American Multinational Firms Research Articles

Dam(n)ing the hills: Indigeneity, American aid, and Cold War politics in the Kaptai Dam, East Pakistan, 1957–1964

AbstractIn the late 1950s, work began on the Kaptai hydroelectric dam, a massive project in the verdant Chittagong Hill Tracts (CHT), an area bordering northeast India, east Pakistan (today Bangladesh), and Burma (now Myanmar), largely populated by indigenous hill communities. At the time, the CHT was situated in newly created East Pakistan, and Kaptai had become a focal site for the development of hydroelectric power. In the process, Pakistan relied upon international networks, including global aid organizations and American multinational construction firms, to fulfil its development dreams; in return the United States found a useful ally to contain Soviet influence and the growth of communism in Asia. In the high stakes exchange of economic aid for political alliance-making, East Pakistani administrators, US State Department officials, and American corporations became inherently entwined in a shared vision of development, to the detriment of local ecologies and the indigenous peoples who lived within them. This article will explore how both the public and private sectors used the language of primitivity, wildness, and atavism to marginalize minority ‘tribal’ populations in the devastating name of development and modernity.

A European Perspective on the US Plans for a Destination Based Cash Flow Tax

The Republican majority in the US House of Representatives is considering the introduction of a destination based cash flow tax (DBCFT). While its global implementation has the potential of substantially increasing welfare, a unilateral introduction of such a tax system raises a range of questions due to the co-existence with source based taxation systems abroad. We consider the US tax plans from an EU perspective. We show that European exporters may suffer, but European firms with affiliation in the US may benefit from a switch to the DBCFT. American multinational firms with affiliates in the EU will be the likely losers of this policy – a surprising finding given President Trump’s “America first!” rhetoric. Finally, tax competition over profits, IP location and investment will further intensify, which will require policy reactions by the EU and its member countries far beyond the implementation of the OECD BEPS project. We will therefore also discuss the legal and economic implications of possible adjustments in EU tax systems.

Corporate Taxation and International Competition

Countries around the world continue to tax corporate income at significant rates despite downward pressures from international competition. Average statutory corporate income tax rates fell from 46 percent in 1982 to 33 percent in 1999, though tax bases simultaneously broadened, as a result of which average corporate tax collections actually rose from 2.1 percent of GDP in 1982 to 2.4 percent of GDP in 1999. Two pieces of evidence point to the possibility that mobile capital has received favorable tax treatment in recent years as a result of tax competition. The first is the experience of American multinational firms, whose average effective foreign tax rates fell from 43 percent in 1982 to 26 percent in 1999. The second is the cross-sectional pattern of tax rate-setting: small countries, facing elastic supplies of world capital, taxed corporate income at significantly lower rates than did larger countries in 1982. Corporate tax rates in 1999 did not substantially differ between small and large countries, implying that large countries set their tax rates in response to the same competitive pressures that small countries have always faced.

What determines the location choice of R&D activities by multinational firms?

We analyse 446 location decisions of R&D activities by multinational firms incorporated in the European Union over 1999–2006. Our results suggest that on average, the location probability of a representative R&D foreign affiliate increased with agglomeration economies from foreign R&D activities, human capital, proximity to centres of research excellence and the research and innovation capacity of the region. Further, our evidence suggests that in comparison to European multinational firms, the effects of patents intensity and proximity to centres of research excellence were stronger in the case of North American multinational firms. While government R&D expenditure intensity increased the probability of location of R&D activities by European multinational firms in the region, it did not have a significant effect on the probability of location of R&D activities by North American multinational firms.

