Showing papers in "Journal of International Business Studies in 2008"

An institution-based view of international business strategy: a focus on emerging economies

Abstract: Leveraging the recent research interest in emerging economies, this Perspective paper argues that an institution-based view of international business (IB) strategy has emerged. It is positioned as one leg that helps sustain the “strategy tripod” (the other two legs consisting of the industry- and resource-based views). We then review four diverse areas of substantive research: (1) antidumping as entry barriers; (2) competing in and out of India; (3) growing the firm in China; and (4) governing the corporation in emerging economies. Overall, we argue that an institution-based view of IB strategy, in combination with industry- and resource-based views, will not only help sustain a strategy tripod, but also shed significant light on the most fundamental questions confronting IB, such as “What drives firm strategy and performance in IB?”

Transforming disadvantages into advantages: developing-country MNEs in the least developed countries

Abstract: We analyze the advantages and disadvantages of developing-country multinational enterprises (MNEs) in comparison with developed-country MNEs. Developing-country MNEs tend to be less competitive than their developed-country counterparts, partly because they suffer the disadvantage of operating in home countries with underdeveloped institutions. We argue that this disadvantage can become an advantage when both types of MNE operate in countries with “difficult” governance conditions, because developing-country MNEs are used to operating in such conditions. The empirical analysis shows that, although developing-country MNEs rarely appear among the largest MNEs in the world, they are more prevalent among the largest foreign firms in the least developed countries (LDCs), especially in LDCs with poorer regulatory quality and lower control of corruption.

Perspectives on China's outward foreign direct investment

Abstract: Recent economic data reveal that, at the infant stage, China's outward foreign direct investment (FDI) is biased towards tax havens and Southeast Asian countries and are mostly conducted by state-controlled enterprises with government sanctioned monopoly status. Further examination of China's savings rate, corporate ownership structures, and bank-dominated capital allocation suggests that, although a surge in China's outward FDI might be economically sensible, the most active players have incentives to conduct excessive outward FDI while capital constraints limit players that most likely have value-creating FDI opportunities. We then discuss plausible firm-level justifications for China's outward FDI, its importance, and promising avenues for further research.

Comparing capitalisms: understanding institutional diversity and its implications for international business

Abstract: This paper examines the role of institutional analysis within the field of international business (IB) studies. Within IB, institutions matter, but the view of institutions tends to be “thin”, utilizing summary indicators rather than detailed description, and thus approaches institutions as unidimensional “variables” that impact on particular facets of business activity. This paper argues that IB research would be usefully advanced by greater attention to comparing the topography of institutional landscapes and understanding their diversity. A number of alternative case-based approaches are outlined that draw on a growing “comparative capitalisms” literature in sociology and political science. The paper develops a number of empirical examples to show the utility and limits of these approaches for IB scholars.

Institutional context and the allocation of entrepreneurial effort

Abstract: The type of activity in which entrepreneurs engage is likely to influence the potential contribution of entrepreneurship to economic growth and prosperity. Yet the entrepreneurship literature has focused largely on identifying the determinants of the level, rather than the type, of entrepreneurial activity. In this paper we hypothesize that a country's institutional environment will influence the allocation of entrepreneurial effort, and in particular will influence the extent to which entrepreneurial effort is directed toward high-growth activities. We test our hypotheses using data on 40 countries over the period 2002–2004. We find that the allocation of entrepreneurial effort toward high-growth activities is positively related to a country's financial and educational activities targeted at entrepreneurship, and is negatively related to a country's level of corruption. Our study is the first to provide empirical evidence that institutional characteristics significantly influence the allocation of entrepreneurial effort, and it is therefore the first to identify an empirically important channel through which a nation's institutions may contribute to economic growth.

Innovation in multinational subsidiaries: The role of knowledge assimilation and subsidiary capabilities

Abstract: Subsidiaries of multinational firms play an important role in the globalization of innovation, yet we have an incomplete idea of the influences on their innovative activity. Drawing on prior research in international business and strategy, we identify two sets of factors that influence the absorption and utilization of knowledge in multinational corporation subsidiaries: (a) the range of external and internal knowledge sources available; and (b) the subsidiary capabilities associated with knowledge absorption and utilization. We find that knowledge absorbed from the host country is useful to subsidiary innovation. We also find support for the role of subsidiary capabilities: both sourcing capability and combinative capability have a significant influence on the scale and quality of innovation.

