The characteristics and performance of Japanese FDI in less developed and developed countries

Data on 26,857 Japanese foreign investments in 150 countries and regions over the 1991–1999 period reveal that there are stark differences in the characteristics and performance of Japanese FDI (JFDI) between less developed countries (LDCs) and developed countries (DCs). JFDI in LDCs has been growing more rapidly over the period, and it is concentrated in the Secondary industrial sector, with a lower level of control within a subsidiary, and has been initiated by parent firms with market-seeking and labor-seeking purposes and with relatively weak ownership advantages. In contrast, JFDI in DCs has maintained relatively stable growth over the period, is concentrated in the Tertiary industrial sector, with a higher level of control within a subsidiary, and has been initiated by parent firms with market-seeking and strategic-seeking purposes and with relatively strong ownership advantages. JFDI in LDCs tended to attain a higher financial performance and a lower exit rate, yet with a greater variance, than those in DCs.     

The right tree for the right bird: Location choice decision of Taiwanese firms’ FDI in China and Vietnam

Firms have to invest in foreign markets to maintain their competitive advantage, but a popular location for foreign direct investment (FDI) may not be suitable for everyone. Available literature as to location choice is mainly based on developed countries and large multinational enterprises (MNEs). However, this study investigates the location choice behaviour of firms originating in newly industrialized economies (Taiwanese firms) investing in emerging countries (China and Vietnam). According to the national economic development of China (further divided into South China and East China) and Vietnam, we divide the location into more developed and less developed regions. Through an empirical firm-level data collection and conditional logit analysis, this study found that: (1) firms with stronger ownership advantages prefer to invest in more developed than less developed regions; (2) firms occupying favourable positions in their network prefer to invest in more developed than less developed regions; (3) firms with a high degree of networking prefer to invest in less developed than more developed regions; (4) firms choose to invest in more developed than less developed regions to gain access to a large market; and (5) firms with strong resource-seeking motives prefer to invest in more developed than less developed regions to access their resources.     

Better marketing to developing countries: Why and how

Managers have long understood the rationale for investing in new products. Now, however, they face an even more compelling need: to invest in targeting new markets, specifically those in less developed countries (LDCs). The argument presented in this article, for initiating or increasing marketing efforts in these nations, makes two related points. First, a healthy world economy requires consumers in developing nations—particularly China—to spend more, because trade imbalances between the United States and LDCs cannot be sustained. Second, in order to foster consumption in LDCs and to profit from it, marketing expertise in the developed world must refocus. Success will require devising, promoting, and distributing products that will overcome economic constraints in some markets, and in others will overcome an understandable reluctance to spend rather than save. We suggest that lessons may be gleaned from examples regarding recent efforts targeting LDCs by a pharmaceutical company (Pfizer) and a food supplement marketer (Procter & Gamble), as well as efforts pioneered in less developed countries themselves (including low-cost private schools and $2,500 automobiles).     

Performance feedback and outward foreign direct investment by emerging economy firms

Integrating the behavioral theory of the firm (the BTF) and the self-enhancement motive of managers, this paper examines how performance feedback—the discrepancy between actual performance and aspiration levels—affects the international expansion of emerging economy firms (EEFs). Empirical results using panel data on 876 publicly-listed Chinese manufacturing companies over a 7-year period indicate that performance relative to social aspiration (i.e., peer performance) and relative to historical aspiration (i.e., firms’ own past performance) affects EEFs’ levels of subsequent outward foreign direct investment (OFDI). Specifically, performance below social or historical aspiration enhances levels of OFDI, while the effect of performance below social aspiration is stronger than that of underperforming historical results. The results also show that performance above social aspiration enhances levels of OFDI, while performance above historical aspiration decreases levels of OFDI. Moreover, we uncover the importance of considering the joint effect of historical and social performance feedback, as receiving consistent or mixed signals about firm performance may result in risk-taking behaviors that differ from those triggered by just one performance signal on its own. These findings underscore the impact of performance feedback relative to social and historical aspirations on EEFs’ OFDI activities.     

