Showing papers on "Multinational corporation published in 2002"

Adoption of an Organizational Practice by Subsidiaries of Multinational Corporations: Institutional and Relational Effects

Abstract: We examine the adoption of an organizational practice by subsidiaries of a multinational corporation (MNC) under conditions of “institutional duality.” Drawing on institutional theory, we identify ...

The strategic impact of external networks: Subsidiary performance and competence development in the multinational corporation

Abstract: A special feature of multinational firms (MNCs) is the notion that their sub-units (subsidiaries) are embedded in different local networks (Ghoshal and Bartlett, 1990; Ghoshal and Nohria, 1997; Fors-gren, Johanson, and Sharma, 2000). Each subsidiary maintains unique and idiosyncratic patterns of network linkages and consequently is differentially exposed to new knowledge, ideas and opportunities (McEvily and Zaheer, 1999). In fact, this differential exposure has been put forward as one of the basic competitive advantages of the multinational firm, because it increases the breadth and variety of its network resources (Malnight, 1996). It is also in line with recent trends in foreign direct investment theory, in which foreign investments are viewed as series of attempts to selectively tap knowledge linked to specific local business contexts (Cantwell, 1990; Almeida, 1996; Dunning, 1996).

Multinational Firms and the Theory of International Trade

Abstract: Multinational Firms and the Theory of International Trade James R. Markusen Despite the great importance of multinational firms in international economics, theoretical and empirical research on these firms has generally been conducted separately from that on international trade. In this book, James Markusen provides a comprehensive integration of the two fields. Drawing on twenty years of research, he focuses on the interaction of scale economies, trade costs, factor endowments, and imperfect competition. He analyzes decisions about whether to build or acquire a foreign plant separately from decisions about where to raise the financing. Markusen begins with the simplest possible partial equilibrium models and works systematically toward a full-fledged general equilibrium model with both horizontal and vertical foreign direct investment. He offers empirical tests of hypotheses derived from the theoretical models. The notation is unified throughout, distinctions between models are explained with thoroughly explained derivations, and numerous graphs support the analysis.

Institutional distance and the multinational enterprise

Abstract: We draw from the recently developed construct of institutional distance to propose a framework that explains foreign direct investment by the multinational enterprise. We decompose the institutional distance between the host and home countries into distances on the regulative, normative, and cognitive dimensions of institutions, and match these with firm-level attributes to produce propositions regarding host country selection and foreign market entry strategies.

Centers of excellence in multinational corporations

Abstract: This paper seeks to understand the conditions under which ‘centers of excellence’ emerge in foreign subsidiaries of multinational firms. We define a center of excellence as an organizational unit that embodies a set of capabilities that has been explicitly recognized by the firm as an important source of value creation, with the intention that these capabilities be leveraged by and/or disseminated to other parts of the firm. Drawing on overlapping research in international business and strategic management, we argue that the formation of centers of excellence is shaped by conditions in the subsidiary's local environment as well as by various aspects of the subsidiary's relationship with other parts of the multinational firm. Based on a survey of 99 foreign units in Canada, our results highlight the fundamental role played by parent firm investment as well as the role of internal and external organizations in the development of subsidiary capabilities. Performance implications of the center of excellence phenomenon are also explored. Copyright © 2002 John Wiley & Sons, Ltd.

The Choice Between Joint Venture and Wholly Owned Subsidiary: An Institutional Perspective

Abstract: The study of foreign entry-mode choice has been based almost exclusively on transaction-cost theory. This theory focuses mainly on the impacts of firm- and industry-specific factors on the choice of entry mode, taking the effects of country-specific contextual factors as constant or less important. In contrast, the institutional perspective emphasizes the importance of the influence of both institutional forces embedded in national environments and decision makers' cognitive constraints on the founding conditions of new ventures. Still, this theoretical perspective has yet to provide insights into how institutional factors influence the choice of foreign entry mode. The primary goal of the present study is to provide a unifying theoretical framework to examine this relationship. We synthesize transaction-cost and institutional perspectives to analyze a sample of 364 Japanese overseas subsidiaries. Our results support the notion that institutional theory provides incremental explanatory power of foreign entry-mode choice in addition to transaction-cost theory. In particular, we found that multinational enterprises tend to conform to the regulative settings of the host-country environment, the normative pressures imposed by the local people, and the cognitive mindsets as bounded by counterparts' and multinational enterprises' own entry patterns when making foreign entry-mode choices.

