinese listed multinational firms during the period 2009–2018, we find EE firms’ OFDI contributes more to short-term performance when the OFDI portfolio features a higher overall quality of host institutions or a higher diversity of strategic factor market developments in the host countries. However, over a relatively long period, EE firms’ OFDI contributes more to long-term performance when the portfolio features a higher overall diversity of strategic factor markets and institutional environments. These findings offer further knowledge on the OFDI?performance link in emerging economies.     

Multinational Corporations and the Transforming Operational Environment in China

China and the multinational corporations (MNCs) have had a long period of close relationship. In locating operations in China, MNCs beneficially followed the principle of least‐cost location. However, China's economic and business environment has been undergoing a striking transformation. The Chinese economy is losing some of its beneficial emerging‐market traits. Many foreign business enterprises and MNCs have experienced deep erosion of profits. This article first focuses on the growing importance of China and the Chinese markets for foreign business firms and MNCs. The sheer size of the market naturally draws them in. Next, it dwells on the challenges that have evolved over the years and the budding new business environment, often referred to as “the new normal.” Many MNCs realize the need to adapt to the new operating environment in China. This article proposes a list of adaptive and coping measures for the foreign enterprises and MNCs. © 2015 Wiley Periodicals, Inc.     

Environmental sustainability practices and offshoring activities of multinational corporations across emerging and developed markets

Using panel data of 1080 multinational corporations (MNCs) from the United States, we examine the effects of environmental sustainability practices on the degree of firms’ offshoring activities. In addition, we disaggregate offshoring activities into their core components depending on whether or not the firm buys (inputs) or sells (outputs) and/or owns assets in a given country and examine the extent to which sustainability practices influence the different components of offshoring decisions. The results indicate that sustainability practices significantly affect offshoring activities of MNCs. In particular, we found that sustainable business practices matter when the firm sells goods or owns assets in the given host nation. Additionally, the results show that the sustainability–degree of the internationalization relationship is crucial for MNCs that have offshoring activities in advanced economies relative to those firms that have activities in emerging markets. Our results are robust to alternative explanations.     

Determining investment size and local embeddedness under host market uncertainty and growth rates

This study employs a growth options perspective to examine how multinational corporations (MNCs) design their investment attributes under the influence of host market uncertainty and growth rates. It specifically examines MNCs’ decisions on investment size and local embeddedness under host market conditions. Using data on Korean overseas manufacturing subsidiaries, we find that MNCs choose either more-local-embedded small investments or less-locally-embedded large investments under high demand uncertainty and GDP growth rates. We also find that this choice is moderated by host market political risk and competition. Our findings imply that MNCs consider both uncertainty-driven flexibility and growth rate-induced commitment when selecting international investment modes. This consideration allows MNCs to gain flexibility as well as an enhanced ability to expand in the future. This study contributes to the literature on real options and entry modes in the international business area by showing how host market conditions and investment decisions are related.     

Outward foreign direct investment and domestic innovation performance: Evidence from China

Recent years have witnessed substantial outward foreign direct investment (OFDI) from many emerging economies. Should the governments of these economies encourage OFDI in order to promote domestic innovation? Much OFDI by emerging economy multinational enterprises (EMNEs) has been undertaken to acquire strategic assets overseas, but do these acquisitions bring innovation benefits at home? The empirical analysis presented in this paper considers the effects of OFDI on regional innovation performance, using a panel of Chinese provinces, and finds that OFDI has a very significant impact on domestic innovation. Furthermore, we also identify three contingent factors – absorptive capacity, foreign presence, and the competition intensity of the local market – that moderate the impact of OFDI on innovation performance.     

Business innovations from emerging market countries into developed countries: Implications for multinationals from developed countries

This article addresses innovation and emerging‐market countries. Both are important topics in the business world today. The focus of this article is on the importance of innovation and market development in emerging‐market countries by Western multinational companies typically based in North America and Western Europe. The authors of this article argue that as Western multinationals innovate and develop emerging markets, this will give multinationals the opportunity not only to compete effectively in emerging markets but also to protect their home markets in developed countries. Implications for Western multinationals are discussed. © 2012 Wiley Periodicals, Inc.     

The demise of the American hegemony in international business research has been greatly exaggerated

The drivers for the internationalization of business teaching and research were multinational corporations, the Cold War, and the relative price advantage of non-America business schools. Yet, the internationalization largely failed to reflect local contexts. The consequent paucity of original local business thought, international or not, exposes non-American business schools to the raid of American-based massive open online courses which will prune off the mainstay courses at emerging market business schools. Deprived of a substantial share of their fee-paying students, the remaining docents at those schools will be less likely to publish altogether, including in fields that might sustain independent thought. Therefore, American-like international business research is likely to have a longer life, more narrowly focused on English-speaking countries and Europe, with even less of a contribution from emerging markets.     

