Firm internationalization,business group diversification and firm performance: The case of Latin American firms

We examine the influence of multinationality and business group diversification on firm performance. Further, we examine how their interaction varies between service and manufacturing firms. We assess these relations in three Latin American countries using a sample of 103 firms over the period from 2000 to 2007. We found that there is a limit to the positive effects of business group diversification and that business group diversification effectively moderates the multinationality-performance (M-P) relationship. Our results also suggest that diversified business groups have a stronger positive influence on the M-P relationship for service firms compared to manufacturing firms.     

Foreign market entry mode of service firms: The case of U.S. MBA programs

While international expansion has become an important strategic imperative on the part of knowledge intensive service firms such as U.S. business schools, little empirical support is available on how these business schools enter foreign markets. If U.S. based business education programs are expected to prosper in light of the potential onslaught of international competition, expansion to overseas markets will be one of the most sought after options available. A poor choice in market entry strategy, or the lack of international market entry, can result in a negative impact on the educational institution. This research focuses on developing, measuring, and empirically testing a framework of key factors influencing international market entry mode choice of U.S. business schools by using primary data from faculty and administrators of U.S. Master of Business Administration (MBA) schools.     

Who Invests in the Least Developed Countries?

Abstract

Africa is a giant market with a population of Europe and Japan combined, and highly diversified with respect to culture, natural resources, economic development, and political regimes. Yet, the continent is largely ignored with respect to research on the multinational activities of U.S. firms. In this paper, we provide the first evidence regarding the operating characteristics of U.S. firms that operate in Africa. We find that firms with operations in Africa are larger, more diversified, and more profitable than a matched control sample of multinational firms. This paper also shows that technology firms, manufacturing firms, and mining firms dominate the rest of companies operating in Africa. Certain geographical regions in Africa also seem to attract more companies than others, with Southern Africa being the most preferred region, while Central Africa is the least preferred. Finally, when a multinational firm invests in a specific country in Africa, it tends to do so in several business sectors.     

Rethinking guanxi and performance: Understanding the dark side of Sino–U.S. business relationships

Previous studies on guanxi (關係) have focused on how guanxi contributes positively to business relationships, without addressing the pivotal role that guanxi plays in managing the dark-side of business relationships. To address this knowledge gap, this study specifically investigates guanxi’s influence on conflict, opportunism, and switching intention in Sino–U.S. business relationships and examines how guanxi mediate the positive effect of performance as well as the negative effect of uncertainty on such dark-side constructs. Drawing on data from over 270 Chinese firms, the findings reveal that guanxi is undermined by relationship uncertainty but enhanced by performance, guanxi also reduces the dark-side of Sino-US business relationships. Chinese buyers’ guanxi with U.S. suppliers significantly lessens their switching intention, opportunistic behavior, and the perceived levels of conflict in Sino-US relationships. The findings explain how guanxi is employed as a tool to reduce the burden associated with the dark-side of business relationships and give relevant implications.     

A comparison of Japanese and U.S. firms completing initial public offerings

We set out to examine firms breaking into the top tier of for-profit companies in the U.S. and Japan to find differences across the two groups. To accomplish this, we conducted a questionnaire survey of companies that had recently undergone an initial public offering (IPO) in each country and compared them on characteristics frequently associated with new firms.As we expected, even when the different sizes of the two economies were taken into account, there were considerably fewer listings in Japan than in the U.S. One reason for this is that the listing requirements for young Japanese firms, although not stricter, are much more strictly enforced. Hence, fewer Japanese firms are able to list.Our results show that the Japanese firms were markedly different from their U.S. counterparts on several characteristics. They tended to be older and larger, which is consistent with more stringent listing requirements in Japan. They were also much more often led by their original founders. This is a surprising result given that the Japanese firms, being older, had longer to lose their founders. When a successor to the founder was president, it was much more often a relative of the founder than in the U.S. The Japanese founders rated themselves higher on relatively emotional characteristics, such as aggressiveness, paternalism, and charisma than did either the U.S. presidents or the Japanese nonfounder presidents.The Japanese firms relied solely on the president for decision-making prior to the IPO more often than the U.S. firms did. However, the Japanese firms also moved in greater numbers to group decision-making around the time of the IPO.The post-IPO investment strategies of the Japanese firms were characterized by a focus on new product development, an increase in R&D spending, and investment in the company's capital plant. In contrast, the U.S. firms reported more interest in exploiting their existing market and buying other companies, usually leaving R&D spending at its pre-IPO level.Overall, it is surprising that on many characteristics, the Japanese IPOs tended to fall more to the extreme associated with new companies than did the U.S. firms. They were dominated by founder influence, the founders were apparently highly emotional, their management style was initially autocratic, and their strategies targeted innovation and internal development as avenues to growth. This pattern is consistent with a prior hypothesis that the lack of structural support for new firms in Japan results in only the most extreme personalities pursuing and succeeding in company formation.For researchers, a significant implication of this research is that Japanese ventures may not behave according to the same rules as U.S. ventures. Research samples that fail to distinguish nationality may obscure cross-regional variations.For practitioners, the major lesson is that a Japanese venture is likely to be much different from one in the U.S. Dealing with one is probably even more unlike dealing with an established company than working with a U.S. start-up might be.     

