Showing papers on "Multinational corporation published in 2012"

Trade, Foreign Direct Investment, and International Technology Transfer

Abstract: What role does trade play in international technology transfer? Do technologies introduced by multinational firms diffuse to local firms? What kinds of policies have proved successful in encouraging technology absorption from abroad and why? Using these questions as motivation, this article surveys the recent trade literature on international technology transfer, paying particular attention to the role of foreign direct investment. The literature argues that trade necessarily encourages growth only if knowledge spillovers are international in scope. Empirical evidence on the scope of knowledge spillovers (national versus international) is ambiguous. Several recent empirical plant-level studies have questioned earlier studies that argued that foreign direct investment has a positive impact on the productivity of local firms. Yet at the aggregate level, evidence supports the view that foreign direct investment has a positive effect on economic growth in the host country.

Extending theory by analyzing developing country multinational companies: Solving the Goldilocks debate

Abstract: I analyze how the study of developing country multinational companies (DMNCs) can help extend theory. The renewed interest in DMNCs has generated a ‘Goldilocks’ debate, with one camp arguing that the analysis of DMNCs is ‘hot’ and requires new theory, another camp arguing that it is ‘cold’ and no new theory is required, and a third camp arguing that it is ‘just right’ and it can be used to extend theory. I follow this third camp and argue that the unique conditions of developing countries influence the internationalization of DMNCs, creating a laboratory for extending theory. I illustrate this idea by reviewing some of the key theories and models of the multinational company and explaining how they can be extended with the study of DMNCs.

The global strategy of emerging multinationals from China

Abstract: The global strategy of multinational enterprises (MNEs) from China started to emerge recently. While sizable components of their strategy and behavior are consistent with what we observe of MNEs from other countries, Chinese MNEs are characterized by three relatively unique aspects: (1) the previously underappreciated role played by the home country governments of MNEs as an institutional force, (2) the challenge of going abroad in the absence of significantly superior technological and managerial resources, and (3) the rapid adoption of (often high-profile) acquisitions as a primary mode of entry. Overall, this article argues that these three relatively unique aspects of emerging multinationals from China will have significant ramifications for future theory building and empirical efforts of the global strategy research community. Copyright © 2012 Strategic Management Society.

Catch-up strategies in the Indian auto components industry: Domestic firms’ responses to market liberalization

Abstract: Market liberalization in emerging-market economies and the entry of multinational firms spur significant changes to the industry/institutional environment faced by domestic firms. Prior studies have described how such changes tend to be disruptive to the relatively backward domestic firms, and negatively affect their performance and survival prospects. In this paper, we study how domestic supplier firms may adapt and continue to perform, as market liberalization progresses, through catch-up strategies aimed at integrating with the industry's global value chain. Drawing on internalization theory and the literatures on upgrading and catch-up processes, learning and relational networks, we hypothesize that, for continued performance, domestic supplier firms need to adapt their strategies from catching up initially through technology licensing/collaborations and joint ventures with multinational enterprises (MNEs) to also developing strong customer relationships with downstream firms (especially MNEs). Further, we propose that successful catch-up through these two strategies lays the foundation for a strategy of knowledge creation during the integration of domestic industry with the global value chain. Our analysis of data from the auto components industry in India during the period 1992–2002, that is, the decade since liberalization began in 1991, offers support for our hypotheses.

Innovation and Foreign Ownership

Abstract: 1 Many have argued that this is because multinationals transfer superior technologies and organizational practices—in the form of new product and process innovation—to their foreign subsidiaries. 2 However, since the most prevalent form of multinational entry is through acquisition (89 percent of FDI flows in developed countries—Barba Navaretti and Venables 2004), rather than through greenfield investment, their superior performance could be due to the selection of higher-performing domestic firms. To date, little is known about the economic determinants of which domestic firms are selected to become foreign subsidiaries and the extent to which newly acquired subsidiaries increase their productivity by innovating—introducing technologies that are new to that firm. In this article, we use a unique panel dataset to analyze both the selection and innovation decisions of multinational firms. We propose a new mechanism to explain how these decisions are jointly determined, highlighting how the market access provided by multinationals creates incentives for subsidiary innovation and, hence, acquisition. We argue that one cannot fully understand the relationship between for

Foreign direct investment strategies by developing country multinationals: A diagnostic model for home country effects

Abstract: We explore how home country conditions affect outward foreign direct investment (OFDI) strategies (scale, timing, location) employed by developing country multinational corporations (DMNCs). Extending from the springboard and LLL (leverage, linkage, and learning) perspectives, we illustrate that DMNCs rely on their home base during their internalization process in a unique fashion compared with traditional multinationals due to their well-established strengths at home and competitive weaknesses overseas. Our survey of 153 DMNCs from China shows that, beyond the host country impacts that have been widely studied, DMNCs' overseas investment strategies are influenced by home country environment parameters, including economic growth, perceived institutional hardship, competitive pressure, and by their home country operational characteristics, including inward internationalization, innovation orientation, and business development stage.

Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters

Abstract: This paper examines income shifting of U.S. multinational companies over the past two decades. Domestic and foreign policy makers are increasingly concerned with the effect of income shifting on dwindling tax revenues, however, extant research on income shifting by U.S. multinational enterprises is mixed. We address the disconnect between the academic literature and the policy maker’s perceptions by examining the extent of multijurisdictional income shifting by U.S. multinational companies. We directly address conflicting results in extant literature and show that using either multiperiod proxies or instrumental variables overcomes weaknesses of annual proxies in this setting. Our tests show that U.S. companies have become more active at shifting income out of the United States as the regulatory costs of shifting have changed. Holding tax rate differences between U.S. and foreign jurisdictions constant, our empirical estimates suggest that our sample of 380 corporations with low average foreign tax rates collectively shifts approximately $10 billion of additional income out of the United States annually during 2005–2009 relative to 1998–2002 due to varying regulatory costs of shifting.

Home Country Tax System Characteristics and Corporate Tax Avoidance: International Evidence

Abstract: We examine whether three tax system characteristics—required book-tax conformity, worldwide versus territorial approach, and perceived strength of enforcement—impact corporate tax avoidance across countries after controlling for firm-specific factors previously shown to be associated with tax avoidance (i.e., performance, size, operating costs, leverage, growth, the presence of multinational operations, and industry) and for other cross-country factors (i.e., statutory corporate tax rates, earnings volatility, and institutional factors). We find that, on average, firms avoid taxes less when required book-tax conformity is higher, a worldwide approach is used, and tax enforcement is perceived to be stronger. However, the relations between tax avoidance and all three tax systems characteristics are contextual and depend on the extent to which management compensation comes from variable pay, including bonuses, stock awards, and stock options. Data Availability: Data are available from sources ident...

CSR and the Debate on Business and Human Rights: Bridging the Great Divide

Abstract: Human rights have not played an overwhelmingly prominent role in CSR in the past. Similarly, CSR has had relatively little influence on what is now called the "business and human rights debate." This contribution uncovers some of the reasons for the rather peculiar disconnect between these two debates and, based on it, presents some apparent synergies and complementarities between the two. A closer integration of the two debates, as it argues, would allow for the formulation of an expansive and demanding conception of corporate human rights obligations. Such a conception does not stop with corporate obligations "merely" to respect human rights, but includes an extended focus on proactive company involvement in the protection and realization of human rights. In other words, the integration of the two debates provides the space within which to formulate positive human rights obligations for corporations.

Are U.S. Multinational Corporations Becoming More Aggressive Income Shifters

Abstract: This paper examines income shifting of U.S. multinational companies over the past two decades. Domestic and foreign policymakers are increasingly concerned with the effect of income shifting on dwindling tax revenues, however, extant research on income shifting by U.S. multinational enterprises is mixed. We address the disconnect between the academic literature and the policymaker’s perceptions by examining the extent of multijurisdictional income shifting by U.S. multinational companies. We directly address conflicting results in extant literature and show that using either multi-period proxies or instrumental variables overcome weaknesses of annual proxies in this setting. Our tests show that U.S. companies have become more active at shifting income out of the U.S. as the regulatory costs of shifting have changed. Holding tax rate differences between U.S. and foreign jurisdictions constant, our empirical estimates suggest that our sample of 380 corporations with low average foreign tax rates collectively shift approximately $10 billion of additional income out of the U.S. annually during 2005-2009 relative to 1998-2002 due to varying regulatory costs of shifting.

CSR-Based Political Legitimacy Strategy: Managing the State by Doing Good in China and Russia

Abstract: The state is a key driver of corporate social responsibility across developed and developing countries But the existing research provides comparatively little knowledge about: (1) how companies strategically manage the relationship with the state through corporate social responsibility (CSR); (2) how this strategy takes shape under the influence of political institutions Understanding these questions captures a realistic picture of how a company applies CSR to interacting with the state, particularly in countries where the state relationship is critical to the business operation This article draws on political legitimacy as a useful concept to directly address both strategic and politically embedded natures of CSR This work extends the currently under-specified political implication of the strategic view of CSR and provides fresh insights to the political legitimacy research by specifying a typology of CSR-based legitimacy strategies and its contextual variation China and Russia are the focal settings A qualitative analysis of business–state interaction cases is done using a database that contains the majority of CSR reports published in Chinese and Russian as the end of 2009 As a result, this paper identifies four qualitatively different types of CSR-based political legitimacy strategies and reveals how the adoption of these strategies differs across Chinese companies, Russian companies, and multinational corporations

