Do MNEs from developed and emerging economies differ in their location choice of FDI? A 36-year review

This study examines the extent to which MNEs from developed (DMNEs) and emerging (EMNEs) economies differ in Location behaviour. Studies on MNE location choices have failed to capture the changing FDI landscape and leave the inconsistent findings unexplained. We address this gap by systematically reviewing the extant literature on location choices of DMNEs and EMNEs over the past 36 years – from the introduction of the OLI model to 2016. Key themes emerging from the review reflect a comprehensive picture, capturing the impact of multiple factors affecting location choices of DMNEs and EMNEs. Future research is challenged by: a. adopting an integrated approach examining three levels – individual (managerial), firm (ownership structure, type of FDI, internationalisation stages, and the different nature of ownership advantage), and context of location decisions (home, host, sub-national, regional, supranational, and networking); b. refining or developing theories to capture the dynamic picture of MNE internationalisation.     

A race to the bottom? Employment protection and foreign direct investment

A common critique of globalization is that it leads to a race to the bottom. Specifically, it is assumed that multinationals invest in countries with lower regulatory standards and that countries competitively undercut each other's standards in order to attract foreign capital. This paper tests this hypothesis and finds robust empirical support for both predictions. First, a reduction in employment protection rules leads to an increase in foreign direct investment (FDI). Furthermore, changes in employment protection legislation have a larger impact on the relatively mobile types of FDI. Second, there is evidence that countries are competitively undercutting each other's labor market standards.     

What drives outward FDI of Chinese firms? Testing the explanatory power of three theoretical frameworks

This study examines the forces driving outward FDI of emerging-market firms. Its contribution lies in integrating and testing insights from institutional theory, industrial organization economics and the resource-based view of the firm. This approach enables us to consider three different levels of analysis – firm, industry and country – and, thus, to distinguish between different sources of variation. Using a large firm-level Chinese dataset, we offer new evidence indicating that government support and the industrial structure of the home country of the investing firm play a crucial role in explaining outward FDI. By contrast, technological and advertising resources tend to be less important. The findings have important implications for theorizing. Although some firm-specific idiosyncrasies still play a role in explaining variations across firms in the same industry, the theoretical analysis and empirical results consistently indicate that foreign investment of Chinese firms is largely driven by their distinctive institutional and industrial environment.     

The role of human mobility in promoting Chinese outward FDI: A neglected factor?

Extending Dunning's investment development path, this study examines the impact of human mobility, a neglected factor, on Chinese outward foreign direct investment (OFDI) using time-series analysis. Our findings show that the two-way mobility of highly skilled Chinese students and scholars significantly promotes Chinese outward FDI. In addition, Chinese outward FDI is also driven by domestic economic development, but substitutes exports. The findings have important policy and managerial implications.     

Why does the diffusion of environmental management standards differ across countries? The role of formal and informal institutions in the adoption of ISO 14001

This research explores the factors underpinning the international diffusion of environmental management standards (EMSs), focusing on how macro-level institutions explain differences in the extent to which ISO 14001 has penetrated into each country. We argue that macro-level institutions affect the diffusion of ISO 14001 by shaping both how managers assess it and the pressures that stakeholders exert on firms to adopt it. Our results, based on a sample of 49 countries between 2000 and 2014, show that informal and formal institutions, namely, uncertainty avoidance and market-supporting institutions, contribute to explaining cross-country variations in the number of firms implementing ISO 14001.     

Does state ownership facilitate outward FDI of Chinese SOEs? Institutional development,market competition,and the logic of interdependence between governments and SOEs

Outward foreign direct investment (OFDI) of manufacturing state-owned enterprises (SOEs) from emerging economies (EE) has emerged as a significant phenomenon in global markets. Although previous research has emphasized the bright-side of state ownership in facilitating SOEs’ OFDI, the stream of research largely overlooks its dark-side effects. Drawing on resource dependence theory (RDT), we argue that state ownership creates dependence of SOEs on their home governments, which may undermine manufacturing SOEs’ willingness to conduct OFDI, autonomy and market orientation, and legitimacy in overseas markets. Thus, substantial state ownership may counteract with manufacturing SOEs’ OFDI from EE. Our empirical results, based on a sample of 507 Chinese publicly-listed manufacturing SOEs during 2007–2013, show that a high percentage of state-owned shares exerts negative effects on SOEs’ OFDI. Relative to local SOEs, central SOEs are less likely to engage in OFDI. Further, the negative effect of the percentage of state-owned shares on SOEs’ OFDI will be alleviated by institutional development and competition intensity. The study contributes to literature by making a real theoretical case for the dark-side effects of state ownership on manufacturing SOEs’ OFDI from EE.     