Heterogeneity in OFDI by EMNEs: Drivers and trends of Chinese and Indian firms

Previous research has identified a distinction between the internationalization of emerging market multinational enterprises (EMNEs) and their advanced-economy counterparts. However, the question as to whether EMNEs conduct outward foreign direct investment (OFDI) in a uniform manner remains under-studied. Prior studies have grouped together all emerging markets but have ignored the essential heterogeneity of EMNEs that leads to their diverse OFDI patterns and behaviours. In this study, we illustrate the drivers and related phenomena of heterogeneity by exploring differences and similarities between Chinese and Indian MNEs’ OFDI activities, namely, investment destinations (i.e., advanced vs. emerging economies), the level of political relationships with host countries, industry sectors supported by institutional patronage, and the primary motivations of investment projects. We suggest that the heterogeneity in OFDI is the result of the institutional environment and the strategic priorities of the industry sector.     

From Voids to Sophistication: Institutional Environment and MNC CSR Crisis in Emerging Markets

Why do multinational corporations (MNCs) frequently encounter corporate social responsibility (CSR) crises in leading emerging markets in the new century? Existing research about institutional impacts on MNC CSR has developed a void-based account about how the flawed institutional system allows misdeeds to happen. But the fact that such misdeeds have turned into increasing CSR crises in the new century along with institutional change is rarely taken into account. This paper combines studies of institutional voids, institutional entrepreneurship, and stakeholder theory to develop a concept of institutional sophistication, which refers to both the top-down maturation of the regulatory system that standardizes firm behavior and the bottom-up diversification and intensification of grassroots initiatives that redefine stakeholder membership. Based on this concept, we developed a framework to comprehensively demonstrate how both institutional voids and sophistication drive the MNC CSR crisis in leading emerging markets. Empirically, we established an original database that includes 309 publicized CSR crises encountered by major foreign MNCs in China, India, and Russia, 2000–2011. Through a content analysis, the paper reveals six common sophistication processes that drive the MNC crisis across contexts and also specifies stakeholder strategies that make these processes happen and vary by social problems and national contexts. We also discussed the value of studying corporate social irresponsible behavior in understanding the institution–MNC relationship.     

Market entry of multinational companies in markets at the bottom of the pyramid: A learning perspective

Multinational companies (MNCs) can play an important role in poverty alleviation. The international business literature, however, lacks theoretical insight and systematic empirical evidence of MNCs entering low-income markets. Therefore, this study sheds light on the questions: How MNCs enter low-income markets? How MNCs operate? And how they gain knowledge in these markets? Using a multiple case study approach, we analyze MNCs with business activities in low-income markets by taking recourse to the internationalization process model of Johanson and Vahlne. The results reveal that companies develop knowledge by enlarging their mode of market commitment to a new level that exceeds local manufacturing and production facilities.     

Missing Links: Regional Reforms for Asia's Bond Markets

Recent empirical studies established that Australian multinational corporations (MNCs) have been unsuccessful in international markets and explained the reasons behind this lack of success. The purpose of this paper is to elaborate on issues that flow from this recent empirical work. We develop propositions to stimulate further research into the economic consequences of international diversification in the Australian context. We also discuss the implications of the evidence for managers of MNCs and industry policy.     

Ambidexterity in MNC knowledge sourcing in emerging economies: A microfoundational perspective

Innovation performance of multinational corporations (MNCs) derives from access to and utilization of a combination of explorative and exploitative knowledge across heterogeneous settings. These settings increasingly encompass flagship industries in emerging economies. There is limited research, however, that scrutinizes the processes of knowledge sourcing within such dynamic host environments, taking into account MNCs’ differing location capabilities. We draw on the concept of ambidexterity – the combination of exploration and exploitation – and the microfoundations approach to study eleven MNCs in the Bulgarian software development industry by focusing on their local R&D projects. We extend the explanatory capacity of ambidexterity at the micro level and clarify the relationship between exploration and exploitation by identifying four types of ambidexterity: global knowledge differentiator, global-local knowledge integrator, emerging local-global integrator, and local knowledge integrator. Our typology is underpinned by three specific dimensions of R&D capabilities: technical know-how, scope of expertise, and market potential.     

MNCs and local cross-sector partnerships: The case of a smarter Baltic Sea

Although cross-sector partnerships (XSPs) between multinational corporations (MNCs), governments and non-profit organizations are increasingly used to solve local problems and build responsible business, they have received limited attention in international business research. Because XSPs are vulnerable to conflicts and pose specific demands for subsidiary managers, it is critical to understand the integration mechanisms of XSPs that enhance their success. We study managerial sensemaking in an XSP formed to improve the environmental state of the Baltic Sea. Drawing from a cross-disciplinary literature review and insights from a case study we identify three kinds of integration mechanisms: resource mechanisms, ideational and social mechanisms, and organizational mechanisms. Our findings further imply that managerial “bricolage”, i.e. strategically combining resources at hand, is critical in enacting the integration mechanisms. The findings help to understand how integration and success of MNCs’ local partnerships may be increased.     

