Governments as owners: State-owned multinational companies

This paper studies the case of a French multinational company which doubled its size and geographical spread of activities because of acquisitions of Anglo-Saxon multinational companies. It analyses the rationale behind the introduction of a competency-based leadership model in this multinational company through the frameworks of agency and neoinstitutional theories. The interpretation of the data through agency theory leads to the following conclusion: globalization means strengthening agency problems and therefore an increase in agency costs. It is argued that the multinational company introduced the competency-based leadership model as a means of cultural control. A formalized and common reference for leadership development and evaluation makes it possible to reduce information asymmetry, diminish the possibility of opportunistic behaviour among managers and thereby reduce agency costs. While agency theory justifies the introduction of the competency-based leadership model, it does not explain the modalities of its choice. This theoretical perspective ignores the institutional context of HRM choices. The results obtained through the frameworks of neoinstitutional theory show that the choice of the competency model was based on the mimetic mechanisms of institutional isomorphism. Furthermore, the introduction of the competency-based leadership model allows the multinational company to gain both internal and external organizational legitimacy. Consequently, the paper suggests that agency theory has to be combined with insights from the neoinstitutional theory in order to explain the introduction of organizational practices. While agency theory provides the rationale of the model's introduction, neoinstitutional theory explicates the nature of the selected organizational practice.

Corporate governance is concerned with how firm performance may be affected by how the organization is governed. Corporate governance is a multifaceted concept that ranges in scholarly interest from the composition of boards to ownership and relational issues of power dependency, control, and decision-making within an organization. International business (IB) researchers have employed multiple theoretical lenses across institutional, resource dependency, and agency theories to examine corporate governance in the multinational enterprise (MNE). As the organizational form of the MNE shifted from hierarchical to heterarchical, and responsibility for sourcing market and innovation knowledge was increasingly devolved to competent subsidiaries, governance arrangements in the MNE came under increased scrutiny. Much IB research into corporate governance examined the balance of power within the MNE and how decision making is influenced by both headquarters (HQ) and its subsidiaries. A parent-subsidiary governance dilemma became apparent around the degree of freedom and control that HQ should leverage over its foreign subsidiaries to maximize the survival and performance of these economically, culturally, and politically dispersed units. Agency theory and resource dependence theory were to the fore in examining the parent-subsidiary dilemma around how control over decision-making scope and processes shaped subsidiary governance around the strategies and operations with the MNE governance architecture. In essence, subsidiary governance and strategy can be seen to represent two sides of the same coin. Subsidiary governance and strategy become complex issues the minute we step outside the hierarchical domain and allow for subsidiaries to have a greater contributory role in the MNE. As a subsidiary is mandated to pursue certain activities in the environment where it has been located, it also is granted some autonomy to strategize around its assigned activities and responsibilities. Opportunities may surface through the embeddedness of its activities in the local environment and the resources this can provide to the subsidiary and MNE. Acting on these opportunities by taking initiatives can result in increased influence and an elevated role in terms of mandate gain and enlarged responsibilities. The issue of subsidiary governance first emerges in relation to how the subsidiary strategy is aligned or not aligned with HQ strategy. Subsidiary managers can decide to solely perform their assigned mandate, or they can choose to generate a resource endowment that may help them become indispensable for HQ, but crucially to guarantee their own survival. The mechanisms available to subsidiaries to achieve this strategic aim are evidenced via initiative taking, seeking autonomy, increasing their role, appropriating power and influence, and embedding themselves in the local and internal environments. In this chapter we approach corporate governance from the perspective of the subsidiary (subsidiary governance) and examine the relationship between subsidiary governance and what we determine to be the prime elements of subsidiary strategy. We respectively define subsidiary governance as the gamut and interplay of control and operations around which management strategize and subsidiary strategy as a process of continuous, deliberate upgrading of knowledge and capabilities to thrive and survive. IB literature on MNE subsidiary governance and strategy to date is incomplete insofar as there are disparate steams of research that warrant integration into a grand theory of subsidiary governance and strategy.

