Performance shortfalls and outward foreign direct investment by MNE subsidiaries: Evidence from China

Foreign subsidiaries of multinational enterprises (MNEs) have been conducting outward foreign direct investment (OFDI) into new overseas destinations. Drawing upon the behavioural theory of the firm, we explain that such OFDI can occur in response to performance shortfalls relative to aspirations. When performance shortfalls in subsidiaries are attributed to the institutional distance between them and the home country of the parent firm, these subsidiaries select institutionally closer destinations for their own OFDI. Our study goes beyond the direct investment of MNE headquarters and advances the internationalisation process model by investigating the underexplored, secondary and springboard-based internationalisation, and by underscoring the value of a subsidiary’s OFDI behaviour.     

MNE home country cultural norms and conflict strategy fit in transnational business contract disputes

The increasing frequency and complexity of transnational business relationships has been commensurate with an increase in contractual disputes. In such situations, home country cultural norms will often influence how MNEs resolve contractual disputes in foreign markets. This begs the question: does fit between an MNE's choice of conflict strategy and its home country cultural norms affect monetary payouts (costs) in transnational business contract disputes? We apply organizational imprinting theory and the fit paradigm to a model employing data from U.S. court cases involving 316 MNEs from 47 countries. We find that choosing a conflict strategy that fits home country cultural norms will result in higher monetary payouts for MNEs. Additionally, cultural distance, but not legal distance, enhances the positive relationship between MNE conflict strategy fit and monetary payouts. Implications and future research directions are discussed.     

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.     

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.     

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.     

我国投资银行业务的现状、风险防范及业务创新

我国投资银行业务的现状及存在的问题 :传统型业务 ,存在承销业务雷同 ,经纪业务品种单一 ,业务趋同和业间合作趋同化 ;创新型业务———并购业务 ,存在诸多非市场因素及投资银行自身障碍导致了并购后企业的低效率 ;业务多元化是投资银行的发展趋势 ,但多元化带来的利益冲突日益突显。政府在政策上就必须逐步解除人为垄断 ,引导投资银行走特色经营之路 ,完善相关法规 ,继续实施产权制度改革 ,推动并购业务的创新发展。券商要不断地进行业务创新 ,开拓业务的多元化和国际化 ,以实现投资银行的可持续发展。     

Comparison of codes of conduct for multinational corporations

The conflict between increasing technical and economic integration and a resistance to political integration has led to tension between multinational enterprises (MNEs) and nation states. One result has been a growth in pressures to regulate MNEs, often through codes of conduct. This article compares five codes of conduct prepared by groups ranging from the OECD to the non-aligned countries.While substantial areas of agreement are found, important disagreements over the objectives and provisions of a code of conduct do emerge on a North-South or rich-poor axis. The most important disagreements involve resolution of investor-host government disutes and questions of national treatment of investors.Although the major disagreements between rich and poor countries will be difficult to resolve, the article posits that the process of code development per se is valuable as a means of facilitating the transmutation of symbolic into concrete differences. The development of a reasonably explicit code for regulation of MNEs requires that the parties concentrate on relatively narrow issues areas and permissible behavior rather than symbolism and ideology. While important, and perhaps even interactable problems remain, it is suggested that the process of code development is important, as the relatively concrete differences that result are at least potentially subject to resolution through rational negotiation. Symbolic differences obviously are not.The article also suggests a minimal scope of issue areas to be covered if a code is to be an effective instrument.     

Do MNEs from developed and emerging economies differ in their location choice of FDI? A 36-year review

This study examines the extent to which MNEs from developed (DMNEs) and emerging (EMNEs) economies differ in Location behaviour. Studies on MNE location choices have failed to capture the changing FDI landscape and leave the inconsistent findings unexplained. We address this gap by systematically reviewing the extant literature on location choices of DMNEs and EMNEs over the past 36 years – from the introduction of the OLI model to 2016. Key themes emerging from the review reflect a comprehensive picture, capturing the impact of multiple factors affecting location choices of DMNEs and EMNEs. Future research is challenged by: a. adopting an integrated approach examining three levels – individual (managerial), firm (ownership structure, type of FDI, internationalisation stages, and the different nature of ownership advantage), and context of location decisions (home, host, sub-national, regional, supranational, and networking); b. refining or developing theories to capture the dynamic picture of MNE internationalisation.     

MNEs and policy networks: Institutional embeddedness and strategic choice

Political strategies are a crucial matter for MNEs in the context of globalization. We argue that MNEs’ influence on political decision-making depends on their insertion into policy networks, which define the institutional framework and the interaction patterns of business/government relations in different issue-areas. Then, we propose a stylized taxonomy regarding the differentiation of MNEs’ political leverage in various domains, at a home country level. Finally, we explore the influence of political power at home on MNEs’ strategic approaches to the host countries, taking into account the bargaining power of local actors in the concerned issue-areas.     

