State ownership and internationalization: The advantage and disadvantage of stateness

We critically review the literature on state-owned multinationals to clarify previous arguments and guide future studies. The content analysis of prior research reveals that state-owned firms differ from private firms in their internationalization: they are motivated by national strategic objectives, select more challenging countries, and use acquisitions more intensively despite adverse market reactions. The analysis also reveals conflicting predictions on the level of internationalization; some studies find that state-owned multinationals internationalize more while others find the contrary. We introduce one solution to these conflicts by classifying theories into two camps based on the balance between the costs and benefits of state ownership. One camp suggests a disadvantage of stateness (agency theory, resource dependence theory, and neo-institutional theory). Another camp promotes an advantage of stateness (economic development, resource-based view, and institutional economics). We conclude by outlining three promising relationships in the study of these firms: (1) relationships internal to state-owned multinationals and the balancing of stakeholder demands; (2)relationships between state-owned multinationals and government and the influence of the political system; and (3) relationships between home and host country governments and the impact of their dynamics on state-owned multinationals.     

How Do Entry Motives and Institutions Influence the Acquisition Strategies of Multinationals in Foreign Markets? Lessons from Acquisitions of Finnish Multinationals in Global Markets

When acquiring foreign targets, multinationals have an option for partial acquisition, staged acquisition, and full acquisition. This study seeks to understand how the motives of market entry and institutions influence these acquisition strategies in foreign markets. By integrating OLI paradigm and institutional theory with an empirical case study of seven acquisitions of Finnish multinationals in global markets, the study finds that the motives of market entry (i.e., market-seeking, efficiency-seeking, strategic-asset-seeking motives) interact with host country institutions in influencing the choice of partial, staged, and full acquisitions. The study also develops six propositions and recommends areas for future research.     

International network formation,home market institutional support and post-entry performance of international new ventures

Effectuation and causation decision-making logics are noted to be major alternative approaches to international network formation. However, knowledge is lacking on how and the conditions under which the two approaches contribute to post-entry performance of international new ventures (INVs). We integrate the theory of effectuation and institutional development logic to explain how effectuation and causation approaches to international network formation individually and jointly contribute to post-entry performance under varying conditions of home market institutional support. We test our proposed framework on primary data from 228 INVs in a sub-Saharan African economy. Results suggest that greater uses of both effectuation and causation approaches to international network formation are associated with stronger post-entry performance. More interestingly, results show that the joint effect of the two international network formation approaches on post-entry performance is amplified under conditions of low home market institutional support. Our findings provide theoretical and managerial insights on the importance of complementing effectual and causal reasoning in international network formation in weak home market institutional environments.     

Competing with emerging market multinationals

A new breed of multinationals from emerging markets is appearing in many industries. Western firms are wrong to underestimate, as they often do, the competitive threat from these firms. The discussion herein highlights the non-traditional competitive advantages these firms use to win at home and abroad and shows how these firms use internationalization not only to exploit competitive advantage but to bolster it. The article concludes with suggestions for how Western managers should respond to the competitive threat from emerging market multinationals.     

On religion as an institution in international business: Executives’ lived experience in four African countries

We use institutional theory to understand how managers in different types of firms make sense of the dysfunction of institutionally weak environments. We interviewed ninety executives working in Botswana, Kenya, Nigeria and Zimbabwe, and found that religion was used as a normative institution when dealing with remediable institutional dysfunction, typically corruption, and as cultural-cognitive institution when dysfunction was perceived as non-remediable (associated with pervasive uncertainty) for those working for domestic firms and so-called nascent multinationals. No executives working for developed country (European) multinationals used religion as a system of meaning-making; executives of emerging market (South-African) multinationals used religion only normatively.     

Strategy and structure of service multinationals and their impact on linkages with local firms

Drawing on case studies of two leading UK service firms in five host countries (Argentina, Brazil, China, Korea and Malaysia), we examine how the strategy and organization of service multinationals shape the development of linkages with local firms in host economies. We find that there is reduced autonomy of subsidiaries to engage with local firms as a result of relatively centralized strategies of multinationals. Because of global policies ensuring consistency of services or global sourcing policies to reduce costs, service multinationals tend to prefer global suppliers. Backward linkages occur in a few cases when the relationship can be a vehicle for market expansion for the multinational in a particular host market. Local governments play an important role in the cases where backward linkages are developed.     

Investment motives,ownership advantages and institutional distance: An examination of Russian cross-border acquisitions

We apply the OLI framework, first, to examine the motives of Russian cross-border (CB) M&A activity in the period 2007–2013 and, second, to analyze the ownership preferences of Russian multinationals abroad. We test our first set of models using panel data of 322 country/year observations and the second set of models using cross-sectional firm-level data of 318 M&A deals. Our analysis shows that traditional investment motives provide a limited explanation of what attracts or deters Russian acquirers abroad. We extend our base-model to include institutional distance and find that it plays a critical role on Russian CB M&A activity. As a second step, we employ state ownership as a specific type of institutional ownership advantage and discover that partial state ownership discourages Russian firms from pursuing full-ownership in CB M&As. Moreover, Russian multinationals benefit from internalization advantages (full M&A ownership) in tandem with location advantages derived from natural resource endowments.     

