Accessing host country national talent in emerging economies: A resource perspective review and future research agenda

Through an integrative literature review, we explore the resource-related factors affecting foreign-owned MNE subsidiaries gaining access to host country national (HCN) talent. We focus on MNEs operating in uncertain emerging economy host locations. Adopting a resource perspective, we identify five core themes in the extant literature: the characteristics and roles of HCNs in MNE subsidiaries; the context-specific nature of (a) subsidiary operations and (b) talent management in emerging economies; HCN talent availability in emerging economies; and MNE embeddedness in uncertain external resource contexts. To date, studies have largely adopted an inside-out resource-based view (RBV) of the firm to understand MNE staffing strategies. Although illuminating, the RBV approach limits our understanding of the factors that affect MNEs’ interaction with their external operating environment (adopting an outside-in perspective). We, therefore, propose a framework for future research that emphasizes not only inside-out but also outside-in resource perspectives, exploring the interplay between resource dependency and RBV theorizing through strategic response types in developing a contingent talent strategy.     

Immediate responses to financial crises: A focus on US MNE subsidiaries

This paper provides evidence for the immediate or short-term responses to financial crises of US multinational firm (MNE) subsidiaries. Using a real options perspective, we hypothesize that financial crises change the relative value of ‘within-country’ versus ‘across-country’ options for MNE subsidiaries. We suggest that relocating subsidiary output is an effective short-term response to local financial crises. We examine the effects of 83 financial crises (banking, debt and currency crises) on longitudinal data of US MNEs’ subsidiary sales in over 50 countries in the period 1983–2005. Our results show market-switching effects. Particularly in the case of local currency crises we observe a refocus of the MNE's subsidiary local sales toward export markets. The effect is maintained in the occurrence of twin financial crises. These results confirm our expectation that financial crises cause an increase in the value of ‘across-country’ option relative to ‘within-country’ option.     

Which regions matter for MNEs? The role of regional and firm level differences

This paper explores the impact of regional and firm level heterogeneity on MNE performance from an operational perspective. We find that the underlying economic growth of a region and the MNE’s overall product diversity significantly impact returns from downstream operations in specific regions. Based on a 10 year panel dataset of 1249 US based MNEs, results show that the incremental impact of the degree and speed of operations within a given region, is greater for regions exhibiting faster economic growth than for slower growing ones. For slower growing regions only, product diversity of the MNE becomes important and negatively moderates the link between operations and performance. Previous literature has shown that MNEs largely follow a regional strategy and has ignored the role of inter-regional differences, and how firm level characteristics interact with region specific ones. Once inter-regional heterogeneity is introduced, a more complex picture of the internationalization performance link emerges than has been addressed previously, with significant implications for the theory and practise of internationalization.     

The impact of MNE cultural diversity on the internationalization-performance relationship: Theory and evidence from European multinational enterprises

Prior work has established the importance of degree of internationalization for understanding the performance of multinational enterprises. Despite all efforts, however, the relationship between degree of internationalization and firm performance (I-P) is still the subject of ongoing debate following inconclusive findings. We suggest that the international business literature has largely overlooked MNE cultural diversity as an essential determinant of the I-P relationship. We argue that the impact of the degree of internationalization on MNE performance is contingent on MNE cultural diversity. The impact of the degree of internationalization on performance is positive for MNEs that operate in culturally similar countries and negative for MNEs that operate in culturally diverse countries. Our study is among the first to examine the impact of MNE cultural diversity on the I-P relationship with a unique panel dataset from European multinationals. The results provide convincing support for our approach to the study of the degree of internationalization and MNE performance.     

Firm-Specific Advantages Intra-Regional Sales and Performance of Multinational Enterprises

This article is an extension of recent work that has examined the intra-regional sales of large multinational enterprises (MNEs). First, we examine the interaction between the performance of MNEs and four proxies for their firm-specific advantages (FSAs). This includes: firm size, knowledge (as represented by R&D), marketing ability, and industry type. We find that FSAs in R&D and service sector type are best exploited within the home region. In contrast, the FSA firm size is better exploited by global and bi-regional firms. Second, we find that a service MNE tends to be more home-region oriented and has a higher proportion of intra-regional sales than a manufacturing firm.     