Multinational enterprises and climate change: Exploring institutional failures and embeddedness

Abstract: This paper explores how climate change affects multinational enterprises (MNEs), focusing on the challenges they face in overcoming liabilities and filling institutional voids related to the issue. Climate change is characterized by institutional failures, because there is neither an enforceable global agreement nor a market morality. Climate change is also a distinctive international business issue, as its institutional failures materialize differently in different countries. As governments are still highly involved, MNEs need to consider carefully their strategies to cope with non-market forces, including their embeddedness in multiple institutional settings. Using some illustrative examples of MNE responses to climate-related components in stimulus packages, we explore MNEs’ balancing act concerning their institutional embeddedness (or lack thereof) in home, host and supranational contexts as input for further research on the dynamics of MNE activities in relation to climate change.

A new perspective on the regional and global strategies of multinational services firms

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.

Weak Coffee: Certification and Co-Optation in the Fair Trade Movement

Abstract: The sociological literature on social movement organizations (SMOs) has come to recognize that under neoliberal globalization many SMOs have moved from an emphasis on the state as the locus of change toward a focus on corporations as targets. This shift has led some SMOs to turn to forms of market-based private regulatory action. The use of one such tactic—voluntary, third-party product certification—has grown substantially, as SMOs seek ways to hold stateless firms accountable. This article explores the case of the international fair trade movement, which aims to change the inequitable terms of global trade in commodities for small farmers, artisans, and waged laborers. Drawing from interviews with a range of fair trade participants, document analysis, and media coverage, the article describes fair trade's growing relationship with multinational coffee firms, particularly Starbucks and Nestle. It explores intra-movement conflicts over the terms for and the effects of corporate participation in fair trade, and illuminates tensions between conceptualizations of fair trade as movement, market, and system. The article makes two arguments. First, while fair trade has succeeded partially in reembedding market exchange within systems of social and moral relations, it has also proved susceptible to the power of corporate actors to disembed the alternative through a process of movement co-optation. Second, it argues that co-optation takes a unique form in the context of social movements whose principal tools to achieve social change are certification and labeling: it occurs primarily on the terrain of standards, in the form of weakening or dilution.

Corporate Innovation and Sustainable Community Development in Developing Countries

Abstract: The role of multinational corporations (MNCs) in fostering or undermining development within poor communities in developing countries has been a subject of intensive debate within academic and practitioner circles. MNCs are not only considered an obstacle to development but also as sources of solutions to some of the pressing social and environmental problems facing these communities. This article reviews the way in which companies frame (a) sustainable community development, and (b) their engagements in the community. It then considers the implications of both for sustainable community development and poverty alleviation in developing countries. The article then proposes an agenda for future research centering on how corporations innovate in their governance roles and the conditions in which community development innovations are created, take shape, and are put into practice. The article concludes with an introduction to the other articles presented in this special issue highlighting also their main cont...

A Comparison of the Tax-motivated Income Shifting of Multinationals in Territorial and Worldwide Countries

Abstract: This paper tests for differences in the tax-motivated income shifting behaviors of multinationals subject to different systems of taxing foreign earnings. I find that multinationals subject to territorial tax regimes shift more income than those subject to worldwide tax regimes, but that the difference in shifting is not statistically different when the worldwide firms can defer repatriation of the shifted income. I also find that the difference in shifting is greater when the multinational is cash-constrained in its home country. In additional tests, I find that worldwide firms bear the dead-weight cost of having cash trapped in foreign subsidiaries while territorial firms do not.

Frugal and reverse innovation - Literature overview and case study insights from a German MNC in India and China

Abstract: As the world is shifting its attention towards emerging giants like India and China, the big Western multinational companies [MNCs] are trying to get their foothold in this market. Instead of customizing the western world products to local markets, these companies are increasingly developing products from scratch for the local consumers. They are engaging in frugal & reverse innovations, by developing affordable products and solutions with “good enough” functionalities and minimum frills, and later on, introducing them to the developed countries. This paper focuses on how multinational corporations [MNCs] are establishing themselves in the emerging markets and their innovation strategies. The paper initially differentiates between frugal & reverse innovation and goes on to analyze the practices of a German MNC. The paper concludes that end to end localization, core value identification & a healthy portfolio mix of both kinds of innovations is necessary for success in emerging markets.