The global agglomeration of multinational firms

The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of agglomeration and analyze the different patterns underlying the global economic geography of multinational and non-multinational firms. We present new stylized facts that suggest that the offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including technology diffusion and capital-good market externality play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we explore the process of agglomeration.     

The global agglomeration of multinational firms

The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of agglomeration and analyze the different patterns underlying the global economic geography of multinational and non-multinational firms. We present new stylized facts that suggest that the offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including technology diffusion and capital-good market externality play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we explore the process of agglomeration.     

Introducing Western-style HRM practices to China: Shopfloor perceptions in a British multinational

The management of host country employees is often portrayed as a particularly fraught dimension for multinational firms. The problems involved are considered exponentially greater when there are substantial institutional differences and “cultural distance” between the host country and a multinational firm's parent country, as is assumed to be the case for Western firms operating in mainland China. Based upon detailed case study research conducted at a UK-invested firm in China between 1999 and 2003 and a comparative study of a Chinese state-owned firm, this paper explores the veracity of such assumptions. The findings indicate that Western human resource management (HRM) practices can be transplanted successfully and questions the degree to which foreign-invested enterprises (FIE) need to adopt “the Chinese way of doing things”. Indeed, such practices can be innovative in the Chinese context and provide a competitive source of differentiation for multinationals as employees.     

Private Firms and Corporate Governance: An Integrated Economic and Management Perspective

This article provides a definition of corporate␣governance and highlights the challenges in adapting understanding of governance to the privately-held firm. We emphasize the need to develop the scope of governance in privately-held firms beyond the traditional agency theory focus in the financial economics literature relating to large publicly-listed corporations. There is a need to draw on and integrate an array of theoretical perspectives from both economics and other social science disciplines as well. We present a schematic model of corporate governance which places the contributions presented in the special issue in context and which serves as a guide to highlighting gaps in the research base. We review the principal issues relating to corporate governance in privately-held firms which relate to: governance in different organizational contexts (institutional context; the industrial sector within which the firm finds itself, the ownership context of the firm, and the stage within the firm’s life-cycle); the scope of corporate governance; and other internal governance mechanisms to be considered We identify areas for further research on corporate governance in privately-held firms with respect to processes of governance, organizational contexts, assumptions about the owners, executive remuneration, financial reporting, the nature of the dependent variable relating to the expected outcome of different approaches to governance and various methodological issues. We suggest a need to develop governance codes for privately-held firms that are flexible enough to take account of the different types of governance needs of firms at different stages in their life-cycle.      

制度分割、产业集群与跨国公司区位

当前,产业集群快速发展,并已成为跨国公司的新区位,对文献的回顾也证明集聚经济已成为跨国公司新的优势来源。本文从经济组织角度研究了产业集群对于跨国公司区位的意义,特别注重制度分割对于产业集群的组织属性、效率边界及演进动力的作用,以及这种作用对于跨国公司区位的影响。最后提出发展中国家应以制度分割推进产业集群建设来制定引资战略的政策建议。     

Clusters,knowledge spillovers and new venture performance: An empirical examination

Firms in geographic regions with industry clustering have been hypothesized to possess performance advantages due to superior access to knowledge spillovers. Yet, no prior studies have directly examined the relationship between a firm's location within a cluster, knowledge spillovers and firm performance. In this study, we examine whether technological spillovers explain the performance of new ventures in cluster regions. We find that ventures located within geographic clusters absorb more knowledge from the local environment and have higher growth and innovation performance, but contrary to conventional wisdom, technological spillovers are not the contributing cause of higher performance observed for these firms.     

Law‐abiding organizational climates in developing countries: The role of institutional factors and socially responsible organizational practices

The institutional environment of developing countries may lead firms to engage in unlawful firm conduct, which is a pervasive problem in this context. Our paper examines the effectiveness of organizational practices for ensuring that firms adhere to the law in the light of pressures from the institutional environment to be unlawful. Using the lens of anomie theory, we investigate: (a) the negative effect of aspects of the institutional context—regulatory burden and lack of industry munificence—on a law‐abiding climate, a type of organizational climate related to unlawful conduct, and (b) the role of socially responsible organizational practices in combating these negative effects. Survey data were collected from 118 firms and analysed using OLS moderated regression. Our results indicate that a manager's perceptions of regulatory burden and lack of industry munificence are negatively related to the extent to which the firm has a law‐abiding climate. Furthermore, our findings shed light on the ability of socially responsible practices to countervail this effect. While the negative effect of perceived regulatory burden on law‐abiding climate weakens when codes of ethics are used more extensively by a firm, it strengthens when firms hold a CSR certification. The latter finding may be due to the lack of enforcement associated with the specific certification considered in our study.     