The global agglomeration of multinational firms

The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of agglomeration and analyze the different patterns underlying the global economic geography of multinational and non-multinational firms. We present new stylized facts that suggest that the offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including technology diffusion and capital-good market externality play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we explore the process of agglomeration.     

The global agglomeration of multinational firms

The explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of agglomeration and analyze the different patterns underlying the global economic geography of multinational and non-multinational firms. We present new stylized facts that suggest that the offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including technology diffusion and capital-good market externality play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we explore the process of agglomeration.     

China's outward foreign direct investment: Location choice and firm ownership

This article evaluates the international location decisions made by public listed Chinese firms during the period 2006-2008, using a Poisson count data regression model. Further, we categorize the firms into state-controlled and privately owned according to majority ownership. We find that the determinants of internationalization differ based on ownership. State-controlled firms are attracted to countries with large sources of natural resources and risky political environments. Private firms are more market seekers. Although all firms have strategic intent, the attraction is commercially viable technology rather than core research content. Our findings also show that existing theories can sufficiently explain the actions of private Chinese firms, but adjustments are needed to understand the behavior of state-controlled multinationals.     

Post-entry survival of developing economy international new ventures: A dynamic capability perspective

Recent research suggests that the capabilities needed for the survival of international new ventures (INVs) may be at odds with the original aims that had brought them into the international markets. INV mortality is exacerbated by uncertainty and lack of familiarity with the host market environment, which elevates the liabilities of newness, smallness, and foreignness in the initiating companies. We investigate the key factors that determine the post-entry survival of developing economy INVs by analyzing in-depth seven software INVs originating in the developing economy of Pakistan. These INVs survived the 2000 dotcom crisis and the 2008 global financial crisis, and continue to grow. Based on a dynamic capability view on the INVs’ internationalization and survival from sensing-seizing-reconfiguration angles, we find the founders’ entrepreneurial orientations and network development capabilities (sensing), specialized product focus and niche market development (seizing), and transformation and renewal capabilities (reconfiguration) are the key capabilities that enhance the post-entry survival of these INVs. Importantly, we find that a stable leadership and the post-entry international experience of the leadership team continuously feed into facilitating the creation and maintenance of dynamic capabilities. This paper identifies key strategic aspects that determine the post-entry survival of the developing economy INVs.     

Lessons learned from Brazilian multinationals’ internationalization strategies

Internationalization of emerging market multinationals is a recent phenomenon gaining importance in the global economy. This foreign expansion of a new breed of companies has challenged established theories and practices in the field of international business (Cuervo-Cazurra, 2007). This article addresses the issue of whether or not there is something to learn from these emerging market companies and their foreign expansion. Focusing on the international trajectories of four Brazilian multinationals (i.e., Odebrecht, Embraer, Stefanini, and Marcopolo), this study analyzes their strategies and managerial processes during and after the recent economic crisis with regards to internationalization. Our qualitative fieldwork suggests that the trajectories of these Brazilian multinationals are quite unstructured and evolve as a reaction to the opportunities they face in international markets. It seems all four companies in our sample shared a strong entrepreneurial spirit and a high motivation to expand their international operations despite the crisis and the obstacles they faced. Our findings and suggestions in terms of lessons learned should provide valuable implications for multinational managers from other emerging markets by providing a better understanding of how Brazilian multinationals expand internationally, deal with economic crisis, and manage relationships with local and foreign institutions.     

Inheriting the DNA of emergingness: Strategies of advanced market firms under emerging market ownership

Despite growing concerns about emerging market firms (EMFs)' acquisitions in advanced markets, the influences of emerging market ownership on advanced market firms (AMFs) as targets remain largely underexplored. This study aims to conceptually advance our understanding of the environmental adaptation strategies of AMFs under emerging market ownership, focusing on the strategic implications of the “emergingness” encapsulated in the resource transfer from EMF acquirers to AMF targets. Drawing on the institution-based view and resource-based view, this conceptual piece develops an Institution-Resource-Strategy framework and proposes two types of strategies for AMFs under emerging market ownership, namely arbitrage and avoidance, each comprising three varying tactics. We illustrate our propositions using three cases of Japanese firms under Chinese ownership. This study adds to the literature on internationalizing EMFs, the institution-based view of global strategies, and cross-border mergers and acquisitions and offers managerial implications for emerging and advanced market stakeholders.     

