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.     

Social and Political Risks: Factors Affecting FDI in China's Mining Sector

Political risk can be defined as the potential for uncertainty and harm to business/economic operations that arise from political (governmental and other) behavior and events. These risks typically stem from factors such as economic structures, government institutions, policies, and societal characteristics, and are becoming more of a concern to prospective investors in a changing global political economy. This article seeks to expand upon the framework of political risk analysis by looking at “softer,” nonquantifiable risk factors. Through the analysis of foreign business experiences in China, we aim to demonstrate, via a qualitative case study of foreign direct investment (FDI) in the Chinese mining sector, that in addition to typical financial, operational, and geological factors, firms should be better aware of the particular sociopolitical and cultural risks that can harm their investments in a given industry. This study draws on primary fieldwork, focuses on micropolitical risks to the industry, and stresses that multinational corporations (MNCs) could be more cognizant of the many societal factors that can influence an investment success. © 2016 Wiley Periodicals, Inc.     

Taking a time-out from exporting: Implications for the likelihood of export re-entry and re-entry export performance

Drawing from Organizational Learning Theory, we explain how the “time-out period” from exporting affects a) the likelihood of re-starting exporting and b) re-entry export performance. We also explain how foreign collaboration influences these two relationships. We show that the time-out period has an inverted U-shaped relationship with the likelihood of re-starting exporting, and a U-shaped relationship with re-entry export performance. Foreign collaboration enhances managerial confidence and thereby increases the likelihood of re-starting exporting during the earlier phases of the time-out period. It also enhances re-entry export performance by accelerating new knowledge accumulation in the later phases of the time-out period.     

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.     

From foreign investors to strategic insiders: Shifting parameters,prescriptions and paradigms for MNCs in China

Multinational corporations (MNCs) entering and operating in China have been significantly changing their dominant strategies over the past two decades to cope with China's shifting competitive and regulatory environments. The new strategies have resulted in a status shift such that MNCs are no longer merely “foreign investors”; they have become “strategic insiders” who view their large-scale China operations as key to their overall corporate success. To provide an overarching picture of this status shift, this article identifies and discusses shifting competitive parameters facing MNCs (from scant to strong competition, from niche to massive competition, from single- to multi-market competition and from structural similarity to multiplicity), as well as the shifting regulatory parameters they face (from entrance to operational intervention, from separation to convergence with domestic policies and from national control to regional regulation). This article also analyzes the shifting dominant strategies MNCs use to deal with changing environmental landscapes, including shifts from parent to national integration, from production relocation to value chain localization, from competence transfer to competence building, from competition to coopetition, from repetition to adaptive diversification and from alliance building to restructuring. This article concludes by discussing how the above strategic shifts provoke the extension and rethinking of extant MNC theories and what future issues merit particular attention.     

Unbundling European operations: regional management and corporate flexibility in American and Japanese MNCS

Empirical research on the European operations of 19 American and Japanese multinational companies (MNCs) suggested, first, that the strategic importance of the region did not translate into an enhanced role for regional headquarters, and second, that American and Japanese MNCs are “unbundling” their European operations as a means of enhancing their flexibility. American MNCs preferred to carve up regional tasks for delegation to local subsidiaries, with coordination assured increasingly by “councils” bringing top European managers together. Japanese MNCs have not altered the formal organizational structure; but the recent internationalization of basic research labs in Europe has forced them to modify their previously monolithic approach to European subsidiaries.     

Forecasting Threats and Opportunities for Foreign Innovators in China's Strategic Emerging Industries: A Policy‐Based Analysis

This article reviews over 50 recent Chinese policies designated to develop China's “strategic emerging industries” (SEIs), and conducts interviews with foreign firms and Chinese government officials to identify the most significant threats and opportunities for foreign innovators in these industries. Threats identified include initiatives to stimulate the market primarily in the interest of Chinese firms, cultivate “indigenous” intellectual property (IP) rights, and create national champions in specific SEIs. Opportunities include using certain strategies to tap into monetary stimuli for SEIs and supporting industries, benefits from further regionalization and optimization of industrial bases, direct benefits and spillovers from improved IP protection and management, and potential opportunities from increased mergers and acquisitions (M&As) by Chinese firms. These findings should be contextualized with the knowledge that not all aspects of the SEIs’ initiative are “new,” current Chinese industrial policy does not only target seven SEIs, and SEI policies may not all work exactly as intended. © 2015 Wiley Periodicals, Inc.     

