MNC Strategic Responses to Ethical Pressure: An Institutional Logic Perspective

In this study, we aim to investigate how multinational corporations (MNCs) balance ethical pressures from both the home and host countries. Drawing on theories from institutional theory, international business, and business ethics, we build a theoretical framework to explain the ethical behavior of MNCs. We apply the institutional logic concept to examine how MNCs with established logics and principles that have grown in the home country respond to local ethical expectations in the host country. We differentiate the core values from the peripheral components of a MNC’s institutional logic and propose that a MNC will pursue distinctive ethical strategies under different scenarios and choose the “right” configuration of core values and peripheral components that align with institutional environment in host countries.     

Performance implications of store format diversification for international retailers

Abstract

International retailers face formidable tasks in trying to replicate, or improve upon, their home country success abroad. Their market-seeking efforts sometimes require strategic diversifications of their store format portfolios capable of serving customers in different host countries. In this study, we examine whether the degree of store format diversification helps improve the performance of international retailers. We also assess the possible moderating effects of three factors—internationalization speed, political distance, and cultural distance—on this relationship. Utilizing 2001–2015 panel data for 19 retailers originating from several home countries and operating in multiple host countries, we employ a fixed effects model to examine the hypothesized relationships. Our results show that the performance of international retailers is influenced negatively by store format diversification. This relationship is moderated by internationalization speed and political distance, but not by cultural distance.     

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.     

National and international developments in technology

Declining R&;D intensities at the national level coincide with growing international technological links. In this context a number of questions arise: Do companies research in the same field of technology abroad as they do at home? Are the fields of technology in which R&;D is concentrated within a country those in which it has a comparative advantage? What drives the process of the internationalisation of technology? What are the implications for host countries and home countries? What are the implications for policy on a national and an international level?     

Corporate engagement with non-governmental organizations in different institutional contexts—A case study of a forest products company

This embedded single case study analyses a global forest products company's, Stora Enso's, engagement with non-governmental organizations (NGOs) globally and in five countries: home country, Finland, and in host countries Brazil, China, Poland and Russia. A model of international corporate responsibility is adapted to the NGO context and the concept of civil society distance is introduced. The study argues that the institutional context and especially the local NGO base have important implications on the strategies (sponsorship, dialogue or partnership), and engagement forms (nine different forms are identified) of business–NGO engagement. Propositions are developed on the link between company motives and engagement strategies as well as the effect of civil society distance on engagement strategies.     

The motivation of international entrepreneurship: The case of Chinese transnational entrepreneurs

The ventures of transnational entrepreneurs (TEs) are a new business phenomenon, representing a fluid context in which established arrangements may be expected to change. In terms of one particular relationship, motivation has been found to be a key construct in international entrepreneurship (IE) research, with two established features of motivation comprising entrepreneurial vision and its implementation. At the same time, nationality has been found to be a consistent influence on entrepreneurial orientation through the impact of culture. Employing qualitative case study methods, this paper investigates these relationships in the new context of the internationalization of Chinese TEs socially embedded in their host and home countries. Subtle changes in established patterns of IE motivation are detected, and Chinese cultural influence may also be weakening to meet the environment of host countries.     

Traces of foreign retailers – local knowledge-spillovers and strategy adaption within retail internationalization

ABSTRACT

Since the 1990s certain retail companies have evolved into some of the largest and most dispersed transnational corporations worldwide. However, within the ‘new era of retail distribution’ retailers are increasingly divesting from foreign markets. This study addresses these recent and under-explored dynamics by revealing the traces transnational retail corporations leave after divesting from a country. It explores the aspect of learning of host market retailers from entering transnational corporations (TNCs) and examines how foreign knowledge is adjusted in the business strategies of these local actors. It takes a fresh empirical slant using qualitative interviews with host market retail managers including former TNCs’ subsidiaries operating under domestic ownership. The emerging economy of Turkey serves as an empirical example. The paper finds that foreign retailers transfer firm-specific resources to the local retail through (1) demonstration and imitation, (2) vertical linkages with suppliers, (3) joint ventures and acquisitions, and (4) labor turnover of TNC trained staff. Certain successful local companies adjust the foreign knowledge based on their local knowledge and strengths, their high level of flexibility and deep territorial embeddedness, and create ‘hybrid’ business strategies. These findings suggest that dynamic capabilities are crucial to successful retailing in an international competitive environment. TNC managers should work with local staff in partnerships of equals and managers of locally operating companies should incorporate new knowledge by hiring TNC trained staff.     

A South-South perspective on emerging economy companies and institutional coevolution: An empirical study of Chinese multinationals in Africa

In this paper, we show how international tenders act as defining moments in building asymmetric coevolution-based mechanisms between Chinese multinational enterprises and local institutions in developing African countries. We used a case study methodology to explore how three Chinese multinationals – Citic, Sinopec, and Chinalco – developed non-market relations with the institutions of three African countries, namely, Algeria, Gabon and the Republic of Guinea, both during and after the submission of international tenders, to win strategic contracts and securely embed the company in question within the target host country. We found that Chinese companies not only submit tenders, but also develop multiple kinds of alliances in order to influence local institutions over the long term, transplant new business practices and standards, and expand in an unparalleled way, with host-country institutions and Chinese MNEs acting as partners in the new ecosystem. Based on our findings, we propose a model which highlights the specific mechanisms through which successful coevolution processes emerge and prosper between Chinese multinationals and developing country institutions. This study contributes to the international management literature by extending the field of institutional theory to co-evolutionism in international business.     

