Disentangling barriers to internationalization

Abstract. Recent literature on multinational firms has focused on low productivity as a barrier to the internationalization of firms. But labour market frictions or financial constraints may also hamper internationalization. In order to assess the importance of these barriers, we present new empirical evidence on the extensive and intensive margin of exports and foreign direct investment (FDI) based on micro‐level data of German firms. First, we find a positive impact of firm size and productivity on firms’ international activities. Second, labour market frictions can constitute barriers to foreign activities. Third, self‐reported financial constraints have no impact on firms’ internationalization decisions. JEL classification: F23, G2     

Creating a High-Trust Organization: An Exploration into Organizational Policies that Stimulate Interpersonal Trust Building

abstract    We examine empirically how an organization that deliberately enhances interpersonal trust to become a significant organizational phenomenon, is different from a similar organization without explicit trust enhancement policies. The point of departure is relational signalling theory, which says that trust is a function of consistently giving off signals that indicate credible concern, to potential trustors. A matched pair of two consulting organizations, with different trust policies but otherwise similar characteristics, were studied intensively, using survey research, participant observation and half-open interviewing, focused on the generation of trust and the handling of trouble when trust was threatened or destroyed. A higher stage of trust can be reached by an inter-related set of policies: promoting a relationship-oriented culture, facilitation of unambiguous signalling, consistent induction training, creating opportunities for meeting informally, and the day-to-day management of competencies. Such policies are in principle independent of recognized contextual contingencies.     

A Blessing and a Curse: Institutional Embeddedness of Longstanding MNE Subsidiaries in Emerging Markets

This article examines the institutional strategies of multinational enterprises (MNEs) operating in an emerging market, drawing attention to how longstanding foreign subsidiaries proactively negotiate their involvement with socio-political actors. We build on institutional logics to explain how MNE subsidiaries develop sustained political, cultural, and cognitive embeddedness. Using an inductive, interpretive study of four century-old Dutch MNE subsidiaries with a colonial legacy in Indonesia, we examine these three dimensions of the institutional environment, finding that local employees embedded in both the MNE and the host country sets of logics ‒ rather than expatriate managers ‒ most effectively facilitated sustained institutional embeddedness. Our findings also suggest that embedding practices in host institutional contexts and developing structures that align with host institutional expectations provided a platform for the unfolding of institutional strategies by local employees. However, MNE subsidiaries face contrasting logics between home and host country institutions, placing significant strains on MNEs’ ability to enact change.     

Book Reviews

Michael T. Skully, Merchant Banking in ASEAN: A Regional Examination of its Development and Operations. Kuala Lumpur: Oxford University Press, 1983, pp. x + 200.

Anwar Nasution, Financial Institutions and Policies in Indonesia, Singapore: Institute of Southeast Asian Studies, 1983, pp. xvi + 182.

R. M. Bautista and S. Naya (eds), Energy and Structural Change in the Asia-Pacific Region. Manila: Philippine Institute for Development Studies and Asian Development Bank, 1984, pp. xxii + 532.

Charles A. Coppel, Indonesian Chinese in Crisis, Asian Studies of Australia, Southeast Asian Publications Series No. 8, Kuala Lumpur: Oxford University Press, 1983. pp. xvii + 236. $24.95 (cloth). $13.95 (paper).

Avé, J., V. King and J. de Wit, West Kalimantan: a bibliography, Leiden: Koninklijke Instituut voor Taal-, Land- en Volkenkunde, 1983. Dfl. 30.     

Book Reviews

Richard Higgott and Richard Robison (eds), Southeast Asia: Essays in the Political Economy of Structural Change, London: Routledge & Kegan Paul, 1985. £18.00 (cloth)

John Wong, The Political Economy of China's Changing Relations with Southeast Asia, London: Macmillan Press, 1984, pp. xvi + 246.

Sumitro Djojohadikusumo, Perdagangan dan Industri dalam Pembangunan [Trade and Industry in Development], Jakarta: LP3ES, 1985, pp. 133.Thee Kian Wie

Masyarakat Indonesia, 12(3), Jakarta: LIPI, December, 1985. Special issue edited by Thee Kian Wie, entitled 'Kaitan-Kaitan Vertikal Antar-perusahaan dan Pengembangan Sistem Subkontraktor di Indonesia: Beberapa Studi Kasus' [Vertical Linkages between Firms and the Development of the Subcontracting System in Indonesia: Several Case Studies].

D. B. G. Denoon, Devaluation under Pressure: India, Indonesia and Ghana, Cambridge, Mass: MIT Press, 1986, pp. xi + 260. US$28.75

John W. Mellor and Gunvant M. Desai (eds). Agricultural Change and Rural Poverty, Baltimore: The Johns Hopkins University Press, 1985, pp. xix + 233. US$27.45.

'Indonesia's Transmigration Programme: A Special Report', The Ecologist, Vol. 16, No. 2/3, 1986. £4.00     

When outcome heterogeneously matters for selection: a generalized selection correction estimator

The classical Heckman (1976, 1979) selection correction estimator (heckit) is misspecified and inconsistent, if an interaction of the outcome variable with an explanatory variable matters for selection. To address this specification problem, a full information maximum likelihood (FIML) estimator and a simple two-step estimator are developed. Monte Carlo (MC) simulations illustrate that the bias of the ordinary heckit estimator is removed by these generalized estimation procedures. Along with OLS and ordinary heckit, we apply these estimators to data from a randomized trial that evaluates the effectiveness of financial incentives for reducing obesity. Estimation results indicate that the choice of the estimation procedure clearly matters.