An assessment of the measurement of performance in international business research

Abstract: A sizeable body of international business (IB) research is devoted to building knowledge about the determinants of organizational performance. A key precursor to accurately diagnosing why some organizations succeed in the international marketplace while others struggle is operationalizing performance appropriately. Yet, to date, no systematic investigation has considered how well IB research measures performance. We examine the measurement of performance in 96 articles published in the Academy of Management Journal, Administrative Science Quarterly, Journal of Marketing, Journal of Marketing Research, Journal of International Business Studies, Management Science, Organization Science ,a nd theStrategic Management Journal between 1995 and 2005. The findings reveal that most studies do not measure performance in a manner that captures the multifaceted nature of the construct. We describe the implications of these results, and offer suggestions for improving future practice. Journal of International Business Studies (2008) 39, 1064–1080.

The cross-cultural research imperative: the need to balance cross-national and intra-national diversity

Abstract: This paper provides a brief overview of the evolution of comparative management theories/paradigms, and highlights the contribution of the ‘cross-vergence’ construct. Despite progress, most studies of work values across countries continue to suffer from two primary limitations. The first is the fallacious assumption of cultural homogeneity with nations. Given the growing diversity of the workforce within country, intra-national variations can often be as significant as cross-national differences. The second is the fallacious assumption of cultural stability over time. Since cultures evolve, albeit slowly, it is important to take these changes over time into consideration, and be aware of the paradoxes inherent within any given society. Hence the paper calls for the need to balance cross-national and intra-national diversity in order to truly understand cross-cultural phenomena, and thus further improve the quality of cross-cultural research.

A framework to update Hofstede's cultural value indices: economic dynamics and institutional stability

Abstract: This study offers an update of the Hofstede cultural value dimensions. We argue that changes in economic conditions are the source of cultural dynamics, while the endurance of institutional characteristics provides the foundation for cultural stability. It is found that national wealth, measured by GDP per capita, has a curvilinear relationship with individualism, long-term orientation, and power distance scores. Relatively speaking, uncertainty avoidance and masculinity mainly reflect some rather stable institutional traditions, such as language, religion, climate, ethnic homogeneity, and legal origin, and are less likely to change over time.

Emerging themes in international business research

Abstract: This study is motivated by two research questions: (1) Which recent contributions have been driving the research agenda in international business? (2) Which emerging themes in the literature are likely to set the stage for future work? To examine these questions, the study examined scholarly work in international business over the time period 1996–2006 in six leading international business journals (Journal of International Business Studies, Management International Review, Journal of World Business, International Marketing Review, Journal of International Marketing, and International Business Review). Next, a Delphi study of the most prolific authors in these journals over the same time period was conducted to delineate a future research agenda in international business. Addressing these two research questions provides us with a more complete understanding of the progress made to date in international business research, and provides a glimpse of the future.

Data equivalence in cross-cultural international business research: assessment and guidelines

Abstract: Data equivalence refers to the extent to which the elements of a research design have the same meaning, and can be applied in the same way, in different cultural contexts. Failure to establish data equivalence in cross-cultural studies may bias empirical results and theoretical inferences. Although several authors have encouraged researchers to ensure high levels of data equivalence, no study has assessed the status of the field in relation to compliance with data equivalence standards. Accordingly, this study examines three aspects of data equivalence (construct equivalence, measurement equivalence, and data collection equivalence) within 167 studies that involve cross-cultural data published in the Journal of International Business Studies, Management International Review, Journal of World Business, Strategic Management Journal and the Academy of Management Journal from 1995 to 2005. The findings indicate that international business researchers report insufficient information in relation to data equivalence issues, thus limiting confidence in the findings of many cross-cultural studies. To enhance future research, a guideline for procedures for researchers to follow and report in establishing data equivalence is offered.

Institutional exceptions on global projects: a process model

Abstract: This inductive study offers an examination of 23 cases in which informants from firms engaged in large-scale global projects reported unforeseen costs after failing to comprehend cognitive-cultural, normative, and/or regulative institutions in an unfamiliar host societal context. The study builds on the conceptual framework of institutional theory. The findings, which include propositions and a generic narrative model, contribute to theoretical knowledge of how institutional exceptions arise, how they are resolved, and how they typically involve three general phases: ignorance, sensemaking, and response. The findings also articulate the kinds of institutional transaction costs that an entrant incurs in each of the three phases, and the conditions that lead to the growth of these costs.

