Emerging Asian MNCs

Developed countries traditionally account for the lion's share of outward foreign direct investment (FDI) and multinational corporations (MNCs). More recently, however, developing countries are emerging as a significant source of outward FDI and globally influential MNCs. The central objective here is to analyze and compare the main issues facing emerging Asian MNCs today with the main issues which faced developed-country MNCs 30 years ago. Our basic hypothesis is that the two groups of MNCs significantly differ due to both exogenous and endogenous factors. Particularly important are differences in motivation and behaviour, ownership patterns, ownership-specific advantages and the institutional infrastructures of their home countries.     

Acquisition of managerial knowledge from foreign parents: evidence from Korean joint ventures

This paper contributes to the literature on intra- and inter-firm knowledge transfer by examining knowledge acquisition by Korean international joint ventures from their foreign parents. A conceptual model is presented which identifies the factors that have been found to influence knowledge transfer, organised into variables related to the local recipient firm, the foreign sender firm and the relationship between the two. The model is examined by means of a series of multiple regressions using a sample of 128 Korean international joint ventures. We find that: (1) the international joint ventures intent to learn and international experience; (2) the level of trust between parents and their business relatedness; and (3) the active managerial engagement of the foreign parent are the most important factors explaining the level of knowledge acquisition within the international joint ventures.     

Subjectivity in fair-value estimates,audit quality,and informativeness of other comprehensive income

This study empirically examines whether difference in audit quality is reflected in the pricing of other comprehensive income (OCI). Specifically, we first investigate whether OCI measures of Big 4 clients are more value-relevant than those of non-Big 4 clients. Considering different degrees of subjective management judgment involved in the OCI reporting process, we then explore whether the differential valuation effect of OCI between Big 4 and non-Big 4 clients is more pronounced for more subjective OCI components (e.g., minimum pension liability and foreign currency-translation adjustment) than a less subjective component (e.g., marketable securities adjustment). We predict that the aggregate OCI of a Big 4 client is more value-relevant than that of a non-Big 4 client. We also hypothesize that the differential valuation effect between Big 4 and non-Big 4 clients can be attributed to the amount of subjective assumption and judgment required in estimating OCI. Consistent with our predictions, we find that aggregate OCI audited by a Big 4 auditor has incremental information content over earnings, compared to OCI audited by a non-Big 4 auditor. More interestingly, our results also show that the differential valuation effect between Big 4 and non-Big 4 clients is stronger for OCI components of a more subjective nature. Our results are robust even after controlling for self-selection bias, the potential effect of the financial crisis, and other related effects.     

Emotional labor's impact in a retail environment

It is essential for organizations to understand and manage salespeople's emotions. By monitoring the effects of emotions on the job, management can promote and enhance its sales force. However, the literature on salespersons' emotions has been largely overlooked. This paper establishes an integrative emotional labor process model to better understand the emotional component of the sales force in a retail context. Specifically, the paper examines the impact of emotional labor and emotional exhaustion in relation to job satisfaction and organizational commitment. Findings suggest that emotional labor predicts both job satisfaction and organizational commitment, while emotional exhaustion only predicts job satisfaction.     

Profitable growth: Avoiding the ‘growth fetish’ in emerging markets

Growth management is a challenging but critical corporate strategy facing the fast economic growth in emerging markets. An overemphasis on growth would lead to the growth fetish, where growth is unqualified and seen as an end in itself. By examining the performance of 105,260 firms in key sectors of Brazil, Russia, India, and China (BRIC) from 2002 to 2011, this study presents quantitative evidence that supports a profit-oriented strategy as a more effective path to sustained profitable growth in emerging markets. To further support this argument, this study also provides qualitative evidence of a group of 70 sustained high-performing firms that are superior to their peers (the top 500 private companies in each of the BRIC countries) in terms of profit, growth, market share, and efficiency over a 10-year period. The study shows that sustained profitable growth requires qualified sales growth (i.e., organic growth), competence-based and competence-enhancing growth, and continuous product diversification.     