Flying with a net,and without: Preventative devices and self-control

Excessive consumption of many vice goods (e.g., alcohol) has both possible immediate (e.g., a drunk-driving crash) and delayed (e.g., liver disease) negative consequences. This research models the consumption choices of a consumer population with heterogeneous impatience and varying degrees of sophistication in conjunction with both immediate and delayed consequences of excessive vice good consumption. We show that even when a preventative device (e.g., a designated driver) that could eliminate the immediate dangers is available for (almost) free, some consumers forgo it in order to try to use the immediate danger as a soft tool to regulate excessive consumption (e.g., “If I know I don't have a designated driver, then I won't drink too much.”). Surprisingly, this “flying without a net” is a successful strategy for some consumers, and we quantify when it is likely to be successful versus harmful. This counterintuitive result has many consequences; e.g., public policies that make the provision of preventative devices compulsory could increase consumer welfare under certain conditions but overall are not Pareto-improving. Likewise, advertising campaigns that exaggerate the likelihood of immediate dangers may be welfare decreasing despite their good intentions. In exploring the effect of our model on pricing of preventative device, we find that pricing is not monotonic in the probability of danger. We also show that consumer pessimism about self-regulation can induce consumers to experience a “boomerang effect” of overconsumption in the presence of a preventative device. Overall our research shows that the relationship between prevention and risk is not as simple as might be assumed in standard analyses and that marketers and public policymakers often need to consider the short-term and the long-term risks as well how prone the consumers are to temptation and how sophisticated they are in judging their temptation.     

Proximity at a distance: The relationship between foreign subsidiary co-location and MNC headquarters board interlock formation

Corporations seek various relationships, such as board interlocks, with other firms to reduce resource dependencies. The consistent theoretical expectation and empirical finding that physical proximity is an important driver for board interlock formation is seemingly at odds with the emerging and growing literature on transnational board interlock ties. We argue that the effect of proximity on multinational corporation (MNC) board interlock formation can also be attributed to the firms’ internationalization strategy, namely, when they have co-located subsidiaries in foreign markets. We call this “proximity at a distance”. We test our assumptions on a dataset covering almost 43,000 board interlocks among MNC headquarters and their 12 million subsidiary co-location pairs. We confirm that proximity among headquarters increases the odds of interlocking but also find robust evidence that co-located subsidiaries also increase firms’ propensity to interlock, particularly for transnational board interlocks. Our results help provide an explanation for the “paradox of distance” by showing that the interlock between two distant MNCs may be driven by proximity to their foreign subsidiaries. As such, we illustrate how MNCs’ resource-dependent strategic responses can occur at the headquarters level to address uncertainties experienced at the subsidiary level.     

Tapping the power of local knowledge: A local-global interactive perspective

Existing theories of international business and strategy do not fully explain how local knowledge disadvantage faced by foreign investors can be mitigated. We conducted an in-depth qualitative study into four MNCs to investigate the micro-processes of how they generated value from their dispersed sources of local knowledge in China. The results suggest an interactive model: that MNCs employed management processes encompassing three strategically interconnected efforts—global knowledge penetration, local-global knowledge blending, and local-global knowledge integration. The model highlights the interplay between global and local knowledge and challenges extant research that solely focuses on the transfer of either home-based or local knowledge.     

Border Effects Within A Dynamic Equilibrium Trade Model

A dynamic general equilibrium model is developed in which border effects are present. It is shown that despite very low trade barriers the presence of national borders can choke off a significant fraction of cross-border trade when firms experience start-up costs in establishing new markets. It is also revealed that country size, as measured by the number of markets in a country, can have a significant effect on how quickly firms grow. Also, it is shown that a decrease in trade barriers will increase the rate at which firms expand into both foreign and domestic markets. Furthermore, an increase in fixed costs at the production level is shown to increase trade flows. This helps explain why developed countries trade more than less developed countries. This article also develops a novel way to solve dynamic optimization problems when “state-space” constraints are present. The solution strategy is applicable to a wide variety of problems in which agents are not constrained now but are expected to be constrained in the future.     

Corporate social responsibility: The debate revisited

Before gaining general acceptance, an idea that jolts individuals out of accustomed-behavioral patterns undergoes a slow evolution. What is interesting in the history of the corporate-social-responsibility doctrine is that, within roughly three decades, it has achieved a status almost coequal with the bottom-line philosophy which, in the past, provided legitimacy to corporate decision making.Nevertheless, debate over corporate responsibilities continues. Two factors explain why: 1) corporate performance is perceived by some as not matching corporate rhetoric and 2) the “battle of definitions” continues.The first factor will be determined within the next five years because the Reagan Administration, by curtailing government activities, places more responsibility on the private sector. The definitional issue of CSR and CSR² (responsibility versus response) is not likely to be resolved soon but the strengths of the “response model” do not equal the strengths of the “responsibility model.” Responsibility is a moral term and response a psychological one: the American people ask their leaders to behave as “virtuous agents.”Moral decision rendered in complex situations—and on behalf of countless others—will lead people to define “correctness” differently, as the “Poletown incident” in Detroit amply illustrates. The search, however, for a new credo and a new character for America business has begun—and will continue.     

