Actualization of growth potential in international joint ventures: The moderating effects of localization strategies

We employ the growth options perspective to examine how multinational corporations’ localization strategies facilitate the actualization of growth potential preserved in international joint ventures (IJVs). This study uses a data of Korean IJVs; it accounts for the endogeneity associated with a firm’s decision to exercise growth options through a two-stage model. We find that the enlarged IJVs, via conversion to majority ownership under reduced host market demand uncertainty, performed better. We also find that the realized growth potential are larger for IJVs that have more local business ties with other firms, or that hire more local employees. This study contributes to the growth options literature by examining the strategies that enable firms to exploit evolved exogenous uncertainty, and thus actualize upside growth potential.     

国际碳贸易价格波动对可再生能源投资的影响机制——基于实物期权理论的分析

有效利用可再生能源是促进节能减排实现绿色循环经济的重要手段。目前,可再生能源技术成本仍高于传统能源技术,因而需要获得额外的经济激励以增加其投资。《京都议定书》所建立的国际碳贸易体系是支持发展中国家实现碳减排的重要机制,但该贸易体系发展前景不明确,这将深刻影响我国可再生能源投资。本文分析和揭示了国际碳贸易体系的不确定性对可再生能源投资决策的影响,在此基础上提出了分别存在于可再生能源项目前期规划阶段和项目建设阶段的增长期权和延迟期权;通过构建两阶段期权模型研究国际碳价格波动下企业延迟投资的灵活性,并量化确定可再生能源项目投资期权价值,采用Monte-Carlo仿真分析法进一步验证模型,推导得出国际碳价格波动对可再生能源项目投资的作用机制。     

Towards a behavioral theory of MNC response to political risk and uncertainty: The role of CEO wealth at risk

Drawing on behavioral agency research, we examine how CEO equity wealth at risk of loss in the form of restricted stock influences the response of multinational corporations (MNCs) to political risk and political uncertainty. In a sample of 14,765 cross-border greenfield investments and full acquisitions announced by U.S. firms from 2004 to 2016, we find that while greater CEO equity wealth at risk of loss in the form of restricted stock strengthens the (positive) relationship between political risk and MNCs’ choice of greenfield investments over full acquisition, CEO equity wealth at risk of loss does not influence the relationship between political uncertainty and MNCs’ choice of greenfield investments. We contribute to international business theory by introducing a behavioral theory of MNC responses to adverse host country political environments. As such, unlike previous studies that have treated political risk and political uncertainty interchangeably, our study highlights the need to differentiate between political risk and political uncertainty as related yet distinct concepts.     

The effect of host country Internet infrastructure on foreign expansion of Korean MNCs

This study examines the effect of host country Internet infrastructure on a multinational corporation (MNC) foreign expansion. Using Heckman’s selection model on a sample of 2589 subsidiaries of 487 Korean MNCs between 1990 and 2011, we find that host country Internet infrastructure is important in MNC expansion decisions. In addition, we find that a well-developed Internet infrastructure within a host country leads to more investments from MNCs producing consumer over industrial goods and is more attractive to domestic market followers than market leaders. We find that the host country’s Internet infrastructure is important for an MNC foreign expansion decision, suggesting that efficient communication within an MNC is critical in coordinating globalized MNC subsidiary operations.     

Interstate competition in the US South for South Korean auto investments: a US perspective

Multinational corporations (MNCs) recognize the importance of optimizing their international site-selection decision(s). Similarly, host regions recognize the potential economic benefits of securing ‘greenfield’ investment projects. Thus, there is intense intra-regional competition to secure ‘trophy investments’. The extant research offers little insight to the very final stages of the site-selection negotiation process. No previous study has examined in detail the final stages of international site-selection negotiations involving South Korean MNCs. This paper focuses on the role of US government officials and Southern state stakeholders seeking to secure investments by Hyundai Motors and Kia Motors. It offers an exploratory eclectic theory to explain site-selection decisions.     

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.     

Multinational operational flexibility,within-network redundancy,and downside risks and divestment rates of international investments

This study takes the multinational operational flexibility perspective anchored in real options theory to examine how intra-firm connectedness and switchability affect the performance and longevity of international investments. We postulate that more extensive intra-firm trade connectedness, along with multinationality, reduces downside risks and divestment rates. Through an empirical examination of a large sample of Korean multinational corporations, we find that more extensive trade ties within the same MNC network are negatively associated with downside risks. We also find that decreased downside risks decrease divestment rates. Furthermore, we observe that these impacts of intra-firm trade ties are more salient when more in-network manufacturing subsidiaries produce the same product type and operate in negatively correlated countries in terms of labor costs. These findings indicate how the flexible configurations of international investments influence their performance and longevity.     

