Expansion Of Multinational Enterprises Research Articles

Taking two to tango: A comparative nationalism view of cross-border acquisitions

Nationalism is an important yet underexplored issue in the international business strategy literature. As a new reality, the resurgence and augmentation of nationalism in recent decades has brought disruption effects that challenge traditional arguments on the international expansion of multinational enterprises (MNEs). We suggest that nationalism is not merely about one’s own national interest but should be extended to consider the mutual forces from home and host countries in international business (IB) research. This study proposes a comparative nationalism view to investigate the impacts of various types of intercountry nationalism on MNEs’ expansion through cross-border acquisitions. Through scenario analysis, the MNEs’ expansion trajectories are characterized by different degrees of comparative nationalism, including incremental expansion, deceleration, leapfrogging, and divestment strategies. Our findings and propositions create a new vision for cross-border research considering the interacting effect of national sentiments. We also discuss promising future research agendas enabling further exploration of this topic.

Cross-Border M&As and Green Innovation among Emerging Market Multinationals: Evidence from China

The reverse spillover effect of the foreign expansion of multinational enterprises (MNEs) from emerging economies (EMNEs) on their green innovation in home countries have been largely ignored; by contrast, the main focus has been directed toward the spillover effect of MNEs from developed countries in emerging economies. The only related research available limits their analysis to the regional level, rendering the relationship between the foreign expansion of EMNEs and their green innovation unclear. Specifically, as an increasing foreign expansion strategy adopted by EMNEs, how do cross-border mergers and acquisitions (CBMAs) affect the post-merger green innovation of EMNEs? To examine this question and explore the boundary conditions, this study integrates institutional theory and the business ethics literature to construct a motivation–ability framework in the context of green innovation. Using the Propensity Score Matching with Difference-in-Difference (PSM–DID) method, we tested our hypotheses on a sample of Chinese listed manufacturing firms between 2009 and 2017. Results suggest that Chinese MNEs decrease their green innovation in response to CBMAs. Moreover, the CBMA–green innovation relationship varies across firms and is determined by heterogeneity in state ownership, government subsidies, and industry openness. These findings not only elucidate the reverse effect of the foreign expansion of EMNEs on their green innovation in home countries; they also provide an approach to reconciling mixed conclusions on the relationship between CBMAs by EMNEs and their innovation performance by clarifying types of innovation in international business research.

Legal Resolution of Commercial Bribery by MNEs: Based on Foreign Corrupt Practices Act

With the expansion of multinational enterprises (MNEs) overseas, corruption has become an unavoidable problem. Among the many acts of corruption, commercial bribery is the most rampant and has a strong impact on the world economic order, thus the legal resolution of commercial bribery in the trade of MNEs is crucial. This essay will mainly discuss effective legal regulatory measures for the commercial bribery of MNEs based on the Foreign Corrupt Practices Act, and make suggestions for improving the existing legal system of the issue in China through comparative research methods.

Impact of outward foreign direct investments on patent activity of Greenfield multinationals

We study the impact of outward greenfield foreign direct investment (OGFDI) expansion of multinational enterprises (MNEs) on their innovation activity, proxied by the internal generation of patents. By combining three databases: Orbis by Bureau van Dijk, FDIMarkets by Financial Times, and PATSTAT by The European Patent Office, we obtain a sample of more than 20,000 firms for the period 2008–2015. The MNE firms originate in 175 countries, which span the entire spectrum of economic development- from low to high-income countries. The industrial distribution of the firms covers 72 industries at the 2-digit ISIC level. We construct a model, which allows us to analyze the impact of OGFDI capital investment, as well as OGFDI-created employment, on the number of patents of the companies engaging in the GFDI. We control for various firm characteristics, such as performance measures and size of the corporate group. We also control for the country of origin of the firms, stratifying the sample into emerging market MNEs and developed countries MNEs. We use linear estimation techniques to analyze the relationship between the variables and test how the results change across industries with different patent intensities. We find that both capital investment and jobs created through OGFDI boost the innovation activity of MNEs, and these effects are bigger for industries with higher patent intensities, such as the production of chemicals, computers, and motor vehicles. For sectors that rely less on patents (oil and electricity sectors) the impact of GFDI on patenting activity is smaller and for the case of building constructions, we even find a negative impact of investments on innovation. We further find that the effects are larger for EMNEs than DMNEs and discuss appropriate policies.

