A comparative ownership advantage framework for cross-border M&As: The rise of Chinese and Indian MNEs

MNEs from emerging economies (EE MNEs) have recently undertaken aggressive cross-border mergers and acquisitions (M&As). This phenomenon challenges the current understanding in the international business literature. Integrating the comparative advantage theory with Dunning's OLI paradigm, this article develops a comparative ownership advantage framework characterized by five attributes: (1) national-industrial factor endowments, (2) dynamic learning, (3) value creation, (4) reconfiguration of value chain, and (5) institutional facilitation and constraints. We test five propositions with a dataset of 1526 cross-border M&As by Chinese and Indian MNEs from 2000 to 2008. Preliminary results support the new comparative ownership advantage framework.     

Three decades of research on practice transfer in multinational firms: Past contributions and future opportunities

The cross-border transfer of practices lies at the heart of how multinational enterprises (MNEs) coordinate their international business activities. Research on transfer has increased substantially over the last three decades and now constitutes a well-established literature. For a systematic analysis, we review a sample of 167 articles published in 18 top journals. We structure these past contributions in a ‘Practice Transfer Framework.’ Our mapping reveals some limitations and blind spots in existing theoretical and methodological approaches. Beyond more conventional extensions, we offer several ideas that could qualitatively elevate research on transfer, commensurate with the paradigms of 21^st century global business.     

Corporate social responsibility: Stakeholders influence on MNEs’ activities

This research attempts to examine how specific stakeholder groups influence multinational enterprise (MNE) corporate social responsibility (CSR) practices in South Korea. Generally speaking, the results show that both primary (e.g., consumers, ‘internal managers and employees’ and business collaborators) and secondary stakeholders (e.g., governments, media, local community and NGOs) positively influence MNEs’ CSR. Contrary to previous research, this work also demonstrates that business collaborators have a negative and significant effect on MNEs’ CSR. Based on the findings this paper wishes to offer a framework for MNEs to thoroughly consider the impact of stakeholders when drawing a picture for their CSR strategy. Further, this work also hopes to contribute to current discussions in the area of CSR by bringing a new stream of research into the international business field. In addition, this work strives to provide useful and practical implications for MNEs wanting to operate in the South Korean market.     

International strategy: From local to global and beyond

To survive and thrive, multinational enterprises (MNEs) have had to adapt to dramatic changes and increasing complexity in the global competitive landscape over the past 50 years. MNEs’ international strategies and the academic research on the various attributes and outcomes of these strategies have evolved accordingly. This work reviews the evolution of international strategy research over the past five decades. In particular, the research on international diversification and the timing and speed of entering international markets is closely examined. In recent years, the influence of formal and informal institutions on international strategy has become a central research topic. Furthermore, MNEs’ strategies often seek to explore and exploit critical capabilities to build advantages in international markets. Finally, emerging research themes, such as institutional complexity, business sustainability, emerging economy firms and international new ventures are highlighted.     

MNEs and the practice of international business diplomacy

Scholars of international relations and international political economy have long documented international business diplomacy (IBD) as a practice of multinational enterprises (MNEs), although the specific practices involved have not been consistently established in international business scholarship. We apply "practice theory" to position IBD within the realm of MNEs’ global non-market strategy (NMS), arguing that IBD constitutes a set of practices in the implementation of global NMS, and that the most appropriate practices depend upon two key dimensions of the global institutional governance regime faced by the MNEs: the governance level and the degree of rule formality.     

Domestic firms competing with multinational enterprises: The relevance of resource-accessing alliance formations

The literature includes several papers that compare multinational enterprises (MNEs) to local firms along several dimensions such as financial strength or production capacity. Nevertheless, the focus on how latter firms compete against the former is often missing in the literature; local firms are typically seen as inferior in terms of resources and thus, unable to compete against MNEs. This paper aims at revisiting this competitive ‘battle’. Through a case-based design in a ‘multinational’ domestic market that seems to favour MNEs, we explore how local firms respond to MNEs’ purported superiority. Findings indicate that local firms respond through alliance formations that enable them to access fitting resources and counter ownership advantages of MNEs. Therefore, resource-accessing strategies spearheaded by local firms suggest that ownership advantages should not be inherently translated into competitive advantages for the MNEs. Implications for international business are discussed and avenues for further research are suggested.     

