Investment strategies and activities of leading U.S. multinational firms in east asian markets: an empirical study

The focus of this article is to determine the range of investment opportunities, the ecopolitical environment, expected rates of return, and risk factors in selected East Asian countries as perceived by leading U.S. multinational corporations (MNCs). The study is conducted primarily by means of a mailed questionnaire sent to chief financial officers (CFOs) and officers in charge of international operations. Respondents represent a broad range of manufacturing and service-type MNCs. Data gathered by questionnaires and 10K statements are subjected to various statistical tests utilizing cross-tabulations and analysis of variance.     

Towards a behavioral theory of MNC response to political risk and uncertainty: The role of CEO wealth at risk

Drawing on behavioral agency research, we examine how CEO equity wealth at risk of loss in the form of restricted stock influences the response of multinational corporations (MNCs) to political risk and political uncertainty. In a sample of 14,765 cross-border greenfield investments and full acquisitions announced by U.S. firms from 2004 to 2016, we find that while greater CEO equity wealth at risk of loss in the form of restricted stock strengthens the (positive) relationship between political risk and MNCs’ choice of greenfield investments over full acquisition, CEO equity wealth at risk of loss does not influence the relationship between political uncertainty and MNCs’ choice of greenfield investments. We contribute to international business theory by introducing a behavioral theory of MNC responses to adverse host country political environments. As such, unlike previous studies that have treated political risk and political uncertainty interchangeably, our study highlights the need to differentiate between political risk and political uncertainty as related yet distinct concepts.     

Multinational companies and the growth of the U.S. trade deficit

This article examines the role of multinational companies (MNCs) in the growth of the U.S. trade deficit. Estimates of MNC-related trade are developed for 1977, 1982, and 1987. The data show that MNCs are associated with a significant share of U.S. trade and that the trading activities of multinational companies can be linked to significant trends in the U.S. trade balance.     

The effect of exchange rate uncertainty on the prices and volume of international trade

By specifying a model of differential risk-bearing by import demand and export supply sides of the market for traded goods, the theoretical impact of exchange risk on both equilibrium prices and quantities is analyzed. For several empirical cases of 1965–1975 U.S. and German trade it is found that exchange rate uncertainty has had a significant impact on prices but no significant effect on the volume of trade. These price effects support previous survey results on the currency denomination of export contracts, namely that with the exception of some U.S. imports, most trade is largely denominated in the exporter's currency.     

Operational modes for multinational corporations in post-apartheid South Africa: A proposal for a code of affirmative action in the marketplace

The economic and socio-political impact of multinational corporations (MNCs) on third world countries has been the subject of intense debate and controversy leading to charges of exploitation and colonization on the one hand, and demands for codes of conduct on the other. This article examines the working of one of the most comprehensive of such codes under the most reprehensible political conditions, i.e., the operations of U.S.—based multinational corporations in South Africa under the acgis of the Sullivan Principles. It is argued that despite the best intentions, and considerable social goodwill, the Sullivan Principles were seriously flawed both as to goals and as to means of achieving them. Finally, it suggests a new approach to developing standards of MNC behavior in third world countries which emphasizes those areas of activities that are directly under the control of MNCs, and offers targets of achievement to which MNCs can and should be held accountable.The paper is a revised and expanded version of a keynote speech delivered by the author at the First Biannual Conference on Advances in Management, Orlando, Florida March 25–28, 1992.S. Prakash Sethi is Professor and Associate Director, Center for Management, Baruch College, The City University of New York. He is also the Economic Policy Advisor to the National African Federated Chamber of Commerce and Industry (NAFCOC), which is the largest and the oldest organization of Black business and industry people in South Africa.     

Dual-edged tools of trade: How international joint ventures help and hinder capability building of Chinese firms

Forming international joint ventures (IJVs) with multinational corporations (MNCs) from advanced economies has been widely adopted by firms in emerging economies as an organizational approach to building up their innovative capabilities. In this paper, we emphasize that such an approach has both advantages (knowledge transfer from MNCs) and disadvantages (overdependence upon MNCs and reduction of innovation incentives) in the capability building of indigenous firms. Utilizing a longitudinal dataset consisting of 474 industries in China during 1998–2002, we find supporting evidence for the co-existence of the positive and negative impacts of IJVs. Specifically, we find that IJV presence has an inverted U-shape impact on innovative capabilities of indigenous firms; such an impact is stronger in industries with low (versus high) technology gap. We discuss the implications of our findings for research, managerial practice, and government policy.     

