Showing papers on "Multinational corporation published in 2015"

Internationalisation in Industrial Systems — A Network Approach

Abstract: The theme of the book suggests that international interdependence between firms and within industries is of great and increasing importance. Analyses of international trade, international investments, industrial organisation and international business behaviour attempt to describe, explain and give advice about these interdependencies. The theoretical bases and the level of aggregation of such analyses are naturally quite varied.

Firm Exports and Multinational Activity Under Credit Constraints

Abstract: We provide firm-level evidence that credit constraints restrict international trade and affect the pattern of multinational activity. We show that foreign affiliates and joint ventures in China have better export performance than private domestic firms in financially more vulnerable sectors. These results are stronger for destinations with higher trade costs and not driven by firm size or other sector characteristics. Our findings are consistent with multinational subsidiaries being less liquidity constrained because they can access foreign capital markets or funding from their parent company. They further suggest that FDI can alleviate the impact of domestic financial market imperfections on trade.

How do firms comply with international sustainability standards? Processes and consequences of adopting the global reporting initiative.

Abstract: This paper addresses the issue of the influence of global governance institutions, particularly international sustainability standards, on a firm’s intra-organizational practices. More precisely, we provide an exploratory empirical view of the impact of the Global Reporting Initiative (GRI) on a multinational corporation’s corporate social responsibility (CSR) management practices. We investigate standard compliance by comparing the stated intention of the use of the GRI with its actual use and the consequent effects within the firm. Based on an in-depth case study, our findings illustrate the processes and consequences of the translation of the GRI within the organization. We show that substantive standard adoption can lead to unintended consequences on CSR management practices; specifically it can influence the management structure and CSR committee function; the choice of CSR activities, the relationships between subsidiaries, the temporal dimension of CSR management and the interpretation of CSR performance. We also highlight the need to look at the relationship dynamics (or lack of) between standards. Finally, we illustrate and discuss the role of reporting and its influence on management in order to better understand the internal issues arising from compliance with standards.

Relationship Between Sustainable Development and Financial Performance: International Empirical Research

Abstract: The aim of this paper is to clarify the relationship between companies' sustainable behavior and their financial performance (FP), which has been studied for several years without reaching a consensus on the effect and the direction of it Hypotheses are tested for an unbalanced sample of 1960 multinational non-financial listed companies from 25 countries and one administrative region for the period between 2002 and 2010 Due to the use of an international database and the differences among countries, it is possible to observe divergence between institutional settings For this reason, a corporate governance system (Anglo-Saxon, Germanic, Latin and Asian) is used as characteristic of the macro-environment Results obtained via the generalized method of moments estimator allow us to support the existence of a positive bidirectional relationship between corporate social responsibility and FP, evidencing the existence of a synergistic circle The use of market value indicated that investors are able to identify economic, social and environmental practices generating a positive effect on FP These relationships differ between corporate governance systems, due to the specific characteristics of each system Findings are robust for each sustainable sub-index (society, human rights, environmental and board) Copyright © 2013 John Wiley & Sons, Ltd and ERP Environment

The new mission for multinationals

Abstract: Not long ago, many observers worried that ever-expanding multinationals many of which had revenues exceeding the gross domestic products of smaller countries were going to take over the world. But as globalization marches onward, powerful local companies are increasingly winning out against multinational competitors. This is especially true in emerging markets, where multinationals are assumed to enjoy superiority and CEOs are counting on growth. In China, the ice cream, laundry detergent and appliance markets provide interesting examples of this phenomenon. Despite the presence of multinationals in these markets, the market-share leaders are local companies. A similar pattern is being repeated in other emerging markets. The authors note, however, that in some cases multinationals have been able to resist the market gains of local competition, whether through first-mover advantages or by acquiring the leading local players and nurturing their local identity and strengths. For decades, multinationals were able to make good returns by acting as efficient global conduits for assets that were difficult to transfer, including intangibles such as product designs, technologies, management systems and company cultures. Transfers within the multinational company were more efficient than obtaining those assets through open-market transactions. However, a number of forces have been eroding that advantage. First, in the drive to reduce costs, established multinationals increasingly focused on activities with the highest returns. This meant that lower-value activities were outsourced and often offshored to emerging economies, creating global markets in which local companies can also source components and services. The result is that once-closed value chains have been opened up, enabling local players to source plug-and-play modules that can be combined to create products very similar and sometimes superior to those of foreign multinationals. If multinationals are to succeed against local competition in emerging markets, the authors write, they need to move beyond the credo of integrate globally and adapt locally. They will need to create new advantages in target markets by integrating their businesses with the local commercial networks and the society itself. They will need to help shape local markets, rather than just adapt to them

