Disentangling the effects of domestic corporate political activity and political connections on firms’ internationalisation: Evidence from US retail MNEs

Scholars are increasingly investigating the implications of firms’ domestic corporate political activity (CPA) and political connections on their internationalisation prospects. In this paper, using insights from the resource dependence theory, we argue that domestic CPA and political connections developed within the home country have contrasting effects on firms’ international expansion, such that, while domestic CPAs (mainly, lobbying and campaign contributions) facilitate internationalisation, political connections deter internationalisation. We also argue that this relationship is moderated by firms’ international experience and product diversification. We test our hypotheses using a panel dataset comprising 38 retail Multinational Enterprises (MNEs) originating in the United States (US) whose activities we traced over the 16-year period 2003?2018. Our findings support our hypotheses.     

Engaging informal institutions through corporate political activity: Capabilities for subnational embeddedness in emerging economies

This study examines how multinational enterprises (MNEs) organize internally to enhance subnational institutional fit in new frontier developing economies. We consider how corporate political activity (CPA) can facilitate local embeddedness by engaging informal institutions and nonmarket stakeholders at local community level. We apply an exploratory, qualitative, multi-case study approach to six MNEs in Uganda’s electricity generation sector. The findings suggest that in markets like Uganda, MNEs depend on being bridged with subnational informal institutions such as tribal, social, and religious norms and grassroots political networks. Such bridging in turn positions these MNEs to contribute to developmental processes by integrating recognizable informal institutions into grassroots projects.Drawing on institutional theory and an organizational capabilities perspective, we identify the diverse bridging capabilities that enable MNEs to successfully embed locally, thereby simultaneously pursuing business objectives and achieving societal relevance.     

The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)

Using a sample of 787 Japanese MNEs operating in 60 countries from 1996 to 2010, this study examines the impacts of MNEs’ three most commonly observed forms of non-conventional outbound FDI (i.e., as a means to counter trade barriers, to achieve a financial hedge, or to obtain tax breaks) on domestic employment levels of MNEs at home. We build on a conceptual classification of ‘motivation-activity’ of MNEs as a theoretical framework, and evaluate the impacts of MNEs’ non-conventional outbound FDI on their domestic employment levels in relation to the MNEs’ specific combination of ‘motivation’ and ‘activity’ as they conduct outbound FDI in host countries. The 3SLS regression results show strong evidence that non-conventional outbound FDI in core business activities reduces MNEs’ domestic employment levels when the investment is primarily for responding to country-specific conditions, such as circumventing host country restrictions (e.g., FDI to counter trade barriers) or escaping from home country restrictions (e.g., FDI for tax incentive packages), while FDI in non-core business activities (e.g., FDI for financial hedging or FDI in tax havens) has either a positive or insignificant effect on MNEs’ domestic employment levels depending on whether it aims to develop FSAs or not. We conclude the study with public policy implications from these findings.     

Multinational enterprises’ risk mitigation strategies in emerging markets: A political coalition perspective

This paper contributes to the IB literature by investigating MNEs’ risk mitigation strategies in emerging markets. Drawing on institutional perspectives and March’s theoretical concept of forming a ‘political coalition’, we propose that risk mitigation cannot be limited to passive compliance and/or demonstrating good corporate behavior, but should extend to collective efforts by building a political coalition and working with key stakeholders to manage potential risk and obtain favorable outcomes in complex institutional environments. In considering MNEs in contemporary China and India, we offer different types of risk mitigation strategies under various institutional contexts and a framework for future research.     

Multinational Enterprises’ Entry Mode Strategies in Syria and Jordan: The Impact of Ownership Advantages

This study addresses the issue of ownership advantages affecting multinational enterprises’ (MNEs) entry mode strategies in developing countries. Although a few studies have focused on such effects, very little attention has been devoted to the ownership advantages generated from the institutional environment of MNEs’ home countries. To bridge this gap, this study concentrates on three types of ownership advantages: intangible asset advantages (IAA), advantages of common governance (ACG), and home‐country‐specific advantages (HCSA). Using a sample of 303 foreign affiliates, this study empirically examines the choice of MNEs between a wholly owned subsidiary (WOS) and a joint venture (JV). The data were collected from senior executives of MNEs’ subsidiaries operating in Syria and Jordan. The findings of this study reveal that MNEs’ choice of entry mode strategies is significantly influenced by intangible asset advantages, advantages of common governance, and home‐country‐specific advantages. Hence, senior executives perceiving an increased importance of these assets will opt for a WOS rather than a JV when entering a new market in the Middle East. © 2015 Wiley Periodicals, Inc.     

