Showing papers on "Multinational corporation published in 2004"

A perspective on regional and global strategies of multinational enterprises

Abstract: Multinational enterprises (MNEs) are the key drivers of globalization, as they foster increased economic interdependence among national markets. The ultimate test to assess whether these MNEs are global themselves is their actual penetration level of markets across the globe, especially in the broad ‘triad’ markets of NAFTA, the European Union and Asia. Yet, data on the activities of the 500 largest MNEs reveal that very few are successful globally. For 320 of the 380 firms for which geographic sales data are available, an average of 80.3% of total sales are in their home region of the triad. This means that many of the world’s largest firms are not global but regionally based, in terms of breadth and depth of market coverage. Globalization, in terms of a balanced geographic distribution of sales across the triad, thus reflects a special, and rather unusual, outcome of doing international business (IB). The regional concentration of sales has important implications for various strands of mainstream IB research, as well as for the broader managerial debate on the design of optimal strategies and governance structures for MNEs. Journal of International Business Studies (2004) 35, 3–18. doi:10.1057/palgrave. jibs.8400073

Multinational Firms in the World Economy

Abstract: Depending on one's point of view, multinational enterprises are either the heroes or the villains of the globalized economy. Governments compete fiercely for foreign direct investment by such companies, but complain when firms go global and move their activities elsewhere. Multinationals are seen by some as threats to national identities and wealth and are accused of riding roughshod over national laws and of exploiting cheap labor. However, the debate on these companies and foreign direct investment is rarely grounded on sound economic arguments. This book brings clarity to the debate. With the contribution of other leading experts, Giorgio Barba Navaretti and Anthony Venables assess the determinants of multinationals' actions, investigating why their activity has expanded so rapidly, and why some countries have seen more such activity than others. They analyze their effects on countries that are recipients of inward investments, and on those countries that see multinational firms moving jobs abroad. The arguments are made using modern advances in economic analysis, a case study, and by drawing on the extensive empirical literature that assesses the determinants and consequences of activity by multinationals. The treatment is rigorous, yet accessible to all readers with a background in economics, whether students or professionals. Drawing out policy implications, the authors conclude that multinational enterprises are generally a force for the promotion of prosperity in the world economy.

Globalisation, Economic Geography and the Strategy of Multinational Enterprises

Abstract: The intention of this paper is to review the literature linking ownership and location strategies to economic geography and theories of globalisation and to explore new areas of research. This paper examines globalisation in terms of conflicts between markets and economic management, and suggests that the differential pace of globalisation across markets presents a number of challenges to policy makers in local, national and regional governments, and in international institutions. In examining the changing location and ownership strategies of MNEs, it shows that the increasingly sophisticated decision making of managers in MNEs is slicing the activities of firms more finely and in finding optimum locations for each closely defined activity, they are deepening the international division of labour. Ownership strategies, too, are becoming increasingly complex, leading to a control matrix that runs from wholly owned units via FDI through market relationships such as subcontracting, including joint ventures as options on subsequent decisions in a dynamic pattern. The input of lessons from economic geography is thus becoming more important in understanding the key developments in international business. The consequences of the globalisation of production and consumption represent political challenges, and reaction against these changes has led to a questioning of the effects of global capitalism as well as to its moral basis. These four issues are closely intertwined and present a formidable research agenda to which the international business research community is uniquely fitted to respond.

Is Knowledge Power? Knowledge Flows, Subsidiary Power and Rent-Seeking within MNCs

Abstract: In recent years, as multinational corporation (MNC) subsidiaries have become more closely linked to international networks, their knowledge intensity has risen, and some of their R&D has gained a more creative role. Simultaneously, and often connectedly, many subsidiaries have acquired considerable strategic independence in all aspects of their operations, and therefore are able to exercise considerable intra-firm bargaining power to influence the distribution of the firm’s resources. In this context, we suggest that intra-MNC knowledge flows are a key determinant of subsidiary bargaining power. We argue that subsidiary managers can exploit such power to pursue their own ends. Such rent-seeking behavior is implicit in much of the literature on managerialism, but our analysis suggests that such behavior can now occur in headquarters–subsidiary and subsidiary–subsidiary relations. Thus subsidiary strategic independence, designed to enhance the competitiveness of outputs (market knowledge) and inputs (asset-seeking and learning), can be corroded when the pursuit of subsidiary objectives encourages rent-seeking. Empirical analysis of a sample of high-technology subsidiaries in the UK provides strong support for the theory. We examine several avenues whereby the incentives of units within the MNC can be aligned.