Firm size,age, industrial networking,and growth: a case of the Korean manufacturing industry

This paper investigates the roles of firm size, age, and industrial networking in determining firm growth. Analyses using the 2-year panel data of 7,889 Korean manufacturing firms between 1994 and 2003 confirm that firm size and age have significant negative effects on firm growth and significant positive impacts on firm survival. R&D and export activities are found to facilitate both firm growth and survival. The primary focus of this study is to examine the effects of industrial networking, such as subcontracting and clustering, on firm growth. The results show that subcontracting does not yield any positive effect for firm growth, but encumbers survival, which may be accounted for by the high subcontracting intensity among small firms. Clustering, on the other hand, is found to promote firm growth and survival. There is, however, little evidence that such a positive effect of clustering is derived from network externalities through cooperation and competition among firms in a cluster per se.     

Firm Clustering and Specialization: A Study of Taiwan’s Machine Tool Industry

This study investigates links between firm clustering and firm specialization. The paper argues that firms located in multi-centered, locally owned industrial districts are likely to be relatively specialized. Based on data from 163 companies in Taiwan’s machine tool industry, this study finds support for a positive association between location in a multi-centered, locally owned industrial district and firm specialization.      

Cooperative ventures in emerging economies

Foreign market entry strategy involves choices about which markets to enter and how to do it. Most of the literature on foreign direct investment reflects an interest in ownership structure decisions and the risks foreign investing firm may face. As recognized in many studies, one set of risks arises from public expropriation hazards, a function of the ability of the host country's institutional environment to credibly commit to a given policy or regulatory regime. Empirical research has shown this hazard to have an impact on ownership levels. This study is a theoretical model that describes how multinational firms face moral hazard risk from their local partners and political risk from the host country when they decide to go abroad in a joint-venture alliance. I found that the greater the level of hazard expropriation, the lower the participation of the multinational firm in the final cash flow, except for when the multinational firm has the negotiation power and there is a high level of local investment protectionism. In that case, the multinational firm increases its participation in the final cash flow.     

What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks

This study examines the forces driving outward FDI of emerging-market firms. Its contribution lies in integrating and testing insights from institutional theory, industrial organization economics and the resource-based view of the firm. This approach enables us to consider three different levels of analysis – firm, industry and country – and, thus, to distinguish between different sources of variation. Using a large firm-level Chinese dataset, we offer new evidence indicating that government support and the industrial structure of the home country of the investing firm play a crucial role in explaining outward FDI. By contrast, technological and advertising resources tend to be less important. The findings have important implications for theorizing. Although some firm-specific idiosyncrasies still play a role in explaining variations across firms in the same industry, the theoretical analysis and empirical results consistently indicate that foreign investment of Chinese firms is largely driven by their distinctive institutional and industrial environment.     

Technological capabilities and the decision to outsource/outsource offshore R&D services

We analyze firm and environmental factors influencing the decision to outsource and outsource offshore R&D services. To do so, we have adopted a co-evolutionary approach adapted to firm internationalization, according to which these decisions are conditioned by the institutional environment (the IPR system), managerial intentionality (firms’ international strategy) and organizational path dependence and learning (firms’ technological and governance capabilities). Specifically, we argue that: (1) firms with more technological capabilities will tend to both outsource and outsource offshore R&D services, (2) the positive effect of technological capabilities would be leveraged when the institutional context of the firms’ country of origin has allowed them to transform their technological expertise into governance capabilities, and (3) that those firms with a higher local responsiveness attitude will be more likely to outsource offshore R&D services. We have found support for our hypotheses using survey data from a sample of 182 technology intensive firms from the European Union and the US.     

MNE practice transfer as a process of institutional change

We build upon current theory on strategic organizational practice transfer in multinational firms by incorporating the agency of actors and applying an institutional lens to the transfer process. Our theoretical analysis suggests that practice transfer is a process of institutional change that leads not only to practice adoption, adaptation, or nonadoption, but also to reconstruction. We argue that when contradictions exist within and across institutional environments, misaligned interests motivate actors to engage in praxis. As a parent‐subsidiary coalition, these actors reconstruct the practice by transcending the multitude of institutional environments that comprise the institutional system. Our process theory provides insight into how less powerful subsidiary actors engage in praxis to extend knowledge and build new capabilities within the firm. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

Policy-driven clusters,interfirm interactions and firm internationalisation: Some insights from Malaysia's Multimedia Super Corridor

This paper investigates the impact of social and business interactions on firm internationalisation within the context of an industrial cluster created from scratch by policymakers. Based on in-depth interviews with firms in Malaysia's Multimedia Super Corridor cluster, our findings suggest that a permanent cluster of this nature may not be able to stimulate the development of frequent, spontaneous, informal interaction and rich social networks often seen in ‘organic’ clusters, thus limiting the cluster's effect on firm internationalisation. However, the paper also shows that ‘temporary clusters’, such as trade shows and conferences, organised by policymakers on a regular basis within the broader context of the permanent cluster, can help firms to quickly acquire relevant knowledge.     

