Developing Country Multinationals Research Articles

Multilatinas’ foreign divestment and host country institutional uncertainty: is there a best entry strategy?

PurposeThis paper aims to investigate the divestment behavior of emerging market multinationals from Latin America – multilatinas – by examining how their foreign market entry decision impacts the likelihood of subsidiary divestment.Design/methodology/approachThe hypotheses are tested using Cox’s proportional hazard rate model in a longitudinal database of Brazilian multinational companies established in 43 countries.FindingsResults indicate that these subsidiaries can thrive in environments that bear similarities to their home country, being less likely to divest in institutionally weak countries. Contrary to developed country multinationals, these firms benefit from foreign entry decisions that entail handling partnerships abroad; thus, wholly-owned greenfield (WOGF) investments have a higher likelihood of being divested.Originality/valueTo the best of the authors’ knowledge, this paper is the first to analyze foreign divestment from multilatinas, accounting for how entry mode strategy and host country institutions may impact these firms’ de-internationalization.

MNEs’ corporate governance disclosure: a strategic response to corrupt environments

PurposeThis study aims to examine how corruption influences the voluntary disclosure of corporate governance (CG)-related information by developed country multinationals (DC-MNEs) and emerging market multinationals (EM-MNEs) investing in six Latin American countries.Design/methodology/approachThe study uses information from 300 MNEs included in the 2018 ranking of the 500 Largest Latin American companies (America Economía, 2018). Each MNE’s final annual report for the financial year ending 2018 was examined and coded to obtain the corporate governance disclosure index. Fractional probit regression was applied to test the hypotheses of the research.FindingsDC-MNEs disclose more CG-related information in corrupt environments than EM-MNEs. This differentiated behavior occurs because DC-MNEs face higher legitimacy pressures in corrupt environments than EM-MNEs and because EM-MNEs are more experienced than DC-MNEs in dealing with such corrupt environments.Practical implicationsWhile both EM-MNEs and DC-MNEs need to continue investing in corrupt countries to grow, they need to disclose CG-related information as a strategic tool to manage the legitimacy issues triggered by corruption in the markets they operate.Originality/valueDespite corruption being pervasive in emerging markets, its implications for firms’ strategic behaviors are still under-researched. This paper extends the scope of corporate governance and international business fields by studying how MNEs respond to relevant dimensions of the macro environment. This research shows that voluntary disclosure of CG-related information is a strategic response of the MNEs to gain legitimacy in corrupt environments.

Impact of corruption on Chinese investment in African countries

PurposeThis paper aims to examine the impact of host country corruption on foreign direct investment (FDI) from China to developing countries in Africa. With the opposing arguments that corruption is detrimental to or instrumental in FDI and mixed empirical evidence, this paper contributes to the literature by providing new evidence on the issue. Additionally, little research has been done on the impact of corruption on FDI made by developing country multinationals to developing countries. This paper fills a void in this area.Design/methodology/approachBased on the published literature, as well as China and Africa contexts, the authors develop hypotheses that host countries with low corruption receive more FDI and resource-seeking investments weaken the relationship. The annual stock of Chinese FDI in 35 African countries, host country corruption data and other control variables from 2007 to 2015 are collected. Feasible generalized least squares models are used to test the hypotheses. Additional robustness tests are also conducted.FindingsThe findings support the hypotheses. Specifically, Chinese investors make more investments in host countries with low corruption except for resource-seeking investments in resource-rich host counties. The results are statistically significant accounting for various control variables. The results of the robustness tests show that the main findings are robust.Originality/valueFirst, this study provides new evidence on the impact of corruption on FDI. Second, this study also fills a void by examining FDI from a developing country, China to other developing countries in Africa. Finally, this study also has a practical implication for Chinese multinationals investing in Africa.

The Asymmetric Interactions among DMNEs, EMNEs and Local Firms in the Global Mobile Money Industry

Incorporating the concept of status into the study of legitimacy spillover and competition, this study examines the asymmetric interactions among developed country multinationals (DMNEs), emerging market multinationals (EMNEs), and local firms in the global mobile money sector. These interactions have led different types of firms to demonstrate different patterns, with regard to how established firms impact new entries. Our empirical investigation of market entry strategies, from 2001 to 2015, among DMNEs, EMNEs, and local firms in the global mobile money industry shows that: (1) there is legitimacy spillover from DMNEs to EMNEs, but not vice versa; (2) there is legitimacy spillover and competition between EMNEs and local firms; and (3) DMNEs and local firms represent competition to EMNEs, but not vice versa.