Strategic human asset management: evidence from North America

PurposeHuman resource management (HRM) theory has transitioned in recent decades towards “human capital” and “human assets” frameworks that emphasize strategic choice and “investment”, which are concepts borrowed from strategic management, accounting and economic theories. This paper aims to explore the perspectives of strategic human asset management theory, which involves strategic agility and knowledge management.Design/methodology/approachThe research was based on semi‐structured interviews with 30 senior executives of multinational firms in Canada and the USA in 2009, following the global financial crisis. The qualitative findings were analyzed using the NVivo software (version 8) package.FindingsThe research findings suggest that many North American multinational firms recognize the value of this new interpretation of HRM and are attempting to implement it through “strategic human asset management” in their own firms. The paper concludes with some practical recommendations for line managers and HR professionals in their human assets management imperatives.Research limitations/implicationsThe generalizability of the findings is limited by the relatively small sample size and qualitative nature of the study. However, they provide some interesting implications for HR professionals who wish to transform their role into that of a strategic business partner through innovative human asset management strategies.Originality/valueThe paper builds on previous research by exploring the applications of the concepts of strategic human asset management, strategic agility, and knowledge management within the context of US and Canadian multinational firms.

The Japanese global leadership challenge: what it means for the rest of the world

The rise of the modern Japanese economy in general and of Japanese multinational corporations (MNCs) in particular has been well documented. However, as the Japanese economy has struggled and as emerging markets including China have taken off, interest in Japanese multinational firms has slid. This is unfortunate, because the relative failure of Japanese MNCs to adapt to a more complex, global marketplace can provide lessons for the rest of the world, particularly MNCs from emerging markets. The purpose of this work is to examine why Japanese firms succeeded first at home and then in exports, but overall failed to move successfully into international operations and globalization. This work is informed by examining the relative performance of Japanese firms on several databases, such as the Fortune Global 500 and United Nations Conference on Trade and Development (UNCTAD), and through in-depth case studies – one of which we share here. Our research found that many of the factors that helped Japanese firms succeed at home and with exports became stumbling blocks as they set up operations overseas and later tried to globally integrate their increasingly complex worldwide operations. Specifically, their efforts to transplant into foreign operations methods that worked domestically and with exports created huge unanticipated negative consequences. In particular, the reliance of Japanese firms on home-country expatriates combined with their failure to identify and develop local talent or to promote non-Japanese leadership talent to regional and global positions severely hurts their ability to globalize their operations and grow their non-Japanese revenue, especially when compared to North American and European multinational firms. We review the huge challenges this posed not only on Japanese affiliates in general but on the people at senior leadership positions at home and abroad in particular. Understanding the psychology of both Japanese and foreign managers is critical to gaining insights into how and why so many Japanese multinational firms derailed over the past decade. We review not only the conditions that led to the failure of so many Japanese firms, but also the actions they need to take to regain their place on the global stage. Finally, our research offers a cautionary tale for multinational firms from emerging markets such as Brazil, Russia, India and China. Many firms from these countries are in situations that are similar to those of Japan 30 years ago. Failure to learn the lessons from the Japanese global leadership challenge could increase the chances that in not learning from history they are doomed to repeat it.

Securing Jobs or the New Protectionism? Taxing the Overseas Activities of Multinational Firms

Tax policy toward American multinational firms would appear to be approaching a crossroads. The presumed linkages between domestic employment conditions and the growth of foreign operations by American firms have led to calls for increased taxation on foreign operations - the so-called end to tax breaks for companies that ship our jobs overseas. At the same time, the current tax regime employed by the U.S. is being abandoned by the two remaining large capital exporters - the UK and Japan - that had maintained similar regimes. The conundrum facing policymakers is how to reconcile mounting pressures for increased tax burdens on foreign activity with the increasing exceptionalism of American policy. This paper address these questions by analyzing the available evidence on two related claims - i) that the current U.S. policy of deferring taxation of foreign profits represents a subsidy to American firms and ii) that activity abroad by multinational firms represents the displacement of activity that would have otherwise been undertaken at home. These two tempting claims are found to have limited, if any, systematic support. Instead, modern welfare norms that capture the nature of multinational firm activity recommend a move toward not taxing the foreign activities of American firms, rather than taxing them more heavily. Similarly, the weight of the empirical evidence is that foreign activity is a complement, rather than a substitute, for domestic activity. Much as the formulation of trade policy requires resisting the tempting logic of protectionism, the appropriate taxation of multinational firms requires a similar fortitude.