Multinational corporations (MNCs) play key roles in development processes. Yet the developmental role of MNCs plays a negligent role in the current international business (IB) literature, the literature that deals with MNCs. It was not always like this: the IB literature was born out of an engagement in societal and developmental agendas and was fueled by the pursuit of grand questions, such as why MNCs exist, how and why international activities of MNCs are expanding to more and more regions and sectors, and how MNC activity affects the welfare and development of societies. Since the early 2000s, however, it seems that IB has lost sight of the grand questions, instead immersing itself in increasingly specific, theoretically inspired enquiries. As a consequence, IB has lost relevance for practical development policy. This chapter documents this development in the IB literature based on an extensive survey of development-related work in three leading IB journals. The chapter calls for IB to rediscover its roots and relate to some of the grand questions of current development discourse. The chapter ends by outlining research agendas for future IB research on the development role of MNCs that take their point of departure from the comparative advantage of IB: its ability to understand MNCs qua being MNCs.

Research SummaryResource dependence theory (RDT) has been widely applied in the context of international business (IB) over the past four decades. This study reviews and synthesizes the insights of RDT in IB literature accumulated over the past 40 years and derives an integrative addendum for future research. We highlight three critical dependence dimensions (i.e., locational, interorganizational, and intraorganizational dependencies) and three essential RDT themes (i.e., dependence solutions, dependence‐managing outcomes, and macro environmental conditions of RDT) in the IB context. Our review concludes that the IB literature has reached a good level of conceptual and empirical consensus concerning how multinational corporations (MNCs) take a large array of resource dependence actions and manage their resource dependence in various situations. We also find a strong need for further extension of RDT in IB research, offering suggestions for future research, including additional theoretical integration, underlying processes, and new dynamics that change the course of cross‐border interdependencies under the new global reality.Managerial SummaryThis study systematically reviews the stock of knowledge over the past 40 years on how the logic of resource dependencies unfolds in IB practices (e.g., cross‐border M&As, alliances and joint ventures, global supply chains, corporate political strategies, headquarters‐subsidiary relationships, and upper‐echelon decisions). Our findings and conclusions offer a decision roadmap for IB practitioners to assess various resource dependence situations with external and internal stakeholders in IB operations and to effectively manage such interdependencies. We also elaborate on the important implications of MNCs' strategies for effectively managing their resource dependencies in international exchanges in the modern world, which is characterized by the coexistence of trends leading of both globalization and de‐globalization.

In a broad sense, corporate governance is about how firms should be governed so that they are run effectively and efficiently. This paper takes a broad perspective on corporate governance mechanisms and considers possible synergies between corporate governance and international business (IB) research. We summarize the papers included in this Focused Issue, and draw out their main contributions to the literature. In so doing, we compare and contrast the four theoretical perspectives concerning corporate governance and IB adopted in the five papers: i.e. transaction cost economics, the resource-based view, agency theory, and institutional theory. Finally, we highlight five research themes (international diversification, business groups, entry modes, subsidiary mandates, and new international ownership structures) where future work explicitly addressing governance issues may prove fruitful.

PurposeThis study aims to clarify the factors that act as a buffer to rent extraction from multi-national corporations (MNCs) in exchange relationships with the host country’s political actors.Design/methodology/approachThis study proposes a conceptual model of the factors that determine rent extraction by host country political actors from MNCs. The model identifies the sources of power the MNC can use to alleviate the power imbalance relative to the political actor to decrease rent extraction. Additionally, it identifies the factors that constrain the power-advantaged political actor, thus moderating the relationship between power imbalance and rent extraction.FindingsThis conceptual paper’s propositions remain for future empirical validation.Originality/valueThis study integrates insights from the international business literature and resource dependence theory (RDT) to identify the determinants of firm-specific rent extraction risk for MNCs. First, the model sheds light on the heterogeneity among MNCs in their susceptibility to rent extraction and their ability to manage their liability of foreignness in the host country. Second, by integrating the horizontal and vertical distribution of power in the political environment to analyze the power-dependence relationship between the MNC and host country political actors, the framework addresses a shortcoming of RDT and accounts for the dynamics of the external environment for MNCs managing their dependencies. This study also provides a basis for discussing the rent extraction MNCs face worldwide and lays the foundation for future empirical works.

