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.     

Acquisition Entry Strategy of Nordic Multinational Enterprises in China: An Analysis of Key Determinants

ABSTRACT

This article addresses the key determinants of acquisition entry strategy (i.e., the choice between full versus partial acquisition) of Nordic multinational enterprises (MNEs) in China. Although general establishment and entry mode strategies have been a highly researched area in international business studies, acquisitions as a specific entry strategy and its different aspects have been scarcely researched. Therefore, the current study aims to fill the gap in literature by analyzing determinants of acquisition entry strategy based on three important theoretical bases: transaction cost economics, resource-based view, and institutional theory. Our study is one of the first to analyze acquisition entry strategy of MNEs from all four Nordic economies (Denmark, Finland, Norway, and Sweden) in China during 1987 through 2012, and this unique empirical context adds further value to the study findings. The empirical results show that high target country experience, high cultural distance, high level of product diversification, and subsidiary location in institutionally developed and open cities of China were positively associated with choice of full acquisitions by Nordic MNEs. On the other hand, high industry research and development intensity and timing of acquisition led to the choice of partial acquisitions by the investing Nordic MNEs.     

The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)

Using a sample of 787 Japanese MNEs operating in 60 countries from 1996 to 2010, this study examines the impacts of MNEs’ three most commonly observed forms of non-conventional outbound FDI (i.e., as a means to counter trade barriers, to achieve a financial hedge, or to obtain tax breaks) on domestic employment levels of MNEs at home. We build on a conceptual classification of ‘motivation-activity’ of MNEs as a theoretical framework, and evaluate the impacts of MNEs’ non-conventional outbound FDI on their domestic employment levels in relation to the MNEs’ specific combination of ‘motivation’ and ‘activity’ as they conduct outbound FDI in host countries. The 3SLS regression results show strong evidence that non-conventional outbound FDI in core business activities reduces MNEs’ domestic employment levels when the investment is primarily for responding to country-specific conditions, such as circumventing host country restrictions (e.g., FDI to counter trade barriers) or escaping from home country restrictions (e.g., FDI for tax incentive packages), while FDI in non-core business activities (e.g., FDI for financial hedging or FDI in tax havens) has either a positive or insignificant effect on MNEs’ domestic employment levels depending on whether it aims to develop FSAs or not. We conclude the study with public policy implications from these findings.     

Engaging informal institutions through corporate political activity: Capabilities for subnational embeddedness in emerging economies

This study examines how multinational enterprises (MNEs) organize internally to enhance subnational institutional fit in new frontier developing economies. We consider how corporate political activity (CPA) can facilitate local embeddedness by engaging informal institutions and nonmarket stakeholders at local community level. We apply an exploratory, qualitative, multi-case study approach to six MNEs in Uganda’s electricity generation sector. The findings suggest that in markets like Uganda, MNEs depend on being bridged with subnational informal institutions such as tribal, social, and religious norms and grassroots political networks. Such bridging in turn positions these MNEs to contribute to developmental processes by integrating recognizable informal institutions into grassroots projects.Drawing on institutional theory and an organizational capabilities perspective, we identify the diverse bridging capabilities that enable MNEs to successfully embed locally, thereby simultaneously pursuing business objectives and achieving societal relevance.     

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.     

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.     

Bank regulation and the process of internationalisation: A study of Japanese bank entry into London

The paper provides a theoretical insight into bank regulation and the process of internationalisation by examining the concepts of regulatory push and market pull within the context of Japanese bank entry into London during the 1980s. Rugman and Verbeke's [(1998). Corporate strategy and international environmental policy. Journal of International Business Studies, 29(4), 819–833] Consistency of Home and Host Government Goals model is utilised to structure the discussion, which centres on a situation where there is a conflict of goals between multinational enterprises (MNEs) and the home government but goal alignment between MNEs and the host government. As such the paper examines a relatively under-researched aspect of internationalisation and concludes that in certain circumstances internationalisation can occur despite great ‘psychic distance’. The paper also argues that although bank regulation can lead to a conflict situation it can also be conducive to the development of a strong home base and the development of firm specific advantages.     

