Showing papers on "Multinational corporation published in 2008"
TL;DR: In this article, a review of the literature suggests that international management applications of this perspective have been dominated by a narrow set of neo-institutional ideas, and they develop a set of provocations that challenge the validity of traditional neoinstitutionalism in the context of MNCs.
Abstract: This paper was motivated by the growing interest of scholars of multinational corporations (MNCs) in the institutional perspective. Our review of the literature suggests that international management applications of this perspective have been dominated by a narrow set of neoinstitutional ideas. We develop a set of provocations that challenge the validity of traditional neoinstitutionalism in the context of MNCs. We then offer ideas for more novel theory building in the study of MNCs, based on integrating “old” and “new” institutionalism.
1,266 citations
TL;DR: In this article, the advantages and disadvantages of developing-country multinational enterprises (MNEs) in comparison with developed-country MNEs are analyzed in the least developed countries (LDCs) with poorer regulatory quality and lower control of corruption.
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.
1,166 citations
Posted Content•
TL;DR: In this paper, an institutional approach, that tries to bridge both the macro and micro levels of analysis, and that encompasses both formal and informal institutions, offers a promising way to advance our understanding of the different forms of the contemporary MNE.
Abstract: The prevailing ownership-based theories of the firm are increasingly being challenged by new forms of organising, as exemplified by the Asian network multinational enterprise (MNE). We believe that an institutional approach, that tries to bridge both the macro and micro levels of analysis, and that encompasses both formal and informal institutions, offers a promising way to advance our understanding of the different forms of the contemporary MNE. This paper introduces a theoretical framework which draws substantially on the work of Douglass North, and examines how an institutional dimension can be incorporated into the three components of the OLI paradigm.
628 citations
TL;DR: In this article, the authors introduce a theoretical framework that draws substantially on the work of Douglass North, and examine how an institutional dimension can be incorporated into the three components of the OLI paradigm.
Abstract: The prevailing ownership-based theories of the firm are increasingly being challenged by new forms of organising, as exemplified by the Asian network multinational enterprise (MNE). We believe that an institutional approach, that tries to bridge both the macro and micro levels of analysis, and that encompasses both formal and informal institutions, offers a promising way to advance our understanding of the different forms of the contemporary MNE. This paper introduces a theoretical framework that draws substantially on the work of Douglass North, and examines how an institutional dimension can be incorporated into the three components of the OLI paradigm.
564 citations
Book•
07 Oct 2008TL;DR: To compete in the big emerging markets, multinationals must reconfigure their resources, rethink their cost structures, redesign their product development processes, and challenge their assumptions about who their top-level managers should be, the authors say.
Abstract: As they search for growth, multinational corporations will have no choice but to compete in the big emerging markets of China, India, Indonesia, and Brazil. But while it is still common to question how such corporations will change life in those markets, Western executives would be smart to turn the question around and ask how multinationals themselves will be transformed by these markets. To be successful, MNCs will have to rethink every element of their business models, the authors assert in this seminal HBR article from 1998. During the first wave of market entry in the 1980s, multinationals operated with what might be termed an imperialist mind-set, assuming that the emerging markets would merely be new markets for their old products. But this mind-set limited their success: What is truly big and emerging in countries like China and India is a new consumer base comprising hundreds of millions of people. To tap into this huge opportunity, MNCs need to ask themselves five basic questions: Who is in the emerging middle class in these countries? How do the distribution networks operate? What mix of local and global leadership do you need to foster business opportunities? Should you adopt a consistent strategy for all of your business units within one country? Should you take on local partners? The transformation that multinational corporations must undergo is not cosmetic--simply developing greater sensitivity to local cultures will not do the trick, the authors say. To compete in the big emerging markets, multinationals must reconfigure their resources, rethink their cost structures, redesign their product development processes, and challenge their assumptions about who their top-level managers should be.
489 citations
TL;DR: This paper identified 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 utilisation.
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.
