Executive migration and international mergers and acquisitions

This study applies the microfoundations approach to examine the impact of migrating executives on firms’ selection of host country in their international acquisition decisions. Viewing executive migration as a conduit for inter-organizational learning, this study offers the first empirical findings that a migrating executive’s inter-organizational learning associated with two specific types of international acquisition experience, i.e., general and country-specific, accumulated at a prior affiliated firm positively impacts host country selection in the executive’s current affiliated firm’s acquisition decisions. The findings further suggest that the migrating executive’s prior country-specific international acquisition experience has a greater influence compared with the migrating executive’s prior general international acquisition experience. Last, the findings show that industry similarity between a migrating executive’s prior and current affiliated firms enhances the effect of the migrating executive’s specific host country acquisition experience. In sum, this study contributes by introducing migrating executives as a new learning conduit in international acquisitions.     

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.     

Firm-specific intangible assets and subsidiary profitability: The moderating role of distance,ownership strategy and subsidiary experience

How does distance attenuate the value of MNC parent intangible assets on affiliate profitability? Beyond the basic assumption of internalization theory about the positive relationship between parent intangibles and foreign affiliate performance, we test how this relationship, is contingent on ownership strategy, subsidiary experience, and is moderated by the distance between home and host economies, in terms of differences in technological capacity, intellectual property regimes, economic development, language and geography. Based on newly-available accounting data on intangible assets, we test hypotheses on a sample of over 2000 multinationals and 5000 of their overseas affiliates in 45 home and host economies.     

Governance, organizational capabilities, and restructuring in transition economies

This paper focuses on the links between governance, firm capabilities and restructuring following the large-scale privatization process in Central and Eastern European transition economies using an integrative approach. Restructuring in these countries has been motivated by political and institutional changes and less so by market forces. Accordingly, political processes have produced political solutions such as “give-away” privatizations to insiders. These privatizations, in contrast to divestitures to outside owners, have realized less substantive restructuring because non-market incentives, such as too much managerial equity ownership, have created managerial entrenchment. In addition, we propose a connection between governance and organizational learning suggesting that learning is inhibited by excessive managerial ownership and lack of board knowledge regarding its oversight function. Furthermore, this entrenchment and poor board functioning may be perpetuated in financial-industrial groups, which have emerged as substitutes for market intermediaries in emerging economies. Thus, we propose that outside ownership involvement and the development of organizational capabilities may facilitate restructuring in the Central and Eastern European context. Our theoretical arguments are supported by case study evidence from transition economies.     

Back to roots: TMTs’ country-specific experience,FDI preference,and political center favoritism

This paper investigates how the origin experience and work experience of top management teams (TMTs) affect foreign direct investment (FDI) decisions of multinational enterprises (MNEs), drawing on learning theories and social capital view. Using data from Standard and Poor’s firms operating in China during 2014–2016, we find that TMTs’ country-specific origin experience and work experience have a positive impact on the extent of FDI in the focal country, while we find that the former has a greater impact. Consistent with the consideration of being deeply anchored in the specific country, we find that TMTs with origin experience, relative to work experience, are more likely to choose FDI locations in the political center. We further find that the effect of origin experience on the extent of FDI and the preference for political centers will be more pronounced for MNEs with low levels of profitability. This study contributes to the literature on international business and provides practical implications for international expansion.     

Foreign direct investment in the banking sector: the case of Italian banks in the '90s

The present paper addresses the issue of the determinants of the growth of multinational banks upon foreign markets at a micro individual level. Theories and approaches suggested so far about globalisation of the banking sector basically relate banks' international growth to the theory of the multinational enterprise. Accordingly, this paper relies on the eclectic paradigm, which views the foreign direct investment decision to be a combination of ownership, internalisation and location advantages. Empirical evidence is provided through an econometric model based on count data techniques, with reference to the Italian case in the decade 1989–1999. Results show that the availability of resources and international experience already gathered by the parent banks have positive effects on their decision to undertake direct investments abroad. Multinational banks are also proved to grow internationally in order to internalise their pre-existing bank–client relationships, and to locate their foreign units where they can exploit positive externalities related to the presence of important international financial centres.     

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.     

The relative importance of old and new decision specific experience in foreign ownership strategies: an exploratory study

In this paper, we examine the relative importance of old and recent decision specific experience for MNC's foreign ownership structure decision. Using established procedures to measure decision specific experience construct, we find, from data for Japanese MNCs for the period 1969–1991, empirical evidence that firms tend to rely on both old and recent decision specific experiences for their current ownership structure decision, but that they rely more on recent decision specific experience than on old decision specific experience, contrary to the conventional organizational learning view on the temporal importance of decision specific experience. Sub-sample analysis involving developed and developing countries indicates that both old and new decision specific experience are important for both groups of countries, but old (new) decision specific experience is marginally more important for investments made in developing (developed) countries.     