Cultural bridging and the performance of international joint ventures

The existing predictions and findings regarding the effect of cultural distance on the performance of international joint ventures (IJVs) remain inconsistent. We suggest that this inconsistency is due to the lack of conceptually differentiating the cultural distance between the firm’s home country and its partner(s)’country (home-partner country cultural distance) from the cultural distance between the firm’s home country and the location of the IJV (home-host cultural distance). We contribute to our understanding of IJVs by explicitly differentiating these two types of cultural distance, and by introducing the concept of cultural bridging. Cultural bridging relates to the proportion of home-host cultural distance that is compensated by having a joint venture partner, whose home country culture is more similar to the host country culture than the MNE’s home country culture is to the host country culture. We theorize how cultural bridging affects IJV performance and how it interacts with home-partner country cultural distance and home-host cultural distance to influence IJV performance. We test our hypotheses using a sample of 1708 IJVs. We find that cultural bridging has a positive influence on IJV performance, strengthens the positive performance effect of home-host cultural distance, and reduces the negative performance effect of home-partner country cultural distance. Our findings help make sense of some of the inconsistent findings regarding the role that cultural distance plays for IJV performance.     

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.     

Taking two to tango: A comparative nationalism view of cross-border acquisitions

Nationalism is an important yet underexplored issue in the international business strategy literature. As a new reality, the resurgence and augmentation of nationalism in recent decades has brought disruption effects that challenge traditional arguments on the international expansion of multinational enterprises (MNEs). We suggest that nationalism is not merely about one’s own national interest but should be extended to consider the mutual forces from home and host countries in international business (IB) research. This study proposes a comparative nationalism view to investigate the impacts of various types of intercountry nationalism on MNEs’ expansion through cross-border acquisitions. Through scenario analysis, the MNEs’ expansion trajectories are characterized by different degrees of comparative nationalism, including incremental expansion, deceleration, leapfrogging, and divestment strategies. Our findings and propositions create a new vision for cross-border research considering the interacting effect of national sentiments. We also discuss promising future research agendas enabling further exploration of this topic.     

The Exporter - Import Agent Contract and the Influence of Cultural Dimensions

This paper examines the relationship between an exporter and an import agent in an international marketing channel using agency theory and cultural dimension frameworks, and proposes a research agenda with five testable propositions from this literature. Agency theory provides a way of forming an efficient exporter-agent contract and suggests that efficient contractual conditions are likely to provide the basis of a successful negotiated outcome. Cultural dimensions are elements that are likely to create obstacles to an efficient contractual outcome. This paper presents the concept of the dimensional gap that exporters may need to bridge in order to form an efficient contractual relationship. We suggest that in a cross cultural encounter, a divergence of cultural dimensions between the parties to the contract will impact adversely on agency costs and lead to contractual inefficiencies. By identifying gaps in the cultural dimensions between contractual parties, and taking steps towards reducing these gaps, the potential for such inefficiencies can be reduced, improving the chances of successful contractual outcomes. The dimensional gap considers the influence of four cultural dimensions on contractual efficiency. This paper presents five testable propositions suggesting that cultural gaps within power distance, individualism and masculinity, can be bridged through greater flexibility and adaptability in management decisions acquired through experience and learning, whereas gaps in long term orientation and uncertainty avoidance are less likely to be influenced by such behaviour. Where the latter condition exists, it is proposed that the potential of high transaction costs will result in exporters by-passing intermediaries and using more integrated forms of entry.     

The Relationship Between Psychic and Cultural Distance and Business Ethicality Attitudinal Values of Future Business Leaders

ABSTRACT

Psychic distance and cultural distance between countries are phenomena that can affect a company's entry strategy into foreign markets, as can differences in levels of business ethicality. The author examines the use of three measures of psychic and/or cultural distance (Brewer, 2007; Ellis, 2008; Fletcher & Bohn, 1998) and assesses the extent to which they are related to business ethicality values. A two-stage sampling design was used to survey undergraduate business students in 23 countries regarding their business-related ethics attitudes. This study had 13 countries in common with the Brewer (2007) and Fletcher and Bohn (1998) studies and 12 countries in common with Ellis (2008). Comparisons were made between the index values of the countries and their average scores on a scale of business ethicality by correlation analysis. Correlations were not statistically significant. The results suggest that none of the measures of distance examined is a good indicator of business ethicality and vice versa. Thus, one cannot assume a priori that a country that is culturally or psychically close to one's own country will have similar business ethicality values.     