Storming the Beachhead: An Examination of Developed and Emerging Market Multinational Strategic Location Decisions in the U.S.

Entering a foreign market is challenging given the fierce competition posed by local incumbents. The literature suggests that when entering a foreign market, it is advantageous to locate where there are agglomeration benefits. Given the dynamic nature of regional development, foreign firms have multiple location options. While the literature has primarily focused on developed country multinationals’ (DMNEs) location decisions, emerging market multinationals (EMNEs) are increasingly becoming influential in high-tech industries. Due to differences in DMNE and EMNE resource endowments, they may consider alternative options when locating abroad and, thus, we examine these nuances. Using multinomial logistic regression, we investigate domestic and foreign location patterns of firms within the U.S. biopharmaceutical industry as of 2018. We constructed a unique dataset of 19,962 U.S. locations and examined the location patterns of DMNEs and EMNEs from 61 countries and territories. Given the heterogeneity of regional development in the U.S., we developed a typology that stratifies regions into four categories (developed, growth, transitioning, and nascent). Counterintuitively, we find that foreign multinationals are more likely to be attracted to less developed regions than domestic firms and have different location patterns, not only compared to domestic firms, but also with respect to each other.

Globalization Impact on Multinational Enterprises

The impact of globalization on multinational enterprises was examined from the years 1980 to 2020. A scoping literature review was conducted for a total of 141 articles. Qualitative, quantitative, and mixed typologies were categorized and conclusions were drawn regarding the influence and performance (i.e., positive or negative effects) of globalization. Developed countries show more saturated markets than developing countries that favor developing country multinational enterprises to rely heavily on foreign sales for revenue growth. Developed country multinationals are likely to use more advanced factors of production to create revenue, whereas developing country multinationals are more likely to use less advanced forms. A number of common trends and issues showed corporate social responsibility, emerging markets, political issues, and economic matters as key to global market production. Recommendations signal a strong need for more research that addresses contributive effects in the different economies, starting with the emerging to the developed. Limitations of data availability and inconsistency posed a challenge for this review, yet the use of operationalization, techniques, and analyses from the business literature enabled this study to be an excellent starting point for additional work in the field.

Entry mode choice in emerging markets: is there any difference between emerging and developed country multinationals

Entry mode choice in emerging markets: is there any difference between emerging and developed country multinationals

Articles: The relationship between MNE tax haven use and FDI into developing economies characterized by capital flight

The use of tax havens by multinationals is a pervasive activity in international business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens and has important policy implications at both the domestic and the international level.

Parent-firm advantages and management control effects on subsidiary performance in emerging economies: a study of foreign direct investment in Thailand

ABSTRACT This paper empirically investigates how parent management control and firm-specific advantages (FSAs) influence subsidiary performance in Thailand. We find that parent management control has a mediating effect on the influence of political risks and subsidiary goals on subsidiary performance for emerging market multinationals, whereas for developed country multinationals, it only shows a mediating effect on the influence of subsidiary goals on subsidiary performance. We also find that the FSAs of parent firms based in developed countries moderate and mediate the effect of parent management control on subsidiary performance.

New challenges and opportunities in the global marketplace: learning from developed-country multinationals’ failures

In this article, we integrate the attention-based view of the firm and the organizational ambidexterity literature to develop a perspective on the effects of unbalanced attention to both domestic and foreign expansion. We utilize the case of British supermarket Tesco’s expansions in the UK and USA to demonstrate divestment as an unintended outcome of unbalanced attention to both domestic and foreign markets. We demonstrate how emerging-market multinationals could learn from historical international expansion strategic failures by developed-country multinationals.

Entry mode choice in emerging markets: is there any difference between emerging and developed country multinationals

Previous research has documented that, when investing abroad, emerging market multinationals (EMMs) have a higher tolerance for risk than developed country multinationals (DCMs), highlighting their propensity to make bold acquisitions and to form alliance networks. In this paper we examine the differences between EMMs and DCMs when it comes to choosing between these options of external growth. We argue that EMMs have a higher propensity than DCMs to choose joint ownership options and, among them, those involving complex partnerships, so as to leverage their routines and imprinted capabilities to deal with partners. In order to carry out the study, we consider the differences in entry mode patterns in emerging markets by multinationals from USA, European Union, BRIC, and Next-Eleven countries between 1996 and 2012. Our results supported our hypotheses.