Economic creativity and innovation implementation: the entrepreneurial drivers of growth? Evidence from 63 countries

This paper examines the effect of culture on national innovation and prosperity. Because culture shapes the way people think about and behave in regard to risk, opportunities, and rewards, it should influence the nature of entrepreneurial activity and, by extension, economic outcomes. Using structural equation modeling on a sample of 63 countries, we propose and test a comprehensive explanation of how culture as an umbrella construct (as opposed to an analysis of its constituent parts) affects innovation and national prosperity. We propose a two-stage model of innovation, and find support for our hypothesized relationship that “economic creativity” influences “innovation implementation.” At the national level, we find that culture does indeed influence economic creativity. We also find that innovation implementation explained some of the variation in prosperity across countries. By establishing that “big picture” culture matters to innovation, the door has opened for researchers to evaluate this relationship using data from any one of a number of rival culture frameworks. Moreover, these empirical finding buttress the theoretical arguments that culture powerfully shapes the character of national innovation.     

Does the Quality of Investment Protection Affect FDI Flows to Developing Countries? Evidence from Latin America

Studies on the impact of international investment agreements (IIAs), including bilateral investment treaties (BITs), on foreign direct investment (FDI) inflows have been inconclusive. This paper contributes to the debate about the effectiveness of IIAs using an original database that differentiates between investment agreements according to the quality of investor protection, and which covers a wide variety of trade and investment agreements signed and ratified in the Americas. We find evidence that in the least likely case of south–south FDI flows, high‐quality international investment treaties have a demonstrable effect on foreign direct investment inflows. Moreover, international investment agreements appear to be most effective in a context of deeper economic integration. That is, they work better when they provide higher quality protection to investors and when they are combined with other preferential economic integration agreements, such as trade agreements.     

What can we learn from the historic road safety performance of high-income countries?

Abstract

Road traffic deaths in high-income countries (HICs) have been steadily declining for five decades, but are rising or stable in low- and middle-income countries (LMICs). We use time-series cross-sectional methods to assess how age- and sex- specific death rates evolved in 20 HICs during 1955–2015, controlling for income, population density and urbanization. Past work has attributed improvements in safety in HICs to income growth, suggesting that countries intervene when they become richer (Kuznets hypothesis). In contrast, we show that HICs had statistically significant declines in road traffic injuries starting in the late 1960s that persist after controlling for income effects, and inclusion of a lagged dependent variable. These findings are consistent for all age-sex groups but the effects are strongest for the elderly and young children. We argue that the reversal in the traffic injury trend did not occur because HICs reached an income threshold. Instead, the 1960s were a period of paradigmatic change in thinking about road safety. Subsequent, safety improvements occurred because countries at different income levels established regulatory institutions that had a legislative mandate and financial resources to conduct large-scale safety interventions.     

How much would low- and middle-income countries benefit from addressing the key risk factors of road traffic injuries?

Abstract

Despite strong advocacy, the UN Decade of Action for Road Safety (2011–2020) is ending with most low- and middle-income countries (LMICs) no closer to the Sustainable Development Goals target of reducing traffic mortality by half. In contrast, most high-income countries (HICs) have seen large benefits in recent decades from large-scale safety interventions. We aimed to assess how much LMICs would benefit from interventions that address six key risk factors related to helmet use, seatbelt use, speed control, drink driving, and vehicle design for safety of occupants and pedestrians. We use a comparative risk assessment framework to estimate mortality and health loss (disability adjusted life years lost, DALYs) that would be averted if these risks were reduced through intervention. We estimate effects for six countries that span all developing regions: China, Colombia, Ethiopia, India, Iran, and Russia. We find relatively large benefits (27% reductions in road traffic deaths and DALYs) from speed control in all countries, and about 5%-20% reductions due to other interventions depending on who is at risk in each country. To achieve larger gains, LMICs would need to move beyond simply learning from HICs and undertake new research to address risk factors particularly relevant to their context.     

Do real payments really matter? A re-examination of the compromise effect in hypothetical and binding choice settings

Numerous empirical studies have confirmed the existence of the compromise effect, which stipulates that options positioned between extreme alternatives in a product space are perceived as more attractive, hence becoming more likely to be chosen by consumers. However, literature on the topic frequently addresses the limited realism of prior work due to the artificial designs that were used. In a laboratory-based replication study, we examine the compromise effect across several categories in a more market-like scenario, in which experienced consumers make unforced decisions between real brands. In particular, we investigate whether the compromise effect varies in strength across the choice settings, depending on whether a hypothetical choice setting or a binding setting (in which subjects face buying obligations in terms of real payments for products) has been applied. While our results prove the robustness of the compromise effect for both choice frames, its strength differs significantly. Specifically, the compromise effect is evidently not as strong when real payments are introduced in binding choice settings. In addition, analysis of moderating factors confirms that compromise effects are stronger for categories where subjects are more in agreement about the relative quality of the options.     

A review of research on outward foreign direct investment from emerging countries,including China: what do we know,how do we know and where should we be heading?