Network complementaries in the international expansion of emerging market firms

Can domestic political capital be transferable to more or less similar institutional contexts abroad? Motivated by contradictory results in two streams of research, this study seeks to combine the insights from two theoretical arguments and conceptualize the role of domestic political ties in international expansion as a dual problem of securing key resources from home governments and looking for opportunities in foreign markets and matching resources to capture them. We adopt the notion of network complementarity to examine the complementarity effect of domestic political ties and foreign ties on international expansion. The implication is that EMNE research that concentrates on either looking for foreign opportunities or securing domestic resources, but not both, is likely to be incomplete when international expansion is being studied. Using a longitudinal panel dataset of Chinese international new ventures expanding to 105 foreign markets, we find a positive interactive effect of domestic political ties and foreign ties on Chinese MNEs’ internationalization. This positive interactive effect on internationalization is found to be stronger for expanding to developing host markets than to developed host markets. We discuss the implications of these findings for research on domestic political ties, the international expansion literature, the network complementarity literature, and the international entrepreneurship literature.     

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.     

Why does MNE performance vary across countries?: An inquiry into the competitive value of MNE assets

Variations in MNEs’ competitive positions across countries are a prevalent phenomenon in the business landscape, but are not fully explained by MNE theory. Building on competition theories and applying them to the context of MNEs, we hypothesize that the value of MNEs’ assets varies in relation to competitors of different nationalities and geographic scope, as well as across locations. These predictions are tested on US legal-services MNEs in competition with US domestic firms and non-US MNEs in the US and abroad. We find support for the hypothesized variations, particularly with reference to competitors’ location and nationality. These variations suggest that the value of MNE assets is relative, and that their varying market positions across countries are an inherent feature of international competition, calling for corresponding positioning and strategies.     

Knowledge-oriented leadership and open innovation: Role of knowledge management capability in France-based multinationals

This paper discusses the links between knowledge-oriented leadership, open innovation and knowledge management in the international business context. Open innovation has become crucial for an increasing number of multinational enterprises (MNEs) to gain and maintain competitive advantage and become a market leader. Despite the recent proliferation of papers dealing with open innovation practices of MNEs, there is limited work investigating the role of knowledge management (KM) capability on the relationship between knowledge-oriented leadership and open innovation. Given MNEs’ growing interest in open innovation, the lack of research on knowledge-oriented leadership and KM capability in the open innovation context is a significant research gap in our knowledge. In response, we conducted a study on the mediating role of KM capability in the linkage between knowledge-oriented leadership and open innovation (inbound and outbound), using data collected from 172 subsidiaries of MNEs based in France. A structural equation modelling approach is employed to study the impact of the latent variables associated with knowledge-oriented leadership and KM capability on open innovation. The results indicate that higher levels of knowledge-oriented leadership can lead to enhanced KM capability and improved open innovation outcomes. That is, knowledge-oriented leadership has a direct, positive impact on KM capability and open innovation. Also, KM capability is found to mediate the linkage between knowledge-oriented leadership and open innovation. This study provides useful insights for managers who wish to enhance open innovation activities in MNEs, and offers useful guidance to international business scholars, encouraging further research in this area.     