Strategic Investment Decisions by Western Firms in Ukraine

The transition to free market economy in Ukraine has the country entering a period of discontinuous change. Much of the necessary infrastructure for a free market economy is missing. Enforced segegation from the rest of the developed world has resulted in inherently diiferent socio-cultural beliefs. The economy is in crisis. There is a lack of reliable statistical data, invalidating the use of traditional matrix-based planning tools. Yet there has been a significant level of Western investment in Ukraine since liberalisation In many instances, this has involved "high commitment" modes of operation (Johanson and Vahine 1977). Research into international entry and expansion decisions from macro-economic, strategic, behavioural and marketing perspectives differs as to the relative weight which it accords to exogenous and endogenous influences. However, a recurrent theme is that uncertainty increases risk. Traditional "stage" models of internationalisation would suggest that the level and nature of foreign investment in Ukraine is counter-intuitive, given the levels of uncertainty. This paper explores the entry and expansion decisions which Western firms are making in Ukraine. It seeks to understand why firms make "high commitment" investments in markets in transition. Moreover, it looks at the ways in which firms use relationships in the home and host market to reduce the risks of strategic investment decisions in Ukraine.     

Multilevel determinants of subsequent FDI in China

Among developing countries, China is the world's largest foreign direct investment (FDI) destination. A significant portion of the FDI in China comes from multinational corporations' (MNCs) subsequent investments of retained earnings or additional capital contribution. However, the characteristics of MNCs' subsequent investment have not been systematically studied. This study attempts to examine MNCs' subsequent investment in China both conceptually and empirically. Conceptually, the study approaches three levels of determinants: firm, location, and international, within an integrated model. Empirically, the study considers whether origin, experience, initial location, and other related factors significantly affect subsequent investment of MNCs after their initial entry into the Chinese market. Through empirical analyses, this study identifies some statistically significant factors around MNCs' subsequent investment decisions in China. © 2008 Wiley Periodicals, Inc.     

Frequency of international expansion through high control market expansion modes and interlocked directorships

This study investigates director interlock as a mechanism by which an MNC learns and adopts high control market expansion modes that other MNCs use. Using data on greenfields and acquisitions by S&P 500 firms in the period 2003–2010, we find a significant relationship between the use of high control market expansion modes by interlocked MNCs and the frequency of international expansion of a focal MNC through such modes in unrelated industries, with the relationship stronger for the depth of interlocked director experience. The findings contribute to the literatures around the frequency of international expansion and microfoundations of international strategy.     

When are venture capital projects initiated?

This paper examines how public market information relates to the initiation of venture capital projects. Analysis of venture capital investments in the U.S. between 1980 and 2007 indicates that venture capitalists tend to defer new investment projects in target industries with substantial market volatility. This delay effect of market volatility is reduced if the target industry experiences high sales growth or if competition among venture capitalists is intense in the target industry. The paper provides further evidence to corroborate the view that venture capitalists rationally respond to market shifts in their investment decisions.     

International entrepreneurial marketing strategies of MNCs: Bricolage as practiced by marketing managers

The extant research lacks information on entrepreneurial marketing in large international firms. This study explores the international entrepreneurial marketing strategies of multinational corporations (MNCs), and its results reveal that MNC marketing managers use bricolage to develop international entrepreneurial marketing. A novel finding of the study is that the international entrepreneurial marketing strategies of MNCs include co-innovation, accelerating customer value, and international expansion based on regional market leadership. Marketing managers use both parallel and selective bricolage in their international entrepreneurial marketing. Environmental uncertainty and entrepreneurship culture are important drivers of the implementation of bricolage to develop international entrepreneurial marketing. The research findings can inform MNC management of the options available to utilize corporate venturing to facilitate bricolage and in turn to realize international entrepreneurial marketing strategies.     

Does Post‐ante Investment Experience Matter? Lessons from FDI in China

Ample efforts of FDI literature have researched on the motives and determinants of FDI flows based on ex‐ante conditions. Little has been studied with regard to the effects of post‐ante behaviour in determining future investment decisions. Post‐ante experience of FDI decisions with regard to foreign investors’ satisfaction or dissatisfaction and future profit expectations on recurrent decisions are critical. This paper, thus, attempts to investigate FDI in the context of an emerging market environment with emphasis on how environmental and institutional factors and the micro‐firm effects of how investors’ post‐ante views on profits expectations and investment experience would affect MNCs’ decisions on recurrent investment and firm relocation. Empirical results show that decisions in the short and long run were affected differently by the factors under study. Specifically, the short‐run decisions were more affected by profit expectations while the long run by post‐ante experience on investment satisfaction/dissatisfaction and environmental and institutional determinants.     

The interplay of need and opportunity in venture capital investment syndication

This study examines the syndication of investments novel to a VC firm as a function of the firm's need and opportunity to do so. We distinguish two types of uncertainty that firms face when considering novel investments: egocentric, pertaining to making the right decisions, and altercentric, pertaining to being evaluated as a potential partner on the investment. Whereas the former increases the firm's need to syndicate the investment, the latter reduces the firm's opportunity to do so, making it contingent upon the firm's status and reputation for attracting potential partners. Using data on first-round venture capital investments, we find that novel investments are more likely to be syndicated. Moreover, this relationship is stronger for firms with higher status and weaker for firms with higher reputation. These results highlight a relational aspect of uncertainty, inherent in a particular VC firm — investment dyad, and suggest that status and reputation play different roles in aligning the need and opportunity to syndicate novel investments.     