Utilizing the broader agency perspective for studying headquarters–subsidiary relations in multinational companies

Abstract: The nature of global business today increases the complexity of multinational companies and highlights the challenges of managing headquarters–subsidiary (HQ–Sub) relationships. We identify key unresolved issues in HQ–Sub relations including closing the gap between headquarters’ expectations and subsidiary performance, managing the nested hierarchical relationships across multiple organizational layers, and aligning these relationships across diverse subunits embedded in different social contexts. We propose that agency theory, particularly its more recent progressions, can advance our understanding of these issues and we offer a perspective to guide such research. We discuss several research implications of the static bilateral, static multilateral, dynamic, and social and contextual streams of agency theory.

International Universities: Misunderstandings and Emerging Models?.

Abstract: Internationalization has transformed higher education institutions and systems but there is much confusion as to what an international, binational, transnational, cosmopolitan, multinational, or gl...

The New Internalization Theory and Multinational Enterprises from Emerging Economies: A Business History Perspective

Abstract: The recent surge of emerging-economy multinational enterprises (EMNEs) has prompted a debate on whether existing international business theory—particularly internalization theory—can accommodate this phenomenon. Our view is that no new, EMNE-centric theory is required to study EMNEs. Using historical evidence, we argue that “new” internalization theory is sufficient to address the complexity of EMNEs, and we illustrate our argument with examples of ten successful EMNEs from Asia and the Americas. We further argue that a business history lens can illuminate the behavior of developed-economy multinationals. We show how management scholars can advance their research agendas by engaging with business history and how business historians can use internalization theory to analyze the history of multinationals.

Political Risk, Democratic Institutions, and Foreign Direct Investment

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.

Intrafirm trade and vertical fragmentation in U.S. multinational corporations

Abstract: Using firm-level data, we document two new facts regarding intrafirm trade and the activities of the foreign affiliates of U.S. multinational corporations. First, intrafirm trade is concentrated among a small number of large affiliates within large multinational corporations; the median affiliate ships nothing to the rest of the corporation. Second, we find that the input-output coefficient linking the parent's and affiliate's industries of operation—a characteristic commonly associated with production fragmentation— is not related to a corresponding intrafirm low of goods.

Barriers to knowledge seeking within MNC teams: Which differences matter most?

Abstract: Do international or non-international differences between members matter most for multinational corporation (MNC) teams? We consider two types of international differences, arising from geographic locations and national origins, and two types of non-international differences, arising from structural affiliations and demographic attributes. Examining the barriers to knowledge seeking between MNC team members, we argue that whether international or non-international differences create greater barriers depends on whether they are position-based or person-based. Using the Social Relations Model to analyze 13,616 dyadic interactions among 2090 members of 289 teams in a large MNC, we find that, for both international and non-international differences, those that are position-based (i.e., geographic and structural differences) created greater barriers than those that are person-based (i.e., nationality and demographic differences). In addition, familiarity from a prior team reduced the barriers created by international and non-international differences that are position-based more than those that are person-based. We discuss the implications of our study for understanding the micro-foundations of knowledge flows in MNCs.