Sequence of value-added activities in the multinationalization of developing country firms

Abstract This paper studies the sequence of value-added activities in the multinationalization of firms from developing countries. Analysis of twenty Latin American multinational firms, or Multilatinas, reveals three alternative sequences: start multinationalizing with marketing subsidiaries in all countries, start multinationalizing with production subsidies in all countries, or start multinationalizing with marketing subsidiaries in some countries and production subsidiaries in others. These alternative sequences are explained through the integration and extension of arguments from the incremental model of internationalization and its discussion of difficulties, and the eclectic paradigm of foreign production and its discussion of advantages. I argue that firms that benefit from a location advantage in the country of origin are more likely to start multinationalizing using marketing subsidiaries, firms that benefit from a location advantage in the host country are more likely to start multinationalizing using production subsidiaries, and firms that face difficulties in the transfer of products across countries are more likely to start multinationalizing using production subsidiaries.

Foreign Direct Investment and the Domestic Capital Stock

This paper evaluates evidence of the impact of outbound foreign direct investment (FDI) on domestic investment rates. OECD countries with high rates of outbound FDI in the 1980s and 1990s exhibited lower domestic investment than other countries, which suggests that FDI and domestic investment are substitutes. U.S. time series data tell a very different story, however: years in which American multinational firms have greater foreign capital expenditures coincide with greater domestic capital spending by the same firms. One dollar of additional foreign capital spending is associated with 3.5 dollars of additional domestic capital spending in the time series, implying that foreign and domestic capital are complements in production by multinational firms. This effect is consistent with cross sectional evidence that firms whose foreign operations expand simultaneously expand their domestic operations, and suggests that interpretation of the OECD cross sectional evidence may be confounded by omitted variables.

Foreign Direct Investment and the Domestic Capital Stock

This paper evaluates evidence of the impact of outbound foreign direct investment (FDI) on domestic investment rates. OECD countries with high rates of outbound FDI in the 1980s and 1990s exhibited lower domestic investment than other countries, which suggests that FDI and domestic investment are substitutes. U.S. time series data tell a very different story, however: years in which American multinational firms have greater foreign capital expenditures coincide with greater domestic capital spending by the same firms. One dollar of additional foreign capital spending is associated with 3.5 dollars of additional domestic capital spending in the time series, implying that foreign and domestic capital are complements in production by multinational firms. This effect is consistent with cross sectional evidence that firms whose foreign operations expand simultaneously expand their domestic operations, and suggests that interpretation of the OECD cross sectional evidence may be confounded by omitted variables.

Corporate Environmental Disclosure: Contrasting Management's Perceptions with Reality

This paper's purpose is to assess how management's perceptions regarding certain aspects of environmental reporting relate to the firm's actual reporting strategy. Toward that end, we propose a model where a firm's environmental disclosure is conditional upon executive assessments of corporate concerns. The study relies on a survey that was sent to environmental management executives from European and North American multinational firms enquiring about the determinants of corporate environmental disclosure. Responses from these executives were then contrasted with their firms' actual environmental reporting practices, which was measured using a comprehensive multi-criteria grid. Results show that there is a relationship between environmental managers' attitudes toward various stakeholder groups and how those managers respond to the stakeholders via the decision to disclose and the actual disclosures made. Our model provides a perspective as to how a firm responds to the numerous stakeholders to whom it must be accountable. This accountability in turn relates to how the company communicates its actions to society in order to achieve or maintain its social legitimacy.

Foreign direct investment in a world of multiple taxes

Governments impose multiple taxes on foreign investors, though studies of the effect of tax policy on the location of foreign direct investment (FDI) focus almost exclusively on corporate income taxes. This paper examines the impact of indirect (non-income) taxes on FDI by American multinational firms, using affiliate-level data that permit the introduction of controls for parent companies and affiliate industries. Indirect tax burdens significantly exceed the foreign income tax obligations of foreign affiliates of American companies. Estimates imply that 10% higher local indirect tax rates are associated with 7.1% lower affiliate assets, which is similar to the effect of 10% higher income tax rates. Affiliate output falls by 2.9% as indirect taxes rise by 10%, while higher income taxes have more modest output effects. High corporate income tax rates depress capital/labor ratios and profit rates of foreign affiliates, whereas high indirect tax rates do not. These patterns reveal the impact of indirect taxes and suggest the mechanisms by which direct and indirect taxes affect FDI.