Perspectives on multinational enterprises in emerging economies

Abstract: Multinational enterprises (MNEs) play a pivotal role in the development of many emerging economies. In consequence, they became the focus of scholarly research by economists and policy analysts. In contrast, international business scholars have been comparatively uninterested in analysing this role of MNEs. Yet they could make important contributions to these debates. First, studies taking the individual firms as starting point would enhance understanding of the interaction between MNEs and the local environment. Second, theories and research methodologies developed in international business research could provide new insights into the dynamics of MNEs in emerging economies. The objective of this paper is to motivate more international business scholars to engage in research on positive and negative spillovers from foreign direct investment (FDI) in emerging economy societies. To advance this research agenda, scholars need to analyse the specific activities and capabilities of the firms involved, and the impact of FDI on the broader social and environmental context. For management, this agenda raises the ethical question: To what extent ought businesses to care about their local stakeholders?

Subsidiaries and knowledge creation: the influence of the MNC and host country on innovation

Abstract: This paper studies the influence of external knowledge on innovation in subsidiaries of multinational firms. The focus on subsidiaries is especially interesting since they are simultaneously embedded in two knowledge contexts: (a) the internal multinational corporation (MNC) comprised of the headquarters and other subsidiaries; and (b) an external environment of regional or host country firms. We develop hypotheses to suggest that the extent of influences of these contexts on subsidiary technological innovation depends on the characteristics of the knowledge network (technological richness and diversity) and the knowledge linkages of the subsidiary with other entities. The study uses patent citation data pertaining to innovations by foreign subsidiaries of U.S. semiconductor firms to test these hypotheses. The paper finds that (a) the technological richness of the MNC, (b) the subsidiary's knowledge linkages to host country firms, and (c) the technological diversity within the host country have a positive impact on innovation. Copyright © 2004 John Wiley & Sons, Ltd.

Globalisation, economic geography and the strategy of multinational enterprises

Abstract: The intention of this paper is to review the literature linking ownership and location strategies to economic geography and theories of globalisation and to explore new areas of research. This paper examines globalisation in terms of conflicts between markets and economic management, and suggests that the differential pace of globalisation across markets presents a number of challenges to policy makers in local, national and regional governments, and in international institutions. In examining the changing location and ownership strategies of MNEs, it shows that the increasingly sophisticated decision making of managers in MNEs is slicing the activities of firms more finely and in finding optimum locations for each closely defined activity, they are deepening the international division of labour. Ownership strategies, too, are becoming increasingly complex, leading to a control matrix that runs from wholly owned units via FDI through market relationships such as subcontracting, including joint ventures as options on subsequent decisions in a dynamic pattern. The input of lessons from economic geography is thus becoming more important in understanding the key developments in international business. The consequences of the globalisation of production and consumption represent political challenges, and reaction against these changes has led to a questioning of the effects of global capitalism as well as to its moral basis. These four issues are closely intertwined and present a formidable research agenda to which the international business research community is uniquely fitted to respond.

A Multinational Perspective on Capital Structure Choice and Internal Capital Markets

Abstract: This paper analyzes the capital structures of foreign affiliates and internal capital markets of multinational corporations. Ten percent higher local tax rates are associated with 2.8% higher debt/asset ratios, with internal borrowing being particularly sensitive to taxes. Multinational affiliates are financed with less external debt in countries with underdeveloped capital markets or weak creditor rights, reflecting significantly higher local borrowing costs. Instrumental variable analysis indicates that greater borrowing from parent companies substitutes for three-quarters of reduced external borrowing induced by capital market conditions. Multinational firms appear to employ internal capital markets opportunistically to overcome imperfections in external capital markets.