Performance feedback on sales growth goal and OFDI location choices for firms in emerging economies

This study explores the influence of performance feedback relative to sales growth on emerging economy firms’ (EEFs) outward foreign direct investment (OFDI) in developed and developing economies. It takes a global value chain perspective to examine whether performance feedback motivates EEFs’ location choice for OFDI. Using listed Chinese firms’ data, we find negative performance feedback relative to sales growth motivates EEFs to increase OFDI in developing economies but reduce it in developed economies. However, positive feedback relative to sales growth reduces it in both developed and developing economies. We contribute to OFDI location choice literature by including a behavioral perspective.     

Where does ESG pay? The role of national culture in moderating the relationship between ESG performance and financial performance

This study investigates the moderating role of a country’s culture as an external contingency factor in the relationship between a firm’s environmental, social, and governance (ESG) performance and financial performance. Using ESG performance data of 4978 firms from 48 countries for 17 years, we argue that the financial return from engaging in ESG varies depending on the countries’ cultural aspects because stakeholder evaluations and appreciations for a firm’s ESG performance differ across nations. We find that a country that espouses a culture of high individualism or masculinity tends to appreciate and reflect on this more explicitly, strengthening the relationship between a firm’s ESG performance and financial performance. Contrastingly, in a country with a culture of high power distance or uncertainty avoidance, firms’ ESG efforts are less likely to be associated with financial performance. Our findings have important implications for multinational enterprises facing various cultural environments when dealing with heterogeneous stakeholder demands across countries.     

The Co-evolutional Advantage: Strategic Management Theory and the Eclectic Paradigm

The eclectic paradigm has been one of the leading frameworks for explaining multinational activity over the past two decades. Yet recent trends in international business pose a challenge to the explanatory power of the paradigm. Strategic management theory, with its focus on performance differences between firms, provides a useful complement to the OLI framework in understanding the activities of the modern multinational. In particular, global competition and the management of a firm's global stocks and flows of knowledge merit closer attention.The advent of global competition requires us to shift from the existing institutional perspective of comparisons of firms and markets or of foreign firms and local firms to a firm-level perspective of comparisons of the multinational firm to its global competitors. It also necessitates a focus on firm-level capabilities in knowledge management relative to competitors, the development of these capabilities involving both macro and micro co-evolutionary processes. Our arguments incorporate these changes to extend the OLI paradigm to accommodate both an economic and a strategic management perspective.     

Performance feedback and export intensity of Chinese private firms: Moderating roles of institution-related factors

Building on the behavioral theory of the firm and institutional view, we examine how performance feedback (i.e., a focal firm’s performance relative to its industry peers) affects export intensity and how institution-related factors moderate this relationship. Using a sample of Chinese private manufacturing firms, we find that positive performance feedback lowers export intensity while the relationship between negative performance feedback and export intensity is insignificant. Moreover, outperforming firms are likely to decrease their export intensity even more when they are located in regions of better institutional development or have political connections. Underperforming firms with political connections tend to increase their export intensity. These findings enrich our understanding of the export behavior of emerging market firms.     

Asset or constraint: Corporate reputation and MNCs’ involvement in the least developed countries

This study investigates the relationship between corporate reputation and a firm's involvement in the least developed countries (LDCs), where the most impoverished base of the pyramid markets are located. We draw upon extant literature in corporate reputation and international business to develop competing hypotheses regarding the foreign investment of the highly reputable firms in the LDCs. Corporate reputation can be a double-edged sword: while it can be a valuable asset to be leveraged in the LDCs, it demands monitoring and protection which might be challenged by a firm's LDC presence, thereby constraining the involvement in LDCs. Our results show that corporate reputation has a negative effect on a firm's foreign direct investment involvement in LDCs, supporting the view that reputation could constrain firm action in uncertain environments. We contribute to a more nuanced understanding of the relationship between reputation and international action than that of existing literature.     