HRM in international firms

Indicates that international human resource management (IHRM) is becoming increasingly important in a growing number of Irish international companies, which, while large in national terms, are medium‐sized when compared withother European and North American multinational firms. The findings of the research suggest that the development of comprehensive IHRM policies and practices may enable smaller firms to be more proactive in their approach to internationalisation and to have a greater choice over the types of markets and countries they enter.

Repatriation Taxes and Dividend Distortions

This paper analyzes the effect of repatriation taxes on dividend payments by the foreign affiliates of American multinational firms. The United States taxes the foreign incomes of American companies, grants credits for any foreign income taxes paid, and defers any taxes due on the unrepatriated earnings for those affiliates that are separately incorporated abroad. This system thereby imposes repatriation taxes that vary inversely with foreign tax rates and that differ across organizational forms. As a consequence, it is possible to measure the effect of repatriation taxes by comparing the behavior of foreign subsidiaries that are subject to different tax rates and by comparing the behavior of foreign incorporated and unincorporated affiliates. Evidence from a large panel of foreign affiliates of U.S. firms from 1982 to 1997 indicates that 1 percent lower repatriation tax rates are associated with 1 percent higher dividends. This implies that repatriation taxes reduce aggregate dividend payouts by 12.8 percent, and, in the process, generate annual efficiency losses equal to 2.5 percent of dividends. These effects would disappear if the United States were to exempt foreign income from taxation.

“Basket cases”: Tax incentives and international joint venture participation by American multinational firms

This paper examines the impact of the U.S. Tax Reform Act of 1986 (TRA) on international joint ventures by American firms. The TRA mandates the use of separate “baskets” in calculating foreign tax credits on dividends received from each foreign corporation owned 50% or less by Americans – which greatly reduces the attractiveness of joint ventures, especially those in low-tax foreign countries. Since the effect of the TRA on joint ventures varies with foreign tax rates, the country-level pattern of subsequent joint venture activity illustrates the sensitivity of organizational form to tax considerations. The evidence indicates that American participation in international joint ventures fell sharply after 1986, particularly in low-tax countries. Moreover, joint ventures in low-tax countries use more debt and pay greater royalties to their American parents after 1986, reflecting their incentives to economize on dividend payments.

Why Syria Goes to War (review)