Reconstituting the Global Public Domain: Issues, Actors and Practices

Abstract: This article draws attention to a fundamental reconstitution of the global public domain: away from one that for more than three centuries equated the public in international politics with sovereign states and the interstate realm, to one in which the very system of states is becoming embedded in a broader and deepening transnational arena concerned with the production of global public goods. One concrete instance of this transformation is the growing significance of global corporate social responsibility initiatives triggered by the dynamic interplay between civil society actors and multinational corporations. The UN Global Compact and corporate involvement in HIV/AIDS treatment programs are discussed as examples. The analytical parameters of the emerging global public domain are defined, and some of its consequences illustrated by the chain of responses to the Bush administration's rejection of the Kyoto Protocol by a variety of domestic and transnational social actors.

International human resource management : managing people in a multinational context

Abstract: This text focuses on the choices that confront multinational enterprises in human resource management and some factors to consider in making those choices.

Reconstituting the Global Public Domain — Issues, Actors, and Practices

Abstract: This article draws attention to a fundamental reconstitution of the global public domain — away from one that for more than three centuries equated the ‘public’ in international politics with sovereign states and the interstate realm to one in which the very system of states is becoming embedded in a broader and deepening transnational arena concerned with the production of global public goods. One concrete instance of this transformation is the growing significance of global corporate social responsibility initiatives triggered by the dynamic interplay between civil society actors and multinational corporations. The UN Global Compact and corporate involvement in HIV/AIDS treatment programs are discussed as examples. The analytical parameters of the emerging global public domain are defined and some of its consequences illustrated by the chain of responses to the Bush Administration’s rejection of the Kyoto Protocol by a variety of domestic and transnational social actors.

How do multinational companies leverage technological competencies? Moving from single to interdependent explanations

Abstract: This paper explores the relationships among four fundamental determinants of intrafirm competence transfers that have hitherto been analyzed only separately: formal organization structure, informal relations, geographical distance, and relatedness of competencies across subsidiaries. Using a data set consisting of 4840 dyads between new product development teams and subsidiaries that were potential targets for competence transfers in a high-technology multinational company, we find that these determinants interact in surprising ways to explain different patterns of transfers. Results revealed that teams preferred to approach people they knew rather than people who knew related technologies well. They also showed that teams steered away from spatially distant subsidiaries that had related competencies and that the negative effect of large spatial distances could be overcome through established informal relations. These findings indicate that studying one of the determinants separately can yield biased results, as their net effect may change when the moderating effects of the other determinants are considered. Research on synergies, integration, technology transfers, and geographical and cultural differentiation in multinational enterprises therefore needs to be broadened by analyzing multiple determinants of competence transfers. Copyright © 2004 John Wiley & Sons, Ltd.

Multinational Companies and the Natural Environment: Determinants of Global Environmental Policy

Abstract: This study analyzes the determinants of global standardization of multinational companies’ environmental policies. Survey data from the chemical industry show that MNCs standardize different environmental policy dimensions in response to pressures from different external stakeholders. MNC characteristics also affect environmental policy standardization. Findings demonstrate that the nature of stakeholder demands affects firms’ responses to stakeholder pressures. Because environmental policy standardization reduces MNCs’ ability to exploit cross-country differences in environmental regulations, these findings also have important implications for the self-regulation of MNCs’ environmental conduct.

Participatory IT Design: Designing for Business and Workplace Realities

Abstract: The goal of participatory IT design is to set sensible, general, and workable guidelines for the introduction of new information technology systems into an organization. Reflecting the latest systems-development research, this book encourages a business- oriented and socially sensitive approach that takes into consideration the specific organizational context as well as first-hand knowledge of users' work practices and allows all stakeholdersusers, management, and staffto participate in the process. Participatory IT Design is a guide to the theory and practice of this process that can be used as a reference work by IT professionals and as a textbook for classes in information technology at introductory through advanced levels. Drawing on the work of a ten-year research program in which the authors worked with Danish and American companies, the book offers a framework for carrying out IT design projects as well as case studies that stand as examples of the process.The method presented in Participatory IT Designknown as the MUST method, after a Danish acronym for theories and methods of initial analysis and design activitieswas developed and tested in thirteen industrial design projects for companies and organizations that included an American airline, a multinational pharmaceutical company, a national broadcasting corporation, a multinational software house, and American and Danish universities. The first part of the book introduces the concepts and guidelines on which the method is based, while the second and third parts are designed as a practical toolbox for utilizing the MUST method. Part II describes the four phases of a design projectinitiation, in-line analysis, in-depth analysis, and innovation. Part III explains the method's sixteen techniques and related representation tools, offering first an overview and then specific descriptions of each in separate sections.