479 citations
TL;DR: It is suggested that knowledge transfers in MNCs typically occur between highly capable members of an “in crowd,” and the isolated minority rarely, if ever, engages in knowledge-sharing activities.
Abstract: Applying a new theoretical and empirical approach to intrafirm knowledge transfers, this paper provides some initial insight to the little-researched phenomenon of why some subsidiaries are isolated from knowledge-transfer activities within the multinational corporation (MNC). Knowledge transfer is framed as a problemistic search process initiated by the recipient unit. We show that knowledge flows from units that are perceived to be highly capable to units that perceive themselves to be highly capable. Knowledge flows are also associated with existing levels of communication and reciprocity. Taken together, these findings suggest that knowledge transfers in MNCs typically occur between highly capable members of an “in crowd,” and the isolated minority rarely, if ever, engages in knowledge-sharing activities. Finally, we show that the isolated minority underperforms other subsidiaries, suggesting the possibility of a “liability of internal isolation.”
442 citations
TL;DR: In this article, the authors utilize price data from political risk insurance agencies to directly test how domestic political institutions affect the premiums multinationals pay for coverage against government expropriations and contract disputes.
Abstract: There is a renewed interest in how political risk affects multinational corporations operating in emerging markets. Much of this research has focused on the relationship between democratic institutions and flows of foreign direct investment (FDI). Yet the existing studies suffer from data problems that only allow for indirect evidence of the relationship between political institutions and political risk. In this paper I utilize price data from political risk insurance agencies to directly test how domestic political institutions affect the premiums multinationals pay for coverage against government expropriations and contract disputes. I find that democratic regimes reduce risks for multinational investors, specifically through increasing constraints on the executive. Utilizing qualitative evidence from investors, insurers, and location consultants, I explore the mechanisms linking democratic regimes with lower levels of political risk.
365 citations
TL;DR: In this article, the authors present a model of a multinational firm's optimal debt policy that incorporates international taxation factors, which yields the prediction that multinational firms' indebtedness in a country depends on a weighted average of national tax rates and differences between national and foreign tax rates.
327 citations
TL;DR: In this article, a detailed study of a major global apparel company and its suppliers is presented, where the authors argue that the compliance model relies upon misguided theoretical and empirical assumptions concerning the power of multinational corporations in global supply chains; the role information (derived from factory audits) plays in shaping the behavior of key actors in these production networks; and the appropriate incentives required to change behavior and promote improvements in labor standards in these emergent centers of global production.
Abstract: Private, voluntary compliance programs, promoted by global corporations and non-governmental organizations alike, have produced only modest and uneven improvements in working conditions and labor rights in most global supply chains. Through a detailed study of a major global apparel company and its suppliers, this paper argues that this compliance model rests upon misguided theoretical and empirical assumptions concerning the power of multinational corporations in global supply chains; the role information (derived from factory audits) plays in shaping the behavior of key actors (i.e., global brands, transnational activist networks, suppliers, purchasing agents, etc.) in these production networks; and the appropriate incentives required to change behavior and promote improvements in labor standards in these emergent centers of global production. We argue that it is precisely these faulty assumptions and the way they have come to shape various labor compliance initiatives throughout the world - even more than a lack of commitment, resources, or transparency by global brands and their suppliers to these programs - that explains why this compliance-focused model of private voluntary regulation has not succeeded. In contrast, this paper documents that a more commitment-oriented approach to improving labor standards co-exists, and in many of the same factories, complements the traditional compliance model. This commitment-oriented approach, based upon joint problem solving, information exchange, and the diffusion of best-practices, is often obscured by the debates over traditional compliance programs but it exists in myriad factories throughout the world and has led to sustained improvements in working conditions and labor rights at these workplaces.
315 citations
TL;DR: In this article, the authors view firms as unique configurations of tacit and codified knowledge, and propose that the strategies pursued by an MNE will determine whether the investment will create positive externalities, through knowledge diffusion and provision of public goods, or negative externalities through a crowding out effect on indigenous enterprises.