Back to roots: TMTs’ country-specific experience,FDI preference,and political center favoritism

This paper investigates how the origin experience and work experience of top management teams (TMTs) affect foreign direct investment (FDI) decisions of multinational enterprises (MNEs), drawing on learning theories and social capital view. Using data from Standard and Poor’s firms operating in China during 2014–2016, we find that TMTs’ country-specific origin experience and work experience have a positive impact on the extent of FDI in the focal country, while we find that the former has a greater impact. Consistent with the consideration of being deeply anchored in the specific country, we find that TMTs with origin experience, relative to work experience, are more likely to choose FDI locations in the political center. We further find that the effect of origin experience on the extent of FDI and the preference for political centers will be more pronounced for MNEs with low levels of profitability. This study contributes to the literature on international business and provides practical implications for international expansion.     

The effect of home country characteristics on the internationalization of EMNEs: The moderating role of knowledge stock

This paper examines the effect of home country characteristics on the internationalization of emerging market multinational enterprises (EMNEs). Drawing on the institution-based view (IBV), we argue that institutional, political, and social characteristics will positively relate to the internationalization of EMNEs. Further, drawing on the knowledge-based view (KBV), we also argue that a firm’s knowledge stock (KS) will positively moderate the aforementioned relationship. Our research setting involves the incorporation of primary data collected from Iranian multinational enterprises (MNEs) operating in the food and beverage industry. The results provide support for the hypotheses that home country characteristics positively impact the international growth of EMNEs but this does not lead to their further expansion. Also, supported was the hypothesis that EMNEs' knowledge stock positively moderates the relationship between home country characteristics and their international growth. These findings not only contribute to the current knowledge about the drivers of EMNE’s internationalization but also stress upon the idiosyncratic role of home country institutions and the impact of knowledge-specific capabilities on the internationalization of EMNEs, their international growth, and expansion.     

Domestic firms competing with multinational enterprises: The relevance of resource-accessing alliance formations

The literature includes several papers that compare multinational enterprises (MNEs) to local firms along several dimensions such as financial strength or production capacity. Nevertheless, the focus on how latter firms compete against the former is often missing in the literature; local firms are typically seen as inferior in terms of resources and thus, unable to compete against MNEs. This paper aims at revisiting this competitive ‘battle’. Through a case-based design in a ‘multinational’ domestic market that seems to favour MNEs, we explore how local firms respond to MNEs’ purported superiority. Findings indicate that local firms respond through alliance formations that enable them to access fitting resources and counter ownership advantages of MNEs. Therefore, resource-accessing strategies spearheaded by local firms suggest that ownership advantages should not be inherently translated into competitive advantages for the MNEs. Implications for international business are discussed and avenues for further research are suggested.     

An internalization theory perspective on the global and regional strategies of multinational enterprises

Many multinational enterprises (MNEs) claim to be pursuing a ‘global strategy’, but the majority of MNEs is not global, in the sense that these firms cannot emulate their domestic success outside of their home region. This inability is largely caused by compounded distance among regions and can be mitigated in part, by infusing a regional component into the MNE's international strategy. In this paper, we explore whether internalization theory can address the global versus regional strategy phenomenon. Specifically, we investigate whether internalization theory can predict under which circumstances MNEs will be able to pursue successfully a global strategy, and whether the theory can explain firm-level variations in utilizing regional components in international strategic governance. We argue that internalization theory can help regionalization scholars unbundle regional strategy by matching resource bundling needs with various firm-level resource recombination practices. We identify four distinct resource recombination processes with increasing complexity: fast bundling, principles-driven bundling, adaptive bundling and entrepreneurial resource orchestration, and argue that adopting the best-matched resource recombination practices will advance the MNE's success outside of its home region.     

Corporate social responsibility: Stakeholders influence on MNEs’ activities

This research attempts to examine how specific stakeholder groups influence multinational enterprise (MNE) corporate social responsibility (CSR) practices in South Korea. Generally speaking, the results show that both primary (e.g., consumers, ‘internal managers and employees’ and business collaborators) and secondary stakeholders (e.g., governments, media, local community and NGOs) positively influence MNEs’ CSR. Contrary to previous research, this work also demonstrates that business collaborators have a negative and significant effect on MNEs’ CSR. Based on the findings this paper wishes to offer a framework for MNEs to thoroughly consider the impact of stakeholders when drawing a picture for their CSR strategy. Further, this work also hopes to contribute to current discussions in the area of CSR by bringing a new stream of research into the international business field. In addition, this work strives to provide useful and practical implications for MNEs wanting to operate in the South Korean market.     

