The impact of home business network attributes on Chinese outward foreign direct investment

Researchers who take a network perspective argue that insidership in foreign market networks is a necessary condition for internationalization. In this study, we argue that insidership in home market networks also matters. The effect of home network insidership on outward foreign direct investment (OFDI) depends on both individual and joint effects of structural and relational network attributes. Our study based on a survey of 194 Chinese firms shows that firms in a central network position are more likely to engage in OFDI than those in a brokerage position. Furthermore, we find the interaction between firms’ centrality and their connections to foreign-invested enterprises to be significantly and positively associated with OFDI, whereas a significantly negative effect is evidenced when a firm is connected more to domestic firms.     

Multilevel determinants of subsequent FDI in China

Among developing countries, China is the world's largest foreign direct investment (FDI) destination. A significant portion of the FDI in China comes from multinational corporations' (MNCs) subsequent investments of retained earnings or additional capital contribution. However, the characteristics of MNCs' subsequent investment have not been systematically studied. This study attempts to examine MNCs' subsequent investment in China both conceptually and empirically. Conceptually, the study approaches three levels of determinants: firm, location, and international, within an integrated model. Empirically, the study considers whether origin, experience, initial location, and other related factors significantly affect subsequent investment of MNCs after their initial entry into the Chinese market. Through empirical analyses, this study identifies some statistically significant factors around MNCs' subsequent investment decisions in China. © 2008 Wiley Periodicals, Inc.     

Globalization of R&D and China: An Introduction

In this introduction, we discuss the recent changes in multinational corporations' (MNCs) research and development (R&D) strategies and China's rising role in this new development. Significant changes include: 1) More and more corporations have started overseas R & D operations; 2) the missions of many overseas R&D facilities have shifted from the traditional supplementing and supporting roles to become critical and strategic components of MNCs' global R&D networks; and 3) MNC overseas R&D operations have expanded their geographic reach to carefully selected developing countries. China has benefited from such changes and has become one major attraction for such R&D facilities due to its rich endowment of low-cost and well- trained scientists and engineers as well as its fast growing domestic market and burgeoning foreign investment in manufacturing. The explosion of foreign R&D investment has also been accompanied by the rapid growth of China's domestic investment in R&D. The growth in both domestic and foreign investment in R&D implies that China will improve its position in global economic and technological competition. However, it is unclear to the rest of the world about the implications of China's rising R&D and whether or not China can capture the value from the presence of foreign R&D centres. We conclude that issues related to China's science and technology development in general and foreign R&D in China in particular warrant more research in the future.     

Entry decisions of multinational firms: The role of competition threats

How do multinational corporations (MNCs) influence each other's foreign entry decisions? In this paper, I examine the interactions in MNCs' entry decisions by investigating how MNCs respond to competition threats from their multinational competitors. The analysis shows that entry threats anticipated through foreign investment news encourage MNCs to take preemptive actions by entering the same city after the news, while the actual entry of competitors and the anticipated expansion of incumbents discourage more entry. Incumbent MNCs, on the other hand, respond to entry threats by upgrading productivity. The effect of competition threats depends on each MNC's own existing activity and production network within the region. The effect of entry threats increases with the size of threats, measured by the investment value, expected employment and expected output, the influence of the news, the credibility of the news and the local market orientation of the threats. Across industries, MNCs' entry decisions are found to respond to only the actual entry—not anticipated entry—in vertically linked industries. Further, by exploring the time path, I find that MNCs' preemptive entry is only taken before FDI news expires. The main results are robust to IV analyses that explore unique information from news source and news content.     

Managing Corporate Networks from America to China

Multinational corporations (MNCs) are making a major contribution to China's economic development. This analysis examines how eight prominent American MNCs are handling the process of linking the management of their China joint ventures into their global structures. It looks at how the MNCs are addressing the tensions that arise between maintaining control in terms of their worldwide standards while attempting simultaneously to adapt to the complex and dynamic environment of China. The reconciliation of these requirements depends on a relatively few focal actors, who are located at critical interfaces within the MNCs' internal networks between the China joint ventures and the corporate level.     

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.     

