Showing papers on "Multinational corporation published in 2017"

The Tortuous Evolution of the Multinational Corporation

Abstract: Two hypotheses seem to be forming in the minds of executives from international firms that make the extent of their firm's multinationality of real interest. The first hypothesis is that the degree of multinationality of an enterprise is positively related to the firm's long-term viability. The second hypothesis stems from the proposition that the multinational corporation is a new kind of institution—a new type of industrial social architecture particularly suitable for the latter third of twentieth century. Polycentric firms are those which, by experience or by the inclination of a top executive, begin with the assumption that host-country cultures are different and that foreigners are difficult to understand. Executives can draw their firm's profile in ethnocentric (E), polycentric (P) and geocentric (G) (EPG) dimensions. The costs of ethnocentrism are ineffective planning because of a lack of good feed-back, departure of the best men in the subsidiaries, fewer innovations, and an inability to build a high calibre local organization.

Escaping the iron cage: Liabilities of origin and CSR reporting of emerging market multinational enterprises

Abstract: This article examines the link between the condition of institutional voids in emerging markets and the use of the practice of corporate social responsibility (CSR) reporting by emerging market multinational enterprises (EM-MNEs). Based on neo-institutional theory and in light of the specificity of emerging markets, we propose a positive relationship between institutional voids and CSR reporting. Home-country institutional voids push companies to internationalize as a way to escape the institutional constraints and inefficiencies in their own markets, but at the same time create legitimacy challenges for these companies abroad. In particular, EM-MNEs from less institutionally developed countries are likely to face liabilities of origin – negative perceptions in host countries about these firms’ willingness and ability to conduct legitimate business. CSR reporting is an effective strategy to overcome such liabilities and barriers to legitimation as it conveys to host countries and global stakeholders alignment with global meta-norms and expectations. Internationalization, listing on developed country stock exchanges, and time, further magnify EM-MNEs’ legitimacy challenges and thus the use of CSR reporting to mitigate them. Our hypotheses are supported in a longitudinal study of 157 of the largest EM-MNEs ranked by the United Nations Conference on Trade and Development (UNCTAD) between 2004 and 2011.

Adapting the Uppsala model to a modern world: Macro-context and microfoundations

Abstract: Vahlne and Johanson (2017) present the multinational business enterprise (MBE) as a new form of cross-border organization that supersedes the multinational enterprise (MNE). They offer a ‘general model of the evolution of the MBE,’ arguing that the MBE evolves through ongoing internationalization processes by proactively and entrepreneurially engaging in business exchange rather than production. In this counterpoint, we focus on two critical dimensions absent from Vahlne and Johanson’s (2017) arguments: the impact of the digital context as a defining macro-level feature of our modern world, and the role of the individual as a core microfoundation of the internationalization process. We argue that a robust theory of the evolution of the modern firm must necessarily account for these dimensions. To explicate these impacts, we draw from a range of complementary research streams across international business, entrepreneurship, and international entrepreneurship. We identify research implications for scholars seeking to further advance the Uppsala model of internationalization and those who will use the revised model to study the modern multinational.

Uncovering Offshore Financial Centers : Conduits and Sinks in the Global Corporate Ownership Network

Abstract: Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identification of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of five countries – the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland – canalize the majority of corporate offshore investment as conduit-OFCs. Each conduit jurisdiction is specialized in a geographical area and there is significant specialization based on industrial sectors. Against the idea of OFCs as exotic small islands that cannot be regulated, we show that many sink and conduit-OFCs are highly developed countries.

Knocking on Tax Haven's Door: Multinational Firms and Transfer Pricing

Abstract: This paper analyzes the transfer pricing of multinational firms. Intrafirm prices may systematically deviate from arm’s-length prices for two motives: pricing to market and tax avoidance. Using Fre...