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.     

Is there an advantage of emergingness? A politico-regulatory perspective

The source(s) of competitive advantage of emerging-economy multinational enterprises (MNEs) remains a puzzle in international strategy scholarship, with some arguing that such firms are at a disadvantage compared to developed-economy rivals. Drawing on the concept of institutional advantage and using a sample of 233 foreign subsidiaries operating in 25 emerging economies over the period of 2000–2017, we find that foreign subsidiaries of emerging-economy MNEs are more adept than foreign subsidiaries of developed-economy MNEs at deploying their fixed asset management capabilities in emerging-economy host countries, especially when host-country politico-regulatory institutions are underdeveloped. Likewise, we find that subsidiaries of emerging-economy MNEs are more adept at deploying their tax planning capabilities when host-country politico-regulatory institutions become increasingly volatile. We discuss how these findings contribute to scholarly thought regarding the performance of emerging-economy MNEs.     

Talent management motives and practices in an emerging market: A comparison between MNEs and local firms

This paper compares the differences in talent management motivations and practices between MNEs and local firms in the emerging market of Turkey. It uses institutional theory and the resource based view of the firm to explain these differences. Examining data from 201 firms the findings show significant differences between the talent management motives of MNEs and local firms, with MNEs having more tactical motivations for their talent management systems. The study also shows significant differences in the talent management practices between MNEs and local firms, with MNEs implementing more robust systems of talent management overall. The findings indicate that the motives for TM and the practices that are pursued by organizations are society-bound. The study of TM motives and practices has to be framed within the context of the institution as this shapes the way in which actors perceive and respond to environmental and organizational stimuli and the extent to which they seek to protect the rules that shape and structure their environments.     

Exploring reverse knowledge transfer and asset augmentation strategy by developed country MNEs: Case study evidence from the Indian pharmaceutical industry

Using an in-depth qualitative longitudinal case study approach, we examine strategic asset and knowledge augmentation strategies of an advanced economy multinational enterprise (MNE). Our study is unique as it is contextualized in the knowledge-intensive pharmaceutical industry within the changing institutional landscape in India. And, in contrast to previous studies, it focuses on RKT from a newly acquired subsidiary where the protocol for knowledge transfer and relationship between MNE headquarters (HQ) and subsidiary does not exist. We contribute to the evolving literature on reverse knowledge transfer (RKT) which assumes that MNEs extract knowledge from their existing subsidiaries to strengthen their competitive advantages. We also reveal that MNEs design an architecture, that is reflected in the mechanism, governance structure, and timing, for efficient transfer and effective absorption of the knowledge and assets acquired. We introduce a novel concept of ‘reverse asset augmentation’ (RAA) to capture the MNE’s behavior of strategic asset seeking from emerging economies. RAA is parallel to and entwined with RKT conceptualization as knowledge is embedded within certain physical assets, other assets, such as brand name/image, may not embody knowledge. Thematic and processual analysis of interview data, collected in three phases, suggests that RAA complements RKT and that both concepts together capture the unconventional strategies of advanced economy MNEs acquiring emerging economy MNEs in search of strategic assets and knowledge.     

Digital transformation,sustainability, and purpose in the multinational enterprise

We discuss how environmental and pandemic crises in combination with digitization are presenting the multinational enterprise (MNE) with increasing geopolitical, organizational, and market tensions. Institutional pluralism is creating a more complex global environment. The organization of productive work is shifting, which challenges how MNEs structure and coordinate their activities. Changing consumer and investor expectations are broadening the understanding of value creation with implications for business models. We contend that the tensions invite MNEs to reconsider how they frame, formalize, and realize corporate purpose. We close with a research agenda that recognizes the need for MNEs to become purpose-driven actors.     