Business under adverse home country institutions: The case of international sanctions against Myanmar

We expand the institutional perspective of international business by exploring the range of institutions outside the host country that influence international business. We use a critical case, Myanmar, to explore the dynamics of institutional constraints and the reaction of business to such constraints. Our in-depth case analysis focuses on four industries for the period 1996–2011. On this basis, we develop the concept of ‘low profile strategy’ and propose a conceptual framework of home country pressures influencing multinational enterprises’ international operation, and the variation of their impact across industries and firms. This framework provides a foundation for future work on the extra-territorial effects of institutions in international business.     

The Role of Religiosity in Business and Consumer Ethics: A Review of the Literature

This study investigates antecedents of corporate social responsibility (CSR) in multinational corporations’ (MNCs’) subsidiaries. Using stakeholder theory and institutional theory that identify internal and external pressures for legitimacy in MNCs’ subsidiaries, we integrate international business and CSR literatures to create a model depicting CSR practices in MNCs’ subsidiaries. We propose that MNCs’ subsidiaries will be likely to adapt to local practices to legitimize themselves if they operate in host countries with different institutional environments and demanding stakeholders. We also predict that MNCs’ subsidiaries will be likely to adapt to local practices to avoid spillover effects if their parent companies suffer major legitimacy problems at home or abroad. However, we speculate that MNCs’ subsidiaries will be less likely to adapt to local practices if they are strongly annexed to their parent companies and the benefit to gain internal legitimacy outweighs external legitimacy. This article contributes to the discourse on CSR across borders by exploring the antecedents of CSR practices in MNCs’ subsidiaries at social and organizational levels, and integrating institutional and stakeholder views. We provide a number of propositions for future studies and explore implications for practitioners.     

Transaction services and SME internationalization: The effect of home and host country bank relationships on international investment and growth

Building on the argument put forward by North and Wallis (1994) that the transaction sector enables economic growth by lowering the costs of transacting, we investigate how internationalizing firms’ host and home country bank relationships affect their international specific investments and growth. Banks provide payment, liquidity, and risk management services, which are essential to international business relationships, yet little is known about how banks affect international business relationships. In a sample of 255 small and medium-sized enterprises (SMEs), we find that host and home country bank relationships affect the dependent variables differently. We contribute to the literature by explicating the role and effects of banks in international business relationships. Our findings have implications for understanding transaction services in international business as well as the choices made by their customers.     

Innovation capacity,international experience and export performance of SMEs in Brazil

Innovation capacity and international experience are factors often related to the internationalisation process of firms, with export activities as the first stage of the process. However, firms from emerging countries seem to show advantages and follow patterns of international expansion that may differ from firms based in developed countries, where the internationalisation models were created. Specifically, exporting firms from emerging countries tend to have limited resources, especially small firms (e.g., for investing in R&D). Despite these facts, the literature on export performance seems biased towards recommending firms to enhance, above all, their innovation capacity in order to achieve better export performance, while little attention is paid to international experience as a factor that is as important as innovation. In this context, the objective of this study is to investigate the impact of innovation capacity and international experience on the export performance of small and medium-sized enterprises (SMEs) located in an emerging country and to identify which factor is more significant. The Resource-Based View and Dynamic Capabilities approach were used as theoretical frameworks. A research model was developed and tested on a significant sample of Brazilian industrial SMEs. The data were analysed through partial least squares structural equation modelling. The results indicate that international experience has a greater impact on export performance than innovation capacity, showing that there is possibility of overemphasising the role of innovation in the export performance of SMEs, at least, in the Brazilian context.     

Host country risk and foreign ownership strategy: Meta-analysis and theory on the moderating role of home country institutions

Empirical evidence for the relationship between host country risk and a firm’s ownership level in its foreign entry strategy is inconclusive. We revisit this relationship by integrating the internalisation logic with an institution-based view to examine the moderating effects of formal and informal institutions in the home country. By meta-analysing 64 empirical studies involving 52,229 ownership decisions on foreign market entry, this study gives support to theoretical arguments that the focal relationship is positively moderated by institutional constraints on policymakers and risk-taking tendencies in the home country but is negatively moderated by the joint effect of these two institutional factors. These findings shed new light on the literature of host country risk and foreign ownership strategy. Besides describing the implications of the findings for theory and practice, we discuss the agenda for future theory development in international business.     