Relevant knowledge and recipient ownership: Chinese MNCS’ knowledge transfer in Africa

This paper examines emerging market multinational corporations’ (EMNCs’) knowledge transfer (KT) in emerging markets using case studies of Chinese MNCs (CMNCs) in Africa. CMNCs are found to transfer “relevant knowledge”, existing knowledge reconfigured so that recipients can apply it more effectively with less effort in the new context. Relevance is ensured through recipients exerting ownership of the KT process, influencing what knowledge is transferred and how it is transferred. We summarise EMNCs’ KT process in a “relevant knowledge recipient ownership model”. The model contributes to KT theory by refining and empirically testing a new type of knowledge – relevant knowledge – and a new transfer model – recipient ownership – associated with EMNCs. It leads to a “relevance-based view” in which EMNCs’ competitive advantage in emerging markets is significantly enhanced by knowledge relevance rather than superiority. This contributes to a better understanding of EMNCs’ competitiveness in emerging markets as created from distinct characteristics of their relevant knowledge (applicability, assimilability, affordability) and recipient-driven transfer (selection, scrutiny and synthesis).     

Corporate name change: Investigating South African multinational corporations' postacquisition performance

It has long been argued a multinational corporation (MNC) needs to be able to leverage the firm‐specific advantages to overcome the liability of foreignness in the host markets so the MNC can enjoy the benefit of internationalization while competing with the indigenous firms in the host market. However, emerging‐market MNCs, which have the nontraditional ownership advantages, such as flexibility and cost‐advantage, may require different international strategies to realize the anticipated profit in their cross‐border acquisitions. This article takes an organizational identity approach to study how the foreign identity of South African MNCs constitutes the source of liability and negatively impacts their postacquisition performance. We find South African MNCs that adopted a corporate name change for their acquired subsidiaries experienced worse postacquisition return on asset than the South African MNCs who did not do so. On the other hand, facing a large economic distance, South African MNCs that facilitate the acquired subsidiary corporate name change enjoy better postacquisition performance.     

Uncovering neglected success factors in post-acquisition reverse capability transfer: Evidence from Chinese multinational corporations in Europe

Based on empirical evidence of four Chinese firms’ outward mergers and acquisitions (M&As) to European countries, this paper examines previously neglected key success factors in post-acquisition reverse capability transfer. We identified three such factors: home-country advantage, motivation-oriented complementary resources, and acquirers’ attractiveness, and argue that post-acquisition capability transfer is affected by not only the process factors that occur during the post-acquisition phase but also by pre-acquisition status factors. In this way, the paper enriches the process perspective of M&A, thereby contributing to the international M&A literature and to studies of multinational corporations (MNCs) from emerging economies.     

Dual-edged tools of trade: How international joint ventures help and hinder capability building of Chinese firms

Forming international joint ventures (IJVs) with multinational corporations (MNCs) from advanced economies has been widely adopted by firms in emerging economies as an organizational approach to building up their innovative capabilities. In this paper, we emphasize that such an approach has both advantages (knowledge transfer from MNCs) and disadvantages (overdependence upon MNCs and reduction of innovation incentives) in the capability building of indigenous firms. Utilizing a longitudinal dataset consisting of 474 industries in China during 1998–2002, we find supporting evidence for the co-existence of the positive and negative impacts of IJVs. Specifically, we find that IJV presence has an inverted U-shape impact on innovative capabilities of indigenous firms; such an impact is stronger in industries with low (versus high) technology gap. We discuss the implications of our findings for research, managerial practice, and government policy.     

How emerging market governments promote outward FDI: Experience from China

Large scale outward foreign direct investment (OFDI) by emerging market enterprises has become common in today's business world. Nested within the political economy perspective, this article elucidates why and how emerging market governments enthusiastically stimulate OFDI. Drawing upon our detailed analysis of the Chinese context, we developed the logic that OFDI promotion policies set by emerging market governments are economically imperative and institutionally complementary to offsetting competitive disadvantages of emerging market enterprises in global competition. This study presents the governmental institutions that impact Chinese OFDI, discusses evolutionary changes of OFDI policies, and describes current policies and measures that stimulate Chinese companies to expand into the global market. This article concludes with theoretical and managerial discussions wherein we call for convergence between two seemingly paradoxical views – institutional escapism and governmental promotion – presently used as an institutional logic explicating international expansion of emerging market enterprises.     

International human resource management strategies of Chinese multinationals operating abroad

Strategic international human resource management (SIHRM) is crucial for the effective leveraging of human resources in organizations to achieve the desired business strategies. There is a rich collection of studies on western multinational corporations (MNCs) in China, but few studies that explore the SIHRM of Chinese MNCs operating overseas. This study utilizes cross-level, in-depth interviews to analyse SIHRM of three large Chinese multinationals. The paper contributes to literature by addressing two contextual SIHRM issues, namely the characteristics of the SIHRM for Chinese multinationals and how their SIHRM orientation facilitates their international investment and operation. The findings indicate that organizational transformation is the starting point for latecomers matching their international HRM strategies. Their SIHRM approaches, such as forming learning organizations, reliance on host-country nationals, reconciling both home and host-country effects and promoting ‘best practices’, facilitate their international operations.