Adjustment strategies of multinational enterprises to changing national competitiveness

This article establishes a link between four combinations of relative firm‐specific advantages and comparative advantage and the adjustment strategies of multinational firms. Based on the distribution of firms across advantage combinations, hypotheses on four adjustment strategies are developed: expansion, rationalization, exit and relocation. Upon a detailed analysis of a representative sample of manufacturing firms for 1990–2000, a consistent competitiveness ranking of domestic and foreign firms across industries and over time is derived. The strategies followed by the firms are reflected by the development of employment, value‐added and exports. Results show that firms are not distributed entirely in line with comparative advantage, but the dynamic interaction (“match”) of location‐advantage and firm‐specific advantage seems to be decisive. Results also confirm that domestic and foreign firms partly react differently under a given advantage combination. The following principles for location policies are suggested: the empirically measured mismatch of firm capabilities and location advantages determine when direct and indirect measures should be used. The intensity of policy measures should be oriented towards the competitiveness ranking derived.     

Entry,Growth and Patenting in Industrial Clusters: A Study of the Aerospace Industry in the UK

This paper studies how firm performance is influenced by the strength of the industrial cluster (or industrial district) in which it is located. The paper presents estimates of firm-level employment and patent growth models for a range of '5-digit' aerospace industries in the UK. In these models, employment in the firm's own sector and employment in other sectors is taken as a measure of the strength of the cluster. Strong positive clustering effects are found in many sectors, but nevertheless some clustering effects are negative. Entry into clusters of this industry is also examined and some sectors are found to attract new entry while others are only attracted.     

FDI location choice of Chinese multinationals in East and Southeast Asia: Traditional economic factors and institutional perspective

This paper investigates the factors determining foreign direct investment (FDI) location choices of Chinese multinational firms. We developed a conceptual framework that synthesizes traditional economic factors and institutional perspective. Then several hypotheses were developed in line with the framework and empirically tested using panel data of Chinese outward FDI to eight economies in East and Southeast Asia across a time period of thirteen years. Our findings suggest that institutional factors demonstrate a higher level of significance, complexity and diversity in determining FDI location choice in comparison with economic factors, while both types of factors influence the FDI location choice of Chinese multinational firms. We also found that the FDI location choices of Chinese firms have a dynamic nature, as statistical evidence indicates a heterogeneous response of Chinese FDI towards different economic groups and during different time periods.     

Market convergence and advertising standardization in the European Union

In this study, we draw on industrial organization and institutional research to explore the relationship between market convergence and standardization of advertising programs. We argue that environmental isomorphism, which maintains that the external market environment is a principal driver of firms’ institutional structures, places pressure on firms to adapt their organizational structures and strategies to changing institutional conditions. We propose that the convergence associated with European market integration will lead firms to emphasize three advertising strategies: creating a uniform brand image, appealing to cross-market segments, and increasing cost performance in advertising. Further, we hypothesize that these strategies will be associated with an overall tendency to standardize advertising strategy and execution. Results of a survey of managers of subsidiaries of Japanese and U.S. firms operating in the EU suggest that firms that believe the EU is converging are more likely to engage in these standardized advertising strategies. Additionally, our findings suggest that firms that seek to create a uniform brand image and appeal to cross-market segments are more likely to standardize their overall advertising programs. Finally, we find that firms’ desire to create a uniform brand image is a function of their goal of building brand equity, regardless of the level to which markets converge. We draw implications for research and practice regarding firm responses to market convergence.     

Geographic cluster size and firm performance

We examine whether there are increasing returns to locating in clusters—a fundamental premise of agglomeration theory. This premise is worth exploring because a) it has infrequently been studied; b) recent evidence suggests that diseconomies of agglomeration change over time and may alter the payoffs to firms located in clusters; and c) recent evidence suggests that there may be negative returns to agglomeration. We examine firm payoffs to clustering in the biotechnology industry, and consider five different measures of performance. Our results lend support to the view that there are increasing returns to cluster size, but also suggest that diseconomies of agglomeration play an increasingly important role as clusters evolve. We believe these results help in reconciling previous findings.     

基于产业集群生命周期的技术创新研究

产业集群是当今产业组织发展的重要特征之一,也是开展技术创新活动的重要组织形式。本文在回顾生命周期理论的基础上,结合产业集群的不同发展阶段分别研究了技术创新的特征,分析了我国目前产业集群技术创新的发展困境及其制约因素,并从政府、中介机构、集群企业三个层面上探讨了提升我国产业集群技术创新能力的有效途径。