Responsibility: The new business imperative

Abstract: Executive Overview Businesses today are experiencing profound pressures to reform and improve stakeholder-related practices and their impacts on stakeholders and the natural environment--in short, to manage responsibly as well as profitably. Pressures for expanding the emphasis on profits to managing responsibly derive from three general sources: primary stakeholders such as owners, employees, customers, and suppliers; secondary stakeholders such as non-governmental organizations (NGOs), activists, communities, and governments; and general societal trends and institutional forces. The latter include a proliferation of 'best of' rankings, the steady emergence and development of global principles and standards that are raising public expectations about corporate responsibility, and new reporting initiatives emphasizing the so-called triple bottom lines of economic, social, and environmental performance. To respond to these pressures, many multinational corporations (MNCs) in particular are developing what w...

Pace, rhythm, and scope: process dependence in building a profitable multinational corporation

Abstract: Many potential benefits of foreign expansion have been identified in the literature, yet empirical support that multinational firms perform better than domestic firms is mixed. This paper takes a longitudinal perspective and argues that how much a firm benefits from having foreign subsidiaries depends on its process of internationalization. We argue that a firm's capacity to absorb expansion is subject to constraints: some expansion patterns increase profitability less than others, owing to diseconomies of time compression. We hypothesize that the speed of internationalization, the spread of the geographical and product markets entered, and the irregularity of the expansion pattern negatively moderate a firm's increase in profitability resulting from international expansion. Model estimations based on panel data raised strong support for these predictions.

Are Firms Superior to Alliances and Markets? An Empirical Test of Cross-Border Knowledge Building

Abstract: Are multinational corporations (MNCs) superior to strategic alliances and markets in facilitating the flow of knowledge across borders? If so, what are the sources of this superiority? Despite their central importance to the theory and practice of international management, these questions have not been directly tested. Our paper seeks to address this gap in empirical research.Drawing upon recent research on multinational corporations and the knowledge-based view of the firm, we develop hypotheses regarding the relative superiority of alternative institutional arrangements as regards cross-border knowledge building. Analysis of patent citations by semiconductor companies points to the superiority of multinational firms over both alliances and markets in cross-border knowledge building. Interviews with engineers and managers in MNCs point to the intertwining of codified and tacit knowledge and; therefore, the need for both formal and informal mechanisms for successful knowledge building. Our findings suggest that the superiority of MNCs stems from the firms' ability to use multiple mechanisms of knowledge transfer flexibly and simultaneously to move, integrate, and develop technical knowledge. Our research, therefore, suggests that the challenge of knowledge management for MNCs extends beyond the creation of international information systems, to the design of organizational structures, systems, and culture capable of supporting the flow of knowledge.

The Importance of Social Capital to the Management of Multinational Enterprises: Relational Networks Among Asian and Western Firms

Abstract: Social capital is an important concept for multinational firms. Firms operating in global markets rarely have adequate resources to compete effectively in global markets; they access the needed resources through formal and informal relationships with other firms. The cultures in Asian countries have emphasized relationships much more strongly than Western firms. Thus, relational capital, based on guanxi (China), kankei (Japan) and inmak (Korea), provides the framework for business dealings in many Asian countries. As a result, the social capital of many Asian firms gives them a potential competitive advantage in global markets. Western firms must develop social capital and learn to manage relational networks to gain and sustain a competitive advantage in global markets. Western firms can learn how to develop and manage social capital from Asian firms. Alternatively, social capital has some disadvantages. Firms are limited by their networks and thus experience opportunity costs and path dependence. Additionally, while Asian firms often have strong network ties in their domestic markets, they have to develop many more ties globally to operate effectively in global markets. As a result, the development and management of social capital has become of critical importance for competitive advantage in global markets.

Strategic Responses to Global Climate Change: Conflicting Pressures on Multinationals in the Oil Industry

Abstract: MNCs are increasingly facing global environmental issues demanding coordinated market and non-market strategic responses. The home country institutional context and individual company histories can create divergent pressures on strategy for MNCs based in different countries; however, the location of MNCs in global industries and their participation in 'global issues arenas' create issue-level fields within which strategic convergence might also be expected. This paper analyzes the responses of oil MNCs to climate change and finds that local context influenced initial corporate reactions, but that convergent pressures predominate as the issue matures.

