Showing papers in "Journal of International Business Studies in 1986"
TL;DR: In this article, the authors present a transaction cost framework for investigating the entry mode decision in international marketing and provide guidelines for choosing the appropriate mode of entry, given certain characteristics of the firm, the product, and the environment.
Abstract: A “frontier issue” in international marketing is the appropriate choice of entry mode in foreign markets. The objective of this paper is to offer a transaction cost framework for investigating the entry mode decision. This framework provides 1) a theoretical basis for systematically interrelating the literature into propositions, 2) propositions about interactions which resolve the apparently contradictory arguments advanced to date. Specifically, the paper:
The entry mode literature is reviewed in the context of these propositions, and guidelines are derived for choosing the appropriate mode of entry, given certain characteristics of the firm, the product, and the environment.
2,346 citations
TL;DR: The application of MNE definitions, measurements and theories to international services is still in the infancy, despite the considerable size and growth of this sector as discussed by the authors. But the application of the MNE definition, measurements, and theories for international services are still in their infancy, and they do not require special definitions and theories.
Abstract: The application of MNE definitions, measurements and theories to international services is still in its infancy, despite the considerable size and growth of this sector. There are problems in defining, classifying, measuring, comparing and explaining service MNEs, but they do not require special definitions and theories. Still, research to date suggests: (1) delinking the concepts of multinational enterprise and foreign direct investment under certain conditions, and (2) qualifying the nature of ownership, internalization and location advantages in FDI theory, as far as service MNEs are concerned.
401 citations
TL;DR: In this paper, the financial performance of a sample of multinational corporations (MNCs) is compared with that derived for a control group of domestic corporations (DMCs) using market-based performance measures.
Abstract: The analysis in this paper is composed of two segments. First, the financial performance of a sample of multinational corporations (MNCs) is compared with that derived for a control group of domestic corporations (DMCs) using market-based performance measures. Then, the paper presents a comparison of selected financial characteristics of the firms in the two groups. The results suggest the DMCs appear to have a significantly superior risk-adjusted market-based performance, are significantly less capitalized, and have higher total risk as well as higher systematic risk. The fact that MNCs are substantially larger than DMCs is not found to be a significant factor in explaining the observed difference between the two groups' performance.
345 citations
TL;DR: In this article, the impact of direct foreign investment in manufacturing abroad has a number of consequences for the firm, particularly salient when the company's image is tied to its home country.
Abstract: Direct foreign investment in manufacturing abroad has a number of consequences for the firm. One aspect, particularly salient when the company's image is tied to its home country, is the impact of the DFI upon customer perceptions of the brand. The present study shows how changes in perceptions can be assessed prior to the investment decision, and how the brand value consequences of a particular location can be estimated. The proposed method is illustrated using data from a Japanese company's entry into the U.S.
331 citations
TL;DR: In this paper, the degree of centralization inherent in the headquarters-foreign subsidiary relationship varies in response to a variety of company-wide and subsidiary level conditions, and several new contingency patterns are identified.
Abstract: Research to date on centralization in MNCs has produced many inconsistent findings. The present study attempts to add clarity to the situation by re-testing many of the existing hypotheses with data from a recent study of centralization in 50 large US, UK and European MNCs. It examines how the degree of centralization inherent in the headquarters-foreign subsidiary relationship varies in response to a variety of company-wide and subsidiary level conditions. The influence of company-wide conditions on centralization appears to be much clearer than the influence of subsidiary-level conditions. The study also identifies several new contingency patterns that appear to be at work in MNCs today.
286 citations
TL;DR: In this article, the authors present an overview and evaluation of the standardization debate in international marketing, focusing on the desirability and feasibility of standardizing marketing programs and procedures.
Abstract: A fundamental question in international marketing concerns the desirability and feasibility of standardizing marketing programs and procedures internationally. The primary objective of this paper is to present an overview and evaluation of the standardization debate. Central issues of interest include a discussion of the standardization construct and an evaluation of the evidence regarding corporate implementation of standardization strategies.
