Corporate Governance and returns on information technology investment: evidence from an emerging market

Prior studies have reported mixed findings on the impact of corporate information technology (IT) investment on firm performance. This study investigates the effect of corporate governance, an important management control mechanism, on the relation between IT investment and firm performance in the Taiwanese electronics industry. Specifically, we explore board independence and foreign ownership, which have increasingly become salient factors concerning corporate governance in emerging markets. We address their roles across firms of different sizes and in industries where degrees of competitiveness run a wide gamut. Our results show a positive moderating effect of board independence on the IT investment‐firm performance relation, especially when competition intensifies. Furthermore, we find that the greater the foreign ownership in small firms, the more positive the IT investment‐firm performance relation, suggesting that foreign investors may bring IT expertise to help small firms reap the benefits of using IT. Copyright © 2010 John Wiley & Sons, Ltd.     

Corruption and change: the impact of foreign direct investment

This study examines influences on the level of corruption in countries from a strategic perspective. Corruption is one of the country‐level influences on market entry, investment, and other decisions fundamental to strategic management at the international level. The study examines the impact on corruption of change in levels of foreign direct investment (FDI). It uses the Corruption Perceptions Index (CPI) scores computed by Transparency International for 1999 and 2000. Results indicate that the more rapid the rate of change in FDI, the higher the level of corruption. Higher levels of perceived corruption are associated with each of two dimensions of national culture: uncertainty avoidance and masculinity. Research and managerial implications are also discussed. Copyright © 2004 John Wiley & Sons, Ltd.     

Agglomeration economies,firm heterogeneity,and foreign direct investment in the United States

An overlooked aspect of agglomeration economies, which are positive externalities that stem from the geographic clustering of industry, is that firms contribute to the externality in addition to benefiting from the externality. This insight suggests that if firms are heterogeneous they will differ in the net benefits they receive from agglomerating. We argue that firms with the best technologies, human capital, training programs, suppliers, or distributors will gain little, yet competitively suffer when their technologies, employees, and access to supporting industries spill over to competitors. Therefore, these firms have little motivation to geographically cluster despite the existence of agglomeration economies. Conversely, firms with the weakest technologies, human capital, training programs, suppliers, or distributors have little to lose and a lot to gain; therefore, these firms are motivated to geographically cluster. As a result, when firms are heterogeneous we expect agglomeration to be characterized by adverse selection. We find supportive evidence of these arguments by examining the location choice and survival of foreign greenfield investments in U.S. manufacturing industries. Copyright © 2000 John Wiley & Sons, Ltd.     

Entry mode and equity level: A multilevel examination of foreign direct investment ownership structure

Over the last two decades, strategy researchers have sought to understand the ownership structure of firms' foreign direct investments (FDI) as reflected in entry mode and equity level. However, prior FDI research has ignored the interrelated nature of these key FDI decisions. In addition, prior research does not fully account for the fact that individual ownership structure decisions occur within the context of a firm's broader FDI portfolio, and thus reflect a wide and frequently unobserved range of parent firm and host nation effects. Our research seeks to address both of these limitations. Using a rich dataset of 4,459 subsidiaries established by 858 Japanese firms across 38 countries over a 9‐year period, we specify a conditional bivariate, cross‐classified multilevel model of FDI ownership structure. Our model enables the joint estimation of entry mode and equity level, accounts for the portfolio nature of FDI, and compares the relative predictive power of transaction cost‐ and experience‐based explanatory variables across both facets of ownership structure. Copyright © 2007 John Wiley & Sons, Ltd.     

Firm capabilities and technology ladders: sequential foreign direct investments of Japanese electronics firms in East Asia

This paper investigates how investments in capabilities offer platforms for the upgrading or downgrading of overseas subsidiaries' activities along a ‘technology ladder’ in response to macroeconomic changes. By analyzing panel data on Japanese electronic firms in East Asia from 1988 to 1994, the empirical results confirm the importance of capabilities at host country, parent company, and local subsidiary levels in sequential foreign investment decisions. The results show that subsidiary capabilities offset macroeconomic factors influencing location decisions of multinational corporations. Copyright © 2002 John Wiley & Sons, Ltd.     

Foreign and domestic ownership,business groups,and firm performance: evidence from a large emerging market

We adopt a multi‐theoretic approach to investigate a previously unexplored phenomenon in extant literature, namely the differential impact of foreign institutional and foreign corporate shareholders on the performance of emerging market firms. We show that the previously documented positive effect of foreign ownership on firm performance is substantially attributable to foreign corporations that have, on average, larger shareholding, higher commitment, and longer‐term involvement. We document the positive influence of corporations vis‐á‐vis financial institutions with respect to domestic shareholdings as well. We also find an interesting dichotomy in the impact of these shareholders depending on the business group affiliation of firms. Copyright © 2006 John Wiley & Sons, Ltd.     

Expropriation and control rights: A dynamic model of foreign direct investment

This paper studies the strategic interaction between a foreign direct investor and a host country. We analyze how the investor can use his control rights to protect his investment if he faces the risk of “creeping expropriation” once his investment is sunk. It is shown that this hold-up problem may cause underinvestment if the outside option of the investor is too weak, and overinvestment if it is too strong. We also analyze the impact of spillover effects, we give a rationale for “tax holidays” and we examine how stochastic returns affect the strategic interaction of investor and host country.     

The divestiture of acquired subunits: A resource dependence approach

Resource dependence theory has been widely applied to explain interindustry acquisitions, but little is known about how external and internal dependence conditions affect the divestiture of formerly acquired subunits. We argue that subunit divestiture may be a strategic response to mutual dependence and subunit power following acquisition. Our results, based on a sample of divested subunits by U.S. public firms, show that mutual dependence and increased subunit power both reduce the hazard of subunit divestiture. However, the negative effect of mutual dependence diminishes to the extent that subunit power increases, suggesting that increased subunit power may shift away from the mutual‐dependence logic. We discuss the implications of these findings to advance the theory of interindustry divestiture. Copyright © 2012 John Wiley & Sons, Ltd.