This paper re-visits the relationship between disadvantages and advantages of foreignness, local embeddedness and strategic agency and contributes to the debate on the ability of multinational corporations (MNCs) to introduce change in host countries. By drawing on international business literature and recent developments in neo-institutional theory, we examine the dynamic interplay between MNC embeddedness within the host market environment and MNC capacity for pro-active strategizing towards institutions. We propose that MNCs propensity and ability to exercise agency towards host market institutions is limited when it is weakly embedded as well as when it is strongly embedded, but there is an optimal–or moderate–level of embeddedness at which an MNC may emerge as an agent for change. The theoretical arguments are tested and supported through a qualitative study of 26 MNCs operating in Russia.

Purpose Modern slavery, one of the most abhorrent crimes against humanity, is a profitable international business (IB). It often operates in a hidden form in the global value chains (GVCs) governed by multinational corporations (MNCs). The purpose of this paper is to examine why slavery exists in GVCs and what this means for MNCs. Design/methodology/approach The paper borrows insights from the GVC literature to conceptually link MNCs and modern slavery. Different from the IB literature that predominantly focusses on the MNC as a single firm, the paper emphasizes the importance of paying attention to the MNC value chains and their complexity and fragmentation. Findings Three factors which help explain modern slavery in GVCs are examined: the complexity of GVCs and the challenges this poses to their governance, the business case for slavery and the conditions that enable modern slavery. These factors, taken together, provide an explanation why modern slavery can creep into, persist and thrive in MNCs’ GVCs. Research limitations/implications The argument is put forward for the need for IB scholars to borrow from the GVC literature to help understand why slavery can exist in the GVCs of MNCs. This opens the opportunity for examining the MNC in ways not considered by IB scholars so far. Originality/value The paper addresses an issue long ignored in IB research and issues a call for IB scholars to study MNCs in a new way, namely, linking MNCs’ activities with modern slavery.

State ownership and internationalization: The advantage and disadvantage of stateness

Previous research studies have used multiple theories, such as resource dependence, human capital, social capital, busyness, signalling, behavioural, and agency theories in order to investigate the association between board diversity and earnings management and the association between board diversity and firm performance. This chapter surveys 75 research studies and used 37 theories. Most of the studies focused on agency and resource dependent theories. Also, this study used social capital theory as a contribution of the chapter, which was rarely used and which examined the relationship between board diversity and earnings management in addition to firm performance.

During the past 20 years, a rich but diverse body of theoretical and empirical work has accumulated on information technology outsourcing (ITO). Researchers have studied ITO from over 20 theoretical perspectives — including theories from economics (e.g., Transaction Cost Economics, Agency Theory), strategy (e.g., Resource-Based View, Resource Dependency Theory), sociology (e.g., Relational Exchange Theory, Social Capital Theory, Innovation Diffusion) and natural sciences (e.g., Punctuated Equilibrium Theory) (Barney, 1991; Eisenhardt, 1989; Ekeh, 1974; Gould and Eldredge, 1977; Nahapiet and Ghosal, 1998; Pfeffer and Salancik, 1978; Rogers, 1983; Williamson, 1991). By appropriating so many theories, researchers have tested a large number of relationships between independent and dependent variables. Because of this diversity, findings from the overall body of empirical ITO literature have been difficult to summarize, analyse, and evaluate succinctly.KeywordsTransaction Cost EconomicAsset SpecificityInformation System ResearchRelational GovernanceClient FirmThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Multinational corporations (MNCs) are considered as dispersed structures of power, in which diverse headquarters (HQ)–subsidiary power relationships collectively influence performance and management. Yet, few studies have accounted for the subsidiary portfolio characteristics shaped by the entire set of differentiated HQ–subsidiary power relationships, and little is known about their effect on the performance and management decisions of MNCs. Drawing on agency and resource dependence theories, this study investigates how the power structure of the MNC, or the pattern of power distribution in the subsidiary portfolio, affects MNC performance and expatriate utilization. Results from a comprehensive panel of Korean MNCs show that the degree of power concentration in the subsidiary portfolio has inverted U-shaped relationships with MNC performance and the use of expatriate control. However, the results also reveal that these relationships vary between manufacturing and downstream subsidiary portfolios. These findings suggest that the structural characteristics of the subsidiary portfolio are important determinants of MNC performance and management. This study opens an important new avenue for international business scholarship by explicitly conceptualizing the MNC as a portfolio of differentiated subsidiaries and by examining the consequences of the subsidiary portfolio characteristics.