214 citations
TL;DR: In this paper, the role of major location-specific advantages in the international branch banking involvement of U.S. banks was examined using pooled time-series (1976-82), cross-sectional (thirty countries) regression analysis.
Abstract: This study examines the role of major location-specific advantages in the international branch banking involvement of U.S. banks. Using pooled time-series (1976-82), cross-sectional (thirty countries) regression analysis, this study finds that the U.S. business presence in foreign country has a strong positive effect on U.S. branch banking activity in that country. In contrast, the local market opportunity appears to have no significant effect. These results hold for the entire set of countries, as well as each of five subsets (developed, less developed, European, Latin American, and Asian countries). The openness of the host country to the establishment of new foreign bank branches does affect U.S. branch banking involvement. This effect is most pronounced in the less developed countries, particularly those in Asia.
186 citations
TL;DR: In this paper, failure probabilities of a sample of multinational corporations (MNCs) were compared with those of a control group of domestic corporations (DMCs), and the results suggest that the mean insolvency-probability of DMCs is significantly higher than that of the MNCs.
Abstract: The failure-probabilities of a sample of multinational corporations (MNCs) are derived and compared with those of a control group of domestic corporations (DMCs). The results suggest that the mean insolvency-probability of DMCs is significantly higher than that of the MNCs. It is also observed that MNCs are significantly more capitalized, and the standard deviation of their equity as well as their average systematic risk are also significantly lower. Furthermore, the average insolvency probability of the DMCs is more sensitive to changes in the values of the parameters than those of the MNCs.
165 citations
TL;DR: In this paper, the authors examined the relationship between excess market value and the two commonly used measures of monopoly power (concentration ratio and the Lerner Index) and found that the Lerner index contributes significantly in explaining excess market values but concentration ratio does not.
Abstract: The results of this study show that there is a positive and significant relationship between excess market value of multinational corporations and the degree of international involvement as measured by foreign sales percentage. However, the excess market value is not determined by the number of foreign subsidiaries, nor the interaction between foreign sales and the number of foreign subsidiaries. The relationship between excess market value and the two frequently used measures of monopoly power–concentration ratio and the Lerner Index–was also examined. This study found that the Lerner Index contributes significantly in explaining excess market value but concentration ratio does not. Furthermore, the positive and significant coefficients of advertising and R & D intensity serve as evidence that product market imperfections appear to play a bigger role in explaining the excess market value experienced by MNCs during our sample period.
153 citations
TL;DR: In this article, the use of international strategies by some non-dominant firms to avoid direct competition with industry leaders is discussed, and seven different strategies are identified together with their attendant firm characteristics, stage of industry internationalization and underlying competitive logic.
Abstract: There has been a growing interest in how follower firms can compete with industry leaders. This article documents the use of international strategies by some non-dominant firms to avoid direct competition with industry leaders. Twenty-five cases of international strategies used by non-dominant firms in a variety of industries were cluster analyzed to identify common strategies. Seven different strategies were identified together with their attendant firm characteristics, stage of industry internationalization, and underlying competitive logic.
149 citations
TL;DR: In this paper, a matched sample of British companies and their major Japanese competitors was used to examine Japanese marketing and found that Japanese subsidiaries in Britain are much more market-oriented, more single-minded in their pursuit of market share and more alert to strategic opportunities than their British counterparts.
Abstract: Hypotheses about Japanese marketing are examined using a matched sample of British companies and their major Japanese competitors. Japanese subsidiaries in Britain are shown to be much more market-oriented, more single-minded in their pursuit of market share and more alert to strategic opportunities than their British counterparts. Organizationally, however, their subsidiaries are more like successful British companies than the Japanese stereotype. Differences in performance between the two groups appear due to marketing skills rather than national cultures.
TL;DR: In a study of senior American and Japanese executives, the Japanese showed a stronger commitment to this theory of action than the Americans did as discussed by the authors, and the implications for strategy-setting behavior in both cultures are discussed.