How does Industry 4.0 affect international exposure? The interplay between firm innovation and home-country policies in post-offshoring relocation decisions

This paper investigates whether and how Industry 4.0 innovation intensity, which is developed through patenting and which provides a firm-specific ownership advantage, relates to “relocation of second degree” (RSD) of manufacturing activities, i.e. the movement of previously offshored activities to either the home country (RHC) or a third country (RTC), thus representing a reconfiguration of the firm’s extant international exposure. Moreover, we analyse the role of Industry 4.0 policies adopted in the home country, which offers a location advantage that can possibly moderate this relationship. Our findings, based on a sample of 118 RSDs implemented by European companies, reveal that both Industry 4.0 innovation intensity (at the firm level) and policies (at home-country level) have an impact, with the former pushing firms towards RTC, unless the latter are in place at the home country, thus showing the pivotal role of Industry 4.0 policies in re-attracting Industry 4.0 innovative companies in their country of origin.     

Toward a Model for International Business Ethics

This paper briefly examines the topic of business ethics and attempts to suggest a code of ethics for multinational firms. While most companies have basic policies on employee integrity, confidentiality and sexual harassment, relatively few have established policies regarding bribery, exploitive child labor, human rights violations and other issues they may encounter in the global market place (Drake, 1998). Until recently, very few companies had truly global operations. Consequently little attention was paid to the issue of ethical guidelines in a global context. Recent changes in international markets have led to an explosion of corporations with global operations, and the need for a global code of ethics has grown commensurately. In this paper we explore the issue of global business ethics and attempt to provide a framework for future discussion. We also examine some of the unique difficulties surrounding the development of any set of global business standards. Key among these difficulties is the issue of competing ethical values in home and host countries.     

Lessons learned from international expansion failures and successes

Many retail and restaurant companies adopt international expansion as a strategy to take advantage of business opportunities presented by target markets. Common objectives include increasing revenue, escaping a hypercompetitive or saturated home market, entering an emerging or lucrative market, and leveraging domestic capabilities in a bordering country. Success in international expansion is not guaranteed, however; the business world is littered with failures. In this article, we examine the international expansion failures of five service companies that opened physical facilities in a foreign country: Target, Tim Hortons, Best Buy, Tesco, and Walmart. While a variety of factors led to these failures, some common causes have been identified. These include a lack of understanding of the purchasing characteristics of consumers, underestimation of the local competition, supply chain issues, and poor strategic decisions regarding facility location and the rate of expansion. Not all international expansions are failures, though, and herein we also present the success stories of Aldo, Carrefour, and Nordstrom. These companies understood customer preferences and focused on location issues and their supply chains. Based on the aforementioned failures and successes, we offer guidance for companies looking to expand their business operations via a physical presence in a foreign country.     

The effect of language use on the financial performance of microfinance banks: Evidence from cross-border activities in 74 countries

This multi-year study examines the relationship between financial performance and language use, observing 405 partnerships between microfinance banks and their international financial partners in 74 countries. Drawing on language research in international business, we find that microfinance banks based in English-speaking, French-speaking, and Spanish-speaking countries have higher performance. Furthermore, the linguistic distance between the home country of a microfinance bank and the home country of its international partner(s) is negatively related to its financial performance. Our large-scale study confirms the effect of language use on organization-level financial performance and extends research on language in multinationals from intra-firm to inter-firm relationships.     

Brazilian OFDI Determinants

Recently, the global economy assumed a new setting in which emerging economies began to make substantial investments in the international market. This study aimed to investigate the determinants of outward foreign direct investment from Brazil from 2002–2011. The proposed models developed included attractiveness of the host country, characteristics of home country, and firms’ strategies. The results corroborate the existing argumentations concerning adaptation of mainstream theory with respect to the realities of emerging economies. Brazilian multinationals do not internationalize their activities in pursuit of cost reduction, efficiency, or to explore new markets or natural resources of the host countries. Results show that Brazilian investments were attracted by the availability of skilled labor, openness of the host market, geographic proximity, improved financial conditions of Brazilian companies, and national companies’ strategy of reaffirmation and consolidation as global players.     

Internationalization performance of Chinese multinational companies in the developed markets

This study investigates the relationship between prior cooperation experience with partners from the developed markets and internationalization performance of emerging multinational companies. Based on the knowledge-based view, this study sheds light on the crucial role of knowledge base, organizational learning in the home country, and acquisition possibility of knowledge in the host country. Employing a sample of Chinese international firms, this study demonstrates that international experience accumulated by learning through linkage with partners from the developed markets improves the performance of companies from the emerging market. Organizational learning in the home country and acquisition possibility of knowledge in the host country moderate the effect of international experience. The implications of these findings for theoretical development and future research are discussed.     

Brain drain: Inclination to stay abroad after studies

‘Brain drain’ is a phenomenon in which people of a high level of skills, qualifications, and competence, leave their countries and emigrate. One major case of the brain drain happens when students from developing countries studying in the developed countries decide not to return home after their studies. We examined the reasons for international students’ inclination to stay in their host countries in a sample of 949 management students who came to study in the United Kingdom and the United States. The results support a three-fold model of factors that influenced this inclination. Students’ perceptions of ethnic differences and labor markets, their adjustment process to the host country, and their family ties in host and home countries all affect their intention to stay.