Valuation of brand equity and retailer growth strategies using real options

In marketing, significant attention has been devoted to the study of drivers and outcomes of strategic flexibility drawing on real options theory. However, research that quantifies the specific value of flexibility reflected in a bundle of strategic real options is lacking. To remedy this gap, we develop a real options-based framework that takes account of brand expansion and extension options to value brand equity and retailer growth strategies. We show how to value the bundle of strategic real options associated with a flexible marketing strategic vision and how to assess the growth strategies related to the corporate brand of an international retailer. We apply our method to estimating the brand equity of Starbucks both under growth and adversity conditions. The results reveal that our method can more reliably incorporate the growth potential of the brand under uncertainty conditions. Comparisons with other brand valuation approaches are discussed. Our study helps clarify the links among management’s strategic plans, brand-based marketing strategies and share price, and allows to better monitor the impact of retailer strategic choices on long-term brand equity value.     

Safety risk and international investment decisions

We identify and demonstrate the merit of a novel institutional factor, safety risk, which likely affects multinational corporations’ (MNCs’) international investment decisions. Safety risk refers to the extent to which security and physical well-being are endangered due to normalized aggression and criminality in society. Despite concerns from executives and policymakers, safety risk has attracted little research attention. We validate a safety risk measure and evaluate the construct’s effect on MNCs’ investments. The findings indicate that countries’ safety risk deters MNCs from investing. Further, in post hoc analyses, firms’ prior experiences with safety risk and countries’ private security investments moderated this relationship.     

Real options and the theory of foreign direct investment

We extend applications of real options theory to foreign direct investment (FDI) research regarding choice of location and choice of market entry mode under uncertainty. Our study is motivated by the regional configuration of multinational enterprises (MNEs), as well as observed deviations from the stages model in internationalization theory. We shed light on these issues using real option modeling and computer simulations. The results suggest that from the standpoint of pursuing business opportunities and generating real options, building a subsidiary in a nonhome region could be more beneficial than in a home region. However, high option exercise cost may reduce the option value of a nonhome-region location. Our models also imply that choice of entry mode depends on the magnitude (high vs. low) and the type (exogenous vs. endogenous) of uncertainty. When uncertainty is high and endogenous, MNEs may prefer high-commitment entry modes because they contribute to the reduction of uncertainty and provide valuable growth options.     

Entry decisions of multinational firms: The role of competition threats

How do multinational corporations (MNCs) influence each other's foreign entry decisions? In this paper, I examine the interactions in MNCs' entry decisions by investigating how MNCs respond to competition threats from their multinational competitors. The analysis shows that entry threats anticipated through foreign investment news encourage MNCs to take preemptive actions by entering the same city after the news, while the actual entry of competitors and the anticipated expansion of incumbents discourage more entry. Incumbent MNCs, on the other hand, respond to entry threats by upgrading productivity. The effect of competition threats depends on each MNC's own existing activity and production network within the region. The effect of entry threats increases with the size of threats, measured by the investment value, expected employment and expected output, the influence of the news, the credibility of the news and the local market orientation of the threats. Across industries, MNCs' entry decisions are found to respond to only the actual entry—not anticipated entry—in vertically linked industries. Further, by exploring the time path, I find that MNCs' preemptive entry is only taken before FDI news expires. The main results are robust to IV analyses that explore unique information from news source and news content.     

The role of market orientation,relational capital,and internationalization speed in foreign market exit and re-entry decisions under turbulent conditions

Firms’ internationalization strategies can vary with changing environments. Occasionally, a firm may choose to re-enter a foreign market it had abandoned in the past if environmental conditions have improved. The present study provides insight into the foreign market exit and subsequent re-entry processes. Specifically, we utilize the strategic flexibility perspective to investigate the impact of market orientation, relational capital, and internationalization speed on market exit and re-entry decisions under turbulence in a host market. Using a sample of 156 Turkish firms that operated during the Arab Spring in the Egyptian market between 2010 and 2015, we find that the market-oriented firms are more flexible in their market exit decisions than less market-oriented organizations. In addition, relational capital specific to the host country has a negative impact on market exit decisions under conditions of political conflict. The results also suggest that strong ties with partners in the host country increase the propensity to re-enter the market.     

Institutional conditions,economic policy uncertainty and foreign institutional investment in China

This paper investigates the influence of host and home country institutional conditions on foreign institutional investment. Utilizing longitudinal and multilevel data on foreign institutional investment in Chinese listed firms between 2004 and 2017, we document that foreign institutional investment decreases with increasing economic policy uncertainty in the host nation. We also find that foreign institutional investors respond more strongly to local economic policy uncertainty when their home nations are closer to China, are culturally and administratively similar to China, operate a smaller domestic stock market, and have weaker minority shareholder protection. The impact of economic policy uncertainty on foreign institutional investment is also stronger when the host nation institution is more developed and open.. Moreover, we reveal the mediating role of stock market volatility on this relationship. Overall, we document that foreign institutional investment is not only shaped by institutional conditions in the host country but also influenced by home country characteristics that define geographical and institutional distance between home and host nations.