Theory of the multinational enterprise

Abstract: Volume I: Theory of the Multinational Enterprises Volume II: Joint Ventures and Modes of Entry Volume III: Strategic Management of Multinationals Volume IV: Multinationals in a Social and Regional Context

Local and global networks of immigrant professionals in Silicon Valley

Abstract: INTRODUCTION Entrepreneurship and globalization concern scholars and policymakers interested in economic transformation. However, researchers typically treat these phenomena in isolation. Most studies of entrepreneurship focus either on the attributes of individual entrepreneurs or on their connections to the local or regional environment. (1) Studies of globalization focus on multinational corporations and nation-states. (2) As a result, entrepreneurship and globalization are rarely linked. Recent research suggests, however, that globalization and entrepreneurship are related: Foreign-born entrepreneurs are becoming agents of globalization by investing in their native countries, and their growing mobility is in turn fueling the emergence of entrepreneurial networks in distant locations. In Silicon Valley, for example, Taiwan-born entrepreneurs have built social and professional networks to support U.S. ventures, which they use to accelerate new firm in Taiwan. (3) There is evidence of a similar process among Indian immigrant entrepreneurs, (4) and scholars have begun to document emergence of strikingly similar transnational activities among Latin-American immigrants in the United States. (5) We know little about the extent and contours of this phenomenon. In what ways are globalization and entrepreneurship linked? Do foreign-born counterparts? What role do ethnic networks play in the process of new firm formation? To what extent are first-generation immigrants creating transnational networks that link their native countries and the Unite States? What is the nature of these connections? Is the "brain-drain"-the migration of the best and brightest from poor to rich nations-accelerating, being reversed or being replaced by "brain circulation". That is, are there more complex two-way flows of skilled workers between developed and less-developed economies? (6) Policymakers, face challenges resulting from the increasingly open flows of skill, technology, and capital across national boundaries. These processes have transformed debates about trade, immigration policy, and intellectual property rights, forcing creation of new institutions and mechanisms for adjudicating conflicts. This study will help to identify significant, and often unanticipated, areas of policy concern. This study contributes to our understanding of entrepreneurship, globalization, and their interrelations by documenting findings of the first large-scale survey of foreign-born professionals in Silicon Valley. The survey explores the scope and organization of the local and transnational networks constructed by the region's immigrant engineers and scientists. It focuses on first-generation Indian and Chinese immigrants, the two largest groups of skilled immigrants in the region, and compares their participation in local and global networks to one another and to that of their U.S. born counterparts. METHODS Surveying foreign-born professionals is unusually difficult. Most daunting is developing a sampling frame because the target population (foreign-born engineers and other professionals) is difficult to identify and, once identified, difficult to reach. We have only rough estimates of the population of immigrant professionals in a region, making difficult to determine representativeness survey. Nevertheless, we have attempted to maximize the study's validity. We estimate from Current Population Survey (CPS) data that there were about 320,000 professional workers in the high-technology sectors of the San Francisco Bay Area economy in 2000, including approximately 20,700 born in Greater China (Mainland, Hong Kong, and Taiwan) and 18,400 born in India. [The estimates of the representation of foreign-born workers in the Silicon Valley workforce are based on data on place of birth and employment from the Current Population Survey 1994-2000 sample for the five-country Bay Area (San Francisco, Oakland, and San Jose). …

Multinational Firms and the Theory of International Trade

Abstract: Multinational Firms and the Theory of International Trade James R. Markusen Despite the great importance of multinational firms in international economics, theoretical and empirical research on these firms has generally been conducted separately from that on international trade. In this book, James Markusen provides a comprehensive integration of the two fields. Drawing on twenty years of research, he focuses on the interaction of scale economies, trade costs, factor endowments, and imperfect competition. He analyzes decisions about whether to build or acquire a foreign plant separately from decisions about where to raise the financing. Markusen begins with the simplest possible partial equilibrium models and works systematically toward a full-fledged general equilibrium model with both horizontal and vertical foreign direct investment. He offers empirical tests of hypotheses derived from the theoretical models. The notation is unified throughout, distinctions between models are explained with thoroughly explained derivations, and numerous graphs support the analysis.