Abstract: Karl Weick, in The Social Psychology of Organizing, theorized in effect that organizational learning must be governed by a theory of action. Such a theory can be described in terms of variety amplification by senior managers and variety reduction by junior managers. In a study of senior American and Japanese executives, the Japanese showed a stronger commitment to this theory of action than the Americans did. Implications for strategy-setting behavior in both cultures are discussed.
TL;DR: The authors examined countertrade using standard economic theory and showed that countertrade is a rational response to transaction costs, information asymmetry, moral hazard-agency problems, and other market imperfections.
Abstract: This paper examines countertrade using standard economic theory. We show that in many circumstances countertrade is a rational response to transaction costs, information asymmetry, moral hazard-agency problems, and other market imperfections. This paper also integrates countertrade into international business theories. Some preliminary hypotheses, that may be empirically testable after refinement, are developed. As reports of countertrade arrangements have become frequent, academic interest has increased. Many popular explanations have been advanced, among them shortage of foreign exchange, balance of payments difficulties, exercise of monopsony power, and imposition of trade barriers. It has also been alleged that countertrade is an inefficient form of international trade and that iitepresents a retrograde development. Most of these arguments have not been established theoretically, nor have they been tested empirically.
TL;DR: In this article, the authors examine how the firm's exposure to exchange rate uncertainty influences its valuation and identify the variables affecting a firm's economic and accounting exchange exposure as well as the cost of capital in a formal unified model.
Abstract: This paper examines how the firm's exposure to exchange rate uncertainty influences its valuation. It identifies the variables affecting the firm's economic and accounting exchange exposure as well as the cost of capital in a formal unified model.
TL;DR: In this paper, the authors look at the historical record of early foreign direct investment in Malaysian tin mining and draw its implications for the theory of the MNE, and draw a conclusion that the theory is correct.
Abstract: This paper looks at the historical record of early foreign direct investment in Malaysian tin mining and draws its implications for the theory of the MNE.
TL;DR: The authors presented logit and discriminant models of debt rescheduling, which incorporated new short-term debt data and variables representing economic shocks, and used them to forecast debt reschuling.
Abstract: This paper presents logit and discriminant models of debt rescheduling. The models incorporated new short-term debt data and variables representing economic shocks. The 30-country database covered the period from 1975 to 1982 and contained the largest number of debt rescheduling observations of any previous database. Because of the new indicators and more recent data, the models captured the effects of the changes that have occurred in the world economy since the oil price shocks and the period of rapid debt accumulation by the developing countries. Compared to the earlier research models, the models have proven to be efficient in forecasting debt reschedulings.
TL;DR: In this paper, the authors suggest how the literature on East-West trade and the choice of contracts can be integrated into recent work on the theory of the multinational corporation and contract enforceability.
Abstract: This article suggests how the literature on East-West trade and the choice of contracts can be integrated into recent work on the theory of the multinational corporation and contract enforceability. By using the properties of foreign direct investment as a benchmark, it explains why one type of contract tends to prevail over another. The explanation rests on the premise that because of the prohibition on FDI, contracts are used which most closely replicate the benefits of intra-firm trade, while providing managerial and risk-shifting services to the eastern partner.
TL;DR: In this article, the authors found that the difference between the international loan portfolios of U.S. banks and those of the non-U.S banks may be explained by the patterns of trade flows and investments by non-financial corporations.
Abstract: The international lending behavior of the U.S. commercial banks depends upon economic links between countries. Much of the difference between the international loan portfolios of U.S. banks and those of the non-U.S. banks may be explained by the patterns of trade flows and investments by nonfinancial corporations. These trade flows and investment patterns explain most of the variations in the bank lending patterns for 70-80 percent of the countries. The analysis points to an increasing influence of economic ties on the lending process over time.
TL;DR: In this article, a network optimization approach that is both computationally efficient and intuitively appealing is presented to integrate the netting system with the MNC's overall cash management systems as well as by explicitly accounting for cash outflows on account of transfer costs.