Corporate Social Responsibility and Governance: Information Disclosure in Multinational Corporations

Abstract: Multinational corporations (MNCs) are facing increasing pressure on two fronts – the demand for more transparency and disclosure and the need to implement good corporate governance practices This paper develops several testable hypotheses that address these issues based on agency theory and stakeholder management approach arguments As such, the relationship between corporate social responsibility (CSR) programs and firm-level governance structures are discussed CSR is measured using Transparency International's study on the disclosure practices of the world's largest MNCs Links between board size, board independence, and duality are explored The results indicate that board independence and board size are strongly and positively related to several CSR practices In addition, extractive industries have a significant and positive impact on the level of CSR activities Policy and managerial implications related to these findings are also discussed Copyright © 2017 John Wiley & Sons, Ltd and ERP Environment

Uncovering Offshore Financial Centers: Conduits and Sinks in the Global Corporate Ownership Network

Abstract: Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identification of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of five countries -- the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland -- canalize the majority of corporate offshore investment as conduit-OFCs. Each conduit jurisdiction is specialized in a geographical area and there is significant specialization based on industrial sectors. Against the idea of OFCs as exotic small islands that cannot be regulated, we show that many sink and conduit-OFCs are highly developed countries.

Bricks and Mortar in a Borderless World: Globalization, the Backlash, and the Multinational Enterprise

Abstract: Research summary Globalization, increased interconnectedness, and deep integration resulted in significant increases in trade and FDI from 1989 through 2008. The recession marked the end of that trend and the rise of a broad-based opposition that has economic, social, and political components. This article explores the backlash, arguing that is driven by sociotropic perceptions. While globalization can be explained as a cyclical or structural phenomenon, I argue that technological change results in a networked global economy, the transition from a space of places to a space of flows, and increases the potential cost of devolution to the point where economic independence is no longer feasible. Nonetheless, I conclude that MNCs face a period of prolonged uncertainty and develop implications for firm strategy. Managerial summary Globalization entailed explosive growth in trade and FDI from 1989 through 2008. The decline in both since the recession and the strident backlash may indicate the end of this wave. The economic, political, and social components of the backlash are explored, and I argue that while the economic and political factors that gave rise to globalization longer exist, structural factors—networked MNCs, dispersion of technology, and complex global supply chains—increase the cost of devolution to the point where a return to independent national markets is not feasible. We are likely to be stuck with an international economy from which we can neither withdraw nor manage effectively, a prolonged period of angst and uncertainty. I conclude with scenarios and implications for multinational firms. Copyright © 2017 Strategic Management Society

Digital technology and marketing management capability: achieving growth in SMEs

Abstract: Purpose The purpose of this study is to evaluate the relationships between digital technology, tangible/intangible assets and marketing capabilities to gain more insight into the factors related to small- and medium-sized enterprises’ (SMEs’) growth in the UK. Based on the resource-advantage theory, this research addresses the question “to what extent does digital technology influence marketing capability which leads to companies’ growth?” Design/methodology/approach Data were gathered through 21 in-depth interviews with managers from different multinational organizations and six focus groups with employees. Findings The study identifies the two key components of digital technology as information quality and service convenience. In addition, the relationships between digital technology, tangible/intangible assets and marketing capabilities perform the significant role of facilitator of a company’s growth. Research limitations/implications The focus on UK SMEs limits the generalizability of the results. Further studies should be conducted in other sectors and country settings to examine the associations identified in the current study. Originality/value This study identifies the main impacts of digital technology on intellectual/physical assets. While managers and employees have specified that marketing capability is significant for organizations, there are a few other areas of concern with regard to consequences related to a company’s growth, competence and core competence, particularly in an SME’s setting.

Global Production with Export Platforms

Abstract: Most international commerce is carried out by multinational firms, which use their foreign affiliates both to serve the market of the host country and to export to other markets outside the host country. In this article, I examine the determinants of multinational firms’ location and production decisions and the welfare implications of multinational production. The few existing quantitative general equilibrium models that incorporate multinational firms achieve tractability by assuming away export platforms—that is, they do not allow foreign affiliates of multinationals to export—or by ignoring fixed costs associated with foreign investment. I develop a quantifiable multicountry general equilibrium model, which tractably handles multinational firms that engage in export platform sales and that face fixed costs of foreign investment. I first estimate the model using German firm-level data to uncover the size and nature of costs of multinational enterprise and show that the fixed costs of foreign investment are large. Second, I calibrate the model to data on trade and multinational production for twelve European and North American countries. Counterfactual analysis reveals that multinationals play an important role in transmitting technological improvements to foreign countries and that the pending Canada-EU trade and investment agreement could divert a sizable fraction of the production of EU multinationals from the U.S. to Canada.