British Fire Insurers in Australia, 1860–1920: A Story of Enterprise, Luck, and Resilience

The global expansion of British insurers in the nineteenth century has been a feature of insurance history that has highlighted the strategic nature of the multinational enterprise (MNE). The growth of the Australian colonies from the mid-nineteenth century attracted the interest of these overseas insurers. This article considers the challenges these firms faced and the way in which these trials were overcome. Effective networks were important in establishing a market presence in the Australian colonies. A combination of enterprise, luck, and resilience assisted in building these links. The experience of British insurers in the colonies sheds light on the processes of MNE expansion into markets beyond their range of tacit knowledge and expertise.

Multinational Expansion in Time and Space

This paper studies the expansion patterns of the multinational enterprise (MNE) in time and space. Using a long panel of US MNEs, we document that MNE affiliates usually start with sales exclusively to the host market and eventually enter export markets, and that this extensive margin of expansion accounts for most of their sales growth. Informed by these facts, we develop a multi-country quantitative dynamic model of the MNE that features heterogeneity in firm-level productivity, persistent aggregate shocks, and a rich structure of costs that affect MNE expansion. Importantly, MNE affiliates can decouple their locations of production and sales, and endogenously choose to enter or exit the host and the export markets. We introduce a novel compound option formulation that allows us to capture in a tractable way the rich heterogeneity observed in the data, which is necessary for quantitative analysis. Using the calibrated model, our quantitative application to Brexit reveals that the nature of the frictions to MNE activities matters for understanding the reallocation of MNE activity in time and space and for predicting the effects of globalization shocks.

Core or periphery? The effects of country-of-origin agglomerations on the within-country expansion of MNEs

We show how the initial subnational entry location of foreign multinational enterprises (MNEs) in China influences their subsequent within-country location choices and expansion speed. We distinguish between MNEs that establish their first subsidiary in co-ethnic cores – dense agglomerations of other firms from the same country of origin – and MNEs that locate their first subsidiary in the periphery, i.e., outside of these co-ethnic cores. To identify co-ethnic cores in China, we employ a geo-visualization methodology, which draws the boundaries of cores organically and dynamically over time. We contrast our findings with the prevailing approach of using static administrative boundaries for identifying agglomerations. Our results provide evidence of path dependency, in that (a) entry through subnational locations with strong co-ethnic communities is followed by expansion into other locations where co-ethnic communities are present, and that (b) entry through co-ethnic communities accelerates the pace at which MNEs establish additional subsidiaries in China. We also find that co-ethnic community effects continue to influence within-country MNE activities over time, despite a host of economic, institutional, and investment developments.

Determinants of Corporate International Expansion Beyond the Home Region: An Empirical Examination of U.S. Multinational Enterprises Expansion to Europe and Asia‐Pacific

Research SummaryThis study extends Rugman and Verbeke (2001)'s model by examining how firm‐specific advantages (FSAs) and host region conditions affect multinational enterprise expansion at the inter‐regional level. We examine the impact of their three constructs (non‐location‐bound FSAs, location‐bound FSAs, and complementary resources in the host regions) on U.S. MNEs’ sales in Europe and Asia/Pacific. We also suggest and examine the impact of two additional factors (host market efficiency and FSA fragmentation). For empirical testing, we use U.S. industry‐ and firm‐level panel data and compare results from both datasets. We find that location‐bound FSAs and fragmented FSAs hinder expansion to other regions, while non‐location‐bound FSAs, host region complementary resources, and host market efficiencies facilitate expansion to other regions. Results from the two datasets are highly consistent.Managerial summaryThis study aims to provide guidelines for multinational enterprise (MNE) managers seeking to expand to areas beyond their home region. Some firm capabilities “travel” well to distant countries, to different cultures, and across economic levels, i.e., they are transferable. Others are not, i.e., they are more embedded in the firm's home‐country environment. Expansion of U.S. MNEs to Europe and Asia/Pacific is facilitated by (a) higher levels of intrafirm transfers, (b) access to complementary resources abroad, and (c) relative host market efficiencies. In contrast, such expansion is hindered by (a) higher productivity of labor at home relative to that abroad and (b) fragmentation of its product portfolio. This analysis is helpful for managers interested in building the systems, conditions, and mechanisms that increase the MNE's geographic reach. Copyright © 2017 Strategic Management Society.