Firm Heterogeneity,Origin of Ownership and Export Participation

This paper investigates the relationship between firm heterogeneity and a firm’s decision to export, using the annual survey of Thai manufacturing firms from 2001 to 2004. A significant contribution of this paper is that we are, for the first time, able to break down FDI by country of origin to observe whether the behaviour of MNEs differs by region of origin. We find that sunk entry costs and firm characteristics are important factors in explaining a firm’s decision to export. Another important determinant is the ownership structure of the firm, with foreign‐owned firms having a higher probability of exporting than domestically owned firms, although this differs across country of ownership with potentially important policy implications. Export platform FDI is used to explain the behaviour of foreign firms that invest in Thailand. Using three measures of total factor productivity, we also find that highly productive firms self‐select into the export market. The implication for governments of developing countries is the need to think carefully about how and to whom they target their inward FDI policies as a means of growth. The heterogeneous behaviour of multinationals from different nations means that policies targeting specific regions or countries may be preferable to general tax concessions or the implementation of special economic zones that are open to all.     

Multinational cash management and conglomerate discounts in the euro zone

We discuss the impact of liberalisation, deregulation and the introduction of a single currency on cash management within multinationals in the euro zone. The developments in the euro zone reduce financial market imperfections in transferring cash and diminish the need for separate local cash holdings. This facilitates the centralisation of cash management and headquarters’ financial control. Increased financial power of multinational headquarters, moreover, offers opportunities for disintermediation. By exploiting these options multinationals in the euro zone can start to reap additional benefits of internal financing and conglomerate discounts of euro zone multinationals may diminish.     

Multilevel psychic distance and its impact on SME internationalization

We expand the conceptualization of psychic distance and use a multilevel framework by studying it as a founder’s psychic distance in the pre-entry phase of entering a specific foreign market, and the SMEs (firm) psychic distance in the post-entry phase of entering that specific foreign market. Based on qualitative research involving six SMEs’ with 18 internationalization events, we found that psychic distance at country and business levels causes difficulties for SMEs in the post-entry phase because of their lack of knowledge. Bridge-makers possessing knowledge about target markets help SMEs to overcome psychic distance challenges. Trust in the relationship with the bridge-maker is an important ingredient to gain knowledge that alleviates the SMEs’ psychic distance challenges. Finally, we go beyond country-business levels of psychic distance by showing that psychic distance also matters at bridge-maker level. This relates to their lack of knowledge about the target market and SMEs’ routines.     

Saving taxes through foreign plant ownership

This paper analyzes to which extent foreign plant ownership involves lower tax payments than domestic plant ownership. We assess hypotheses about the tax savings of endogenous foreign subsidiary ownership relative to domestic firms in a data-set of 507,542 foreign- and domestically-owned manufacturing plants in Europe. We identify a significant profit tax saving of endogenous foreign ownership in high-tax host countries. There is evidence of profit shifting which seems more pronounced than debt shifting in Europe: multinationals earn significantly higher profits than comparable domestic units in low-tax countries but significantly lower ones in high-tax countries. Consequently, profit tax payments of foreign-owned firms are lower than those of domestic firms in high-tax countries but higher in low-tax countries.     

Emerging market multinationals’ role in facilitating developed country multinationals’ regional expansion: A critical review of the literature and Turkish MNC examples

The recent expansion of emerging market multinationals into world markets has generated a rich literature. While this literature has addressed the potential motivations, behaviors, and strategic implications of these firms’ moves abroad, their possible role as facilitating agents in regional expansion has not been adequately explored. In this paper, we explore this question through a critical review of the literature and examples from Turkish multinationals. We also offer questions for future research.     

Firm Heterogeneity and FDI in Distribution Services

Distribution services play a large role in intermediating production and consumption across borders. Using firm‐level data on Japanese multinationals in wholesale and retail sectors, this study examines FDI decisions of distribution firms for local distribution services at the extensive and intensive margin. Consistent with the model of heterogeneous firms on multinational production, I find that more productive multinationals are more likely than less productive multinationals to enter a larger number of markets, to penetrate less attractive markets and to generate larger sales per each market. While these findings are consistent with previous evidence on manufacturing multinationals, I find some distinctive determinants of FDI in distribution services.     

Partner identification and selection of joint ventures in international retailing

Identifying and selecting the ‘right partner’ is one of the key topics in the international retailing literature. Yet, current research provides little knowledge of how international retailers find and select joint venture (JV) partners in foreign markets. We investigate seven cases of British retail multinationals to address this research gap. We find that some retailers initiate formalised partner searches. In other cases, however, JVs arise opportunistically, involving no planned partner identification and selection. Retailer selection criteria revolve significantly around local relationships and market knowledge, specifically concerning local real estate. At the same time, some retailers understand that to leverage these local resources, the relationship and strategic fit with partners are critical.