Institutional Complementarity and Substitution as an Internationalization Strategy: The Emergence of an African Multinational Giant

Abstract: Research Summary: We examine the internationalization decisions made by one of Africa's most successful companies, South African Breweries, as it underwent a period of aggressive expansion. We see processes of both institutional complementarity and substitution at different phases and with different motives. At first it sought countries that played to its strength, namely the knowledge of doing business in environments of institutional uncertainty, but later it pursued an institutional diversification strategy whereby it attempted to minimize its institutional risk exposure. As it became larger, its aspirations increased too, and its over-exposure to emerging market institutional risk saw it engage in institutional substitution into advanced countries. Through this phased international process, it was able to develop its internal assets, and this enabled the moves into developed markets. Managerial summary: We demonstrate that firms can exploit their knowledge of ‘weak’ institutional settings and turn it into a source of advantage as they internationalize into locations with similar institutional ‘weaknesses.’ Using the case of one of Africa's most successful multinational enterprises, we illustrate the value gained from initially capitalizing upon institutional complementarity (utilizing the comparative advantage linked to institutional know-how) by exploiting the experience of the home country's environment into similar settings. Over time and through learning-by-doing, pressure arose to diversify the risk linked with over-exposure to institutional uncertainty and country risk, and this was associated with the process of institutional substitution into more advanced countries. We see emerging multinational learning and building its capabilities by leveraging its understanding of its home country institutional environment.

The role of local context in the cross-border acquisitions by emerging economy multinational enterprises

Abstract: This paper explores the role of local context in cross-border acquisitions by emerging economy multinational enterprises (EMNEs). It argues that the importance of local context has remained despite the increased global integration of the world economy. Hypotheses are tested using data on Indian acquisitions hosted in 70 countries over an eight-year period. Results, which are consistent across number and value of cross-border acquisitions, show that the local context in host countries offers contrasting benefits. Emerging economy multinational enterprises exploited these benefits by embedding in host countries through acquisitions. The acquisition strategy is conventional in the motives underpinning internationalization, but novel in its geographical clustering of host countries, and idiosyncratic owing to the EMNE's ability to draw on home country embeddedness. The paper develops theoretical implications and extends the concept of embeddedness, treating it as a series of internalization or quasi-internalization decisions across a variety of local contexts by multinationals.

Corporate sustainability assessments: MNE engagement with sustainable development and the SDGs

Abstract: The recent introduction of the Sustainable Development Goals (SDGs) calls for an understanding of how multinational enterprises (MNEs) engage with sustainable business practices and how the SDGs may be better implemented by the private sector. Through an examination of 112 MNEs operating in the region of the Association of South-East Asian Nations, this study focuses on evaluating sustainable business practices through the lens of a corporate sustainability assessment framework. The results show that headquarters commitments of MNEs to international sustainability standards and guidelines had a key influence on their sustainability practices. These commitments included the use of tools such as the materiality analysis to identify and prioritize sustainability issues of importance to the MNE and its stakeholders and reflects a focus at the local level of the subsidiary that was in alignment with the corporate strategies of company headquarters. The results of this exploratory study suggest that it is through the use of these international sustainability standards and guidelines (such as the Global Reporting Initiative standards) that a greater consideration and incorporation of SDGs within MNE practices can be achieved. These standards and guidelines are both well accepted and already adopted by MNEs, and have an important influence on what sustainability issues and goals they consider within their operations.