Capability Exploitation and Building in a Foreign Market: Implications for Multinational Enterprises

Abstract: This study examines environmental and organizational factors that influence a multinational enterprise's (MNE's) capability exploitation and building in a complex foreign market. Analysis of data from 167 MNE subunits in the People's Republic of China suggests that capability exploitation and capability building are inversely associated with environmental complexity and industrial uncertainty. Business cultural specificity impedes capability exploitation but not capability building. While capability exploitation is associated with the use of wholly owned entry mode, capability building is linked to the joint venture mode. MNEs seeking local market expansion also deploy greater capability exploitation and building than those seeking export market growth. Our analysis further suggests that the threats of environmental hazards on capability building are reduced when the joint venture entry mode is used. An appropriate alignment of capability exploitation or building with its identified determinants is found to be associated with high performance.

Do civil and political repression really boost foreign direct investments

Abstract: Multinational enterprises are often accused of having a preference for investing in countries in which the working populations' civil and political rights are largely disregarded. This article presents an empirical investigation of the popular “political repression boosts FDI” hypothesis and arrives at the conclusion that the hypothesis is not supported. On the contrary, multinational enterprises rather appear to be attracted by countries in which civil and political freedom is respected.

Does Inward Foreign Direct Investment Boost the Productivity of Domestic Firms

Abstract: Are there productivity spillovers from FDI to domestic firms, and, if so, how much should host countries be willing to pay to attract FDI? To examine these questions we use a plant-level panel covering U.K. manufacturing from 1973 through 1992. Across a wide range of specifications, we estimate a significantly positive correlation between a domestic plant's TFP and the foreign-affiliate share of activity in that planti's industry. This is consistent with positive FDI spillovers. We do not generally find significant effects on plant TFP of the foreign-affiliate share of activity in that plant's region. Typical estimates suggest that a 10 percentage-point increase in foreign presence in a U.K. industry raises the TFP of that industry's domestic plants by about 0.5 percent. We also use these estimates to calculate the per-job value of these spillovers. These calculated values appear to be less than per-job incentives governments have granted in recent high-profile cases, in some cases several times less.

The globalization of technological innovation: definition and evidence

Abstract: The concept of globalization of innovation is the zip between two fundamental phenomena of modern economies: the increased international integration of economic activities and the raising importance of knowledge in economic processes. The paper singles out three different components of the globalization of innovation: (1) the international exploitation of nationally generated innovations; (2) the global generation of innovations by MNEs; and (3) global techno-scientific collaborations. Empirical evidence on these three categories is here presented, suggesting that the relevance of global forces in innovation is rapidly increasing, although at a different pace for each of the three ongoing processes.

Investigating New Product Diffusion Across Products and Countries

Abstract: As firms jockey to position themselves in emerging markets, firms need to evaluate the relative attractiveness of market expansion in different countries. Since the attractiveness of a market is a function of the eventual market potential and the speed at which the product diffuses through the market, a better understanding of the determinants of market potential and diffusion speed across different countries is of particular relevance to firms deliberating their market expansion strategies. Despite a recent spurt in research on multinational diffusion, there exist significant gaps in the literature. First, existing studies tend to limit their analysis to industrialized countries, thus reducing the ability to generalize the insights to many emerging markets. Second, these studies tend to focus on the coefficients of external and internal influence in the Bass diffusion model but do not analyze the determinants of market potential. Third, the choice of variables that affect the parameters of the Bass diffusion model has been rather limited. In this paper, we seek to address these gaps in the literature. To address the scope issue, we assembled a novel dataset that captures the diffusion of 6 products in 31 developed and developing countries from Europe, Asia, and North and South America. The set of countries in our dataset encompasses 60% of the world population and includes such emerging economies as China, India, Brazil, and Thailand. This should provide us with a stronger basis to make empirical generalizations about the diffusion process. For firms seeking to expand into emerging international markets, our findings about penetration potential have considerable significance. For example, we find that for the set of products that we analyze the average penetration potential for developing countries is about one-third 0.17 versus 0.52 of that for developed countries. We also find that it takes developing countries on average 17.9% 19.25 versus 16.33 years longer to achieve peak sales. Thus, despite the well-known positive effect of product introduction delays on diffusion speed, we find that developing countries still continue to experience a slower adoption rate, compared to that of developed countries. Our study also investigated the impact of several new macroenvironmental variables on penetration potential and speed. For example, our findings indicate that a 1% change in international trade or urbanization level can potentially change the penetration potential by about 0.5% and 0.2% respectively. These are some of the key variables projected to change significantly over the coming years for developing countries. While business managers have relatively little influence on such variables, our findings can still serve as valuable empirical guide for the variables that they should consider in evaluating diverse international markets and in performing sensitivity analysis with respect to their projected trends. Finally, our study also holds implications for managers seeking to combine information about past diffusion patterns across products and countries for better prediction. We pool information efficiently across multiple products and countries using a Hierarchical Bayes estimation methodology. By sharing information across countries and products in a single, coherent framework, we find that this pooling approach leads to substantial improvements in prediction accuracy. Our technique is particularly superior in predicting sales and BDM parameter values in the early years of new product introduction in a new country, when forecast estimates are managerially most useful. We also decompose the variance in the BDM model parameters into product, country, and product-country components. These results give guidelines to managers about which market experience they should weigh more to arrive at forecasts of market potential and diffusion speed. We find that while past experiences of other products in a country country effects are relatively more useful to explain penetration level cumulative sales, past experiences in other countries where a product was earlier introduced product effects are more useful to explain the coefficients of external and internal influence and thus the speed with which the product will attain peak sales.