我国物流企业沟通问题研究

当今越来越多的物流企业开始进行跨国经营,组织成员在文化背景、思维方式、行为习惯等方面存在的巨大差异,由此带来的矛盾和冲突程度直接决定物流企业国际化战略的成败,沟通作为一种化解矛盾、解决冲突的主要的组织信息交流活动更凸显出其重要性。本文将对我国物流企业沟通问题进行较为深入的研究。     

Cultural distance,political risk,or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research

It is well accepted that multinational enterprises (MNEs) prefer equity joint ventures (JVs) over wholly owned subsidiaries (WOSs) in foreign countries where the formal and informal external environment is highly uncertain. Many entry mode studies have modeled the external uncertainty faced by MNEs in foreign countries as the cultural distance to these countries (thus focusing on the informal environment), or as their political risk level (thus focusing on the formal environment). We argue that both approaches are suboptimal because (1) cultural distance not only reflects the external uncertainty associated with WOSs but also the internal uncertainty associated with JVs, and (2) political risk covers only one aspect of the formal external environment. We contend that the governance quality of foreign countries is a better proxy for external uncertainty. The lower this quality, we hypothesize, the higher the likelihood that MNEs will choose JVs over WOSs. An analysis of 231 entries by Dutch MNEs into 48 countries offers support for this hypothesis. We also find that cultural distance has no impact on entry mode choice and that political risk has the weakest impact of all aspects of governance quality.     

Does distance matter in foreign direct investment sub-national location choice? Evidence from China

Multinational enterprises (MNEs) make investment decisions according to the distance factors at a sub-national level. This paper made estimates using the gravity model with provincial foreign direct investment (FDI) data from 2000 to 2012 and employed three concepts of distance. Our empirical results indicate that geographic distance and cultural distance have significant negative effects on FDI flow, whereas economic distance has a significant positive effect. It suggests that FDI prefers to locate in regions that are geographically and culturally close but economically distant from the home country, which further implies that FDI in China is dominated by vertical FDI. Our findings suggest that Chinese provincial governments should place emphasis on attracting FDI from culturally close countries and provide institutional support to encourage and promote horizontal FDI.     

Equity-based entry modes of emerging country multinationals: Lessons from Turkey

Based on a sample of 522 foreign affiliates of Turkish multinational enterprises (MNEs) with varying levels of Turkish equity ownership, this study provides an empirical analysis of the determinants of equity-based entry mode strategies in host country markets. A number of hypotheses are developed to examine the impact of institutional, transaction specific and firm level variables on Turkish MNEs’ choice of equity ownership mode in their foreign affiliates. The results reveal that institutional variables are important in explaining the equity composition of foreign affiliates of Turkish MNEs. Particularly important in determining equity ownership mode were found to be political constraints, linguistic distance, knowledge infrastructure and the extent of parent diversity. Results concerning the influences of the size of the affiliate are contrary to expectations and contradict the findings of previous research. No support was found for the impact of cultural distance on the equity ownership mode of Turkish MNEs in their foreign affiliates. Apart from political constraints, equity ownership choice and its underlying determinants do not vary between emerging and developed host country markets.     

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.     

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.     

Multinational Enterprise Decision Principles for Dealing With Cross Cultural Ethical Conflicts

Cross cultural ethical conflicts are a major challenge for managers of multinational corporations (MNEs) when an MNE's business practices and a host country's practices differ. We develop a set of decision principles to help MNE managers deal with these conflicts and illustrate with examples of ethical conflicts faced by MNEs doing business in contemporary Russia (DeGeorge, 1994). We discuss the generalizability of the principles by comparing them to the Donaldson (1989) and Buller and Kohls (1997) decision models. Finally we discuss changes in the cross cultural ethical problems facing MNE managers and offer suggestions for future corporate and academic work on these problems.     

“Your forward is our reverse, your right, our wrong”: rethinking multinational planning processes in light of national culture

Planning processes are potentially important governance mechanisms in multinational enterprises (MNEs). However, the complex multi-level and multi-cultural nature of these organizations may result in compatibility or clashes of culture between the various units of the MNE with respect to planning processes. In this theory building paper we develop a model that outlines how national culture will affect planning processes at both home and host country levels. This framework is applied to show how different planning outcomes may emerge due to these cultural differences. Finally, aspects of language, nontraditional structures, implications and limitations of the model are also discussed.