Corporate social responsibility in global health: an exploratory study of multinational pharmaceutical firms

Abstract: As pharmaceutical firms experience increasing civil society pressure to act responsibly in a changing globalized world, many are expanding and/or reforming their corporate social responsibility (CSR) strategies. We sought to understand how multinational pharmaceutical companies currently engage in CSR activities in the developing world aimed at global health impact, their motivations for doing so and how their CSR strategies are evolving. We conducted a small-scale, exploratory study combining (i) an in-depth review of publicly available data on pharmaceutical firms’ CSR with (ii) interviews of representatives from 6 firms, purposively selected, from the highest earning pharmaceutical firms worldwide. Corporate social responsibility differed for each firm particularly with respect to how CSR is defined, organizational structures for managing CSR, current CSR activities, and motivations for CSR. Across the firms studied, the common CSR activities were: differential pharmaceutical pricing, strengthening developing country drug distribution infrastructure, mHealth initiatives, and targeted research and development. Primary factors that motivated CSR engagement were: reputational benefits, recruitment and employee satisfaction, better rankings in sustainability indices, entrance into new markets, long-term economic returns, and improved population health. In terms of CSR strategy, firms were at different points on a spectrum ranging from philanthropic donations to integrated systemic shared value business models. CSR is of increasing importance for multinational pharmaceutical firms yet understanding of the array of CSR strategies employed and their effects is nascent. Our study points to the need to (i) develop clearer and more standardized definitions of CSR in global health (2) strengthen indices to track CSR strategies and their public health effects in developing countries and (iii) undertake more country level studies that investigate how CSR engages with national health systems.

The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes

Abstract: We apply insights from “new, new” trade theory to explain a puzzling decline in US firm antidumping (AD) filings in an era of persistent foreign currency undervaluations and increasing import competition. Firms exhibit heterogeneity both within and across industries regarding foreign direct investment (FDI). We propose that firms making vertical or resource-seeking investments abroad will be less likely to file AD petitions, and firms are likely to undertake vertical FDI in the context of currency undervaluation. Hence, we argue, the increasing vertical FDI of US firms makes trade disputes far less likely. We use firm-level data to examine the universe of US manufacturing firms and find that AD filers generally conduct no intrafirm trade with filed-against countries. We also find that persistent currency undervaluation is associated over time with increased vertical FDI and intrafirm trade by US multinational corporations (MNCs) in the undervaluing country. Among larger US MNCs, the likelihood of an AD filing is negatively associated with increases in intrafirm trade. In the context of currency undervaluation, we confirm the existing finding that undervaluation is associated with more AD filings. We also find, however, that high levels of intrafirm imports from countries with undervalued currencies significantly decrease the likelihood of AD filings. Our study highlights the centrality of firm heterogeneity in international trade and investment in understanding political mobilization over international economic policy.

The rise and fall of stand-alone social reporting in a multinational subsidiary in Bangladesh:a case study

Abstract: Purpose -The main aim of this paper is to examine the underlying drivers for the development and subsequent discontinuation of stand-alone corporate social responsibility (CSR) reporting in a multinational subsidiary in Bangladesh. Design/Methodology/Approach - The research approach employed for this purpose is a case study using evidence from a series of in depth interviews conducted during the period 2002-2010. Interview data is supplemented by examining other sources of information including annual reports, stand-alone social reports and relevant newspaper articles during the study period. Findings - It appears that the stand-alone CSR reporting process was initiated to give the subsidiary a formal space in which to legitimise its activities in Bangladesh where both tobacco control regulation and a strong anti-tobacco movement were gaining momentum. At the start of the process in 2002 corporate interviewees were very receptive of this initiative and strongly believed that it would not be a one off exercise. However, in the face of subsequent significant national policy shifts concerning tobacco control, irreconcilable stakeholder demands and increasing criticism of the CSR activities of the organisation at home and abroad the process was brought to an abrupt end in 2009. Research Limitations/Implications - The paper has a number of implications for policy makers concerning the future prospects for stand-alone social/sustainability reporting as a means of enhancing organisational transparency and accountability. In addition the paper discusses a number of theoretical implications for the development of legitimacy theory. Originality/value - Using the lens of legitimacy the paper theorises the circumstances leading to the initiation and subsequent cessation of CSR reporting in the organisation concerned. As far as we know this is the first study which theorises and provides significant fieldwork based empirical evidence regarding the discontinuation of stand-alone social reporting by a multinational company operating in a developing country. Thus, it extends previous desk-based attempts at using legitimacy theory to explain a decrease (or discontinuity) in CSR disclosures by de Villiers and van Staden (2006) and Tilling and Tilt (2010).