This study examines if the CEO duality influence the firm economic performance in Bangladesh and the moderating effects of board composition in the form of outside independent directors. While doing so, it examines the relationship between CEO duality and firm performance during the pre appointment of outside independent directors and post appointment of outside independent directors (the role of other corporate governance mechanism as moderating variable). The finding is that there is there is a negative (non-significant) relationship between CEO duality and firm performance before appointment of outside independent directors in the board. However, independent leadership structure and firm performance is found to be positively related following the acquisition of resource (outside independent directors in the board) supporting the ’resource dependence theory’. The findings of this study partially support the ’agency theory’ and ’resource dependence theory’ but do not support the stewardship theory. This study contributes to the literature on CEO duality in the context of less a developed country.

The field of Chinese management studies has grown tremendously over the past four decades. Despite an increasing interest in uniquely Chinese phenomena, Western management theories have long been the dominant perspectives for understanding Chinese firms and managers. Yet, the explanatory potential of our current theoretical toolkit remains unelucidated in non-Western contexts. Through a matched-samples meta-analysis, which integrates matching techniques into meta-analysis, we compare the mean effect sizes for five classic Western management theories (i.e. institutional theory, resource dependence theory, the resource-based view, agency theory, transaction cost theory) on 452 matched samples drawn from 1,028 U.S. and Chinese studies. Results show that, contrary to popular belief, Chinese firms (a) are less responsive to coercive and mimetic pressures yet more subject to normative forces, (b) are less focused on establishing relational ties when faced with resource dependencies and transaction costs, (c) are better at managing strategic resources for profit, and (d) respond better to pay incentives than their U.S. counterparts. To understand the specificities of Chinese management practices, we furthermore conduct a focused review of the emerging literature on China-endemic explanations: political institutional imprinting theory, a specifically Chinese take on sustainable development, and a China-specific theory of corporate governance.

The field of Chinese management studies has grown tremendously over the past four decades. Management theories originating from the United States have remained dominant in the analysis of Chinese firms, prompting the question of how powerfully these Western lenses explain management practices in non-Western contexts. Through a matched-samples meta-analysis, which integrates matching techniques into meta-analysis, we compare the mean effect sizes for five classic Western management theories—institutional theory, resource dependence theory, the resource-based view, agency theory, and transaction cost theory—on 452 matched samples drawn from 1,028 U.S. and Chinese studies. Surprisingly, as compared to their U.S. counterparts, Chinese firms (a) are less responsive to coercive and mimetic pressures yet more subject to normative pressures, (b) establish fewer business relations when faced with resource dependencies and transaction costs, (c) extract more profit from managing generic strategic resources, and (d) are more sensitive to pay incentives and private blockholders. To understand the specificities of Chinese management practices, we furthermore conduct a focused review of the emerging literature on China-endemic explanations: political institutional imprinting theory, state-driven sustainable development, and China-endemic corporate governance. We conclude that indigenous theories effectively complement Western perspectives when accounting for Chinese management practices.