Regional diversification and firm performance

Abstract: This study examines how regional diversification affects firm performance. The results indicate that regional diversification has linear and curvilinear effects on firm performance. Regional diversification enhances firm performance linearly up to a certain threshold, and then its impact becomes negative. The results also show that firms of developed countries maximize their performance when they operate across a moderate number of developed regions and a strictly limited number of developing regions. This explains why internationalization by most international firms is regional rather than global.

The role of past performance in export ventures: a short-term reactive approach

Abstract: This paper employs organizational learning theory to examine the short-term effect of past export performance, and internal (management) and external (market) forces on marketing strategy adaptation and current export performance. Results from a survey of over 500 export managers indicate that current-period performance improvement (in terms of performance achievement, export intensity, and performance satisfaction in the current year) is influenced by the firm's commitment to exporting. Further, the authors found that while performance satisfaction feeds performance improvement in the following year, both the previous year's export intensity and export performance achievement produce a negative impact on current-period performance improvement. More importantly, the level of development in the export market facilitates marketing strategy adaptation in the short term, as does export intensity in the previous year. However, satisfaction with previous-year performance negatively influences the degree of distribution adaptation. Implications for international business researchers and practitioners are also discussed.

Institutions and inflows of foreign direct investment: a fuzzy-set analysis

Abstract: This study addresses the essential question of causal complexity and diversity related to the influence of institutions on the direct investments (FDI) of multinational enterprises. Using a relatively new methodological approach of fuzzy-set analysis, and 47 host countries from the period 1999 to 2003, the paper analyses how and why countries with different degrees of membership in different institutional constraints either attract or do not attract FDI. The findings show that institutional factors have diverse influences. Similar institutions may even be associated with different outcomes if different regional categories of countries are examined. Countries may neither be attractive nor unattractive owing to the presence or absence of a single institutional factor. Instead, the outcome usually results from a combination of institutional conditions. Moreover, there typically are several possible paths to a specific outcome. The study confirms some of the propositions of previous theory, but, most importantly, it explains why earlier research has provided conflicting conclusions related to institutional factors. The study also offers an approach for future international business research to apply fuzzy-set methods and develop mid-range theories.

Closing knowledge gaps in foreign markets

Abstract: Knowledge and learning are ascribed pivotal roles in firms' internationalization processes: perceived market uncertainties, namely knowledge gaps related to business environments in foreign markets, may curb firms' inclinations to commit resources to these markets. This study explores whether knowledge gaps tend to increase or decrease with time when operating in the foreign market, and it discusses which learning components narrow – or widen – the perceived knowledge gap. A theoretical model is developed based on the internationalization process view and the more recent organizational learning perspective, including such concepts as overconfidence and absorptive capacity. The theoretical model is tested on a set of primary data covering Danish and Swedish firms and their foreign market operations. The results suggest a more subtle relationship between experience and perceived knowledge gaps than the “mechanical” relationship portrayed by the internationalization process view – a relationship in which absorptive capacity and, in particular, overconfidence play important roles.

The effects of social capital and organizational innovativeness in different institutional contexts

Abstract: This paper examines how social capital and organizational innovativeness influence business performance through their separate, indirect, or interactive effects, and how these effects differ across the institutional contexts of a transition economy and a market economy. In line with institutional theory, our findings show that the effects of social capital are more extensive and probably more malignant in a transition economy than in a market economy. Furthermore, different types of organizational innovativeness, as corporate culture, can be cultivated by different forms of social capital in different institutional contexts. The implications for institutional theory and social capital theory, and the managerial implications, are discussed.

A perspective on multinational enterprises and climate change: Learning from “an inconvenient truth”?

Abstract: This paper explores whether and how an important environmental issue such as climate change can not only give multinational enterprises the opportunity to develop “green” firm-specific advantages (FSAs), but also help reconfigure key FSAs that are viewed as the main sources of firms' profitability, growth, and survival. We examine the nature and geography of such FSA development, and develop two organizing frameworks, which are subsequently applied to climate change, using information from Global 500 firms. Implications and future directions for international business research are indicated.