From international new ventures to MNCs: Crossing the chasm effect on internationalization paths

This paper explores the market expansion path of knowledge-based international new ventures (KINVs) toward multinational corporations (MNCs) over time and identifies relevant enabling factors. Integrating crossing the chasm and international new venture (INV) theories, we analyzed international expansion paths of four KINVs headquartered in three countries (the U.S., Japan, and Israel). Based on trademark data, triangulated by both sales data and primary interviews of corporate executives, we proposed an integrative framework to examine the effect of crossing the chasm on market expansion paths towards MNCs. Our findings suggest that KINVs that cross the chasm in lead market are more likely to become MNCs. Our studies also identify several important factors that enable KINVs toward MNCs; these enabling factors include firm-specific assets and capabilities (e.g., proven products, R&D expertise, intellectual property assets, brands and reputation), partnership with leading customers, and collaborators built during the dynamic process of crossing the chasm.     

The impact of internationalization degree on cash levels: Evidence from Latin America

Although cash management has been extensively studied, the cash policies of multinational corporations (MNCs) outside of the U.S. market have been underexplored. We fill this gap in the literature by comparing the cash policies of MNCs to those of non-MNCs in a Latin American setting (Argentina, Brazil, Chile, Colombia, Mexico and Peru). Using different proxies for multinationality, we find evidence that the cash holdings of multilatinas are significantly higher than those of their domestic counterparts. Overall, given that foreign markets may offer the best investment opportunities for many MNCs, our results are consistent with the argument that multilatinas maintain higher cash levels to take advantage of the greater growth opportunities abroad. We contribute to the literature on cash management and international business by expanding knowledge regarding the efforts of MNCs in emerging markets. Our results hold following a series of robustness checks and endogeneity concerns.     

Financialization and the non‐financial corporation: An investigation of firm‐level investment behavior in the United States

Changes in the portfolio and financing behavior of non‐financial corporations (NFCs) over the post‐1970 period in the U.S. economy point to the financialization of the NFC and raise the question of accompanying changes in fixed investment behavior. Using a firm‐level panel, this article econometrically investigates the relationship between financialization and investment, exploring the implications of changes in financing behavior, increasingly entrenched shareholder value norms and rising firm‐level demand volatility for NFC investment in the U.S. economy between 1971 and 2013. Shareholder value orientation is, in particular, identified as a characteristic of the post‐1970 U.S. economy associated with a statistically and economically significant decline in NFC investment rates. The stock of financial assets, conversely, is found to be a positive correlate of firm investment. The analysis also highlights key differences by firm size. In particular, shareholder value norms are found to primarily influence the investment behavior of large NFCs, while rising volatility most substantially impacts small firms.     

Country-of-Destination and Export Marketing Strategy:

As changes in the economic and political environment in many developing countries bring opportunities for multinational corporations, many U.S. and other MNCs find that they have little experience with marketing and exporting to such countries, having focused mainly on developed-country markets. In addition, there has been little research which has investigated issues relating to marketing in LDCs. This study explored these issues and found that different marketing strategies are used by U.S. companies which export to developing countries as opposed to those which market to developed countries, thereby highlighting the importance of taking the country-of-destination into account when planning export marketing strategies. In addition, a separate analysis of firms which export mainly to developing-countries revealed that direct distribution, the number of countries exported to, product standardization, and a focus on price are negatively associated with market share. The implications of these findings are discussed.     

IP protection and ownership in cross-border acquisitions

We use the institutional theory to examine the impact of intellectual property protection on US multinational corporations (MNCs) ownership levels of their foreign acquisitions. Based on a sample of 7238 completed international M&A deals made by US MNCs from 1998 to 2017, we found that multinationals protect their intellectual property through more ownership when they are technologically intensive and invest more when IP protection is strong. However, IP protection negatively moderates the need for more ownership for technologically-intensive multinational corporations. Our results are robust to a battery of empirical tests, including a unique instrumental variable approach. This leads us to claim that our results are not merely correlated but are causal.     

Evaluating Corporate Training and Development: An Indian Experience

The central purpose of this article is to report on the current practices of evaluating training and development programs in the Indian corporate sector. The data were collected from written questionnaires mailed to 252 respondent companies—127 private, 99 public, and 26 multinational corporations (MNCs). The results and discussions are based on the major drivers and key result areas of training and development; purposes, levels, instruments, timing, and designs of evaluation; serious limitations of the training system; and finally the major challenges currently faced by the Indian corporate sector in strengthening the training and development function.     

The maturity effect,rates of return and the course of U.S. foreign investment

The article addresses the question of whether the downtrend in reported rates of return to U.S. direct investment in Europe, which brought them to approximate equality with U.S. rates about 1970, was authentic or the reflection of bias created by increasing ‘immaturity’ due to the acceleration of the outflow. The answer is relevant to interpretation of the restraint program and its aftermath. Exploiting newly available age distribution data on multinational corporations, the article formulates two approximations to the maturity effect. Although both reflect the imperfect suitability of the data, it is probable that they span the possible range. The result: maturity effects accounted for only a small fraction of the observed downtrend.     