The motives and performance of cross-border acquirers from emerging economies: Comparison between Chinese and Indian firms

During the recent decade, the world has witnessed the rapid growth of MNEs from emerging economies. Their increasing participation in cross-border mergers and acquisitions has raised great attention in the extant literature. This study evaluates the value creation from these cross-border transactions from two representative emerging countries, namely China and India, and determines factors that result in the different performance of these international acquisition activities. Cross-border acquisitions conducted by these countries’ companies indeed lead to significant shareholder wealth creation. Furthermore, Indian shareholders are more likely to benefit from deals in small cultural distance countries, while Chinese investors gain from the cross-border expansion of manufacturing companies. Location also affects the performance of cross-border acquisitions, with acquisitions into developed countries generating higher returns to shareholders. Our sample consists of 203 Indian and 63 Chinese cross-border deals over the period 2000–2010 and our results hold after controlling for various deal-level and firm-level characteristics.     

The emergence of multi-sided platform MNEs: Internalization theory and networks

The rise of the digital economy provides firms across the globe with unique business opportunities. Companies such as Facebook, Alibaba, and Uber are competing in a new multi-sided platform world; the primary focus of these firms, from their inception, is to provide digital infrastructure, information and technology—intangible assets that enable direct interaction or value creation across platforms by linking different user group and complementors, often at the international level. Building on data drawn from multinational multisided Platform corporations (MMPCs) operating in China, we combine insights from internalization theory and network effects in understanding the value creation of such firms. We explore the boundaries of these new “breed” of MNEs in exploiting firm-specific advantages (FSAs) and in creating new knowledge between headquarters and subsidiaries. The findings suggest that internalization theory needs to shift its focus from the ‘boundaries of the firm’ to the ‘boundaries of the local network’. By integrating their internal and external networks of knowledge in adapting their business models in host markets, this new breed of MNEs is more likely than the traditional one to gain a sustainable competitive advantage in the new information age.     

‘How do firms reach out to foreign universities? Inventors’ personal characteristics and the multinational structure of firms’

We analyze the determinants of firm-based inventors’ collaborations with universities abroad, comparing them with collaborations with national universities. We propose a micro-founded theoretical framework that introduces the role of personal linkages and global organizational pipelines as drivers of international academic collaborations, and we empirically investigate collaborations with national and international universities in a sample of inventors in Italy. We find that in general international collaborations depend positively on inventors working for multinational enterprises (MNEs). Instead for collaborations with national universities, the personal local linkages of the inventors play a large role. However, we also find that for collaborations with very distant universities abroad, such as US ones, working for an MNE is less crucial and the personal linkages of inventors become more important. In this case being an inventor with a network of foreign colleagues and with greater acquaintance with the norms of open science facilitates the interaction. This applies also to inventors who work for MNEs. The results point to a hybrid model of global linkages in the case of collaborations between firms and universities, in which both the personal international linkages of the inventors and the global organizational pipelines of MNEs play an important role.     

To elevate or to duplicate? Experiential learning,host-country institutions,and MNE post-entry commitment increase

A multinational enterprise’s (MNE) decision to commit more resources to a host country operation is a key aspect of internationalization. MNEs can change their foreign operation mode in several ways in order to increase host-country commitment after initial entry, but existing theory on mode changes provides little guidance on what drives MNEs to increase commitment in a certain way over another. In this paper, we differentiate between mode duplication, whereby an MNE replicates an existing operation mode in a host country, and mode elevation, whereby an MNE establishes a new, different mode of operation either in lieu of or in addition to an existing one. We subsequently leverage learning theory to argue that both deeper international experience and broader international experience increase the likelihood of implementing a mode elevation rather than a mode duplication due to the higher complexity of the former. We further argue that these relationships are not uniform across different levels of host-country institutional quality. We test our hypotheses in a primary dataset of 80 Austrian MNEs implementing 527 mode changes while internationalizing into 21 countries in Central and Eastern Europe over 24 years, and find support for our theory. Overall, this study contributes to the international business literature on mode changes by offering theory and evidence regarding the drivers of whether an MNE increases foreign commitment by establishing a new operation mode or by duplicating an existing one in a host country.     