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.     

Acquisitions Entry Strategies in Africa: The Role of Institutions,Target‐Specific Experience,and Host‐Country Capabilities—The Case Acquisitions of Finnish Multinationals in Africa

Acquisition is an important entry strategy for multinational enterprises (MNEs) seeking to gain faster entry into new and emerging markets and remain competitive in the global marketplace. MNEs utilize partial‐, staged‐, and full‐acquisition strategies when entering into foreign markets. This research analyzes how and why firms opt for these acquisition strategies in the context of Africa. The study applies institutional theory and explores constructs derived from the Uppsala internationalization process model. Using a case study of five Finnish acquisitions in Africa (Egypt, Morocco, Kenya, and South Africa), it was found that Finnish MNEs opt for partial acquisition rather than staged and full acquisition in the context of acquisitions made prior to late 1990s without earnout arrangements. Finnish MNEs opt for the choice of staged acquisition rather than partial and full acquisition in the contexts of mild regulatory framework in host countries and when the acquired firm business requires extensive improvements and the target host market structure is fragmented. Finnish MNEs opt for the choice of full acquisition rather than partial and staged acquisition in three contexts specifically: (1) when the acquiring Finnish MNE possesses host‐country capability, target‐specific experience, and ensures the retention of top management personnel of the acquired target; (2) when the size of the acquired target is relatively very small compared to the acquiring MNE; and (3) when the nature of the acquired firm business is well developed and the target host‐market structure is consolidating. © 2016 Wiley Periodicals, Inc.     

Intermediary Products: FDI Strategies,Imports, Exports,and Trade Balances in Developed Economies

Has the relationship between the dominant investment motives of multinational enterprises (MNEs) and national trade balances, imports, and exports changed over time? A 1996 study hypothesized and found that the MNE market versus resource seeking investment motives in developed countries (DCs) resulted in different aggregate impacts on national trade balances, imports, and exports. In this study, we ask whether the increased use of intermediary products, a major change in the way MNEs conduct business, affect the previously found patterns. Because firm‐level data on intermediary products is not widely available across countries, we indirectly test their impact, hypothesizing that the rise in use of intermediary products has changed MNE investment motives in DCs, resulting in stronger relationships between foreign direct investment (FDI) and imports/exports in high‐FDI DCs but weaker links between FDI and national trade balances. Implications and future research directions are discussed. © 2015 Wiley Periodicals, Inc.     

Determinants of voluntary environmental management practices by MNE subsidiaries

There have been few empirical studies of the determinants of voluntary environmental management practices (VEMPs) of MNE subsidiaries operating in emerging countries. To provide insight on this issue, this study explores the antecedent factors that drive MNE subsidiaries to adopt VEMPs, using data drawn from a key emerging country – Turkey. Based largely on the arguments of institutional theory and the resource based view of the firm, a number of hypotheses are formulated in order to investigate the effects of stakeholder pressures, perceived polluting potential, customer focus and competitive intensity. Each of these factors, with the exception of competitive intensity, is found to positively influence the adoption level of VEMPs by MNE subsidiaries. Some of the study's parent-level and subsidiary-level control variables are also found to have significant effects on the extent of VEMPs adoption by MNE subsidiaries.     

The moderating effect of bilateral investment treaty stringency on the relationship between political instability and subsidiary ownership choice

We investigate whether the degree to which a bilateral investment treaty (BIT) protects against expropriation (i.e., its “stringency”) influences the international strategy of multinational enterprises (MNEs) as they invest in countries with varying levels of political instability. We draw on institutional logic and insights from political economics to hypothesize that BIT stringency will moderate the established positive relationship between host country political instability and minority ownership. Analysis of a sample of 289 foreign investments made by AEX-listed Dutch MNEs in 34 countries between 2004 and 2013 provides support: a more stringent BIT will encourage the MNE to choose a majority stake as political instability rises. Robustness tests provide further support for our argument. The results have both managerial and policy implications relating to the role that BIT stringency plays in determining MNE strategy.     