International labor mobility and knowledge flow externalities

Abstract: Although knowledge flows create value, the market often does not price them accordingly. We examine “unintended” knowledge flows that result from the cross-border movement of inventors (i.e., flows that result from the move, but do not go to the hiring firm). We find that the inventor's new country gains from her arrival above and beyond the knowledge flow benefits enjoyed by the firm that recruited her (National Learning by Immigration). Furthermore, the firm that lost the inventor also gains by receiving increased knowledge flows from that individual's new country and firm (Firm Learning from the Diaspora). Surprisingly, the latter effect is only twice as strong when the mover moves within the same multinational firm, suggesting that knowledge flows between inventors do not necessarily follow organizational boundaries, thus creating opportunities for public policy and firm strategy.

National culture and life insurance consumption

Abstract: This cross-disciplinary study examines the way national culture affects consumption patterns of life insurance across countries. Life insurance is a service that is abstract, complex, and focused on unsure future benefits. Because of the uncertainty and ambiguity inherent in the life insurance product, consumers are more likely to respond according to their cultural prescriptions. Our research hypotheses are tested empirically using Hofstede's cultural dimensions, and data from 1976–2001 across 41 countries. The findings show that individualism indeed has a significant, positive effect on life insurance consumption, whereas power distance and masculinity/femininity have significant, negative effects. The results are robust, even after controlling for economic, institutional and demographic determinants.

International entrepreneurship and geographic location: an empirical examination of new venture internationalization

Abstract: In this paper, we argue that geographic location may be one reason why some ventures are able to acquire the resources needed to internationalize while others cannot. We use ecological arguments to predict an inverted U-shaped relationship between the concentration of industry clustering within a geographic location and the venture’s internationalization. We also explore whether venture characteristics influence the nature of this relationship. Our hypotheses are regressed on international intensity and scope, and analyzed through a sample of 156 publicly held new ventures. Results confirm that location influences new venture internationalization, and firm characteristics impact the nature of the relationship.

The effectiveness of laws against bribery abroad

Abstract: This paper analyzes the effectiveness of laws against bribery abroad in inducing foreign investors to reduce their investments in corrupt countries. The laws are designed to reduce the supply of bribes by foreign investors by increasing the costs of bribing abroad. Such increase in costs will make foreign investors more sensitive to corruption, and induce them to reduce their investments in corrupt countries. However, the paper argues that these laws need to be implemented and coordinated in multiple countries to become effective. Otherwise, investors in a country will have incentives to bypass them when competitors from other countries are not bound by similar legal constrains. The empirical analysis shows that investors from countries that implemented the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions of 1997 reduced their investments in corrupt countries. Investors from the US, which were bound by the Foreign Corrupt Practices Act of 1977, also reduced investments in corrupt countries, but only after the OECD Anti-Bribery Convention was in place.

Does psychic distance moderate the market size–entry sequence relationship?

Abstract: An analysis of 924 foreign market entries made by a sample of Chinese exporters reveals that psychic distance moderates the relationship between foreign market size and entry sequence. In doing so, this study challenges the extant hypothesis that the establishment of foreign operations conforms to a simple pattern of increasing psychic distance to markets. The findings also reveal that psychic distance is asymmetrical in nature, and that assessments made by sellers and their buyers are inherently inequivalent.

The crossvergence perspective: reflections and projections

Abstract: In this retrospective, I chronicle the development of the crossvergence theory of values evolution, which states: it is the dynamic interaction of the sociocultural influences with the business ideology influences that provides the driving force to precipitate the development of new and unique values systems in societies Crossvergence theory was introduced in our 1993 JIBS paper, and was the focus of our 1997 Decade Award paper, as well as of a series of subsequent papers Thus I discuss the purpose and findings for six papers that have contributed to our present level of knowledge concerning crossvergence theory I conclude my comments with a discussion of the relevance of longitudinal and multilevel research, measures found to be useful, and methodologies to consider, as well as identifying research topics in need of exploration

Does knowledge spill to leaders or laggards? Exploring industry heterogeneity in learning by exporting

Abstract: In recent years the international trade literature has focused on the effects of exporting and its benefits in an open economy. Scholars note that engaging in trade enhances knowledge spillovers, and results in income growth and income convergence among trading partners. Although the macro-literature has long addressed economic convergence, there has been relatively little research examining the effect of exporting on ex post firm performance. Likewise, there has been little research that examines the differential learning-by-exporting effects across industries. In this paper we build upon the convergence literature to argue that engaging in exporting provides firms, especially firms in technologically lagging industries, the opportunity to benefit disproportionately from knowledge spillovers. Using a sample of Spanish manufacturing firms from 1990 to 1997, we investigate empirically how exporting differentially influences the innovative outcomes of firms in technologically leading vs lagging industries. We find evidence that firms in technologically lagging industries (in which Spain lags the global technology frontier) learn more from exporting than those firms in technologically leading industries (in which Spain is at, or near, the global technology frontier). The results enrich the traditional convergence argument by suggesting that industry heterogeneity matters to knowledge transfer, and stands to play a substantial role in reducing knowledge gaps.