The limits of firm-level globalization: Revisiting the FSA/CSA matrix

Multinational enterprises (MNEs) engaging in foreign direct investment (FDI) need advantages allowing them to offset the liability of foreignness in host countries. This liability of foreignness gives rise to additional operational costs related to economic, institutional, and cultural differences between home and host countries. MNEs therefore need to own or control firm-specific advantages (FSAs) that, along with country-specific advantages (CSAs) and internalization advantages, affect international business transactions. In this paper, we revise Rugman’s classic FSA/CSA matrix to better reflect how firms bundle their assets with CSAs. We further contribute to the prior debate on the linkages between the global factory paradigm and internalization theory by empirically evaluating the validity of a key proposition associated with the global factory, namely that FDI becomes relatively less important as a building block of the modern MNE. We do so using data on FDI and cross-border mergers and acquisitions, a major component of FDI.     

The micro-foundation of ambidextrous opportunity identification in international expansion

This study builds upon social cognitive theory and the research on micro-foundations to elaborate on how, and under what conditions, multinational enterprises (MNEs) identify various international opportunities (e.g., ambidextrous and non-ambidextrous opportunities). Using a qualitative approach, this study develops a theoretical framework for explaining the international opportunity identification behaviour in the empirical context of Chinese MNEs. The findings establish cognitive mechanisms enabled by international management teams relevant to international opportunity identification and clarify the specific constituents of self-efficacy in the ambidextrous opportunity identification process. We discuss theoretical and practical implications of findings for the international business literature.     

The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)

Using a sample of 787 Japanese MNEs operating in 60 countries from 1996 to 2010, this study examines the impacts of MNEs’ three most commonly observed forms of non-conventional outbound FDI (i.e., as a means to counter trade barriers, to achieve a financial hedge, or to obtain tax breaks) on domestic employment levels of MNEs at home. We build on a conceptual classification of ‘motivation-activity’ of MNEs as a theoretical framework, and evaluate the impacts of MNEs’ non-conventional outbound FDI on their domestic employment levels in relation to the MNEs’ specific combination of ‘motivation’ and ‘activity’ as they conduct outbound FDI in host countries. The 3SLS regression results show strong evidence that non-conventional outbound FDI in core business activities reduces MNEs’ domestic employment levels when the investment is primarily for responding to country-specific conditions, such as circumventing host country restrictions (e.g., FDI to counter trade barriers) or escaping from home country restrictions (e.g., FDI for tax incentive packages), while FDI in non-core business activities (e.g., FDI for financial hedging or FDI in tax havens) has either a positive or insignificant effect on MNEs’ domestic employment levels depending on whether it aims to develop FSAs or not. We conclude the study with public policy implications from these findings.     

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.     

基于移动互联网的跨境电子商务商业模式研究

基于移动互联网的跨境电子商务是移动互联网与国际贸易的全新组合,是突破当前国际贸易形势低迷现状的新途径。基于移动互联网的跨境电子商务的商业模式,将现有的商业模式归纳为跨境大额B2B、跨境垂直B2C以及跨境C2C等3种模式,比较分析了不同模式的运行机制,发现物流仓储与质量控制是制约移动跨境电商发展的主要因素。由于跨境大额B2B和跨境垂直B2C有较为完善的物流和售后解决方案,因此二者将成为未来移动跨境电商发展的主要模式,而跨境C2C将通过提供差异化商品与服务以填补二者之间存在的商业空隙。移动跨境电商既是传统国际贸易在互联网时代的变革,又是电子商务进一步发展的必然趋势。     

Home base and knowledge management in international ventures

This paper examines the scope and sequence of international activities carried out by nascent international ventures. Building on earlier research about foreign direct investment (FDI) and knowledge management in international firms and on the analysis of six international ventures the paper develops a number of propositions. We suggest that international ventures are conceived as ‘international’ because cross-border activities increase the chances of venture survival and growth. We also suggest that, in the early stages of international ventures, cross-border activities that augment the venture's knowledge base are more prevalent than cross-border activities that exploit the venture's knowledge base. Finally, the paper points out research trajectories for more detailed studies of knowledge management in international ventures.