The network model of internationalisation and experiential knowledge

This study operationalised the network model of internationalisation [Johanson, J., & Mattsson, L.-G. (1988). Internationalization in industrial systems—a network approach. In N. Hood, & J.-E. Vahlne (Eds.), Strategies In Global Competition (pp. 303–321). New York: Croom Helm] to test the association between experiential knowledge, firm degree of internationalisation and market degree of internationalisation. Adaptations of Eriksson et al.’s three knowledge constructs [J. Int. Bus. Stud. 28 (2) (1997) 337] were employed in regression and ANOVA tests. The regression results indicate that internationalisation knowledge is re lated to firm internationalisation, foreign institutional knowledge is associated with both firm and market internationalisation, and foreign business knowledge is strongly related to internationalisation knowledge. The ANOVA results confirm that foreign institutional knowledge levels differ for the Early Starter, Late Starter, Lonely International and International among Others firms. Implications are drawn relating to the effect of different international strategies on the generation of internationalisation knowledge, the vicarious acquisition of foreign institutional knowledge, especially in relation to parent companies and government organisations, and the need to more effectively measure the outcomes of the ac cumulation of foreign business knowledge.     

The determinants of tax haven FDI

This paper examines the determinants of a multinational enterprise's (MNEs) decision to set up tax haven subsidiaries. We adapt the firm-specific advantage–country-specific advantage (FSA–CSA) framework and construct a number of empirically testable hypotheses. The analysis is based on a database covering 14,209 MNEs in twelve OECD countries. We find that the variety of capitalism of a MNEs home location and the level of technological intensity has a strong impact on this decision. We also find that the home country corporate tax rate has a minimal impact. This suggests that corporate tax liberalisation is unlikely to deter MNEs from undertaking this activity.     

International expansion of transnational advertising agencies in China: An assessment of the stages theory approach

This paper examines the expansion of multinational enterprises (MNEs) in a service industry to a country which is both developing and in transition—i.e. the advertising industry in China—to assess how useful the stages theory is in understanding internationalisation issues in today's globalised world. Three of our findings are consistent with the expectations and formal denouement of the stages approach: (a) the agencies increased their involvement in the China market over time; (b) the agencies went through organisational structure change through an incremental process; and (c) the internationalisation process was much faster for late entrants. On the other hand, some findings are not congruent with the theoretical explanations or logic of the theory. The main reason why agencies change their form of operations to a more involved mode, according to executives, was that their clients’ investment in China had increased. They argued that change in operational form is client-driven, rather than being driven by an increase in market knowledge. In sum, form must not be taken for the substance, although some aspects of the Uppsala model can explain the stages and changes of modality in MNE operations in China.     

Which foreign states support the global use of the Chinese renminbi? The international political economy of currency internationalisation

The internationalisation of the Chinese renminbi has taken a path distinct from most cases involving previous international currencies, in that policy measures adopted by governments have played crucial roles in it. This paper conducts a cross‐country analysis of the factors that have led foreign governments to introduce three primary policy infrastructures to support renminbi use—renminbi swap lines, Renminbi Qualified Foreign Institutional Investor quotas and renminbi clearing banks. Our analysis shows that a state holding renminbi assets among its reserves or having more developed financial markets is likely to establish a higher level of policy infrastructure supporting renminbi use. We also find that a country's economic and political relations with China may have meaningful impacts on the level of its establishment of those renminbi‐related policy infrastructures. These findings significantly expand our understanding of renminbi internationalisation, by identifying which non‐Chinese factors have affected its progress to date. They also contribute meaningfully to the literature on currency internationalisation and international currencies in general, by calling attention to the roles of foreign states in the process of a currency's internationalisation.     

Supply chain capabilities for facilitating the internationalisation of retailers – a multiple case study of three Swedish retail companies

ABSTRACT

Market-oriented aspects of retail internationalisation have received a lot of research attention since the 1990s. However, beyond these aspects lies also supply-chain oriented capabilities that are necessary for retailers to successfully internationalise into foreign sales markets. By using a perspective based on resource-based theories, this paper explores supply-chain oriented capabilities that facilitate retail internationalisation. The research is based on a multiple case study of three Swedish retailers. Through the perspective of research based theories, specifically capabilities, the empirical data is studied in a single-case as well as a cross-case analysis. Findings reveal three supply chain-oriented capability categories (leadership capability, integration capability and learning capability) of importance for retail internationalisation. Resources necessary for the capabilities are to be found internally at the retailer, but also externally at other firms. This research adds to the market-oriented knowledge on retail internationalisation by adding a supply-chain oriented perspective. Further, it provides an understanding of the early phases of retail internationalisation.     