The Eclectic Paradigm in the Global Economy

Economic globalisation and the subsequent growth of global and alliance capitalism have fundamentally affected the way in which MNC activities are undertaken and organised. The various contributions to this special issue have evaluated the eclectic paradigm in the global economy, and its validity as a theoretical basis to understand these developments. This paper places these contributions into context. We highlight that globalisation has increased the interactive dynamics between and among 'O', 'L' and 'I' characteristics at firm, industry and country level, in at least two ways. First, a knowledge-based society has meant that the efficient exploitation of MNCs' ownership advantages and the continual need to augment and sustain their competitive advantages is ever more crucial, leading to a complex interdependence between ownership and location advantages. Second, globalisation has affected how MNCs seek to organise their cross-border activities coherently in response to changing boundaries of the firm. We find that the paradigm continues to provide a framework which facilitates how best to synthesise relevant complementary theories, or how to choose between potentially competing theories, and helps to operationalise them.     

Institutional determinants of ownership stake in cross-border acquisitions in Africa: The moderating role of geographic distance

We look at how emerging markets' institutional features affect ownership stake in cross-border acquisitions (CBAs) within Africa. Particularly, we show that the presence of shared colonial history between the home and host country and the extent of fractionalization distance and formal institutional distance influence the acquiring firm's decision regarding its ownership stake in the target. Moreover, we show that geographic distance between the home and host country, by augmenting uncertainty faced by acquiring firms, moderates the relationship between these institutional features and ownership stake. We test our hypotheses in a sample of 341 intra-Africa CBAs from 2001 to 2016. Generally, we find that greater ex ante uncertainty and ex post costs increase ownership stake. Specifically, greater geographic distance strengthens the positive relationship between shared colonial history and ownership stake and reverses the negative relationship between formal institutional distance and ownership stake. As for fractionalization distance, the relationship is more nuanced and needs to be further studied. We contribute to advance research on south–south CBAs in general, particularly within Africa, as well as to extend hostage theory in foreign market entry strategies in and from emerging markets.     

The Upgrading of Multinational Regional Innovation Networks in China

Theories of globalization of innovation assume a hierarchical structure of location in the global division of innovation, with advanced innovative activities in the advanced economies and routine ones in the developing economies. This study attempts to explain why multinational corporations (MNCs) have localized a wide spectrum of innovative activities to China since 1995, which range from process innovation and product innovation to basic research. By comparing the dynamic transformation of two MNCs' regional innovation networks (RIN) in China – namely Motorola and Microsoft – this essay argues that the innovation upgrading process can be better understood through examining the interaction between the MNC subsidiary innovation centres and the local institutions.     

Investment motive as a moderator of cultural-distance and relative knowledge relationships with foreign subsidiary ownership structure

In this analysis, we seek to contribute to the growing body of literature exploring moderators of cross-national differences and foreign subsidiary ownership structure relationships, by developing the argument that cultural distance and majority-owned foreign subsidiary relationships will be positively moderated if a subsidiary serves a manufacturing motive, as opposed to a market-seeking motive. Additionally, we argue that relationships between increasingly greater levels of host country technical knowledge, relative to a firm's home country, and the use of majority-owned foreign subsidiary structures will be negatively moderated by manufacturing motives. These ideas are tested, and supported, in the empirical context of subsidiaries of Japanese automotive firms from 1993 through 2009.     

Paths of evolution for the Chinese migrant entrepreneurship: a multiple case analysis in Italy

Chinese diaspora is one of the most important areas in the field of immigrant entrepreneurship and the Chinese case is, for absolute numbers, entrepreneurship rates and scientific attention, one of the most significant phenomena in the world and in Italy. While much of the literature on the topic focuses on ethnic networks and social ties, there is a lack of studies that acknowledge the role of business networks in the later growth of migrant entrepreneurship, when the importance of social ties within the ethnic community diminishes. This paper tries to answer the following research question: Which is the role of ethnic networks and business networks in the path of evolution of Chinese migrant entrepreneurship? Thus, the paper analyses the structure and characteristics of ethnic networks and business networks and the role of each in the growth and evolution of Chinese migrant entrepreneurship. Our research considers business networks as the main focus of analysis that may replace social ties in consolidating insidership in new business settings and in finding new opportunities. A qualitative methodology is adopted, namely a multiple case study. Five cases of individual Chinese companies settled in a specific area are presented, for which the networks in which they are involved are traced and analysed. The case analysis shows that in the evolution of Chinese migrant entrepreneurship, ethnic networks are very important in the early phases of the business, but the role of cross-cultural business networks becomes relevant for further development. Implications—managerial and for policy makers—are highlighted and discussed.     