Organizing knowledge processes in the multinational corporation: an introduction

Abstract: This Introduction discusses the contrast between, on the one hand, the current popularity of addressing MNC organization in knowledge terms and, on the other, the lack of adequate understanding of many of the causal mechanisms and contextual factors in relations between knowledge processes and organizational factors. A number of the relevant research challenges are identified, and it is clarified how the five articles in this Focused Issue addresses some of these.

Multinationals and corporate social responsibility in developing countries: a case study of Nigeria

Abstract: Corporate social responsibility (CSR) has a powerful potential to make positive contributions to addressing the needs of disadvantaged communities in developing countries On the other hand, there are ways in which CSR could, whether by mistake or design, damage the same communities, politically, socially and economically This paper presents evidence that demonstrates that although there is a good business case for Shell to contribute to poverty alleviation in the Niger Delta, Nigeria, there is also a danger that in the long term Shell could effectively be leading the pace of, and directing the paths to, socio-economic development in the region with little or no contribution from the Nigerian government The paper concludes that lack of national macro-economic planning and management, backed by equitable resource allocation, and an enabling environment, have significant implications for the overall performance of CSR initiatives by multinational corporations (MNCs) in developing countries In other words, if the macro-economy is under-performing due to government failure, there is a likelihood that the contributions of MNCs to poverty alleviation could fail to achieve the desired outcomes Good governance in all its dimensions is therefore an important component of the CSR agenda Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment

How to build collaborative advantage

Abstract: For many years, multinational corporations could compete successfully by exploiting scale and scope economies or by taking advantage of imperfections in the world's goods, labor and capital markets. But these ways of competing are no longer as profitable as they once were. In most industries, multinationals no longer compete primarily with companies whose boundaries are confined to a single nation. Rather, they go head-to-head with a handful of other giants. Against such global competitors, it is hard to sustain an advantage based on traditional economies of scale and scope. MNCs must seek new sources of competitive advantage.While multinationals in the past realized economies of scope principally by utilizing physical assets and exploiting a companywide brand, the new economies of scope are based on the ability of business units, subsidiaries and functional departments within the company to collaborate successfully by sharing knowledge and jointly developing new products and services. Collaboration can be an MNC's source of competitive advantage because it does not occur automatically ? far from it. Indeed, several barriers impede collaboration within complex multiunit organizations. And in order to overcome those barriers, companies will have to develop distinct organizing capabilities that cannot be easily imitated. The authors develop a framework that links managerial action, barriers to interunit collaboration and value creation in MNCs to help managers understand how collaborative advantage can work. The framework conceptualizes collaboration as a set of management levers that reduce four specific barriers to collaboration, leading in turn to several types of value creation. They draw on BP's experience to illustrate the effectiveness of a collaborative approach.

Developing countries and MNEs: extending and enriching the research agenda

Abstract: Foreign direct investment (FDI) through multinational enterprises (MNEs) has emerged in the last decade as the principal source of foreign capital for developing countries. Meyer (this issue) underlines the need for international business (IB) scholars to understand the impact of these investments on host developing countries. He offers a useful assessment of the literature and proposes a rich set of questions for further research. However, his research agenda can be extended and enriched in two ways. First, IB scholars must study, as they always have, causation in the opposite direction—namely, the impact of developing country context on MNE behavior and the co–evolution of these two variables over time. In doing so, they must incorporate into their models contemporary issues, such as the continued inadequacy of rules for FDI in infrastructure sectors, or the clever means by which MNEs are rewriting the global rules under which they operate in developing countries (e.g., on intellectual property rights). Second, IB scholars must pay more attention to topics that are not mainstream within the field but are of great importance to developing countries. Examples include the behavior and performance of a new generation of home-grown MNEs, the role of diaspora in homeland FDI (in countries like China and India), and the implications of global outsourcing of services.