Institutionalization of protection for intangible assets: Insights from the counterfeit and pirated goods trade in sub-Saharan Africa

Based on inductive qualitative multiple case studies of MNE subsidiaries in a sub-Saharan African market, this study investigates how multiple political networking capabilities are developed and leveraged to institutionalize protection for strategic internationally transferrable intangible assets in weak institutional environments. The study finds that MNE subsidiaries use a three-phase process to institutionalize protection for intangible assets: diagnosis of the nature of transaction costs and risks in the weak institutional environment (Phase 1); development of political networking capabilities to generate multiple political resources (Phase 2); and leveraging of a multiplicity of political resources to institutionalize protection for internationally transferable intangible assets (Phase 3). The study concludes that an ability to develop and leverage political networking capabilities to recombine multiple political resources enables MNE subsidiaries to institutionalize protection for internationally intangible assets in challenging host-market institutional environments. The wider theoretical, managerial, and public-policy complications of these findings are discussed, and avenues for future research proposed.     

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.     

Entrepreneurial leadership and MNE subsidiary performance: The moderating role of subsidiary context

Managers of international subsidiaries, especially subsidiary CEOs, operate at critical interfaces within multinational enterprises (MNEs) and hold strategic responsibility for the operations in their country. Yet, their impact on subsidiary performance has received scant research attention. Building on the subsidiary entrepreneurship and strategic leadership literatures, we develop a model of how subsidiary CEOs’ entrepreneurial leadership affects subsidiary performance, and how this relationship is moderated by the subsidiary context that determines managerial discretion. We combine survey data of 291 international subsidiaries in South Korea with archival data to test our hypotheses. Our results show that subsidiary CEOs’ entrepreneurial leadership enhances subsidiary performance and that this relationship is strengthened by managerial discretion. Our study highlights the pivotal role of subsidiary CEOs within MNEs and contributes to a microfoundational understanding of international subsidiary management.     

Temporal boundaries and expatriate staffing: Effects of parent–subsidiary work-time overlap

By integrating the boundary-spanning perspective with the expatriate staffing literature, we explore why and how temporal boundaries between multinational enterprise (MNE) parent and subsidiary locations affect MNEs’ deployment of expatriates in foreign subsidiaries. Temporal boundaries, defined as local work-time schedule differences, delimit the degree of work-time overlap between two locations. A lack of work-time overlap between MNE parent and subsidiary locations creates significant barriers in day-to-day, remote real-time communication, resulting in increased deployment of expatriates as intermediaries by parents to overcome these barriers. Conversely, greater parent–subsidiary work-time overlap enables more remote real-time communication via digital technologies, altering the cost–benefit analysis of deploying expatriates over local nationals, consequently reducing parents’ reliance on expatriates as intermediaries. Therefore, we posit a negative relationship between parent–subsidiary work-time overlap and the expatriate ratio in a subsidiary. Further, we posit that the negative relationship is weakened by home – host country distance in terms of information and communication technology development and linguistics because technological and semantic boundaries can reduce the effectiveness of parent–subsidiary real-time communication. Empirical analyses of 22,556 subsidiaries established by 5,912 Japanese MNEs operating in 31 host countries between 1990 and 2018 support our theorizing.     

Emerging Economy MNEs: How does home country munificence matter?

Multinational Enterprises (MNEs) from emerging economies (EEs) are establishing operations in advanced economies (AEs), apparently departing from traditional models of internationalization. We explore an under-explored difference between EE MNE and their AE counterparts concerning their country of origin: EEs have less munificent business environments. This leads EE MNEs to make different location choices than AE MNEs when entering AEs, specifically because they are more deterred by barriers to entry. We therefore predict EE MNEs to be relatively more deterred by distance and weak intellectual property protection and relatively more attracted by diaspora of migrants and by markets. Our empirical results are consistent with these predictions.