Ties Binding Asia,Europe and the USA

We investigate changes in Asia's regional and global trade linkages and their influence on macroeconomic relationships among Asia, Europe and the USA. We first document changes in tripartite trade patterns and discuss stylized facts about East Asia's trade structure, with particular focus on the role of China. China plays a critical role in the rapidly expanding intra‐Asian trade as an assembly and production center that supplies final goods for the advanced economies. However, China's trade shares in final goods with East Asia and in parts and components with Europe and the USA are rising, suggesting that the region's production chains are becoming increasingly integrated into the global business network. Empirical results from a panel vector autoregression model generally confirm increasingly mutual macroeconomic interdependence among East Asia, Europe and the USA. The findings suggest a future role for Asia as an important trade partner and balancing power in the world economy.     

Line and HR executives' perceptions of HR effectiveness in firms in the People's Republic of China

This paper examines the differences in perceptions of the importance and effectiveness of human resources (HR) practices in firms operating in the People's Republic of China. The major finding is that while there are no significant differences between HR and line executives' perceptions of the importance of each functional area in human resource management (HRM), there are significant differences between line and HR executives' perceptions of the effectiveness of these areas. Line and HR executives both view the issue of securing, developing and maintaining human resources as a critical issue for the execution of daily operations and long-term strategic plans. However, line executives perceive HR performance effectiveness as significantly lower in these functional areas than HR executives do. Therefore, HR departments are not meeting the performance expectations of line executives. There are three possible reasons for the poor performance of HR departments. First, government intervention may limit HR departments' ability to act strategically. Second, HR departments may not have enough power to act strategically. Third, HR departments may have few capabilities to respond to line executives' demands.     

Sources of and Responses to the Liability of Foreignness: The Case of Korean Companies in the Netherlands

Abstract

This study aims to investigate the liability of foreignness, or the additional difficulties of foreign companies compared to their local competitors. Past studies have found fair amount of empirical evidences for the liability of foreignness. The present study attempts to take one step further by addressing two questions: what are the sources of such disadvantages and what are the solutions sought by the companies? To do this, we conducted a field study exploring the on-going dynamics of foreign multinationals. Specifically, we collected primary data through interviews with Dutch and Korean managers of Korean multinational companies. Through the interviews, we found evidence for the existence of such disadvantages. We identified four sources of the liability of foreignness—cross-border transfer, interaction with the local government, local discrimination, and interaction within the multinational—and two ways in which these companies actively reduced their exposure to the problem—localization and unfamiliarity reduction. This study should be useful to both practitioners and theorists in international business with an interest in disadvantages connected to the foreign status of a company.     

Bankers on the Board,Market Competition,and Conflicts of Interest

Abstract

Bankers on the board are expected to act as a fund-raiser and to help lowering financial costs, but they can impose conflicts of interest between shareholders and creditors. We empirically analyse the impact of banker-directors on corporate leverage and investment, using Korean firm data during the period from 2000 to 2012. Bankers on the board turn out to play different roles depending on market competition and macroeconomic circumstance. In less competitive industries where banks are less concerned about financial distress as a creditor, the presence of bankers on the board has higher leverage and more active investment, which can align with the interest of shareholders. However, in more competitive environment where firms are more concerned about financial distress and external financing, bankers on the board do not always increase leverage and investment, which can be divergent from the interest of shareholders.     

Determinants of Different Modes of FDI: Firm-Level Evidence from Japanese FDI into the US

There are four major modes through which firms undertake foreign direct investment (FDI) – merger and acquisition (M&A), joint venture (JV), new plant (NP) and others (O). The four modes of FDI are distinct from each other, and each has its own unique advantages and disadvantages. While a large and growing empirical literature examines the determinants of FDI, very few studies examine the determinants of different modes of FDI. The central objective of this paper is to empirically analyze the extent to which the determinants of FDI such as firm size influences the choice of one mode of FDI over another. Our analysis follows a stylized two-stage investment process. First, we look at the probability of whether a Japanese firm is willing to undertake FDI in the US. Second, for firms that are willing to undertake FDI, we analyze which mode of FDI - i.e. M&A, joint venture, new plant or other FDI – they will undertake. The second stage is the innovation of this paper and its contribution to the FDI literature.