Abstract: Rationalization of global production and operations by multinational corporations have created a large volume of inter-company funds flows. By a process of netting interaffiliate payments, significant savings in cost can be realized. Shapiro formulated the multinational payment netting problem using linear programming. This paper presents a network optimization approach that is both computationally efficient and intuitively appealing. Further, the proposed approach recognizes the need to integrate the netting system with the MNC's overall cash management systems as well as by explicitly accounting for cash outflows on account of transfer costs. Additionally, the paper provides insight into actual corporate netting practices.
TL;DR: A Delphi study conducted with academicians, business executives, and policymakers involved in international trade found that the most crucial issue identified by that research is the current challenge to the multilateral trade framework as discussed by the authors.
Abstract: Much of the current research and teaching in international business and trade is not part of a concerted effort in a given direction This is the result of a lack of adequate information about what the major issues will be, and a lack of adequate communication between the academic, business, and policymaking communities This article presents the findings of a Delphi study conducted with academicians, business executives, and policymakers involved in international trade The most crucial issue identified by that research is the current challenge to the multilateral trade framework This challenge emanates from such new factors as trade in services, subsidization, high technology transfer, countertrade, and orderly marketing agreements After discussing these and other newly emerging issues in international business and trade, recommendations are made to encourage a better focus for future research and teaching in the international business and trade arena
TL;DR: In this article, a normative model for determining how firms should select the countries to be used in the information search for foreign direct investment was developed and tested, where a subset of countries is selected in the first stage of the decision process, and a final selection process chooses the country with the best score within the subset: a "percentile method of subset selection" for singling out clusters of countries for information search and for identifying the best of the subset.
Abstract: This paper reports the development and testing of a normative model for determining how firms should select the countries to be used in the information search for foreign direct investment. After a subset of countries is selected in the first stage of the decision process, a final selection process chooses the country with the best score within the subset: A “percentile method of subset selection” for singling out clusters of countries for information search and for identifying the best of the subset is presented that performs better than maximum country rankings (“top means”) and maximum uncertainty (“top variance”) techniques of subset selection. As an illustration, the percentile selection method is applied empirically.
TL;DR: In this article, the authors empirically tested the hypothesis that no yield differentials exist between similar securities in these two markets and showed that the pricing influence is similar in both markets, and that issue size, issuer's rating and the market's familiarity with the issuer do not uniquely influence Eurobond pricing any differently than domestic U.S. bond pricing.
Abstract: This study develops equilibrium yield relationships between otherwise similar dollar denominated Eurobonds and U.S. bonds with the use of supply and demand conditions and the standard arbitrage argument. It them empirically tests the hypothesis that no yield differentials exist between similar securities in these two markets. A matched pair sample of these bonds is obtained on the basis of five criteria: (a) same parent; (b) same rating; (c) similar coupon rates; (d) similar time to maturity; and (e) yield observations from the same month. Empirical results obtained during 1975 to 1983 shows that dollar Eurobond yields do not differ from domestic bond yields for comparable securities. This implies that these two markets are either devoid of systematic and material imperfections, or if any such imperfection do exist, their pricing influence is similar in both markets. It is also observed that issue size, issuer's rating and the market's familiarity with the issuer do not uniquely influence Eurobond pricing any differently than domestic U.S. bond pricing.
TL;DR: In this article, a production function model of a plant in a labor-intensive consumer goods industry is developed and estimated econometrically to access the influence of various factors on labor productivity.
Abstract: To access the influence of various factors on labor productivity, a production function model of a plant in a labor-intensive consumer goods industry is developed and estimated econometrically. The model is derived from a production function specified in three functional forms which is expanded to include management and quality-adjustment factors for the capital and labor inputs. The management variable is a performance ranking of the plants in terms of meeting output, quality, and cost goals. Data on approximately 30 plants from a dozen countries over the period 1975 through 1982 was used for the analysis. All of the plants are of a single multinational firm and produce similar products.