Direction of outward FDI of EMNEs: Evidence from the Indian pharmaceutical sector

This article seeks to add to the small but growing literature of emerging‐market multinational enterprises (EMNEs). Using two linked large firm‐level databases, it seeks to explore the determinants of outward investment of Indian pharmaceutical companies, distinguishing between developed‐ versus developing‐country destinations. It specifically examines the impact of two firm‐level characteristics that embody “non‐OLI” [ownership, location, and internalization] firm‐specific capabilities of EMNEs. The finding of this study is that family firms are keen on investing in other developing countries but much less so in developed countries. However, international linkages in the form of foreign investors offset this. © 2011 Wiley Periodicals, Inc.     

Escapism FDI from developed economies: The role of regulatory context and corporate taxation

In this paper, we extend the conceptualisation of escapism Foreign Direct Investment (FDI) holding for emerging economies to developed economies that face specific institutional failures, such as weak or incomplete regulations, along with high taxation. We combine this literature with the recent development of Dunning’s eclectic paradigm, which includes institutional aspects regarding location factors. We argue that in developed economies with problematic regulations and high taxation, sound institutions and lower tax rates abroad are extremely significant for domestic firms’ internationalisation. A central result regards the moderating effect of host regulatory quality on taxation, which highlights the crucial role of institutions for firms originating in developed economies that lack sound institutions. Additionally, the results challenge the available theorising and evidence on the moderating role of institutions in the prior experience of a firm at a location. We instead provide evidence that once firms establish a subsidiary abroad, they acquire substantial knowledge about the host institutional environment, which translates into an Ot advantage, providing an additional motive for further expansion. This work uses a unique database of the total population of Greek MNEs – released for the first time – for an extended time period, 2001–2010. The results could be generalised to similar developed economies facing analogous regulatory failures and high taxation, such as the southern European Union countries, as well as even for northern European Union countries, such as Germany, according to Bundesbank’s report.     

Exploring a Measurement of Analytics Capabilities

Changes in the volume and velocity of data have led many organizations to consider assessing and improving analytics capabilities. The purpose of this research is to describe a methodology developed to assess organizations’ analytics capabilities and explore the empirical value of data collected using this methodology. The measurement for analytics capabilities was developed by IBM during 2009–11 marketing efforts. To assess the data’s empirical value, we investigate whether measurements of analytics capabilities are internally consistent, associated with decisions to invest in analytics software and hardware, and able to explain firm profitability. In analyzing consistency, we find a natural sequence in the development of analytics capabilities. Exploring decisions to invest in analytics, we discover that firms with higher levels of capabilities are more likely to invest, as are firms that are larger and located in more profitable industries. However, we find no relationship between analytics capabilities and firm profitability.     

Internet resources and capabilities: Japanese SME risk-taking,industry and performance

This study investigates how Internet-related resources and capabilities are influencing performance in Japanese small- and medium-sized enterprises (SMEs). We use a structural equation modelling approach to test these relationships between Internet readiness, Internet capability, risk-taking perceptions and performance within Japanese SMEs (350 SMEs). Unlike other counterpart countries, such as South Korea, Japanese SMEs have been relatively slow in implementing Internet technologies into business practice. However, the results indicate that if Japanese SMEs allocate appropriate resources and deploy Internet capabilities these firms will benefit with performance gains. Further, we find that both the perception of risk-taking and the industry in which the firm operates are key factors in either inhibiting or enhancing the firm’s ability to leverage Internet-related capabilities for firm performance.     

International diversification of family-dominant firms: Integrating socioemotional wealth and behavioral theory of the firm

Drawing on the behavioral theory of the firm, we shed light on an extant debate about whether family firms are more or less likely to diversify internationally. In an analysis of firm-level data from 93 countries over 2011–2018, we find that family-dominant firms—with their established preference for low breadth-high depth international diversification—will seek to increase their breadth when performance falls below aspiration level, but that doing so can hurt their performance stability. Our study advances the literature by identifying important boundary conditions to their prioritization of socioemotional wealth and micro-foundational mechanisms that underlie strategic change in family-dominant firms.     