Abstract: Under what conditions does a multinational enterprise's (MNE's) investment in a developing country produce spillovers for local firms operating in the same industry? In this paper I view firms as unique configurations of tacit and codified knowledge, and I propose that the strategies pursued by an MNE will determine whether the investment will create positive externalities, through knowledge diffusion and provision of public goods, or negative externalities, through a crowding out effect on indigenous enterprises.
TL;DR: In this paper, the authors provide a conceptual integration and synthesis of the literature on power and influence in multinational corporations (MNCs), focusing on the situation facing, and the strategies pursued by, low-power actors within the MNC network, that is, actors who are currently positioned in relatively weak or low status positions vis-a-vis other actors.
TL;DR: In this article, the authors explore 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.
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.
TL;DR: The authors examined how financial constraints and product market exposures determine the response of multinational and local firms to sharp depreciations and showed that a differential ability to circumvent financial constraints is a significant determinant of the observed differences in investment responses.
Abstract: This article examines how financial constraints and product market exposures determine the response of multinational and local firms to sharp depreciations. U.S. multinational affiliates increase sales, assets, and investment significantly more than local firms during, and subsequent to, depreciations. Differing product market exposures do not explain these differences in performance. Instead, a differential ability to circumvent financial constraints is a significant determinant of the observed differences in investment responses. Multinational affiliates also access parent equity when local firms are most constrained. These results indicate another role for foreign direct investment in emerging markets—multinational affiliates expand economic activity during currency crises when local firms are most constrained. (JEL F23, F31, G15, G31, G32)
TL;DR: This article found that multinational corporations tend to manage their human resources in ways that are distinct from those of their host country; at the same time, country of origin effects seem relatively weak.
Abstract: There is considerable debate as to the determinants of the human resource policies of human resource management: do they reflect national institutional or cultural realities, emerging common global practices, parent country effects or the dual effects of transnational and national realities? We use an extensive international database to explore these differences, assessing variations in a range of human resource practices. We find new evidence of national differences in the manner in which indigenous firms manage their people, but also evidence of a similarity in practice amongst multinational corporations. In other words, multinational corporations tend to manage their human resources in ways that are distinct from those of their host country; at the same time, country of origin effects seem relatively weak. Whilst there is some evidence of common global practices, sufficient diversity in practice persists to suggest that duality theories may provide the most appropriate explanation.
TL;DR: The authors apply Bhabha's epistemology of mimicry, hybridity and the third space to offer an alternative understanding of the transfer process itself, the nature of the organization within which this process takes place, and the notions of power and agency as they are currently understood in international management studies.
Abstract: In this paper I use insights from postcolonial scholar Homi Bhabha to analyze international management discourse on the cross-national transfer of knowledge and practices within the multinational corporation. Stressing the increasing importance of first world–third world geopolitical relations in shaping the transfer process, I apply Bhabha's epistemology of mimicry, hybridity, and the third space to offer an alternative understanding of the transfer process itself, the nature of the organization within which this process takes place, and the notions of power and agency as they are currently understood in international management studies.
TL;DR: In this paper, the authors present a framework for examining the factors that contribute to multinational and community conflict including stakeholder power inequality, stakeholder perception gaps and cultural context, and describe some of the ways that communities can increase their leverage in conflict situations.
Abstract: As conflict between multinational corporations and local communities escalates, scholars, executives, activists, and community leaders are calling for companies to become more accountable for the impact of their activities on external stakeholders. In order for business to do so, managers must first understand the causes of conflict with local communities, and communities must understand what courses of action are available to challenge activities they deem harmful to their interests. In this article, I present a framework for examining the factors that contribute to multinational and community conflict including stakeholder power inequality, stakeholder perception gaps and cultural context. Moreover, I describe some of the ways that communities can increase their leverage in conflict situations.
TL;DR: By studying 164 foreign-owned subsidiaries located in Finland and China, this article attempts to identify the relationship between subsidiary bonus pay based on MNC-wide performance and knowledge sharing between different units of the MNC.