Geographic Distance as a Moderator of Curvilinear Relationship Between Cultural Distance and Shared Ownership

This study tests geographic distance as a moderator of the curvilinear relationship between cultural distance and a firm's preference for shared ownership entry mode. The sample consisted of US foreign direct investments in 60 countries spread over 18 years. Results showed that an inverted U‐shaped relationship between cultural distance and preference for shared ownership is stronger for firms separated by high geographic distance. While full equity ownership is most likely when both cultural and geographic distances are either low or high, shared ownership is most likely when the cultural distance is high (low) but the geographic distance is low (high). Copyright © 2012 ASAC. Published by John Wiley & Sons, Ltd.     

Board composition,family ownership,institutional distance and the foreign equity ownership strategies of Turkish MNEs

In much of the developing world, families represent the dominant form of firm ownership. This study investigates how this influences equity ownership strategies when firms venture abroad. Drawing on agency theory and institutional theory, we investigate the direct effect of board composition and family ownership on the equity-based ownership strategies of multinational enterprises (MNEs) in their affiliates, and how institutional distance may moderate this. Examining foreign affiliates of listed Turkish MNEs, we find that a high ratio of independent directors is negatively linked to levels of equity ownership of MNE affiliates. We also find that a high ratio of inside directors on the board is positively associated with the equity stake of MNEs in their affiliates. The significant interaction effect between board composition, family ownership and institutional distance helps explain the unexpectedly weak effects of institutional distance.     

New Service Development Process

Abstract

To continue to grow, more and more U.S. service firms have looked overseas in recent years to find markets for their offerings. Thus, innovation in the global context has become a strategic imperative for many service firms. While the issue of how to foster service innovation has been an area of extensive research, the cross-national comparison of innovation practices particularly between developed and emerging countries has been only a nascent field of research. To address this gap in the literature we conducted a comparative study of new service development process and stages of the financial service firms in an emerging country, India, and a developed country, the United States. The results support the central argument of the article that significant cross-national differences do exist with regard to a firm's new service development process. The findings should be of value to managers faced with the tasks of selecting and managing service innovation in emerging markets, as well as those firms experiencing international competition.     

Global competition and latecomer production strategies: Samsung of Korea in China

This contribution illustrates how latecomer multinational companies (MNCs) have organized international production activities and maintained their competitive advantage under growing global competition. In doing so, an interdisciplinary approach, including an evolutionary theory of MNCs, global strategic management, and organizational and technological learning, is adopted through the case study of Samsung Electronics as a sample latecomer MNC. Samsung reveals that competition in the electronics industry in China is based on the diferential capabilities of players in the market, and their ability to transfer and improve these capabilities faster than competitors. Latecomer MNCs' foreign subsidiaries are under strong pressure to be actively involved in design and product development activities near to production facilities. In order to gain a sustainable competitive advantage, foreign subsidiaries of latecomer MNCs need to rapidly improve their product innovation capability by combining knowledge transferred from the MNC headquarters and global subsidiaries' networks with information about consumer requirements in the foreign location.     

The ownership distance effect: the impact of traces left by previous owners on the evaluation of used goods

This article examines how salient traces left by previous owners on used goods influence product evaluations. Based on the concept of psychological ownership, we propose the ownership distance effect in the context of buying used goods. We argue that when there are salient traces left by previous owners on a used good, it will widen the ownership distance between the potential buyers and the product. As a consequence, buyers will tend to evaluate the product less positively. Four experimental studies were conducted, and the results support this prediction. Buyers preferred used goods with salient traces left by a previous owner less (studies 1 and 2) due to the ownership distance effect. In addition, perceived psychological ownership mediates the ownership distance effect (studies 2 and 4). However, this negative effect decreased when specific situations (e.g., free housecleaning service) lessened the ownership distance, or when people believed that a previous owner’s trace would benefit them in obtaining their consumption goal (studies 3 and 4). The analysis of actual transactions from eBay.com also confirms this effect (study 5). We conclude with a discussion of the substantive theoretical and managerial implications of this research.     