Income Inequality and Multinational Enterprise Expansion Strategy

In this paper, we examine the extent to which host country income inequality influences multinational enterprises’ (MNEs) expansion strategy for foreign production investment. Applying a transactio...

Multinational enterprises from Latin America: investment strategies and limits to growth and diversification

The expansion of multinational enterprises from Latin America over the previous 10 years is part of a global trend of increasing outward foreign direct investment (FDI) from developing countries. This paper proposes to analyse outward FDI in the region categorising the behaviour of the 50 largest multinational enterprises from the region and attempting a broad classification of their motivations, objectives and means for their international expansion (FDI strategies). The author argues that the prevalent strategies identified can point towards an explanation for the current downturn in FDI outflows from the region. The paper finally provides a connection between the FDI strategies and the efforts towards structural change of the economies of the region, highlighting the role of outward FDI in this process.

U.S. MNE Firm-Specific Advantages and Inter-regional expansion

This study examines how characteristics of firm-specific advantages (FSAs) and locational advantages affect the international expansion of multinational enterprises (MNEs) at the inter-regional level. The conceptual framework expands on Rugman and Verbeke’s original model. We examine the impact of location-bound FSAs as reflected in sales productivity of domestic labor forces, non-location bound FSAs as reflected in cross-border intra-firm sales, FSA fragmentation as reflected in unrelated diversification, and complementary resources as reflected in employees concentrated in host regions on US MNEs’ sales in other regions including EU and Asia- pacific. For empirical testing, we used and compared industry and firm level panel data. We find that location-bound FSA and unrelated diversification hinder expansion to other regions, while non-location bound FSAs and host region complementary resources facilitate expansion to other regions. This study contributes to the literature on company internationalization by specifying and fine-graining influencing factors associated with FSAs and locational factors.

Multinational Enterprises, Foreign Knowledge and Host Country

In this paper we study how the expansion of multinational enterprises in the host country affects its wages using a general equilibrium factor specific framework for a small open economy with a flexible labor market. We identify three potential effects of MNE activity associated with the transfer of foreign knowledge, diffusion of this knowledge among indigenous firms and the inflow of capital from abroad. We show that the impact of multinational enterprises on wages in the host country depends on differences in capital intensity between multinational and local sectors, the amount of capital transferred to the host country from abroad and the magnitude of knowledge spillovers stemming from multinational activity to indigenous firms.

Why the Home Region Matters: Location and Regional Multinationals

Much of the literature in international business analysing the multinational enterprise uses the country as the relevant environmental parameter. This paper presents both theoretical and empirical evidence to demonstrate that country‐level analysis now needs to be augmented by analysis at the ‘regional’ level of the broad triad markets of Europe, North America and the Asia Pacific. The great majority of the world's 500 largest firms concentrate their activities within their home region of the triad. This study uses variance component analysis and finds that this home region effect outperforms the country effect. Together, the regional and industry effects explain most of the geographic expansion of multinational enterprises (MNEs), whereas country, firm and year effects are very minor. The new data and variance component analysis on the activities of large MNEs reported here suggest that new thinking is required about the importance of large regions of the triad as the relevant unit of analysis for business strategy to supplement the conventional focus on the country.

Outward FDI from Developing Country MNEs as a Channel for Technological Catch-Up

One of the more recent aspects of the globalization process is the rise and the increasing outward expansion of multinational enterprises (MNEs) from developing countries. Among the more promising effects of this phenomenon is a potentially positive development impact: through outward foreign direct investment (OFDI) developing country MNEs acquire new knowledge, which contributes to the technological catch-up of their home countries. This paper reviews the recent literature on OFDI from developing countries, with a critical focus on the theory and evidence of FDI as a channel for technological catch-up. This literature suggests that the features and global business environment of current emerging country MNEs is different from those of latecomer firms in earlier decades. Modularity of production in an increasing number of sectors, combined with weak national innovation systems (NIS) in many developing countries explain why the sourcing of strategic assets – including technology and innovation – from abroad through OFDI has become such an important channel for technological catch-up.

