How a Firm's Domestic Footprint and Domestic Environmental Uncertainties Jointly Shape Added Cultural Distances: The Roles of Resource Dependence and Headquarters Attention

Even though many firms conduct most of their business domestically, international management research has remained remarkably silent on the role of a firm's domestic footprint in its internationalization strategy. We shed light on that role by exploring how the size of a firm's domestic footprint influences the cultural distance that the firm adds to its country portfolio when expanding internationally. Integrating resource dependence theory and the attention‐based view, we hypothesize that a firm's domestic footprint has a negative relationship with added cultural distance (ACD), and that domestic policy uncertainty strengthens this relationship whereas domestic demand uncertainty weakens it. We find robust support for our hypotheses in a sample of the world's largest retailers covering the period 2000–07, indicating that a firm's domestic footprint and domestic environmental uncertainties jointly shape cross‐cultural expansion strategies. Our findings suggest that ACDs reflect headquarters executives' desire to avoid ineffective foreign expansions, hinting at possible biases in studies of the performance effects of distance.     

Economic openness and trade linkages of China: An empirical study of the determinants of chinese trade intensities from 1993 to 1999

In the 1980s, the Chinese regime took a number of piecemeal steps toward economic liberalization. This process accelerated impressively in the 1990s. This paper reports an empirical study into the determinants of the emerging pattern of Chinese trade (export and import) intensities in the liberalization decade by exploring international trade statistics for 1993 and 1999. Four models are estimated that explain the shifts in the export and import intensities of the trade with different trade partners in the 1993–1999 period. The estimation results reveal differences for export vis-à-vis import trade intentities, as well as for 1993 compared to 1999. For example, the political determinants of trade intensities that were still very important in 1993 have been moved to the background by economic explanations in 1999. JEL no. F14     

Do Foreign Greenfields Outperform Foreign Acquisitions or Vice Versa? An Institutional Perspective

abstract Prior studies of the comparative performance of greenfields and acquisitions have advanced competing arguments, with some arguing that greenfields should outperform acquisitions because acquisitions are costlier to integrate, and others that acquisitions should outperform greenfields because greenfields suffer from a liability of newness. Moreover, while the costs of integration and the liability of newness are at their greatest during a subsidiary's first years, prior studies have tested their competing arguments on samples containing older subsidiaries. We extend these prior studies by (1) developing an institutional theory‐based framework that simultaneously considers the costs of integration and the liability of newness, (2) recognizing that both types of costs vary with the level of subsidiary integration, and (3) focusing on the stage of their life during which subsidiaries predominantly incur these costs. To measure subsidiary performance, we ask managers of Dutch multinationals how their ex ante performance expectations compare to the subsidiary's ex post performance during its first two years. Analysing a sample of 191 foreign subsidiaries and controlling for entry mode self‐selection and other factors, we find that acquisitions outperform greenfields at low and intermediate levels of subsidiary integration, but that greenfields outperform acquisitions at higher integration levels.     

The water footprints of Morocco and the Netherlands: Global water use as a result of domestic consumption of agricultural commodities

The volume of international trade in agricultural commodities is increasing faster than the global volume of production, which is an indicator of growing international dependencies in the area of food supply. Although less obvious, it also implies growing international dependencies in the field of water supply. By importing food, countries also import water in virtual form. The aim of the paper is to assess the water footprints of Morocco, a semi-arid/arid country, and the Netherlands, a humid country. The water footprint of a country is defined as the volume of water used for the production of the goods and services consumed by the inhabitants of the country. The internal water footprint is the volume of water used from domestic water resources; the external water footprint is the volume of water used in other countries to produce goods and services imported and consumed by the inhabitants of the country. The study shows that both Morocco and the Netherlands import more water in virtual form (in the form of water-intensive agricultural commodities) than they export, which makes them dependent on water resources elsewhere in the world. The water footprint calculations show that Morocco depends for 14% on water resources outside its own borders, while the Netherlands depend on foreign water resources for 95%. It is shown that international trade can result in global water saving when a water-intensive commodity is traded from an area where it is produced with high water productivity to an area with lower water productivity. If Morocco had to domestically produce the products that are now imported from the Netherlands, it would require 780 million m³/year. However, the imported products from the Netherlands were actually produced with only 140 million m³/year, which implies a global water saving of 640 million m³/year.     

Multimarket competition and business strategy

Multimarket competition abounds in the real world. Globalization of competition (triad rivalry) and economic integration of communities (European integration) contribute to the intensification of multimarket competition. The fact that firms meet in many markets has implications for rivalry. This paper introduces five key elements of multimarket competition and illustrates their working and influence by applying game-theoretic reasoning. By way of illustration the case of the artificial sweetening industry is discussed.Professor H.W. de Jong and M. van Wegberg are gratefully acknowledged for their valuable comments. Of course, the usual disclaimer applies.     

Matchmaking in organizational change: Does every employee value participatory leadership? An empirical study

Although leadership is generally considered an important lever to increase commitment during organizational change, empirical research has yet to unravel many of the underlying mechanisms. In this paper, we propose that the impact of participative leadership on affective commitment to change will be contingent on employees’ orientation toward leadership. In our empirical study in two police organizations, we find evidence that followers’ orientation toward leadership is a useful interacting variable. Participative leadership lowers affective commitment to change for individuals with high dominance orientation. In contrast, participative leadership increases affective commitment to change for employees with high development orientation toward leadership. Implications for theory and practice are discussed.     

The Effect of Shortfall as a Risk Measure for Portfolios with Hedge Funds

Abstract:  Current research suggests that the large downside risk in hedge fund returns disqualifies the variance as an appropriate risk measure. For example, one can easily construct portfolios with nonlinear pay-offs that have both a high Sharpe ratio and a high downside risk. This paper examines the consequences of shortfall-based risk measures in the context of portfolio optimization. In contrast to popular belief, we show that negative skewness for optimal mean-shortfall portfolios can be much greater than for mean-variance portfolios. Using empirical hedge fund return data we show that the optimal mean-shortfall portfolio substantially reduces the probability of small shortfalls at the expense of an increased extreme crash probability. We explain this by proving analytically under what conditions short-put payoffs are optimal for a mean-shortfall investor. Finally, we show that quadratic shortfall or semivariance is less prone to these problems. This suggests that the precise choice of the downside risk measure is highly relevant for optimal portfolio construction under loss averse preferences.     

What does the Chinese market need? An empirical study of the determinants of Chinese imports, 1996–2008

This study provides an in-depth analysis of the determinants of import demand in China through a multilevel approach. Using disaggregated data over 1996–2008 and a dynamic panel model, we find that the Chinese import market is predominantly characterized by quality competition. However, the nature of the competition varies across different industries. In line with theory, quality plays an important role in industries that are characterized by the potential for quality improvement and product differentiation, whereas price is key in industries in which quality and product differences are rather small. Moreover, private consumption expenditure is more influential than other categories of expenditures. Additionally, variables that can influence the relative price of import products, such as the exchange rate, tariffs and the domestic price index, also have an impact on import demand.     

Managerial Bonus Systems in a Differentiated Duopoly: A Comment

A differentiated Cournot duopoly is considered where firm owners delegate the output decision to a manager, who is rewarded on the basis of his performance. If this performance is measured in terms of (i) pure profits, (ii) a combination of profits and sales, (iii) a combination of profits and market share or (iv) relative profits, the latter option strictly dominates the others if the products are perfect substitutes. Recently it was claimed that this result does not hold for all levels of product substitutability. In this comment, we show however that this result is robust against the introduction of product differentiation. Copyright © 2011 John Wiley & Sons, Ltd.