Formal and informal influences of the state on OFDI of hybrid state-owned enterprises in China

This study investigates how the state influences the outward foreign direct investment (OFDI) of hybrid state-owned enterprises (SOEs) in China. Previous studies have provided conflicting arguments and empirical findings on the internationalization of SOEs, with some studies proposing a positive relationship between state ownership and OFDI, while others propose a negative relationship. In this paper, we argue that the mixed effects are due to different influences of different levels of state ownership and different types of political connections. We investigate our proposed hypotheses based on a sample of publicly listed hybrid Chinese SOEs between 2009 and 2016. We find an S-shaped relationship between state ownership and OFDI such that at low levels of state ownership, OFDI increases as state ownership increases; at medium levels of state ownership, OFDI decreases as state ownership increases; at high levels of state ownership, OFDI increases again as state ownership increases. We further find that executive-branch political connections between boards and top management teams of firms and the government have a negative effect on OFDI, while legislative-branch political connections have no significant effect on OFDI.     

Small firms and networks in capital intensive industries: The case of Spanish steel wire manufacturing

This article uses an interdisciplinary approach to gain a better understanding of the organization of the Spanish industry in a long-term perspective. Sociological concepts about networks, and studies about family firms from management and business history literatures, are combined to illuminate the dominance of family ownership in capital intensive industries. Popp, Toms and Wilson's work on the spatialization of resource distribution and resource dependence has been used to understand the dominance of small family firms co-ordinated by networks in the particular case study of the Spanish steel wire manufactures. The article also has important implications for questioning Casson's interpretation about the difficulties dynastic family firms may have in science-wire rod industries.     

Examining Determinants of Foreign Wage Premiums in China

We estimate foreign wage premiums for every 3‐digit manufacturing industry in China and discover a wide range of premiums both for ‘foreign’ ownership and for overseas Chinese ownership. Foreign ownership generates larger and more prevalent wage premiums than overseas Chinese ownership, but both produce premiums that respond similarly in estimates of determinants. Using the number of computers per worker to measure firms' technology levels, we find evidence consistent with the hypothesis that foreign firms pay higher wages to reduce the risk of worker turnover and the accompanying technology leakage in 76 to 78 per cent of industries. However, this determinant explains only 5 to 6 per cent of the foreign wage premium. We find the most intensive support for the ‘fair wage’ hypothesis that foreign firms pay higher wages because they are more profitable than domestic firms and workers in more profitable firms expect to be paid more, otherwise they will shirk. This hypothesis explains an average of 8 to 9 per cent of the foreign wage premiums, with support found in 72 to 75 per cent of the industries. When we consider the best combination of explanatory variables to include in each industry's wage regression, we find evidence consistent with our combined hypotheses in most industries, but we still find large residual foreign wage premiums.     

Manufacturing for overseas private labels: A win–win strategy for retailers and producers

Abstract

The study discusses the use of private labels, both for retailers and manufacturers, within the context of international markets. It is proposed that agreements between manufacturers and retailers from different markets may solve or mitigate some abiding frictions and serve the interest of both parties. Using data collected through 101 in-depth interviews among marketing managers, qualitative and quantitative procedures were used to explore producers' attitudes and behaviour in regard to agreements to manufacturing for overseas retailers' private labels. The study revealed that lower transaction costs, quicker penetration into new markets and retailers' reputations among customers are the dominant motivators while short-term strategy, appropriate mainly for grocery items, increases dependency on retailers and deters manufactures from contracting with overseas retailers' private labels. The study also found that gaps exist between manufacturers' perceptions and actual behaviour, mediated particularly by firm size and product categories. The findings, which reflect observed practice, are interpreted through theoretical propositions related to earlier studies. Managerial implications are provided.