The effects of business- and non-business-targeting terrorism on FDI to the MENA region: The moderating role of political regime

This study investigates the effects of terrorist attacks on foreign investment by stressing the importance of both business- and non-business-targeting terrorism in the host country. Building on North’s strand of institutional theory, we argue that both forms of terrorism represent exogenous risks likely to generate high levels of non-ergodic uncertainty for MNEs and subsequently deter foreign investors. Further, we hypothesize that these effects may be moderated by host-country political regime type, which serves as a gauge for a favorable investment environment for MNEs operating in institutionally fragile markets. Using panel data on fifteen MENA countries over the period 2001–2018, we find empirical support for our hypotheses whereby hybrid political regimes, namely anocracies, strengthen the negative effects of both business- and non-business-targeting terrorism on FDI. Our work contributes to the research on FDI and exogenous risks by offering a more fine-grained conceptualization of terrorism, as well as by highlighting the moderating role of host-country hybrid regimes.     

Cultural distance,political risk,or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research

It is well accepted that multinational enterprises (MNEs) prefer equity joint ventures (JVs) over wholly owned subsidiaries (WOSs) in foreign countries where the formal and informal external environment is highly uncertain. Many entry mode studies have modeled the external uncertainty faced by MNEs in foreign countries as the cultural distance to these countries (thus focusing on the informal environment), or as their political risk level (thus focusing on the formal environment). We argue that both approaches are suboptimal because (1) cultural distance not only reflects the external uncertainty associated with WOSs but also the internal uncertainty associated with JVs, and (2) political risk covers only one aspect of the formal external environment. We contend that the governance quality of foreign countries is a better proxy for external uncertainty. The lower this quality, we hypothesize, the higher the likelihood that MNEs will choose JVs over WOSs. An analysis of 231 entries by Dutch MNEs into 48 countries offers support for this hypothesis. We also find that cultural distance has no impact on entry mode choice and that political risk has the weakest impact of all aspects of governance quality.     

The art of rhetoric: Host country political hostility and the rhetorical strategies of foreign subsidiaries in developing economies

Multinational enterprises (MNEs) often pay close attention to host country environments and prudently manage relationships with host country stakeholders. However, little attention has been paid to how the foreign subsidiaries of developed country multinational enterprises (DMNEs) communicate with host country stakeholders in developing economies. This paper investigates how host country political hostility influences DMNE subsidiaries’ rhetorical strategies. Using 485,496 Sina Weibo posts by subsidiaries of 71 DMNEs between 2010 and 2018, this paper demonstrates that political hostility has a negative influence on subsidiaries’ rhetorical emotionality and corporate social responsibility (CSR) rhetorical intensity, and has a positive effect on rhetorical clarity. Both bilateral trade and local subsidiary top executive strengthen the influence of political hostility on rhetorical emotionality and rhetorical clarity. The findings shed new light on how DMNE subsidiaries gain and maintain legitimacy in developing economies and how subsidiaries deploy post-entry rhetorical strategies as a response to host country political hostility.     

Russian MNEs Under Sanctions: Challenges for Upgrading in GVCs (Cases of Energy and IT Industries)

Abstract

The article examines upgrading strategies of Russian multinational enterprises (MNEs) under sanctions. We focus on MNEs from energy and information technology industries. Four types of global value chain (GVC) upgrading strategies (process, product, functional, and chain upgrading) are discussed. The paper is based on the case study research. The research questions address the influence of sanctions on Russian MNEs’ upgrading strategies in GVCs and the role of import substitution policies for companies’ upgrading. Research findings show that at microlevel, sanctions do not prevent implementation of upgrading strategies. Import substitution policies provide additional support for MNEs upgrading in GVCs.     