Abstract: Growing interest has emerged in viewing the multinational corporation as a knowledge creating and diffusing entity. The importance of sharing knowledge across organizational and national boundaries has been established in previous research. However, the question of which organizational policies lead to knowledge sharing between multinational units is still not fully understood. In particular, the link between compensation mechanisms and knowledge sharing has not received attention in previous studies. By studying 164 foreign-owned subsidiaries located in Finland and China, this article attempts to identify the relationship between subsidiary bonus pay based on MNC-wide performance and knowledge sharing between different units of the MNC. In line with the knowledge-based perspective of the firm, the results suggest that incentive pay based on the collective performance of the MNC leads to greater knowledge sharing. Copyright © 2008 John Wiley & Sons, Ltd.
TL;DR: In this article, the authors examined the relationship between cultural distance and the use of parent country expatriates in the wholly-owned US subsidiaries of 52 multinational corporations and found that a higher ratio of expatriate staffing is related to lower subsidiary performance, particularly in cases when cultural distance is high.
Abstract: This study examines the relationship between cultural distance and the use of parent country expatriates in the wholly-owned US subsidiaries of 52 multinational corporations. This study also investigates the link between the use of expatriates and subsidiary performance as a function of cultural distance. Testing hypotheses based on transaction costs theory, our results suggest that firms rely on a greater number of parent country expatriates when they are culturally distant from the subsidiary (i.e. the United States). This study further demonstrates the bounded rationality problem faced by multinational corporations: cultural distance moderates the relationship between expatriate staffing and subsidiary performance such that a higher ratio of parent country expatriates is related to lower subsidiary performance, particularly in cases when cultural distance is high.
TL;DR: In this paper, the authors investigate the factors that influence the extent to which a multinational corporation's headquarters (MNC-HQ) sources knowledge from the host countries of its R&D labs.
Abstract: We investigate the factors that influence the extent to which a multinational corporation's headquarters (MNC-HQ) sources knowledge from the host countries of its R&D labs. We propose that the technological capabilities held by MNC-HQs present a paradox. On the one hand, they enhance MNC-HQs' learning capabilities. On the other hand, they reduce MNC-HQs' motivations to outsource knowledge from host countries. We also argue that it is important to consider both relative and absolute levels of technological capabilities, because relative levels can influence MNC-HQs' motivations to source knowledge from host countries. Statistical findings generally support our arguments.
Book•
30 Nov 2008
TL;DR: The authors The Multinational Firm - A Beauty or a Beast? 2. The Dominating Multinational - A Tale of Market Power 3. The Knowing Multinational-A Tale of Value Creation 4.
Abstract: Contents: Preface 1. The Multinational Firm - A Beauty or a Beast? 2. The Dominating Multinational - A Tale of Market Power 3. The Multinational Firm - A Tale of Cost Efficiency 4. The Knowing Multinational - A Tale of Value Creation 5. The Designing Multinational - A Tale of Strategic Fit 6. The Networking Multinational - A Tale of Business Relationships 7. The Politicizing Multinational - A Tale of Legitimacy and Power 8. The Multidimensional Multinational - Concluding Remarks References Index
TL;DR: In this article, the authors analyzed the household-level implications of increased foreign investments and trade in the horticulture sector in Senegal and found significant positive welfare impacts through employment creation and labor market participation.
Abstract: There is no consensus about how globalization - trade and foreign investments - affects poverty reduction. Using household survey data, this study contributes to the empirical literature on globalization and poverty by analyzing the household-level implications of increased foreign investments and trade in the horticulture sector in Senegal. In many aspects this represents what many would consider a "worst-case scenario". Stringent rich country standards are imposed on exports and the supply chain is controlled by a single multinational company with extreme levels of supply base consolidation and vertical integration and complete exclusion of smallholder suppliers. We analyze and quantify income and poverty effects under these "worst-case conditions" and find significant positive welfare impacts through employment creation and labor market participation.