Segmenting U.S. firms for export development

In attempting to aid firms in their exporting efforts, various segmentation approaches have been developed by government agencies and research groups. Each of these segmentation schemes aims at the identification of specific export needs within different groups of firms. The four major approaches suggested in the literature propose to differentiate firms into groups based on the level of international activities, managerial attitudes, size, and service orientation of firms. The research presented in this article investigates these four segmentation approaches by applying them to common data collected from small and medium sized U.S. manufacturing firms and investigating their effectiveness in differentiating among groups of firms. The results indicate that the differentiation of firms according to their level of international activities is the most effective one of the four approaches investigated. Subsequently, various specific needs of exporting firms are presented and a redirection of current export promotion efforts is suggested.     

Who benefits most? The effects of managerial assistance on high- versus low-performing small businesses

This study investigates the relationship between outside managerial assistance and small business performance using a conditional quantile regression approach. The model was tested using a sample of 902 ventures that received managerial or technical assistance from the U.S. Small Business Administration's Entrepreneurial Development Resource Partners. Results show that outside assistance for primary business functions, such as marketing strategy, promotional strategy, financial management and general management, is more effective for firms with lower levels of financial performance. Outside assistance for secondary business functions, such as human resources and obtaining capital, is likely to have a greater impact on firms in the middle- to upper-quantile levels. Based on the results, we propose that managerial outside assistance providers should employ different approaches for firms with lower versus higher levels of financial performance.     

Organizing for external technology exploitation in diversified firms

Besides applying technology in their own products, industrial firms increasingly exploit their technologies externally, for example through out-licensing. Earlier studies cannot explain the discrepancies between a few pioneering firms in active technology licensing and the managerial difficulties of many others. In diversified firms, diverging interests of the corporate and business unit level in the keep-or-sell decision constitute a central barrier to active licensing. Therefore, this article examines two essential dimensions of designing the corporate/business unit interface in diversified firms: the centralization of the activities on the corporate level and the alignment between the organizational levels. The study tests three hypotheses regarding the interaction and consequences of these organizational dimensions with data from 152 firms. Consistent with the hypotheses, the data provide support for the benefits from medium levels of corporate centralization and corporate/business unit alignment. The results have implications for technology exploitation, open innovation, markets for technology, and corporate strategy.     

What constrains firms from divesting their legacy business?

This study focuses on a unique business phenomenon, legacy divestitures, which refers to the sale or spinoff of a firm's original business. I argue that firms may be prevented from engaging in legacy divestiture by organizational inertia, which become increasingly stronger as the legacy business gets older. I also examine factors that help firms overcome the constraints of inertial forces on firms' legacy divestitures. Hypotheses are tested using a sample of 108 diversified American companies, 27 of which divested legacy businesses between 1980 and 2017. Firms are less likely to divest their legacy businesses as the legacy units get older. The negative relationship is weakened by two factors, performance–aspiration gaps and R&D intensity.     

Minimizing effects of ‘liability of foreignness’: Response strategies of foreign firms in the United States

While anecdotal and research evidence exists supporting the difficulties faced by foreign firms in host nation environments due to liability of foreignness, it is clear that many foreign firms have been successfully operating in the U.S. over the years. This study seeks to understand the strategies foreign firms use to cope with liabilities of foreignness in an alien environment and compete successfully with domestic firms, specifically through boundary spanning. Using a sample of 3861 firms in the U.S., we find that foreign firms on the average underperform compared to domestic firms. We also find these firms take a differing strategic posture to cope with the disadvantages of being a foreign firm compared to domestic rivals. Multiple mediation models indicate that once this strategic posture of foreign firms is controlled for, performance differentials do not exist between foreign and domestic firms.     

A resource-based analysis of realized knowledge relatedness in diversified firms

The competitiveness of related diversified firms depends upon their ability to exploit knowledge relatedness by using the internal knowledge transfer processes within the organizational network. However, most existing studies deal with potential knowledge relatedness at the corporate level, rather than focusing on realized knowledge flows among divisions at the business unit level. Little is consequently known about the very essence of related diversifiers, i.e., the management of knowledge flows within the corporate knowledge network. This study therefore attempts to bridge this research gap by distinguishing four knowledge roles within related firms and analyzing their relative performance outcomes. Based on a sample of 116 product divisions, results indicate that divisions playing a knowledge provider role outperform those that not play that role, thus signaling unique resource endowments in the formers. On the contrary, those divisions which plays a knowledge receiving role do not benefit from the internal accumulation of resources.     

Organizational and environmental impact on the use of Japanese-style HRM policies in Japanese firms in the U.S.

This survey investigates the extent of Japanese-style HRM that is being adopted in Japanese-owned firms in the U.S. It focuses on organizational and environmental factors that influence the design and use of Japanese-style HRM policies in Japanese firms in the U.S. Preliminary results show that there is no single model of Japanese HRM in the U.S. Contextual factors in terms of firm size, firm age, firm type, union status firm location, corporate culture, and the degree of parent control all influence the use of Japanese-style HRM policies and practices in the U.S.© 1992 John Wiley & Sons, Inc.     