Using the Antecedents, Decisions and Outcomes (ADO) format as an organizing framework, this article gives an overview of the literature on different dimensions and characteristics of outward foreign direct investment (OFDI) by firms from emerging countries. Based on an extensive coverage of studies published over a period of nearly 25 years between 1993 and 2017, we review extant research on this phenomenon from mainly China, as well as other emerging countries. We identify advances and analytical areas of OFDI research and pinpoint the key theories, methodologies, observed characteristics and the variables that have been examined in this growing research literature. Many areas of the above research themes remain underexplored, despite recent significant advancements, and may provide directions for future research.     

How to move away from the silos of business management education?

Business management education is criticized for being too theoretical and fractional. Despite the numerous efforts to build integrated and experiential business curricula, learning is still organized in disciplinary silos. The curriculum integration efforts are carried out in separate sections of the curriculum rather than the core. There are theoretical, holistic models, but a lack of concrete examples of holistic business curriculum implementations. The authors bring the separate sections together by developing a holistic core curriculum model with three perspectives: a structure to bring intellectual coherence, people organized in learning communities, and an enterprise resource planning–supported learning environment to bring the practical training ground. The authors present a concrete implementation in a case study with first-year undergraduate business students and present their lessons learned.     

Expanding to outward foreign direct investment or not? A multi-dimensional analysis of entry mode transformation of Chinese private exporting firms

This research examines the factors determining whether or not exporting firms expand to outward foreign direct investment (OFDI) as part of their internationalisation strategy, using a recent survey of Chinese private-owned enterprises. We carry out a multi-dimensional analysis to investigate the impact of firm productivity, internal resources and the external environment on OFDI decisions, including both the decision to undertake OFDI and the volume of OFDI flows. It is found that productivity, technology-based capability, export experience, industry entry barriers, subnational institutions and intermediary institutional support affect firms’ OFDI decisions. The findings have important policy and managerial implications.     

A tale of six states: How similar are the Gulf Cooperation Council countries?

This paper reports the convergence rates for the Gulf Cooperation Council (GCC) countries using a Bayesian shrinkage estimator. The estimated convergence rates using a panel dataset covering period from 1972 to 2008 across six countries vary from 9% to 22% per year. The results of a Bayesian change point calculations indicate that following a dramatic change in the crude oil prices in 1985, the pattern of σ-convergence reversed. Based on the estimated steady states for each country, the rank order is hypothesized to be a function of the percentage of foreign workers in the labor force.     

What to Learn from the Japanese? The Process of Japanese-Style Management Transfer to China

Many Chinese and Japanese believe that Japanese-style management methods are a vital factor in establishing the international competitiveness of ‘Japanese-Funded Enterprises’ in China, and both sides thus favour the transfer of such methods to China. This contribution considers three basic questions about the process of this transfer: what kind of Japanese-style management methods have been transferred to China, how has this transfer been effected, and what problems have hindered the transfer? It is argued that many ideas in Japanese-style management draw upon material from ancient China. A detailed case study is presented of a Sino–Japanese joint venture in the fashion industry in Beijing, outlining in some depth the venture's management skills training programme, both to show the kinds of methods which are being introduced and how this introduction is being handled. Finally, there is a brief discussion of the dificulties of assimilating Japanese-style management methods in China, which highlights the importance (for the Chinese) of learning the ‘essence’ of Japanese management.     

The common sources of business cycles in Trans‐Pacific countries and the US? A comparison with NAFTA

This paper uses both a non‐structural and a structural approach to investigate the drivers of the business cycles in the US and 15 Trans‐Pacific (TP) countries. Our non‐structural analysis, based on a principal component methodology, reveals the shares of variation in macroeconomic variables that are due to factors common to both the US and the TP region, and factors that are region‐specific. We obtain similar measures by using a structural model (an estimated two‐country dynamic stochastic general equilibrium model) that allows for common and correlated shocks across the two regions. The clear and common finding from our analyses is that common shocks explain a substantial amount of macroeconomic variation. Comparison with the NAFTA region, along this dimension, reveals that the US economy is more similar to the TP region (a wider region that also includes Mexico and Canada) than its two neighbours.     

In Defence of Principles? A Response to Lurie and Albin

This article presents a response to a recent article by Yotam Lurie and Robert Albin in which they discuss and present the merits of casuistry as a method for resolving moral dilemmas in business, principally by developing ‹edifying’ perspectives on the situation, and in doing so highlight the shortcomings of principles (such as the categorical imperative) in generating insights and thereby moral choices. The present article accepts the importance of cases and examples as a source of insight, but argues that the process of conceptualisation involved in understanding these necessarily involves some reference to principles. However, principles and cases are best seen as complementary to the ethical decision-making process rather than in opposition. The complementary functions of these are highlighted in processes such as reflection upon experience, in applications of moral imagination and in the integration of emotive and cognitive elements in ethical choice.