International Equity Joint Ventures in Ghana and Cote D'Ivoire

Abstract

This paper examines international equity joint ventures (IJVs) in West Africa, presenting data from 45 British and French alliances with local partners in Ghana and Cote D'Ivoire. A comparison with prior studies finds remarkable consistency in the characteristics of IJVs between firms from DCs and LDCs in the following dimensions: motives, instability, asymmetry in equity distribution, frequency of government association, source of CEO, autonomy in management. Differences in IJVs between developed and less developed countries appear cursory rather than fundamental and focus on MNEs' dissatisfaction with IJV performance, the control relationship, and level of equity.     

Digitalization,internationalization, and firm performance: A resource-orchestration perspective on new OLI advantages

Digital forces and digital global connection weaken traditional ownership, location and internalization (OLI) advantages and intensify new OLI advantages (open resources, linkages and integration). However, by building on the resource-orchestration theory, we raise the question of how digitalization (utilization and orchestration of digital resources) and internationalization (firm-level outward internationalization and country-level inward internationalization) affect firm performance. We introduce the degree of outward internationalization and home-country inward foreign direct investment (FDI) inflows as moderators in achieving firm performance as a result of digitalization. Using a panel dataset of 571 U.S. manufacturing firms, we find a curvilinear relationship between digitalization and performance. The top quartile of digitalization efforts is rewarded by significant profitability. Moreover, high levels of outward internationalization and high net-FDI inflows increase the performance gains attributable to high levels of digitalization. Overall, the resource-orchestration theory complements new OLI advantages in explaining firm performance in the digital world.     

Organizational goals and resource allocation to overseas foreign direct investment

We investigate how organizational goal setting impacts slack resource allocation between markets at home and overseas, and argue that organizational goals, publicly announced, impact managers’ evaluations of resource allocation opportunities. Based on a sample of Chinese publicly listed manufacturing firms for the period 2010 to 2016, we find that when firms announce publicly a sales increasing goal as their priority, their attention will be focused on this goal with a tendency to invest the firm's slack resources locally. This tendency to invest slack resources locally is enhanced if the announced goal is not achieved, but is not achieved with a minor discrepancy. However, if the goal is not achieved, and with a major discrepancy, managers will likely conduct problemistic search and look to foreign locations to invest the firm's slack resources to achieve this goal. We also find the impact of organizational goal setting is more salient for SOEs and is dependent on levels of remuneration in the firm. As such, we revisit the importance of organization goals and the resource allocation decision in the firm which has not received the research attention one may have expected.     

Differentiation,labor market and globalization

We consider two countries with initially one firm in each country and the possibility for each firm to invest in the other country or commercialize its products, and for workers to immigrate (Common Labor Market; CLM). Interestingly, when firms compete on the product market with no competition on the labor market (Goods’ Mobility; GM), they do not differentiate their qualities. However, when competition is introduced in both markets (Foreign Investment; FI) firms differentiate their products. We compare the globalization scenarii and prove that they improve the global social welfare relative to autarky and that a cooperative choice by countries of a globalization scenario would lead to GM.     

International business research and risky investments,an analysis of FDI in conflict zones

The purpose of this paper is to examine the determinants of a firm's strategy to invest in a conflict location. To the best of our knowledge, this has not been done before. We examine this using a standard model of international business, overlaid with the fundamental approach to corporate social responsibility. We start with the population of multinationals who have chosen to invest in low income countries with weak institutions. We then split this sample in order to distinguish between firms that have invested in conflict regions compared to those that have not. Our analysis then proceeds to explain the decision of those firms to invest in conflict locations using a simple Probit model. We find that countries with weaker institutions and less concern about corporate social responsibility (CSR) are more likely to invest in conflict regions. Finally, firms with more concentrated ownership are more likely to invest in such locations.     

Innovation and Exporting: Does Quality Matter?

We study the effect of innovation on a firm’s propensity to export, developing a simple model where heterogeneous firms operate in a monopolistically competitive market and set their prices as a markup above the marginal cost. The key proposition of our model is that firms that invest in better quality products are more likely to export. We test it using Italian firms’ data. Econometric results suggest that innovation, defined as quality upgrading, has a significant effect on the firms’ propensity to export; and, for those who are already exporting, innovation—defined as new products—has a significant effect on a firm’s turnover.