Financial rewards and company ownership: An examination of reward practices in Ireland

This article examines the influence of company ownership on the level at which pay is determined in Ireland and on the kinds of payment systems used. U.S. and U.K. multinational companies (MNCs), the two largest foreign investors in Ireland, are the focus of the analysis. Although the evidence points to the national level as the key level at which pay is determined, U.S. and U.K. MNCs operating in Ireland tend to follow the practices of their headquarters, rather than those of the host country. Evidence also suggests that foreign MNCs are much more likely to utilize nonstandard, variable payment systems than indigenous organizations. © 1995 John Wiley & Sons, Inc.     

Outward Foreign Direct Investment,Interindustry Networks,and U.S. Trade Politics

This article investigates how outward foreign direct investment by U.S. multinational corporations influences industry lobbying for trade protection in the United States, focusing on interindustry structure of goods sales networks between upstream and downstream sectors and also on the multinationals’ input procurement patterns. If foreign affiliates of U.S. multinationals switch input sources from U.S. to host-country suppliers, U.S. suppliers should receive a negative demand shock, ceteris paribus. An empirical test finds that those U.S. upstream sectors that are highly dependent upon U.S. multinationals for goods sales tend to lobby more as the multinationals’ overseas production and sales increase.     

EXPLORING THE SUCCESS OF EXPATRIATES OF U.S. MULTINATIONAL FIRMS IN MEXICO

To examine U.S. multinational corporations, this research utilizes a multivariate model to differentiate among IHRM practices and their impact on U.S. expatriate performance. Questionnaires sent to 481 corporations combined with an analysis of the six independent variables, including selection criteria, cross-cultural training, and inability of spouses to adjust help us to understand U.S. expatriate rates of success and failure in Mexico. While, to a considerable degree, an IHRM model based on mainstream literature can predict U.S. expatriate success and failure rates, this research demonstrates the significant discrepancies that exist when comparing the results of the relationship of each variable individually.     

跨国公司选址的影响因素及其对区域经济发展的启示

跨国公司的选址决策对于东道国的经济发展具有重要意义。然而,跨国公司在东道国的分布并不均匀,呈现出比较明显的地区差异。本文从区域条件、跨国公司的战略决策以及跨国公司和东道国之间的技术博弈三个方面研究跨国公司选址的影响因素,并就如何吸引跨国公司进入、融入全球价值链,促进区域经济发展提出了政策建议。     

Neither developed nor emerging: Dual paths for outward FDI and home country innovation in emerged market MNCs

Emerged market multinational corporations (EDMNCs) ? those based in emerged markets that have transitioned out of emerging economic status ? have received little research interest from the international business scholarship, despite their growing presence in the global market. EDMNCs face significant competitive pressure to leverage cross-border knowledge to innovate and leapfrog their middle-zone status between emerging and developed market multinational corporations. Analyzing 174 publicly listed South Korean MNCs and their outward foreign direct investment (OFDI), we find that an EDMNC’s OFDI into developed and emerging markets contributes unequally to its home-country innovation. We also elaborate on the moderating effect of industry peers’ OFDI into developed countries through crowding out and spillover effects. These findings have implications for the OFDI and innovation literature in general, and particularly for international business scholarship focusing on an under-investigated category of MNCs that are increasingly becoming successful in international competition.     

Innovating across boundaries: A portfolio perspective on innovation partnerships of multinational corporations

This paper examines how and under what conditions alliance portfolio diversity influences a firm's innovative performance, with special attention being given to potential performance differences between multinational corporations (MNCs) and domestic firms. Analyses of data from 1045 German firms, among which 598 MNCs, revealed an inverted U-shaped relationship between alliance portfolio diversity and MNCs’ innovative performance. Findings also indicate MNCs to be better positioned than their domestic counterparts with regards to translating alliance portfolio diversity into superior innovative performance. Importantly though, this only holds for MNCs equipped with strong internal R&D capabilities and, to some extent, high human capital.     

Corporate use of innovative foreign exchange risk management products

In today's competitive global markets, firms are threatened by the increasing exchange rate volatility. Over the last two decades, a plethora of new financial products has been introduced in the marketplace to help multinational corporate managers handle currency risks. In this study, the authors examine how extensive are the various major innovative foreign exchange products used by U.S. corporations, and categorize these products into three generations. They find that the popularity of the simpler, first-generation product (forward contracts) has not been overtaken by the sophisticated new entrants, and that the adoption of innovative foreign exchange risk management products is not as common as expected.