Greenfield investments or acquisitions? The influence of distance on emerging-market multinationals

PurposeIn recent years, emerging-market multinationals (EMMs) are receiving significant attention in the international business literature. They represent a challenge for the conventional wisdom, mainly derived from the behavior of developed-country multinationals (MNEs). The purpose of this paper is to analyze how different cross-national distances, namely cultural, administrative, geographic and economic, may affect establishment mode choice by Indian MNEs.Design/methodology/approachData are collected from 328 outward foreign direct investments carried out by Indian MNEs in 73 countries from 1991 to 2014. A binomial logistic regression analysis is used to test the hypotheses.FindingsThe results show that cultural and administrative distances negatively affect the choice of an acquisition. Moreover, firm size, acquisition experience, host country experience, industry, belonging to the G20 alliance and being a state-owned enterprise also influence establishment mode choice.Originality/valueThis is one of the first studies that investigate the relationship between distances and establishment mode choice by Indian MNEs. The findings suggest that they follow a different behavioral pattern among EMMs, since their internationalization decisions are closer to those of developed-country MNEs.

Offshoring Innovation to Emerging Countries: The Effects of IP Protection and Cultural Differences on Firms\u2019 Decision to Augment Versus Exploit Home-Base-Knowledge

Developed-country multinationals (DMNEs) have increasingly engaged in the practice of offshoring innovation to emerging countries. In this article, we leverage and extend the institution-based view to further our understanding of this phenomenon. Specifically, we examine the differential effects of formal and informal institutions on DMNEs’ strategic decision to offshore innovation activities aimed at augmenting (versus exploiting) home-base-knowledge to emerging countries. Concerning formal institutions, we argue that the stronger the emerging host country’s IP protection, the higher the likelihood that a DMNE offshores innovation activities aimed at augmenting home-base-knowledge. Regarding informal institutions, we argue that the greater the cultural differences between the developed home country and the emerging host country, the higher the likelihood that a DMNE offshores innovation activities aimed at augmenting home-base-knowledge. Additionally, we propose a key contingency that attenuates the relationship involving IP protection while strengthening the one involving cultural differences: the DMNE’s experience with offshoring innovation. Analysis of 128 offshoring innovation implementations by 78 DMNEs in ten emerging countries provides support for all our hypotheses except for the one focused on the moderation effect of experience on the relationship involving cultural differences.

How Emerging-Market Multinationals Compete with Developed-Country Multinationals and Local Firm

This paper examines the difficulties that emerging-market multinationals (EMNEs) face when they compete against developed- country multinationals (DMNEs) and local firms, and how they overcome them...

Assessing emerging multinationals “Global Mindedness” profiles

Despite the relevance of developing a global mindedness (GM) in order for firms to explore global opportunities, extant literature on GM has mostly focused on developed country multinationals, overlooking its relevance to emerging country multinationals which have unique features and internationalization patterns. In addition, the studies addressing the impacts of GM on internationalization have mostly relied on the assumption of homogeneity rather than differentiation of GM among multinationals of the same country. This study addresses this theme by exploring GM diversity among Brazilian multinationals. For that purpose, a previously developed multidimensional GM scale is adapted and validated by means of a pretest and a confirmatory factor analysis with Bayesian estimators, and used as the basis for a hierarchal cluster analysis, later optimized by means of the K-means algorithm. As a result, a GM taxonomy is identified, encompassing fully globally minded, cross-culturally skilled, international market-oriented, and domestic market-oriented multinationals. To illustrate the taxonomy, four case studies involving major Brazilian multinationals are brought to the fore by means of interviews and secondary data. The configurations identified points to the need to study GM in conjunction with both institutional and economic factors in order to explain singularities of the internationalization of emerging companies and also differentiations among firms from a single emerging country.