A relational model of export performance

Abstract: Export performance models anchored in the industrial organization and resource-based theories have previously been developed and tested Thus far there have been no empirically tested export performance models that have reflected the core tenets of the relational, or behavioral, paradigm Drawing from relational exchange theory, a model that includes reciprocal perceptions that relate to both past and future exchanges is developed This model is tested with dyadic data from 125 West–East (Australia–Thailand) exporter–importer partnerships, reflecting the increasing importance of West–East exchange relationships Results support the theory's contention that commitment (to future exchanges) is associated with export performance, and is itself driven by a reciprocal cycle of each partner's perception of the other's commitment, relationship-specific investments and dependence This cycle of commitment is in turn influenced by each partner's trust in the other (from past exchanges), with different types of trust linked to different types of commitment Trust and commitment are then found to be related both to interpersonal factors (ie, effective communication, cultural sensitivity and likeability of partner) and to firm factors (reputation and competencies of partner)

Do Multinationals Really Prefer to Enter Culturally-Distant Countries Through Greenfields Rather than Through Acquisitions? The Role of Parent Experience and Subsidiary Autonomy

Abstract: Prior research has argued that multinational enterprises (MNEs) prefer to enter culturally distant countries through greenfields rather than through acquisitions, since acquisitions in such countries are costlier to manage. This argument contains two hidden assumptions: (1) the additional costs of acquisitions in culturally distant countries are the same for all MNEs; and (2) such acquisitions have no benefits over their greenfield counterparts. In this paper we relax these two assumptions by arguing that an MNE's preference for greenfields in culturally distant countries depends on its international and host-country experience, and on the level of autonomy it plans to grant the focal subsidiary. Analyzing 171 wholly owned greenfield investments and full acquisitions made by Dutch MNEs in 35 countries, we find that these MNEs prefer to enter culturally distant countries through greenfields, but that this preference is lower when they have little international experience, or plan to grant the focal subsidiary considerable autonomy in marketing.

Ownership structure, strategic controls and export intensity of foreign-invested firms in transition economies

Abstract: This paper examines the relationships between foreign ownership, managers' independence in decision-making and exporting of foreign-invested firms in five European Union accession countries. Using a unique, hand-collected data set of 434 foreign-invested firms in Poland, Hungary, Slovenia, Slovakia and Estonia, we show that foreign investors' ownership and control over strategic decisions are positively associated with export intensity, measured as the proportion of exports to total sales. The study also analyzes specific governance and control configurations in foreign-invested firms, showing that foreign equity and foreign control over business functions are complementary in terms of their effects on export intensity.

An interpretive examination of the development of cultural sensitivity in international business

Abstract: Cultural sensitivity is assumed to be important in international business, yet little empirical work explores how cultural sensitivity actually develops. In-depth interviews with buyers from the Asian Pacific Rim were conducted, and support was found for a four-stage model of cross-cultural sensitivity in which buyers move through the stages of romantic sojourner, foreign worker, skilled worker, and partner. This paper explores the development and evolution of cultural sensitivity as it interacts with trust and development of international business relationships.

Mentoring across global boundaries: an empirical examination of home- and host-country mentors on expatriate career outcomes

Abstract: There has long been an interest in the effects of mentors on protege career outcomes, and with scholars now beginning to examine mentoring across national boundaries. Using survey information as well as company records for 299 expatriates (163 men, 136 women) in 10 countries, we examined the impact of home- and host-country mentors upon expatriate effectiveness. We found that having a host-country mentor had a significant positive effect on the expatriate's organizational knowledge, organizational knowledge-sharing, job performance, promotability, and perceptions of teamwork. Having a home-country mentor had a significant positive effect only on organizational knowledge, job performance, and promotability. Surprisingly, our results revealed that having a home-country mentor had a significant but negative effect on the expatriate's organization identification and job satisfaction. Contrary to the literature, neither type of mentoring had a significant effect on job tension. Implications for practice as well as future research are detailed.