Selective attention and the initiation of the global knowledge-sourcing process in multinational corporations

Abstract: Multinational corporations (MNCs) frequently use their foreign subsidiaries to identify new opportunities to access external knowledge. This article builds on the attention-based view to examine how selective attention – the focus on certain issues or answers at the exclusion of others – works in the global knowledge-sourcing process in MNCs. The results reveal an intriguing paradox: while MNCs may establish foreign subsidiaries far from headquarters to identify diverse, novel knowledge, and overcome local search, headquarters’ decision makers tend to favor opportunities that are market proven and simply confirm what the MNC already knows. Subsidiary managers’ pre-selling and selling efforts, however, can play a pivotal role in overcoming that bias. This study combines detailed qualitative data with access to a proprietary database on 137 external knowledge-sourcing opportunities in one of the world’s largest MNCs in the telecommunications sector.

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).

Globalization of R&D and open innovation: linkages of foreign R&D centers in India

Abstract: In the new form of Globalization of R&D, Multinational (MNEs) firms have established their R&D units in emerging Asian countries, particularly in India and China. In the 1980s MNEs located their R&D units in their country of origin and were very reluctant to go offshore beyond triad (USA, Western Europe and Japan). However, in the last decade there is a growing trend of MNEs going emerging markets such as India and China. Beside this, sourcing knowledge from globally dispersed knowledge hubs is also one of the major motives of this emerging trend. These foreign R&D centers have developed linkages with the other actors of the host economy to build their assets. This study has investigated the linkage patterns of foreign firms in India from an in-house developed database. The ICT sector is considered as a test case to investigate the linkages of foreign firms with the Indian entities. The study observed that most of the foreign firms are collaborating with the other foreign firms located in India. Next to the foreign firms, Indian firms are preferable compared to university or government research institutes. It shows that industry-academia linkages are quite weak in India. Foreign firms’ embededness with the local innovation system is only by linking with the local firms. Although, India has very strong government research laboratories, these are not playing important role in collaborating with the foreign firms. From the policy perspective, industry - academia linkages needs to be strengthened. MNEs enter markets such as India not only for potential markets and ‘cheap’ skilled human resources but also for knowledge and technology base emerging in the knowledge hubs of these countries. Also, most of the collaboration happens in peripheral (joint development) rather than core domain (joint R&D). Many of the firms are going for ‘Open Innovation’ mode to build up their assets in India.

Bonus Payments and Reference Point Violations

Abstract: We investigate how bonus payments affect the satisfaction and performance of managers in a large multinational company. We find that falling behind a natural reference standard for a fair bonus payment (a “reference point violation”) reduces satisfaction and subsequent performance. The effects are mitigated if information about one’s relative standing toward the reference point is withheld. A model and a laboratory experiment provide complementary insights and additional robustness checks. This paper was accepted by Uri Gneezy, behavioral economics.

Royal Dutch Shell in Nigeria: Where Do Responsibilities End?

Abstract: This case study discusses the scope of responsibilities and the basis of legitimacy of multinational corporations (MNC) in a complex operating environment. In January 2013 a precedent was set when Shell was held liable in The Hague for oil pollution in the Niger Delta. The landmark ruling climaxed the ongoing dispute over the scope of Shell’s responsibilities for both the company’s positive and negative impact. Shell’s was considered a forerunner in corporate social responsibility and had even assumed public responsibilities in a context of a public responsibility void. However, the company remained a regular target of civil society activism and legal proceedings concerned with malpractice. The court case attracted international attention for its novelty and increasing media and civil society pressure required immediate action. How can Shell respond to this negative publicity to keep its license to operate? What is the scope of the company’s responsibilities in such a controversial human rights context? Students are expected to discuss these questions going beyond a simple moralistic or liability thinking. They are encouraged to take into account the complex structural processes that connect persons and institutions in very different social and geographical positions. The experiences of Shell are an excellent case in point since attention is drawn to the background conditions of globally operating companies, in which the isolation of perpetrators based on causality is not realistic. The case also reveals the particular challenges, which MNCs face in the context of increasing demands to take on public responsibilities while respecting their economic mandate.