Environmental risks,localization and the overseas subsidiary performance of MNEs from an emerging economy

Despite the fact that multinational enterprises (MNEs) from emerging economies invest actively in host countries with substantial risks, we have limited understanding of how they manage environmental risks to achieve desirable performance in their overseas subsidiaries. Drawing on resource dependence theory, we argue that different localization strategies serve as a mediating mechanism linking environmental risks and overseas subsidiary performance. Our findings based on a sample of Chinese MNEs show that industry risks significantly reduce the levels of input localization and marketing localization of Chinese MNEs’ subsidiaries, and thus negatively affect subsidiary performance. Political risks have an insignificant impact on input localization and marketing localization, but a positive direct impact on Chinese MNEs’ overseas subsidiary performance. We also find that state-owned MNEs’ localization strategies are more sensitive to industry risks compared with privately owned MNEs.     

Risk management,legitimacy, and the overseas subsidiary performance of emerging market MNEs

Multinational enterprises (MNEs) are exposed to substantial risks when operating abroad and effective risk management plays a key role in determining firms’ competitiveness and success in overseas markets. Integrating the notion of home-country government-created advantages with the legitimacy perspective, we look at a concrete manifestation of government-created advantages, the impact of home-country risk-safeguarding mechanisms on Chinese MNEs’ overseas subsidiary performance. Moreover, we examine their effect under the contingency of firms’ legitimacy in host countries. Using survey data, we find that Chinese MNEs’ overseas subsidiary performance is positively associated with the use of home-country risk-safeguarding mechanisms. The strength of this association depends on Chinese firms’ legitimacy in host countries. The low level of legitimacy of these firms with host-country government and business communities can generate a negative spill-over effect that compromises the role of home-country risk-safeguarding mechanisms.     

Network complementaries in the international expansion of emerging market firms

Can domestic political capital be transferable to more or less similar institutional contexts abroad? Motivated by contradictory results in two streams of research, this study seeks to combine the insights from two theoretical arguments and conceptualize the role of domestic political ties in international expansion as a dual problem of securing key resources from home governments and looking for opportunities in foreign markets and matching resources to capture them. We adopt the notion of network complementarity to examine the complementarity effect of domestic political ties and foreign ties on international expansion. The implication is that EMNE research that concentrates on either looking for foreign opportunities or securing domestic resources, but not both, is likely to be incomplete when international expansion is being studied. Using a longitudinal panel dataset of Chinese international new ventures expanding to 105 foreign markets, we find a positive interactive effect of domestic political ties and foreign ties on Chinese MNEs’ internationalization. This positive interactive effect on internationalization is found to be stronger for expanding to developing host markets than to developed host markets. We discuss the implications of these findings for research on domestic political ties, the international expansion literature, the network complementarity literature, and the international entrepreneurship literature.     

Bank regulation and the process of internationalisation: A study of Japanese bank entry into London

The paper provides a theoretical insight into bank regulation and the process of internationalisation by examining the concepts of regulatory push and market pull within the context of Japanese bank entry into London during the 1980s. Rugman and Verbeke's [(1998). Corporate strategy and international environmental policy. Journal of International Business Studies, 29(4), 819–833] Consistency of Home and Host Government Goals model is utilised to structure the discussion, which centres on a situation where there is a conflict of goals between multinational enterprises (MNEs) and the home government but goal alignment between MNEs and the host government. As such the paper examines a relatively under-researched aspect of internationalisation and concludes that in certain circumstances internationalisation can occur despite great ‘psychic distance’. The paper also argues that although bank regulation can lead to a conflict situation it can also be conducive to the development of a strong home base and the development of firm specific advantages.     

Subnational institutions,political capital,and the internationalization of entrepreneurial firms in emerging economies

This study advances the institution-based view of strategy by integrating it with firm-specific capability considerations. In particular, we investigate the integrative influence of subnational-level home country institutional environments and firm-level political capital, as an important way to seek resources, on emerging economy entrepreneurial firms’ internationalization. With data from Chinese entrepreneurial firms, we find that the development of subnational institutional environments in the home country is related to firms’ degree of internationalization. Furthermore, while political capital with low-level governments enhances the effect of subnational institutions on internationalization, political capital with high levels of government has no such moderation effect. Theoretical and empirical contributions and implications are discussed.     

MNEs and the practice of international business diplomacy

Scholars of international relations and international political economy have long documented international business diplomacy (IBD) as a practice of multinational enterprises (MNEs), although the specific practices involved have not been consistently established in international business scholarship. We apply "practice theory" to position IBD within the realm of MNEs’ global non-market strategy (NMS), arguing that IBD constitutes a set of practices in the implementation of global NMS, and that the most appropriate practices depend upon two key dimensions of the global institutional governance regime faced by the MNEs: the governance level and the degree of rule formality.