The Improvisational Entrepreneur: Improvisation Training in Entrepreneurship Education

Entrepreneurs constantly face unexpected and unanticipated situations; those that thrive are ones that are identified by the literature as “improvisational.” Yet extant entrepreneurship research has not distinguished what improvisation is from how to do it. I propose training in the principles developed from the theory of performing improvisation promotes the entrepreneurship mindset through pedagogy. Qualitative studies reveal entrepreneurial self‐efficacy themes related to interpersonal/team considerations for entrepreneurs, and introduce “improvisational alertness” as a critical entrepreneurship consideration. Entrepreneurs can learn to keenly pay attention to interpersonal conditions of the present and the future in order to adapt potential limitations for venture success.     

跨国公司的技术关联性及我国吸引外资政策

跨国公司的FDI和技术转移与技术的关联性有关,本文首先对相关技术和衍生技术做了新的界定,然后在新熊彼得学派曼斯菲尔德对外直接投资与技术转移的选择理论及邓宁的“三优势模式”等理论基础上,进一步剖析技术关联性对跨国公司FDI和技术转移的影响机理,提出了我国吸引外资的政策建议。     

法律服务出海以保障企业参与“一带一路”建设的对策建议

在国家大力推进“一带一路”建设的大背景下,浙江省在过去几年成绩不菲。作为“一带一路”浙江枢纽中的重要节点,金华市对“一带一路”投资稳步推进。然而,随着“一带一路”建设困境的到来,给企业参与推进“一带一路”建设带来了十分复杂的风险和问题,本文在分析这些风险和问题的基础上,尝试着提出一些建设性的意见和建议,从法律服务视角来阐述如何出海保障企业参与“一带一路”建设。     

The characteristics of intellectual property rights regimes: How formal and informal institutions affect outward FDI location

This study examines the institutional arrangements that define the characteristics of national legal systems that are used to protect intellectual property (IP) assets embedded in outward FDI. The focus of the study is on how the institutional underpinnings of IPR regimes affect the costs and risk of using legal arenas to enable effective use of IP assets. Following a property rights approach it is postulated that formal and informal institutional arrangements influence how IP regimes affect the transaction costs and risk associated with converting ownership rights over IP into economic rights. Informal institutions are considered to affect the behaviour of agents involved in enforcing legal rights. This behaviour influences how IP law is implemented in legal arenas and thereby impacts on the efficacy of IPR regimes to help secure economic rights from the use of IP assets. Using data on outward FDI from the USA to 42 host countries the results find that the strength of informal institutions connected to the enforcement of IP in a country directly affects outcomes and positively moderates the effect of formal legal aspects of IP law on FDI flows. The results highlight the importance of informal institutional aspects connected to the behaviour of enforcement agents when using national legal systems to protect IP rights in cross-frontier transactions.     

Dark times for cosmopolitanism? An ethical framework to address private agri-food governance and planetary stewardship

The scholarly tradition of cosmopolitanism (illustrated by the old saying, “I am a citizen of the world”) offers important insights into the examination of agri-food multinational corporations (MNCs) as powerful global actors. Acknowledging that agriculture is the business sector with the highest planetary environmental impact, in this paper, we advance existing discussions around cosmopolitanism and the normative implications of considering agri-food MNCs as political actors. Relying on an integrative literature review, we propose a tripartite ethical framework that gives a new momentum to the ideals and tenets of cosmopolitanism. This novel lens offers an integrated, seamless ethical approach and revolves around three dimensions: culture, morality, and governance. The first dimension examines key agri-food cultural and social-ecological issues, the second acknowledges interdependence and causality as central to understanding MNCs’ ethical responsibilities, and the third outlines several governance parameters around legitimacy, planetary reach and efficiency. Hence, our integrative framework resituates the planetary geographical imagination of cosmopolitanism within the biophysical parameters outlined by the planetary boundaries concept, advancing key issues on private agri-food environmental governance and planetary stewardship.     

Attribution Effects of Time Pressure in Retail Supply Chain Relationships: Moving From “What” to “Why”

Retail supply chains must be responsive to consumer demand and flexible in adapting to changing consumer preferences. As a result, suppliers are often expected to deal with time pressure demands from retailers. While previous research demonstrates that time pressure can have longer term relational costs that reduce collaborative behaviors and overall relationship quality, this mixed‐methods study goes further by accounting for attribution effects to explain why the time pressure occurs. Specifically, supplier perceptions for the reason of time pressure being within or beyond a retailer's control, rather than time pressure itself, appear to have a stronger effect on relational outcomes. By investigating time pressure through the lens of attribution theory, this research opens a new inquiry of research that moves away from examination of outcomes themselves (the “what”), to examining “why” the outcome occurred.     

HRM in Western Subsidiaries in Russia and Poland

Abstract

This study analyzes the Human Resource Management (HRM) practices in joint ventures and wholly-owned subsidiaries of Western MNCs located in Russia and Poland. Different hypotheses are developed, testing whether or not MNCs are more likely to implement standardized practices in Poland and Russia. The effects on HRM practices of MNC equity share, non-financial resources provided by MNCs to the focal unit, and mode of establishment of the foreign unit are also investigated. Implications for future research and managers are discussed.