Internationalization, Globalization, and Capability-Based Strategy

Abstract: Current trends appear to suggest that globally integrated strategies are the wave of the future for many industries, but no theoretically sound, firm-level model explains this situation International business models explain industry trends from economic perspectives, and organizational theory is beginning to examine the organizing principles of multinational firms, but a gap exists in explaining the strategic motivations of multinational firms as they expand and integrate worldwide This article develops a capability-driven, as opposed to market-driven, framework of multinational strategy This contingent framework explains the organizational consequences of international expansion and global integration depending on the capability types, capability strategies, and multinational strategies of the multinational firm

Dragon Multinational: A New Model for Global Growth

Abstract: The conventional view of globalization sees it as a process driven by giant firms from the Triad regions of North America, Europe, and Japan, shaping the world in their own image. This book contests such a view, describing the extraordinary success of a handful of multinationals from the "Periphery" in globalizing their operations extremely rapidly. Focusing on Acer, the Taiwanese IT company; the Hong Leong hotel group of Singapore; Ispat International in steel; Cemex of Mexico in cement; and Li and Fung from Hong Kong in contract manufacturing, Matthews demonstrates that these firms have been able to utilize strategies of international linkage and leverage to accelerate their global coverage. He contends that they are pioneers of a new kind of global firm, indicators that the global business civilization being created in the 21st century is like to be pluralistic and diverse, offering unprecedented opportunities for firms that know how to enmesh themselves in global networks.

Building an effective global business team

Abstract: Although myriad organizational mechanisms exist for integrating geographically dispersed operations, the most effective tool is assembling and nurturing cross-border teams comprised of many nationalities. The resulting diversity can yield significant synergies and produce collective wisdom superior to that of any individual ? each member bringing a unique cognitive lens to the group. However, mastering the management of a global business team calls for confronting several unique challenges that tend to exacerbate the more common problems faced by all teams, point out authors Govindarajan, director of the Center for Global Leadership at Dartmouth College's Tuck School, and Gupta, a professor of strategy and global e-business at the University of Maryland's Robert H. Smith School of Business. Of the 70 global business teams studied by the authors, about one-third of the teams rated their performances as largely unsuccessful. How can companies reverse the generally weak performance of faltering global teams? The authors' survey of 58 senior executives from five U.S. and four European multinational organizations reveals some hard-earned insights that may benefit your cross-border endeavors. When global business teams fail, it is often due to a lack of trust among team members. As a result, executives guiding global teams must institute processes that emphasize the cultivation of trust. Also high on the list of culpable factors are the hindrances to communication caused by geographical, cultural and language differences. Even in the case of teams whose members speak the same language, differences in semantics, accents, tone, pitch and dialects can be impediments. To mitigate the corrosive effects of these cross-cultural impediments, executives are advised to carefully craft a cross-border team's charter, composition and process ? with each aspect equally emphasized. The authors elaborate on how these work holistically to increase the odds that your global business teams will become high-performing sources of invaluable multinational experience leading to competitive advantage.

Multinational investment and economic structure : globalisation and competitiveness

Abstract: Multinational Investment and Economic Structure examines the relationship between industrial development and foreign direct investment (FDI) activities, and the interaction between multinational (MNE) activity and economic structures. It deals with the changing structure of the world economy as a whole, and the dynamics of the relationship between industrial development and the extent of FDI activities across countries. It evaluates the concurrent (and interrelated) evolutionary processes behind economic growth and MNE activity and how these evolutionary forces impact on the economic structure of individual economies in the industrialised world as their economies converge through globalisation.