Host–home country linkages and host–home country specific advantages as determinants of foreign acquisitions by Indian firms

This paper examines the complementarity of country-specific linkages with country-specific advantages in explaining the foreign acquisitions by Indian MNEs by testing and extending further the Eclectic Paradigm. The approach to internationalisation dominated by the Eclectic Paradigm has constantly faced challenges in gaining acceptance as a holistic framework in explaining outward foreign direct investment (OFDI). In 2006 Dunning acknowledged that the role of networks and linkages (Dunning, 2006a). In this paper we explore the view that linkages between host and home country should be included in the Eclectic Paradigm as institutional assets. Country-specific linkages add to richness and improve explanatory power of the Eclectic Paradigm. Linkage variables are shown to be an adjunct to the Eclectic Paradigm, not an alternative to it.     

Clustering,MNEs, and Innovation: Who Benefits and How?

Abstract

This paper explores three under-researched questions in the literature on multinational enterprises (MNEs), clustering, and innovation. First, to what extent does multinationality lead to higher rates of innovation activity and performance? Second, what, if any, is the link between MNE cluster location and innovation inputs and outputs? Third, are there any significant differences between enterprises belonging to domestic and overseas MNEs in these regards? Evidence is based primarily on 11,775 firms derived from the UK Community Innovation Survey 2007. Diversity in the regional economy exerts the most consistent positive influence, followed by the scale of employment in the enterprise’s own industry. Enterprises belonging to domestic MNEs appear to exert higher levels of innovation effort. However, evidence regarding their superiority in innovation outputs was weaker. Contrary to Michael Porter’s work, it appears that enterprises belonging to overseas firms benefit more than domestic firms.     

On the Differential Behaviour of National and Multinational Firms: A Within‐ and Across‐sectors Approach

This paper looks for different patterns of behaviour of national firms and multinational enterprises (MNEs). Its main contribution is the use of a computable general equilibrium perspective to analyse firms’ performance. The model is calibrated for the case of the Czech Republic, which has been a very attractive foreign direct investment location in the last three decades. We replicate the arrival of MNEs to different sectors of this country in turn and analyse the responses of both types of firms across the 20 different sectors in which the Czech economy has been split. Our results grasp the short‐run impact. The higher labour intensity of national firms leads them to different patterns of production and labour demand, compared with MNEs operating within the same sector. The demand side of the model (particularly, exports and private consumption) drives the evolution of production and labour demand across sectors. Regarding prices, we also find a differential pattern between both types of firms within and across sectors. Our analysis offers detailed evidence on how the impact of MNEs will differ depending on the sector to which they arrive. Finally, the aggregate results suggest that a completely different microeconomic panorama may underlie rather similar macroeconomic outcomes.     

Investment History and Market Orientation Effects in the TFP–FDI Relationship1

This paper examines the robustness of previous stochastic dominance tests that find significant total factor productivity (TFP) heterogeneity between firms that export abroad and multinational enterprises (MNEs). We extend this literature by focusing on how ‘within‐MNE’ heterogeneity affects the extent to which one can identify the TFP threshold in the exporter–MNE TFP relationship. Within‐MNE heterogeneity is established by determining both the number and location of the foreign affiliates established by each MNE. In this way, we separate single‐affiliate MNEs from those with multiple affiliates, as well as analyse the role played by vertical FDI, a topic typically ignored in previous stochastic dominance tests of the Helpman et al. (2004, American Economic Review, 94, 300–16) hypothesis. Our empirical tests employ Japanese firm‐level FDI and TFP data for the period 1975–2000. Using Kolmogorov–Smirnov tests to determine stochastic dominance, we find significant TFP heterogeneity within the MNE group based on investment history and affiliate geographic location. While our results confirm the standard HMY three‐tiered classification to exist for Japanese firms, exporter–MNE ‘between‐group’ TFP heterogeneity is sensitive to the ‘within‐MNE’ investment history heterogeneity. We note that single‐ and two‐affiliate MNEs are statistically more similar to exporting firms than to MNEs with greater foreign affiliate totals. This shows the exporter–MNE TFP threshold to be not as explicit as Helpman et al. (2004, American Economic Review, 94, 300–16) suggest. In fact, our results allow us to identify the MNE‐side width of Girma et al.’s (2005, Economic Letters, 83, 317–24) ‘uncertainty region’ surrounding this threshold. Finally, we also find a strong TFP–market orientation relationship exists where the most productive firms follow complex integration strategies, lesser TFP firms do horizontal FDI, and the least productive MNEs do vertical FDI.     

Regulating the entry of multinational enterprises: Models and practices

This paper examines the policies adopted by host governments to regulate the entry of multinational enterprises (MNEs). The conflict between host governments and MNEs over the choice of entry strategies is demonstrated. The theoretical underpinnings of host governments’ regulations on MNEs’ entry are provided and the restrictive policies adopted by host governments are assessed. In general, prohibiting an MNE to sign a licensing agreement with its own partially owned subsidiary generates a higher level of national welfare. If the size of the host market is large enough to support several efficient plants, encouraging MNEs to license their technologies to several local firms will also increase national welfare.     

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.