The home country of the MNE: The case of emerging economy firms

Abstract: Research on multinational enterprises that originate from emerging economies has highlighted the importance of the home country for firms’ strategies of internationalization. In this paper, we outline a simple analytical framework linking institutions and resource munificence in the home country to the domestic business eco-system in an emerging economy, and thereby to strategies of outward investments. Specifically, we argue that businesses interact with each other in their home economy, and these patterns of interactions influence strategies of internationalization as companies not only compete with each other, but share resources, coordinate actions and serve as each other’s role model. Strategies of outward investment thus reflect the competition and collaboration in their home country business eco-system.

A multiple criteria supplier segmentation using outranking and value function methods

Abstract: Suppliers play a key role in supply chain management which involves evaluation for supplier selection problem, as well as other complex issues that companies should take into account. The purpose of this research is to develop and test an integrated system, which allows qualifying providers and also supplier segmentation by monitoring their performance based on a multiple criteria tool for systematic decision making. This proposal consists in a general procedure to assess suppliers based mainly on exploiting all reliable databases of the company. Firstly, for each group of products, their evaluation criteria are defined collaboratively in order to determine their critical and strategic performance, which are then integrated with other criteria that are specific of the suppliers and represent relevant aspects for the company, also classified by critical and strategic dimensions. Two multiple criteria methods, compensatory and non-compensatory, are used and compared so as to point out their strengths, weaknesses and flexibility for the supplier evaluation in different contexts, which are usually relevant in the supply chain management. A value function approach is the appropriate method to qualify providers to be included in the panel of approved suppliers of the company as this process depends only on own features of the supplier. On the other hand, outranking methods such as PROMETHEE have shown greater potential and robustness to develop portfolios with suppliers that should be partners of the company, as well as to identify other types of relationships, such as long term contracts, market policies or to highlight those to be removed from their portfolio. These results and conclusions are based on an empirical research in a multinational company for food, pharmaceuticals and chemicals. This system has shown a great impact as it represents the first supplier segmentation proposal applied to industry, in which decision making not only takes into account opinions and judgements, but also integrates historical data and expert knowledge. This approach provides a robust support system to inform operative, tactical and strategic decisions, which is very relevant when applying an advanced management in practice.

Where to seek strategic assets for competitive catch-up? a configurational study of emerging multinational enterprises expanding into foreign strategic-factor markets

Abstract: Emerging multinational enterprises (EMNEs) often engage in strategic-asset-seeking foreign direct investment (FDI) for competitive catch-up. This study explores the linkages between an EMNE’s competitive scenario consisting of a configuration of its awareness-motivation-capability (AMC) conditions and the comparative institutional advantages of its strategic-asset-seeking destination. Our configurational analyses of Chinese FDIs in the technology-intensive industries of OECD countries reveal a taxonomy of four distinct asset-seeking strategies of EMNEs. Our findings shed novel insights into the strategic variations within EMNEs based on a theoretically and methodologically extended AMC framework. This study also extends the varieties of capitalism literature by addressing the implications of comparative institutional advantages for foreign entrants, rather than domestic incumbent firms.

Multinational Enterprises within Cultural Space and Place: Integrating Cultural Distance and Tightness–Looseness

Abstract: Prior research into the effects of cultural differences between multinational enterprises’ (MNEs’) home and host countries on expatriate staffing decisions in foreign subsidiaries has produced a la...

An Approach to Strategic Control in MNCs

Abstract: In this chapter the authors presents the results of their research on the changing nature of the strategic control process between the head office (HO) and subsidiaries. In their research the authors finds that multinational corporation (MNC) in mature businesses increasingly have to depend on "subtle mechanisms" for influencing the strategic direction of their subsidiaries. They suggest that the alternative to substantive control, that is, restricting the flow of strategic resources, is the creation of an organizational context. The task of creating an appropriate organizational context for strategic control is built on two sets of concepts. First, authors develop the notion that an organization is an aggregation of four orientations — cognitive, strategic, power, and administrative. Second, they identify the type of organizational mechanisms that managers can use to manipulate these four orientations. HO managers, in order to influence subsidiary strategy, should be sensitive to the use of both substantive controls and the organizational context as an approach to control.