Revisiting the role of cultural distance in MNC's foreign ownership mode choice: the moderating effect of experience attributes

This study investigates potential moderating effects of firm's experience levels in the relationship between cultural distance and foreign ownership mode choice. Using the well established Japanese FDI data base, it is found that higher levels of experience, particularly decision-specific experience (prior experience with a particular ownership structure mode), mitigates potential impacts of uncertainty and costs caused by the high level of cultural distance, thus uncovering one possible answer to the ‘national cultural distance paradox’ reported in the literature. These findings reinforce similar findings of interaction effects between key variables and cultural distance in studies involving other important strategic decisions of the MNC. The ‘decision-specific experience-moderated cultural distance’ variable, and not the ‘absolute cultural distance’ variable, is found to be an important determinant of a firm's foreign ownership mode choice. Furthermore, this variable dominates the other experience-moderated cultural distance variables (international business experience and host county experience-moderated cultural distance variables) in the ability to discriminate between full ownership and shared ownership modes. Based on this moderated cultural distance measure, we find strong evidence that cultural distance is positively associated with full ownership of Japanese foreign manufacturing entities.     

An empirical investigation of immigrant effects: the experience of firms operating in the emerging markets

The immigrant effect consists of the ‘employer’ and the ‘employee’ effect. This study focuses on the ‘employee’ effect. Existing studies on the immigrant effect have identified its contributions to international trade and international marketing management but have not explained under what circumstances this effect can be used to achieve a firm's objectives when operating in a foreign market. This study explores the profile of the firms which have used this effect to assist their operations in three foreign host markets (China, Hong Kong and Taiwan). Based on the outcomes of a multivariate logistic regression analysis, this study has generated a number of useful findings. Firm size is not suggested as a factor for the selection of immigrant effects. Firms are more likely to adopt an immigrant effect when their products are new to the markets. FDI mode users tend to be more likely to use the immigrant effect. Usage of immigrant effects is also found to be associated with firms from a smaller domestic economy. The immigrant effect is often used to break cultural barriers between home and host markets, but is more helpful when the marketing infrastructure in the home and host markets is similar. The choice of immigrant effect is suggested to have no influence on firms' performance in the host markets.     

Top management team’s formal network and international expansion of Chinese firms: The moderating role of state ownership and political ties

This article explores the role of the formal network centrality of top management teams (TMT) for foreign expansion, looking at the case of Chinese firms. The former is defined by the degree to which top managers are connected with TMTs of other firms in formal ways, through service as independent board members. We explore boundary conditions, comparing state ownership with political ties. The analysis of a panel data of 489 firms expanding to 72 developed and developing host markets in the period 2000–2012 confirms that network centrality facilitates internationalization. We found that TMT network centrality had a stronger effect on internationalization in developed than emerging markets. Conversely, state ownership had a positive moderating effect in the latter and political ties a negative effect in developed ones. The literature on comparative institutional analysis suggests that formal ties are more important in developed economies, and informal ties in emerging ones. However, formal political ties and/or links to the Chinese state may be more of value in internationalizing into other emerging markets, where the balance of diplomatic power may be more skewed in China’s favor.     

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.     

Cross‐Border M&As by Chinese Companies in Advanced Countries: Antecedents and Implications

Theoretically grounded in the ownership, location, and internalization (OLI) paradigm and institutional theory, this article investigates major macro‐level factors that determine cross‐border mergers and acquisitions (CBMAs) by Chinese firms in developed markets. Using panel data of Chinese CBMA deals in developed markets from 1996 to 2012, we found that market size, natural resources, and strategic assets of host advanced economies positively affected the number of Chinese CBMAs in the developed markets. With regard to institutional variables, the overall economic freedom of host countries positively affected Chinese CBMAs, whereas the host government effectiveness negatively influenced the number of Chinese CBMAs. Furthermore, the above hypothesized effects were significantly strengthened by the home country's government involvement mainly through ownership. Finally, we found that significant factors to explain Chinese overall outward foreign direct investment (OFDI) are not necessarily applicable to explain Chinese CBMAs. © 2015 Wiley Periodicals, Inc.     

Impacts of intermediate trade on sector structure

Structural changes, i.e. long-run changes in the agriculture-manufacturing-services-structure, are a key property of growth and development processes with massive impacts on economy and society and are part of actual debates regarding policy in developing and developed economies. While traditional literature has attempted to explain structural changes by using autarkic models, recent literature has emphasised the importance of deriving theories of structural change using open economy settings. We elaborate on the impacts of intermediate trade on sector structure. In particular, we study how import of intermediate products, which is increasingly feasible due to improvements in transport technology and political integration, affects sector structure in a multi-sector growth model with capital accumulation. This topic has not been studied in the previous literature on structural change in open economies, despite the fact that intermediate imports and capital accumulation are central aspects of modern developing and developed economies. We show that the impacts of intermediate trade on sector structure depend on three factors: productivity gains from trade, specialisation in international trade and development stage. Depending on the constellation of these factors, intermediate trade may accelerate, decelerate or have no effect on structural change. Thus, the effects of intermediate trade may vary strongly across countries.     