How Domestic and Foreign Firms Differ and Why Does it Matter

Abstract: This paper reviews and summarises the results of selected studies on performance gaps between multinational enterprises and their domestic counterparts. Performance gaps arise in such fields as productivity, technology, profitability, wages, skills and growth. While these gaps are often attributed to foreign ownership of the affiliates, the theory of the Multinational Enterprise argues that these gaps are due to being a Multinational rather than the nationality of the firm. Empirical evidence on the existence of performance gaps between foreign and domestic firms is supportive of this view: foreign ownership turns out to be a much less important explanatory factor than normally assumed. Firm-specific assets and firm characteristics like industry, size, parent country and multinationality per se are more important. Such results are broadly consistent with those derived in the literatures on ownership change, on foreign entry and on spillovers. We conclude that there is little case for foreign direct investment promotion policies to discriminate between firms on the basis of ownership.

Globalization and the coordinating of work in multinational audits

Abstract: This paper examines how the processes of coordinating a multinational audit impacts, and is effected by, the structuration of globalization. Using a detailed field study of an audit involving multiple locations, we argue that the coordination of work in multinational firms links the local and the global in a dialectical manner. In particular, we analyze the relationship between the global and the local through an examination of two key coordinating mechanisms used by audit firms––inter-office instructions and the firm's risk based audit methodology. In so doing, we discuss the local appropriation of global systems, as well as the importance of trust and professional identity in the coordination and management of the multisite audit. Our study suggests two key globalizing tendencies associated with reflexivity in audit––the increased risk of litigation and the commercialization of the audit industry. These changes are intimately linked at the work practice level to changes in documentation, new technologies and methodologies, and a diversification in business advisory services requiring new skills and client relationships. We discuss the implications of these changes for the future of auditing, audit work and large audit firms.

Dynamics of Central Control and Subsidiary Autonomy in the Management of Human Resources: Case-Study Evidence from US MNCs in the UK

Abstract: This article revisits a central question in the debates on the management of multinationals: the balance between centralized policy-making and subsidiary autonomy. It does so through data from a series of case studies on the management of human resources in American multinationals in the UK. Two strands of debate are confronted. The first is the literature on differences between multinationals of different national origins which has shown that US companies tend to be more centralized, standardized, and formalized in their management of human resources. It is argued that the literature has provided unconvincing explanations of this pattern, failing to link it to distinctive features of the American business system in which US multinationals are embedded. The second strand is the wider debate on the balance between centralization and decentralization in multinationals. It is argued that the literature neglects important features of this balance: the contingent oscillation between centralized and decentralized modes of operation and (relatedly) the way in which the balance is negotiated by organizational actors through micro-political processes whereby the external structural constraints on the company are defined and interpreted. In such negotiation, actors’ leverage often derives from exploiting differences between the national business systems in which the multinational operates.