Multinational enterprises, risk management, and the business and economics of peace

Abstract: Purpose The purpose of this paper is to reconceptualize how managers of multinational enterprises (MNEs) manage risk, particularly in fragile and/or conflict-affected areas of operation. The authors suggest that MNEs consider reducing risk at its source rather than trying to avoid or react to risks as they occur. By incorporating peacebuilding strategies, managers may not only reduce investment risk but also contribute to stability and prosperity in the communities where they operate, and gain a competitive advantage in doing so. Design/methodology/approach The authors show how firms can take a more holistic approach to working in conflict-affected areas. They do so by overlaying conceptualizations of risk with those of peacebuilding and then use case examples to illustrate how such actions work in practice. Findings Using a series of examples, the authors find that MNEs that incorporate peacebuilding frameworks in their risk calculations in complex settings tend to have a better understanding of local environments and how they affect firm operations and profitability. These same MNEs may hold a long-term advantage over international competitors that do not share the same understanding. Originality/value The authors argue that the study of relationships between international businesses and society in conflict-affected or fragile areas of operation is under-developed and tends to focus on negative (risk-aversion) aspects as opposed to positive (value-added) opportunities. This paper offers new ways in which these relationships can be reconceptualized. The authors’ main takeaway is that a peacebuilding approach does not require corporations to be arbitrators of peace at the expense of profit. Rather, it is instead a broader way to conceptualize and weigh risk when working in the world’s most challenging regions. This approach is more likely to be in the long-term interest of both the firm and the local society where the firm operates.

Openness, international champions, and the internationalization of Multilatinas

Abstract: In the 1990s Latin American countries abandoned their policies of import-substituting industrialization carried out through fully-owned state enterprises (SOEs). They opened their economies to international competition and privatized their SOEs. We argue that this pragmatic adaptation did not necessarily constitute a fundamental change in policies, long followed by some Latin American countries, of state intervention in the pursuit of nationalistic objectives, but is instead a continuation of these policies by other means. Specifically, to safeguard their autonomy, some Latin American states have selected and nurtured domestic firms to become multinational enterprises (MNEs). They have kept – and obtained – equity stakes in these national MNEs to influence them and to keep them out of the hands of foreigners. These policies explain the timing of the rise of Multilatinas and their, usually partial, state ownership.

Intra-stakeholder alliances in plant-closing decisions: a stakeholder theory approach

Abstract: This article discusses plant-closing decisions by multinational enterprises (MNEs) applying a stakeholder theory approach. In particular, we focus on the emergence of "intra-stakeholder alliances," that is, alliances among the various stakeholder groups of a specific corporation. We analyze the emergence of stakeholder alliances in reaction to MNEs' decisions to terminate production locally and discuss their influence on the outcomes of such decisions. Our research is inspired by two exceptional case studies of two multinational breweries that announced their decisions to close niche breweries in small towns in Italy and Belgium. In both cases, the initial decision was ultimately reversed through the actions of intra-stakeholder alliances. We combine insights from stakeholder theory and the social movement literature to analyze the action and influence of intra-stakeholder alliances in seven cases of plant-closing decisions. We conclude by formulating four general propositions that can provide guidance to MNE management in plant-closing decisions. Our findings extend managerial stakeholder theory, show how this approach can improve strategic management analysis, emphasize the importance of the relationships among (local) stake-holders in the (global) value-creation process, and shed light on the collective action and influence of intra-stakeholder alliances.

Multinational Oil Firms' CSR Initiatives in Nigeria: The Need of Rural Farmers in Host Communities

Abstract: We examine the impact of multinational oil firms' Corporate Social Responsibility (CSR) on agricultural production using binary logit model equation. The result indicates a significant relationship between CSR and agricultural production in oil host communities in Nigeria. This implies that CSR of a multinational oil firm is a critical factor for increasing participation of rural dwellers in agricultural production. The findings suggest for improved CSR investment of multinational oil firms on subsidized fertilizer, certified seed, crop protection products, farm power and rural transportation infrastructures. Copyright © 2016 John Wiley & Sons, Ltd.