Institutional development and firm profitability in transition economies

Although transition economies experience significant institutional transformations that vary in their pace and magnitude, our understanding of how such changes influence firm performance is rather limited. We examine how variations in institutional reforms and international openness in 16 transition economies in Central and Eastern Europe (CEE) influence firm profitability. We enhance the understanding of this subject by showing that such institutional changes have different effects on the competitive advantages and in turn profitability of domestic firms and foreign subsidiaries. Our analysis of over 230,000 observations reveals that institutional reforms benefit domestic firms. Conversely, a completely different pattern emerges for foreign subsidiaries, indicating that institutional reforms have negative consequences for their profitability. Hence, in contrast to the established assumption that developed institutional environments are advantageous for foreign subsidiaries, the nature of institutional changes makes domestic firms the main beneficiaries.     

MNE linkages in international business: A framework for analysis

Empirical research demonstrates backward, forward and collaborative linkages between foreign subsidiaries and firms in host economies can have a major impact on the success of the development of these firms’ capabilities and resources. However, there is insufficient conceptualisation of this phenomenon in the international business literature, which has either presented a list of determinants of the occurrence of inter-firm linkages without identifying underlying constructs, focused on aggregate impacts of specific types of linkages or explored individual firm case histories. Such approaches inhibit our understanding of linkages at the firm-level generally and how they impact both local and foreign participants, in particular. Drawing on insights from other disciplines, a framework for analysis and future research is developed in this paper. This framework identifies three underlying constructs that determine the efficacy of linkages. It is argued that potential for firm capability and resource development via foreign–local interaction depends on the scope, quantity and quality of linkages formed. This approach reinforces the notion that particular dimensions of linkages, such as type, depth or duration, cannot be considered in isolation. Further, the paper argues that the relative emphasis on linkage scope, quantity and quality will involve trade-offs between them and maintaining equilibrium between global and local considerations.     

Does corporate governance risk at home affect investment choices abroad?

Disparity between control and ownership rights gives rise to the risk of tunneling by the controlling shareholder, and is prevalent in many emerging market economies and present in some developed countries. At the same time, international investors come from different countries whose home markets are characterized by varying degrees of control–ownership disparity. This paper studies whether this difference in investors' home countries affects their portfolio choice in an emerging market. It combines two unique data sets on ownership and control in business groups, and investor-stock level foreign investment in Korea. A key finding is that investors from low-disparity countries disfavor high-disparity stocks in Korea, but investors from high-disparity countries are indifferent. Moreover, investors from low-disparity countries became averse to disparity only after the Asian financial crisis. These results suggest that the nature of corporate governance in international investors' home countries affects their portfolio choice abroad, and therefore these investors should not be lumped together in the analyses of their portfolio choice.     

Innovative international strategies

The analysis of practitioners’ narratives in four industries—cables and wires, paint, footwear chocolate, and sugar confectionery—shows that innovative international strategies drive the dynamics of international competition. The four industry case studies suggest an empirical classification of innovative international strategies based on four main dimensions: nature of the firm’s competitive advantage, process of internationalization, segment scope, and level of coordination across borders. From these dimensions derive six types of innovative international strategies that change the rules of competition. The findings support a proactive view of economic development and strategic management. This framework can inspire decision makers in charge of crafting consistent and effective international strategies, as it shows that strategic choice can transform industry structure.     

Empirical Analysis of Business Growth Factors Using Swedish Data

Empirical research conducted on the U.S., German, Australian, and Scottish economies has shown that age, size, location, legal form, and industry are related to business growth. Much of this research has focused on manufacturing firms, thus providing little information about the effect of industrial sector differences on these factors. We seek to both confirm that small independent firms demonstrate the greatest growth rates and to explore the effects of the industrial sector on this conclusion.
This article uses Swedish data to replicate previous research while using a different definition of business to enhance the study of effects from industry, international versus domestic businesses, and domestic versus foreign ownership. Results show that business age, beginning size, ownership form, industrial sector, and legal form are the most important factors related to growth. Although business growth differs among industrial sectors, youth, ownership independence, and small size are major factors that underlie growth across all industries.     

Institutional and transaction cost influences on MNEs’ ownership strategies of their affiliates: Evidence from an emerging market

This paper examines the impact of institutional, and transaction cost specific variables on MNEs’ choice of equity ownership in their foreign affiliates. We consider the determinants of the choice of foreign investors between full ownership (setting up a wholly owned greenfield subsidiary or engaging in a full acquisition) and sharing ownership with a local firm (establishing a greenfield joint venture or making a partial acquisition). Drawing on both transaction cost and institutional theories, a number of hypotheses are developed. Based on a dataset of 6838 foreign affiliates in Turkey, the empirical analysis reveals that institutional variables are important in explaining the equity composition of foreign affiliates. Particularly important in determining equity ownership were found to be political risk, cultural distance, linguistic distance, agglomeration, location and the size of the affiliate. A distinguishing feature of the paper is that we examine the marginal effects of the independent variables in explaining ownership patterns of MNEs.