Talent management in Russian companies: domestic challenges and international experience

Abstract: The study investigates talent management practices in Russian and foreign companies and their influence on a company's performance. In our work, foreign companies are foreign-owned companies (multinational or global) that operate in the Russian market and their headquarters are located outside the Russian Federation. Attention is paid to the analysis of the factors that support talent management implementation. As the results of the research are based on a comparative analysis of differences and peculiarities in talent practices in Russian and foreign companies, the paper explores and provides a number of ideas and conclusions about talent management elaboration, realization and talent practices improvement in the Russian context. Our data show that talent management practices are influenced by a number of factors that are different, in parts, in Russian and foreign companies. Supplementary analysis also suggests that the positive connection between talent management efforts and a company's performance ca...

International Cultural Diversification and Corporate Social Performance in Multinational Enterprises: The Role of Slack Financial Resources

Abstract: Multinational enterprises face numerous challenges due to the difficulties of operating in various markets and the usual cultural differences between the countries. As opposed to local firms, multinational firms are usually exposed to global pressure groups both in home and host countries. In addition, in order to gain license to operate in foreign markets, they are required to be regarded as socially responsible agents that contribute to sustainable development. Finally, apart from the moral reasons, high levels of corporate social performance will lead multinational enterprises to increase their reputation and legitimacy in the areas where they have operations and consequently increase their revenues and levels of financial performance. Traditionally, the literature has focused on studying the relationship between international diversification and corporate results, with very few studies on the effects of internationalisation on firms’ social performance. The aim of this study is to analyse the influence of international cultural diversification of a multinational enterprise on its corporate social performance and to investigate the moderating effect of slack financial resources on this relationship. The present empirical analysis is based on a sample of 113 multinational enterprises from the United States that operate in the chemical, energy and industrial sectors. The results demonstrate that international cultural diversification is positively correlated with the social performance of firms and that a high level of slack financial resources leads multinational enterprises operating in markets with different cultural profiles to improve their corporate social performance. The implications for academia, managers and policy makers are discussed.

The Effect of Tax and Nontax Country Characteristics on the Global Equity Supply Chains of U.S. Multinationals

Abstract: We examine the global equity supply chains of U.S. multinationals to explore how tax and nontax country characteristics affect whether firms use foreign holding companies and where they locate them. We find that U.S. multinationals supply equity from headquarters to their foreign operating companies through foreign holding companies located in countries that lightly tax equity distributions. We also find that foreign holding companies tend to be located in countries with less corruption and investment risk than the countries in which the operating companies they own are located. In addition, we provide empirical evidence that the Netherlands, a well-known location for international tax planning, is a particularly popular site for foreign equity holding companies. Our findings contribute to a nascent literature that examines ownership chains in multinational companies and a larger literature on subsidiary location decisions for multinationals. The findings also provide empirical evidence that could be useful to governments in developed countries as they attempt to reform international tax policy.

The pitfalls of using foreign direct investment data to measure Chinese multinational enterprise activity.

Abstract: The growth of Chinese multinational enterprises (MNE) has stimulated great interest in their outward foreign direct investment (FDI) strategies, particularly among academics in business and management studies. To date, however, serious methodological shortcomings plague empirical studies in these disciplines. Specifically, the vital issue of how Chinese MNEs use and route FDI via tax havens and offshore financial centres is not adequately dealt with. These practices have created large geographical, industrial composition and volume biases in Chinese outward FDI data. Using a sample of 100 Chinese MNEs, we illustrate how the use of tax havens and offshore financial centres has created these biases, and examine the implications for understanding Chinese MNE activity.

Responsible Tax as Corporate Social Responsibility The Case of Multinational Enterprises and Effective Tax in India

Abstract: Anecdotal evidence often suggests that multinational enterprises (MNEs) operating in developing countries “exploit their multinationality” to avoid paying taxes to host governments. This article ex...