TL;DR: This article explored determinants of subsidiary autonomy in setting human resource management practices within US-parented multinational enterprises (MNEs), in Europe and Australia, and found that US MNEs show greater centralisation of control over HRM where the subsidiary faces global markets, in coordinated market economies vs liberal market economies.
Abstract: We explore determinants of subsidiary autonomy in setting human resource management (HRM) practices within US-parented multinational enterprises (MNEs), in Europe and Australia. We examine both the effect of strategic context and the effect of the institutional location of the subsidiary. We find that US MNEs show greater centralisation of control over HRM where the subsidiary faces global markets, in coordinated market economies vs liberal market economies, and where union density is low.
TL;DR: In this article, the authors explore the differences in international strategy between multinational enterprises (MNEs) in services and manufacturing, especially in terms of their international diversification, as measured by their sales and asset dispersion.
Abstract: and Key Results
We explore the differences in international strategy between multinational enterprises (MNEs) in services and manufacturing, especially in terms of their international diversification, as measured by their sales and asset dispersion.
Our longitudinal data show that the largest MNEs in services have a much stronger home-region orientation than manufacturing MNEs. Large MNEs in the services sector average 83.9 percent of their sales in their home region, which is significantly higher than large manufacturing firms at 65.6 percent.
We explore the possible reasons for the relative lack of globalization of services firms. The two main reasons are: the difficulty of adapting separately upstream activities and downstream activities in high distance host environments, and the difficulty of selecting activity locations as a function of supply side criteria.
We offer a refinement of regional strategy theory applicable to services MNEs.
Book•
10 Jan 2008
TL;DR: In this paper, the authors present a comparative analysis of competing capitalisms in the context of Germany, Sweden and the UK in terms of the role of authority sharing and organizational roles.
Abstract: PART I: INTRODUCTION 1. The Comparative Analysis of Competing Capitalisms PART II: THE CHANGING NATURE OF NATIONAL CAPITALISMS: INSTITUTIONAL REGIMES, BUSINESS SYSTEMS AND INNOVATION SYSTEMS 2. The Contingent Nature of National Business Systems: Types of States and Complementary Institutions 3. Constructing Innovation Systems: The Roles of Institutional Regimes and National Public Science Systems 4. Changing Institutional Regimes and Business Systems: Endogenous and Exogenous Pressures on Postwar Systems of Economic Organization 5. The Growth of International Governance and the Restructuring of Business Systems: The Effects of Multileveled Governance in Europe and Elsewhere PART III: CONSTRUCTING ORGANIZATIONAL CAPABILITIES IN DIFFERENT INSTITUTIONAL REGIMES 6. The Institutional Structuring of Organisational Capabilities: Variations in Authority Sharing and Organisational Careers 7. Developing Innovative Competences in Different Institutional Frameworks 8. Constructing Capabilities in Entrepreneurial Technology Firms: A Comparative Institutional Analysis of Germany, Sweden and the UK 9. Project-based Firms: New Organizational Form or Variations On a Theme? PART IV: INTERNATIONALISATION AND THE DEVELOPMENT OF TRANSNATIONAL ORGANISATIONAL CAPABILITIES 10. Divergent Multinational Firms: Home and Host Economy Effects on Internationalisation Strategies and Organisational Capabilities 11. Developing Transnational Organisational Capabilities in Multinational Companies: The Role of Cross- National Authority Sharing and Organisational Careers 12. The Changing Japanese Multinational: Application, Adaptation and Learning in Car Manufacturing and Financial Services
TL;DR: In this article, the authors studied how MNCs manage their relationship with socio-political organizations and developed a theoretical view that is based in business networks and contains the three concepts of legitimacy, commitment and trust.
TL;DR: The authors explored the relationship between attitudes to corporate social responsibility (CSR) and the cultural dimensions of business activity identified by Hofstede et al., using a sample of nearly 90,000 stakeholders drawn from 28 countries.