International strategies of mid-sized firms: A comparison of Indiana and Guangdong Province

A China strategy is becoming more important for a growing number of mid-sized companies as they observe China's increasingly greater impact on the U.S. economy. Our study surveyed Indiana and Guangdong firms to assess their interest in future international engagement in the other's country. Our results confirm current engagement by mid-sized firms from both countries in some activities with the other country, but there is a strong interest in doing more. Hence, there are opportunities for many Indiana organizations to play a role in assisting Indiana firms in developing international expertise, business development, and knowledge of China. In the study, 97 firms from the Guangdong Province and 105 Indiana firms identified their current international activities as well their future intentions relative to business development in the other's country.     

The search for external strategic information: An examination of Nigerian executives

This study examines how executives of manufacturing firms in Nigeria obtain information needed for the operation of their firms. The results of this study show that Nigerian executives collect information from economic and political/legal sources in contrast to U.S. managers who rely on customer/market information. The results also indicate that Nigerian executives use internal sources, both personal and impersonal, more frequently than external sources. Their U.S. counterparts, however, have a preference for external and personal sources of information. The correlation between scanning frequency and performance was not significant for the Nigerian sample. The findings indicate that international executives preparing to operate in Nigeria, or possibly other developing countries, should anticipate difficulties in obtaining information necessary for their business and should seek creative means to obtain such information. © 1995 John Wiley & Sons, Inc.     

Performance expectations of small firms considering radical product innovation

Performance expectations influence business decisions such as investment decisions and demand for supplies, particularly in small firms with limited strategic planning. Despite widespread use of performance expectations by firms and governments when making sales forecasts and economic outlooks, surprisingly little research exists about how small firms form performance expectations. This paper contributes to reduce this knowledge gap by analyzing performance expectations of small firm managers operating in markets with radical product innovations. This paper proposes a model and hypotheses, which explain performance expectations of small firm managers based on firms' current success, radical product innovation, and variables that indicate firms' ability to respond to customer needs for radical product innovation. Data from 200 decision-makers in a real decision-making context support the model. The results show that performance expectations in small firms are only to a limited extent a naïve extrapolation of current success: radical product innovation and small firm's ability to respond to customer needs for radical product innovation influence performance expectations.     

Family firms and financial performance: The cost of growing

This study examines the relationship between financial performance and family involvement for 523 listed and non-listed Colombian firms over 1996–2006. Using a detailed database and performing several panel data regression models, we find that family firms exhibit better financial performance on average than non-family firms when the founder is still involved in operations, although this effect decreases with firm size. With heirs in charge, there is no statistical difference in financial performance. Both direct and indirect ownership (control through pyramidal ownership structures within family business groups) affect firms' financial performance positively. However, this positive effect decreases with firm size. The results suggest that some kinds of family involvement appear to make firm growth expensive.     

Are Group-Affiliated Firms Really More Profitable than Nonaffiliated?

The role of corporate center in influencing the economic performance of business units has been a central research topic in the industrial organization and strategic management literature. A common finding is the limited corporate and business group effects. Recently, an emerging line of studies argues that the market inefficiencies and institutional voids in emerging markets can be overcome more efficiently by large diversified business groups than by non-group small firms. Some empirical evidence also shows that non-group small firms are significantly less profitable than group-affiliated firms. This paper raises this issue by empirically investigating the influence of group affiliation on the return on assets and Tobin's q of 340 group-affiliated firms versus 423 non-group firms in Taiwan, during the period of 1997–1999. The statistical results show that group affiliation can not always create value for member firms. The size of the business group matters. When affiliated with the largest business groups, member firms indeed show improved stock market performance, but when firms are affiliated with small- and medium-sized groups, their accounting performance suffers. Findings of this paper suggest a threshold effect and a U-shape relationship between group affiliation and profitability in emerging economies.     

Chinese customers' loyalty to international consulting firms

International consulting firms enjoy higher customer loyalty than domestic firms in China. This paper investigates an influence model of customer loyalty on international consulting firms that goes beyond traditional research. Using a sample of 231 companies receiving service from international consulting firms in China, structural model testing validated the idea that choice based on service quality and belief caused by halo effect together lead to the customer loyalty on international consulting firms. International consulting companies have some born advantage doing business in emerging markets such as China due to Chinese customers' belief caused by halo effect.     

Comparing Attitudes Toward Ethical Dilemmas in Small Business

Abstract

This paper presents a comparative analysis of attitudes between Russian and U.S. undergraduate students on ethical issues in managing Russian small firms engaged in business transactions with U.S. firms. Based on the real life situations, Russian and American respondents were asked to select decision alternatives dealing with ethical dilemmas. Significant differences were found between the two groups. Russians do not recognize significant differences between various alternatives, despite the disparity in the severity of these alternatives for resolving business problems. Russians, compared to Americans, tend to prefer more forceful decision alternatives resorting to business practices that would be considered unethical in the U.S. This is attributable to differences in the countries' history, political, legal, and cultural environment. The transitional nature of the Russian economy affects decision-making and business ethics.