Staffing managerial positions in emerging markets: a cultural perspective

PurposeThis paper examines the challenges facing multinational enterprises (MNEs) in finding competent managers to staff operations and subsidiaries in emerging market economies (EMEs).Design/methodology/approachThe key question examined is – who is going to manage the business expansion of MNEs in EMEs? Will it be host country nationals who know and understand the local business environment; parent country nationals (PCNs) who are sent on an overseas assignment by the parent corporation; or third country nationals (TCNs) recruited for their unique set of skills and expertise?FindingsThere is no “one size fits all” solution; for most multinational corporations (MNCs), a combination of strategies will work. One approach is to seek out EME nationals that are currently working or studying in the MNCs home country. Other MNCs seek recruits directly in the EMEs and then put the recruits through an intensive training program. An alternative is to improve the cross‐cultural training provided to expatriate PNC and TNC managers. However, despite calls for improved training that have been made over decades, there is little evidence that MNCs are investing the necessary resources in training their expatriates in the soft skills that are essential to success. With a growing need for good managers to staff their overseas operations and not enough local managers to do the job, at least in the short to medium term, MNCs will continue to use a combination of staffing strategies, in the hope that they will be able to build up a cadre of culturally competent international managers, regardless of national origin, who can operate effectively in EME environments.Research limitations/implicationsUnless there is a marked shift in the quality and rigor of the cross‐cultural training programs currently being provided to PCNs and TCNs, we foresee plenty of storm clouds developing in the blue skies of emerging markets.Originality/valueThis paper provides a current and practitioner focused discussion of the specific cultural challenges of EMEs and develops the concept of managerial cultural competence.

International expansion of transnational advertising agencies in China: An assessment of the stages theory approach

This paper examines the expansion of multinational enterprises (MNEs) in a service industry to a country which is both developing and in transition—i.e. the advertising industry in China—to assess how useful the stages theory is in understanding internationalisation issues in today's globalised world. Three of our findings are consistent with the expectations and formal denouement of the stages approach: (a) the agencies increased their involvement in the China market over time; (b) the agencies went through organisational structure change through an incremental process; and (c) the internationalisation process was much faster for late entrants. On the other hand, some findings are not congruent with the theoretical explanations or logic of the theory. The main reason why agencies change their form of operations to a more involved mode, according to executives, was that their clients’ investment in China had increased. They argued that change in operational form is client-driven, rather than being driven by an increase in market knowledge. In sum, form must not be taken for the substance, although some aspects of the Uppsala model can explain the stages and changes of modality in MNE operations in China.

John Paul II’s vision of the role of multinational enterprise expansion in building the social economy

This essay uses three of Pope John Paul II’s encyclicals, Laborem Exercens, Sollicitudo Rei Socialis, and Centesimus Annus to articulate principles that may be useful in evaluating public oversight of multinational enterprises (MNE). These encyclicals are challenges to the prevailing socio‐economic order by an institution that cannot be dismissed as “knee‐jerk liberal” carping. On the contrary, the fact that a conservative institution asserts these principles repeatedly and over time may mean that they should be included in our public consideration of the global resonance of MNEs. Insofar as MNE expansion can mean pervasive improvements in the standard of living of the earth’s population, the writings of Pope John Paul II lead to the conclusion that MNE expansion should be encouraged as long as all of the participants, especially the citizens of developing countries, participate in the benefits. MNE expansion and the expected socio‐economic dislocations accompanying the expansion will require institutional arrangements to minimize conflict, promote cooperation, and encourage solidarity. An organization for multinational enterprises (an OMNE) could fill this need by reducing MNEs’ fears about adverse host country policy changes and simultaneously providing assurances that the citizens of the MNE‐host country will share in the rents generated by the MNE’s expansion.

The Intra-Enterprise Conspiracy Doctrine in the United States and the European Economic Community

With the expansion of multinational enterprises it is important to be cognizant of various differences in foreign substantive laws regarding intra-enterprise conspiracy. In Copperweld Corp. v. Independence Tube Corp.' the U.S. Supreme Court adopted a per se rule that wholly-owned subsidiaries lack the capacity to conspire with their parent corporation in a manner violative of Section 1 of the Sherman Act. This decision effectively nullified application of the intra-enterprise conspiracy doctrine in situations involving a parent corporation and its wholly-owned subsidiary. In the European Economic Community (EEC) courts are also moving in the direction of finding competition laws less applicable to agreements between affiliated corporations. However, the EEC has not made such a definitive statement regarding application of the intra-enterprise conspiracy doctrine. (Neither the Commission nor the European Court has ever used the American term 'intra-enterprise conspiracy.')

Japanese Multinationalization

It is not yet 20 years since the literature began to mushroom on the rapid expansion of multinational enterprises. There are therefore many different opinions even as to the definition of a multinational enterprise, and as yet no generally accepted theories.