Abstract: This paper explores the relationship between attitudes to corporate social responsibility (CSR) and the cultural dimensions of business activity identified by Hofstede & Hofstede using a sample of nearly 90,000 stakeholders drawn from 28 countries. We develop five general propositions relating attitudes to CSR to aspects of culture. We show that the propensity of consumers to punish firms for bad behaviour varies in ways that appear to relate closely to the cultural characteristics identified by Hofstede. Furthermore, this variation appears to be understandable in terms of the standard interpretation of the Hofstede dimensions, suggesting that cultural variation in the attitudes of consumers may play an important role in helping us to understand variations in CSR across countries. This in turn has implications for how managers of multinational companies should implement CSR strategies in different cultural contexts.
TL;DR: Tax havens have attracted increasing attention and scrutiny from policymakers, as exemplified by the OECD's initiatives to combat “harmful” tax practices (OECD, 1998, 2000, 2004).
Abstract: 1) Introduction Tax havens have attracted increasing attention and scrutiny in recent years from policymakers, as exemplified by the OECD’s initiatives to combat “harmful” tax practices (OECD, 1998, 2000, 2004). The interest in tax havens reflects their disproportionate role in the world economy, and in particular their centrality to many of the important current policy debates in taxation, including international tax competition (Slemrod, 2004; Hines, 2006, 2007) and tax avoidance activity by corporations (e.g. Desai and Dharmapala, 2006, 2008). This paper provides an overview of the theoretical and empirical insights from a growing scholarly literature that analyzes the consequences and determinants of the existence of tax haven countries. The paper begins with an analysis of the characteristics of countries that tend to be classified as tax havens. It focuses in particular on recent evidence (Dharmapala and Hines, 2006) that tax havens tend to have stronger governance institutions (i.e. better political and legal systems and lower levels of corruption) than comparable nonhaven countries. The popular image of tax havens is somewhat at variance with this picture, and emphasizes their role in facilitating tax evasion by individuals. Recent estimates that have been widely influential in policy debates suggest large revenue losses from haven-related evasion activities (e.g. Guttentag and Avi-Yonah, 2006). This paper argues, however, that careful scrutiny of these estimates suggests that they imply vast amounts of “hidden” wealth, and (if true) would have wide-ranging implications (many of dubious credibility) for many economic phenomena far beyond the arena of taxation. It appears more likely that evasion by individuals plays only a secondary role in generating tax haven activity. Consistent with this view, some tentative evidence is presented in the paper suggesting that the OECD’s recent initiative (promoting international information-sharing among tax authorities) has had little impact on financial sector employment and wages in a representative tax haven (Jersey). The most important policy questions surrounding tax havens thus appear to relate to their role in enabling tax planning by multinational corporations. Multinational corporations can use tax havens to reduce or defer tax liabilities to other countries, through the strategic setting of transfer prices (especially for intellectual property) and the strategic use of debt among affiliates. It is often argued that tax havens erode the tax base of high-tax countries by attracting these
TL;DR: In this paper, a substantive grounded theory of strategic management accounting and sense-making is developed, which is a basic social process that revolves around organisational actors' attempts to understand their past, present and future situations.
TL;DR: The Oxford Handbook of International Trade Law as mentioned in this paper places international trade law within its broader context, providing comment and critique on a range of questions both related specifically to the discipline of trade law itself and to the outside face of international trade and its intersection with States and other aspects of the international system.
Abstract: The Oxford Handbook of International Trade Law places international trade law within its broader context, providing comment and critique on a range of questions both related specifically to the discipline of international trade law itself and to the outside face of international trade law and its intersection with States and other aspects of the international system. It examines the economic and institutional context of the world trading system, its substantive law (including regional trade regimes) and the settlement of disputes. The final part of the book explores the wider framework of the world trading system, considering issues including the relationship of the WTO to civil society, the use of economic sanctions, state responsibility, and the regulation of multinational corporations.