Selling China: Foreign Direct Investment during the Reform Era

Abstract: Selling China: Foreign Direct Investment during the Reform Era, by Yasheng Huang. Cambridge: Cambridge University Press, 2003. xx + 383 pp. A$140.00 (hardcover). Nearly every year for the last decade China has sucked in more foreign direct investment (FDI) than any country other than the United States. Recently, China even surpassed the US. Despite the hoopla among Chinese government officials and various media, China's ascendancy was a product of a change in American attractiveness as a destination for FDI rather than of a rosier view of China on the part of multinational enterprises or investors. Nevertheless, FDI has fuelled China's phenomenal economic growth over the 1990s, supporting the transfer of increasingly sophisticated technology and managerial skills. China has become the "factory to the world", supplying a multitude of products to the consumers of North America and Europe, while many Chinese are increasingly well off. But is that the whole story? Is FDI beneficial to China? Huang begs to differ. He posits the seemingly contrarian thesis that success in attracting FDI is evidence of far-reaching systemic failure in China's domestic economy. The "central claim" of this book is that the phenomenal absorption of FDI stems from the reluctance of the state to reform the moribund state-owned enterprises (SOEs) to allow private domestic firms to grow more rapidly. As a result, Chinese firms are uncompetitive, Huang argues, held back by the bias towards the state sector in access to capital and by high levels of market fragmentation that disadvantage domestic firms more than foreign-invested enterprises (FIEs). The foreign firms accordingly have delivered to China what its own firms, SOE and private alike, cannot. In doing so, FDI fulfils a "privatization function" that the state has been reluctant to allow through liberalization of controls over domestic enterprises and the financial system: "China desperately needs foreign capitalists to take over its insolvent SOEs precisely because it does not allow its own capitalists to do the same" (p. 319). Huang's study is provocative and incisive, but the book has problems. For one thing, it comprises seven overly long chapters, made even longer by six chapter appendices that address data and interpretation issues. A little copyediting would not have gone astray. The introduction sets out the broad sweep of the thesis and Chapter 2 develops the microeconomic analytical framework. Chapters 3-5 analyse the problems of China's corporate sector-the SOEs, township and village enterprises, new forms of non-state entities and the FEEs. Chapter 6 discusses the relationship between market fragmentation and foreign investment, and claims that the fragmentation is a manifestation of state ownership. One could add that China is a big country-economic integration will not be resolved by simply privatizing the state sector. Chapter 7 is a long conclusion that repeats everything and connects the arguments together for those who may have struggled with the earlier chapters. A busy reader could skip the text between the introduction and conclusion without a great loss of comprehension or detail. My criticism will focus on two aspects. First, Huang's use of comparative data for FDI is unsound. He argues that foreign-invested enterprises have a "pervasive presence" in exports and that foreign firms have crowded out Chinese firms (this ignores the fact that Chinese firms do not have the know-how or the brands to export products that foreign consumers would buy on the scale they do today). To support the argument that foreign firms are over-represented in the externally traded sector, Huang compares China in the mid-1990s with Taiwan, South Korea and Malaysia in the mid-1970s. The comparison is spurious at best. The three economies are all very small compared with China, and in each of them market forces were prominent or dominant-albeit with a high degree of state intervention or guidance. …

The Impact of Organisational Structure and Practices on Learning in the Workplace

Abstract: The main thrust of the research effort into workplace learning has been to identify the characteristics of workplace learning as experienced by the learner. The impact of the wider organisational process in which that learning is embedded have been played down. This paper, building on the work of Koike and Darrah, uses research conducted in a major multinational corporation (MNC) in South-East Asia, to explore the impact of the wider organisational structures on the process of learning. The model it develops not only shows how these processes impact on workplace learning but also helps explain why workers acquire different levels of skill.

Host country specific factors and the transfer of human resource management practices in multinational companies

Abstract: This paper concerns the transfer of human resource management (HRM) practices by multinational companies (MNCs) to their overseas subsidiaries. It investigates how factors originating from the cultural and institutional framework of the host country impact on this transfer. Using data collected from MNC subsidiaries located in Greece and local Greek firms, we examine the degree to which several HRM practices in MNC subsidiaries resemble local practices. Our empirical findings indicate that subsidiaries have adapted their HRM practices to a considerable extent, although some practices are more localised than others. Specifically, practices that do not fit well with Greek culture or are in contrast to employee regulations show a low level of transfer. On the other hand, our interviews revealed that significant cultural changes are underway and that the institutional environment is gradually getting more relaxed, leaving more room to manoeuvre for MNCs.

The Location Behavior of the Multinational Enterprise: Some Analytical Issues

Abstract: In the international business literature location behavior has traditionally been analyzed using Dunning's (1977) OLI framework, which focuses on the nature, role, and behav- ior of multinational enterprise (MNE). In this paper it is argued that this approach is now no longer appropriate for discussing the spatial behavior of MNEs, because of the fundamental changes which have taken place either in MNE organization or in the global and institutional environment for foreign direct investment (FDI). At the same time, the paper argues that current location theory from regional economics and economic geography is also largely unsuitable for discussing these issues, such that the spatial behavior of the MNE provides a set of difficult challenges to location analysts. There appears to have been some response to these issues from the international busi- ness and management literature, most notably the Porter literature on clusters. However, it is also argued here that this literature provides few, if any, real answers to the problems set by the geo- graphical behavior of the MNE. It is concluded that a fusion of traditional economic geography approaches with a focus on the information and organizational aspects of the firm and the region under consideration may be a way forward for both theory and empirical analysis.