THE INTERNATIONALISATION OF EMERGING MARKET HIGHER EDUCATION PROVIDERS: EXPLORING TRANSNATIONAL PROVISION

The delivery of transnational higher education by emerging market providers is a relatively newphenomenon. While much has been written about mainly British, U.S. and Australian providersdelivering higher education programs offshore, this paper explores the transnational deliveryof education by two universities from emerging markets: Mexico's Sistema Tecnológico deMonterrey (Tec de Monterrey) and Malaysia's Limkokwing University of Creative Technology.By developing a comprehensive listing of the universities' transnational engagement andmotivations, and comparing them to traditional and contemporary firm internationalisationtheories, the paper is able to highlight some of the key similarities and differences between thetheory and practise in the context of emerging market transnational education providers. Thepaper finds that, despite the unique character of the sector, the patterns of internationalisationof Sistema Tecnológico de Monterrey and Limkokwing University of Creative Technologyare similar to those of firms in other industries. Furthermore, recent theories explaining theinternationalisation of developing country multinationals help to understand the speed atwhich both universities have internationalised and some of the business and non-businessadvantages gained from delivering programs abroad.Keywords: Transnational Education; Internationalisation, Emerging Markets,Internationalisation Theories, Higher Education, Mexico, Malaysia.

Corporate Social Responsibility in Developing Country Multinationals: Identifying Company and Country-Level Influences

ABSTRACT:The extant literature on cross-national differences in approaches to corporate social responsibility (CSR) has mostly focused on developed countries. Instead, we offer two inter-related studies into corporate codes of conduct issued by developing country multinational enterprises (DMNEs). First, we analyse code adoption rates and code content through a mixed methods design. Second, we use multilevel analyses to examine country-level drivers of differences in code content—specifically, elements of a country’s National Business System (NBS). We find that DMNEs are much more likely to adopt a code of conduct than their domestic counterparts; however, this does not translate into greater code comprehensiveness. We also find support for the ‘substitute view’ of CSR in developing countries, i.e. that MNEs from poorer countries and from countries with lower governance effectiveness tend to express more comprehensive commitments. However, this dynamic does not extend to a country’s labour system; instead, CSR appears here to match the efficiency of a country’s labour market, thus reflecting the ‘mirror view’ of CSR.

Guest Editors’ Introduction:Ethics, Corporate Social Responsibility, and Developing Country Multinationals

ABSTRACT:In this article we provide an overview of the literature on ethics and social responsibility of developing country multinationals (DMNEs) and an introduction to the contributions of the articles in this special section. With the rising influence of DMNEs in the global economy, there is increasing interest in applying descriptive, explanatory, and normative theories to understand the ethics and CSR behavior and practices of DMNEs. This article provides an overarching review of perspectives first from ethics, CSR, and business and society, and then from international business and management scholarship. We identify limits and gaps in the current literature and show how the articles in our special section contribute to fill these gaps. We highlight the emerging, transitional and distinct features of DMNEs that are different from their domestic and foreign counterparts. The very limited extant literature and the contributions of this special section underscore the influence of institutional voids and duality that appear to prompt DMNEs to pursue CSR as a signaling mechanism to gain legitimacy, overcome liabilities of foreignness and obtain a “license to operate” in developed countries. We outline the key contributions from the articles in this special section and discuss the future research agenda espoused by the issues raised in these articles.

The Corporate Social Performance of Developing Country Multinationals

ABSTRACT:In this article, we explore the Corporate Social Performance (CSP) of Developing Country Multinationals (DMNCs). We argue that in competing internationally, DMNCs often face both reputation and legitimacy deficits, which they address by improving their CSP. We develop a series of hypotheses to explain the variation in CSP between DMNCs and domestic-only firms from developing countries and also examine variations in CSP between DMNCs depending on the extent of their multinationality and portfolio of host countries. Our findings support all our hypotheses, which suggest that DMNCs display enhanced levels of CSP compared to their domestic-only counterparts. CSP is also found to be positively related to the DMNCs’ degree of multinationality, but with a declining incremental impact, whereas entry into developed markets leads to a greater improvement in DMNCs’ CSP than expansion into developing markets. We highlight the implications of our findings for managers and researchers.

Vişegrad Ülkelerinde Rus Şirketleri

This article analyses direct investment patterns by Russian firms in the four Visegrád countries, their motivations and ownership advantages, based mostly on the eclectic paradigm. Beside statistical data, it relies on case studies to present the profile of the most important Russian investors in each host country. In the Visegrád countries, market-, and to a lesser extent, resource-seeking investment by state-owned firms in the hydrocarbons, steel and nuclear energy industries dominate. Some innovative private Russian companies, with features similar to developed-country multinationals can also be identified. Extant investment theories, with the exception of the eclectic paradigm, fall short of explaining Russian investment