172 SHOFAR Spring 1998 Vol. 16, No.3 processes in their evaluation ofIsrael's economic policies and their consequences. More attention might have been paid to the role and status ofwomen; to higher education and cultural institutions, including their heavy debt to a devoted diaspora; to the implications of the new consumerist ethos in the emergent post-Zionist era; and to the recent transformation ofisrael's economy to one dominated by a dynamic high technology sector closely linked to American multinational firms. These, however, do not detract from the usefulness ofthis book as an introduction for serious non-specialist readers to Israeli society and government. Milton 1. Esman Department of Government Cornell University Why Syria Goes to War, by Fred Lawson. Ithaca and London: Cornell University . Press, 1996. 222 pp. $29.95. Lawson's argument is that domestic factors drive Syria's war making. I)War originates in crises of capital accumulation which cause economic decline and social conflict over the shrinking pie. 2) Spreading opposition threatens the survival of the regime which often splits over how to respond. 3) Regimes initiate aggressive foreign policies to ameliorate their internal splits, rally public support, and get access to external resources needed to satisfy domestic opponents and supporters. 4) Ifthe regime remains cohesive in the crisis, it will more likely limit the risks of foreign involvement and when the economy is doing well, states have no incentive to go to war. This model is promising as a hypothesis, but Lawson so overstates his case that it loses credibility. Since his argument is counterintuitive-that foreign policy is not shaped by foreign affairs-the burden of proof lies on him to demonstrate: I) the existence of accumulation crises; 2) their linkage to social conflict, political opposition, and intra-regime conflicts; and 3) the impact of these factors in the decision-making process. Lawson gives us separate narratives on these factors for each of five crises, the 1967 war with Israel, the 1970 and 1976 interventions in Jordan and Lebanon, and socalled confrontations with Iraq and Turkey in 1982 and 1994. For the most part, he fails to make the connections between the three factors persuasive, largely asserting rather than demonstrating them. Part ofthe problem is that the research needed to test the argument is unavailable. Socio-economic data is too crude, while Lawson has had nothing like the access to documents and participants required to support his claims about class and intra-elite conflicts and their links to the opaque foreign policy-making process. His approach is to cobble together pieces ofinformation gleaned largely from current events journalism, Book Reviews 173 and to erect towering edifices of speculative inferences, sometimes requiring the most eccentric interpretations of events I and issues, in order to make the data fit his preconceived model. A good example of how Lawson's arguments strain credibility is his account of Syria's 1976 intervention in Lebanon which he attributes to capital shortages, made worse by the loss ofaccess to Lebanon's economy, which jeopardized the incorporation I ofthe bourgeoisie into the regime co~lition. Yet, Lawson's own evidence shows soaring private capital formation and a boothing 9-13 percent GNP growth/year in 1975-76 (pp. 79, 87-88): far from economic cpsis fueling conflict with the bourgeoisie, plentiful regime expenditures encouraged the private sector. Lawson argues that Asad intervened I to get access to Lebanese economic assets and to stabilize Lebanese conditions so the Syrian private sector could continue! to benefit from Lebanese financing and imports. But there is no evidence economic i~sues were considered in Syrian decision-making or that the private sector had access to it. Nor is business likely to have seen the Lebanese crisis as a threat since it h~d alternative (expatriate, Gulf) sources of capital and imports (West European). Limited military intervention, itself costly, could hardly be seen as a solution to economic ptoblems or have allowed Syria to seize Lebanese economic institutions or harness its; bourgeoisie. Finally, rather than Asad's foreign I policy being driven by economic needs, he has consistently sacrificed them to strategic goals, in Lebanon as elsewhere; thus, Ithe intervention antagonized his Soviet patron and...

Politics and Society in Modern Israel: Myths and Reality (review)

Book Reviews 171 Politics and Society in Modern Israel: Myths and Reality, by Adam Garfinkle. , Armonk, NY: W. E. Sharpe, 1997. 32:2 pp. $24.95 (p). This is a very successful introduction t9 society, politics, and govemment in contemporary Israel. While it is carefully and accurately researched, its intended audience is not I the specialist on Israel or the modem Middle East, but the undergraduate student and attentive adult reader with a serious ititerest in learning about present-day Israel. The author is a journalist and scholar, executive editor ofthe National Interest, and director of the Middle East Council of the Fon;ign Policy Research Institute in Philadelphia. The author begins with a panoraJic survey of Jewish history, culminating in the , Zionist movement and the dramatic transition from Yishuv to the modem Jewish I commonwealth. He then traces the rapid evolution and expansion of Jewish society and I manifestations of the tensions that hav.e beset that society-between Ashkenazim and Sephardim, Orthodox and secular, expansionists and moderates; and between Jews and Arabs within Israel, in the 1967 Occup~ed Territories and the Palestinian diaspora, and in the greater Arab world. He then analyzes and evaluates the current political economy, especially the persistence ofthe state-"1anaged and -guided economy. He follows with an excellent description of the main Israeli political and govemmental processes and institutions, contrasting them for the !benefit of American readers with comparable elements ofthe U.S. polity. This is foll9wed by an essay on the complexities ofIsrael's foreign policy and efforts of this sniall, beleaguered state to achieve security and I acceptance in an international environ¢ent that has been often less than friendly. In this context special attention is devoted to ithe critical relationship with the United States. The fmal chapter focuses, overop,imistically as it appears to this reviewer, on the emergence ofa peace settlement between Israel, the Palestinians, and the surrounding Arab states; and the implications of ihese developments for the "normalization" of Israeli life under conditions of relaxe,d tensions and unexpected material prosperity. Relations between Israelis and the Jew~sh diaspora, notably in Russia, Western Europe, and North America, command the aut~or's special concern. Projecting current trends, he concludes that assirnilationist procdses throughout the diaspora, especially in North America, will reduce the numbers and the political efficacy of diaspora Jewry and that I the next century will consequently shift the center of Jewish life and survival to Israel. Thus, the nineteenth-century Zionistidream of a revived and invigorated center of Jewish life in its ancient homeland will be realized during the twenty-first century, while the declining diaspora that su~tained Jewish survival for two millennia will , increasingly look to Israel for its cultUral inspiration and support. A standard expectation ofreviewers is that they will identify and dilate on a book's failures and shortcomings. I find litt~e to criticize in this remarkably compact, well balanced, carefully researched, and clearly written treatment of a very complex theme. Other scholars might have been less committed than this author to orthodox market 172 SHOFAR Spring 1998 Vol. 16, No.3 processes in their evaluation ofIsrael's economic policies and their consequences. More attention might have been paid to the role and status ofwomen; to higher education and cultural institutions, including their heavy debt to a devoted diaspora; to the implications of the new consumerist ethos in the emergent post-Zionist era; and to the recent transformation ofisrael's economy to one dominated by a dynamic high technology sector closely linked to American multinational firms. These, however, do not detract from the usefulness ofthis book as an introduction for serious non-specialist readers to Israeli society and government. Milton 1. Esman Department of Government Cornell University Why Syria Goes to War, by Fred Lawson. Ithaca and London: Cornell University . Press, 1996. 222 pp. $29.95. Lawson's argument is that domestic factors drive Syria's war making. I)War originates in crises of capital accumulation which cause economic decline and social conflict over the shrinking pie. 2) Spreading opposition threatens the survival of the regime which often splits over how to respond. 3) Regimes initiate aggressive foreign policies to ameliorate...

Pricing Practices of American Multinational Firms:

group of large American multinational firms was surveyed regarding pricing strategies. An effort was made to distinguish the A firms from the J model companies regarding their international pricing orientation. The A firms are global while J companies are multilocal. In this context they standardized or localized their pricing practices respectively. Findings indicate that 70 percent of American firms act as if they are A companies. They standardize their prices in most world markets. The findings also show that this type of procedure may be more successful in the short-run. This article reiterates the need for international pricing studies and provides a research agenda in this very important and neglected area.

An Assessment of Supplier Selection: Chinese Purchasing Managers′ Criteria and Their Implications for Western Marketers

China′s foreign trade and investment policies have appeared more attractive to Western marketers in recent years. China presents an opportunity for huge market potential and rapid growth for American multinational firms. However, Western marketers have only limited knowledge about Chinese purchasing decision making, particularly the supplier selection and evaluation criteria of Chinese purchasing managers. Highlights six key criteria of supplier selection and describes the responses of a sample of Chinese purchasing managers. Segments the respondents into three clusters, based on similarities in their supplier evaluation processes and differentiates these clusters in terms of whether the managers emphasize reliable deliveries, price/cost considerations, or product quality. While these findings are of a preliminary nature, they reveal that service/responsiveness of a supplier is not a high priority as opposed to purchasing managers in Western industrialized countries. As China moves rapidly towards a market economy, many Chinese purchasing managers will require suppliers to improve their responsiveness, given comparable levels of price and quality. An understanding of this transition will help Western marketers to enhance their market positions in China.

The Influence of the Spouse on American Expatriate Adjustment and Intent to Stay in Pacific Rim Overseas Assignments

Past international human resource management literature has suggested that most American multinationalfirms that employ expatriate managers have difficulty successfully retaining these managers in overseas assignments. Although some scholars have suggested that the inability of the spouse to adjust is one of the major reasons expatriate managers return early from their overseas assignments, few researchers have attempted to verify empirically a relationship between the spouse's adjustment and the adjustment and intentions to stay or leave of the expatriate manager. This study found that a favorable opinion about the overseas assignment by the spouse is positively related to the spouse's adjustment and the novelty of the foreign culture has a negative relationship with the spouse's adjustment. Additionally, the adjustment of the spouse is highly correlated to the adjustment of the expatriate manager and the adjustment of the spouse and the expatriate are positively related to the expatriate's intention to stay in the overseas assignment.