Foreign Expansion Research Articles

The Moderating Effects of Host Country Governance and Trade Openness on the Relationship between Cultural Distance and Financial Performance of Foreign Subsidiaries in Latin America

Cultural distance (CD) is an important driver of foreign expansion strategy at the firm level. However, its effects can be more or less significant depending on the contextual characteristics of the host country, such as the quality of formal institutions and the openness to international trade. Therefore, it is argued that strong formal institutions in the host country can effectively reduce the adverse impact of CD. Additionally, due to the more frequent interactions with foreign cultures, countries open to foreign trade can positively accommodate the effects of CD. The study tests these assumptions using data from the Orbis database and the World Bank and finds a reduction in the adverse impact of CD on the financial performance of foreign subsidiary firms with robust formal institutions in the host country. Moreover, the negative effects of CD increase with higher degrees of trade openness. Thus, the results indicate that foreign subsidiary firms operating in host countries that are more open to foreign trade will have to conform to the higher expectations from the local culture.

The Nexus between Bank Foreign Expansion and Efficiency: The Moderating Effects of Host Country Regulation and Competition

ABSTRACT Does Chinese bank efficiency benefit or suffer from foreign expansion? To investigate the causal relationship between banks foreign expansion and efficiency, we analyze 431 overseas branches of Chinese banks from 2007 to 2020. After decomposing the efficiency, we find strong, consistent evidence that such foreign expansion reduces cost efficiency due to the agency problem, while improving profit efficiency to retain the long-term bank–client relationship. Furthermore, to examine moderating effects, we consider regulations and competition among host countries. Ultimately, stringent regulations and less competition are found to be key factors impacting the loss and gain of cost and profit efficiency.

The impact of initial public offerings on SMEs’ foreign investment decisions

This study aims to bridge the research on the internationalization of small- and medium-sized enterprises (SMEs) with the literature on initial public offerings (IPOs). It investigates how IPOs affect SMEs’ foreign investment decisions as they internationalize. We argue that IPOs enable SMEs to engage in a period of accelerated foreign expansion, resulting in a wave-like pattern, as suggested by Håkanson and Kappen’s (J Int Bus Stud 48(9):1103–1113, 2017) ‘Casino model’ of internationalization. We also propose that there will be a post-IPO shift in SMEs entering less familiar locations and towards taking higher ownership stakes in new subsidiaries. We use a difference-in-differences design combined with coarsened exact matching to isolate the effects of IPOs. Our analysis of overseas investments by a matched sample of newly listed Japanese manufacturing SMEs and their private counterparts provides strong evidence that SMEs accelerate the pace of establishing new foreign subsidiaries after going public. The results also reveal nuanced changes in the location and ownership patterns in the post-IPO period. This study identifies the IPO as a significant antecedent to SME foreign expansion and offers a new explanation for intertemporal variance in the pace, direction, and commitment of the SME internationalization process.

INTERNATIONALIZATION AS A MODERN IMPETUS FOR THE DEVELOPMENT OF THE ORGANIZATION

In today’s world entrepreneurs are forced to operate not only in the local or national market, but also internationally. Thanks to this they have a chance to develop their business and get more profit. In the context of international activities we can talk about internationalization. What does this concept mean and what does it mean for business owners themselves? Practically any activity of a company in foreign markets can be regarded as a signal of its internationalization. In addition, internationalization can be an element of a company’s development strategy related to its foreign expansion. The article reflects the internationalization, which allows expanding the scope of sales of goods. The main approaches, motives, reasons for this economic process are investigated and highlighted. International marketing, its specificity, main objectives and direct influence on the process of activity of enterprises are given and characterized. Speaking of internationalization, we must remember that this process can take different forms. Which one will be chosen depends not only on our personal sympathies, but also on what solution would be most beneficial for the company.

Romanian family business internationalization: knowledge management and dynamic capabilities

Abstract The key aspects of today’s economic climate are intensified competitiveness and fast-changing global markets. In order to stay competitive, family companies need to respond to these developments and more frequently seek foreign expansion themselves. To understand how organisations should respond to changes in the market to retain a competitive edge, the idea of knowledge management and dynamic capabilities has indeed been developed. Such an environmental transition could be the internationalisation of a family business. The purpose of this research is to examine, through the lens of knowledge management and dynamic capabilities, the internationalisation of family companies. A qualitative single case study model of a family business that has been through an international expansion has been considered, collecting evidence through semi-structured qualitative interviews with three of the company’s key individuals. The study reveals that in the internationalisation process, there are many skills that assist family companies. Sensing technologies include screening capabilities for networks and industries and helping family companies identify new prospects in international markets. Seizing skills provide decision-making and management capabilities and change the capital base to take advantage of the possibilities previously sensed. Finally, family businesses should constantly reconfigure their tools with transforming skills, which consist of entrepreneurial knowledge capabilities, to optimise processes and frameworks in the current international setting. Different facets of family life influence the development of these complex skills.

Accounting Policies, Institutional Factors, and Firm Performance: Qualitative Insights in a Developing Country

This study aims to uncover the determinants for the formulation of accounting practices and their impact on firm performance in Pakistan through the lens of institutional theory. Based on a pragmatic approach, this study has collected data from 455 participants and 21 semi-structured interviews have been conducted. Firstly, it is noted that accounting practices can be traced back to the Mughal regime, and subsequently underwent a major development in the British colonial system. Secondly, our results indicate that institutional factors, namely, accounting regulatory framework, political factors, economic factors, cultural factors, and country-specific factors have also played a major role in the development of accounting practices after the creation of Pakistan as a separate state. Finally, this study suggests that the development of accounting practices have a novel contribution towards the performance of firms. This research thus provides a pathway for policymakers in this county to closing the gaps between accounting practices and the policies of the International Accounting Standard Board (IASB). Furthermore, firms can enhance their performance by implementing international accounting standards. This paper helps Pakistan’s regulatory institutions such as the SECP (Securities and Exchange Commission of Pakistan) and SBP (State Bank of Pakistan) in the process of developing new policies. Such decisions are related, but not limited to: attracting foreign investments, economic expansion, and international trade. Furthermore, it provides a pathway for firms to improve their performance. Ultimately, this research fills the gap as concerns international accounting standards by assessing, both empirically and theoretically, the role of various determinants for the formulation of accounting practices and their impact on the performance of firms.

The Role of Firm’s Location, Export-Related Resources and Capabilities in Relation to Coffee & Sesame Export Performance in Ethiopia

Exporting has been one of the fastest foreign expansion strategies in the last two decades. The purpose of this study is to investigate the role of an exporter's location in the development of export-related resources and capabilities, which will have an impact on the degree of export performance. The relationship between export-related resources, capabilities, and export performance are examined in this study. A total of 300 questionnaires were sent out to coffee and sesame exporters. However, only 253 surveys were used for analysis. The SmartPLS 3 software was used to analyse the data using the Partial Least Squares (PLS) technique. The study's findings suggest that access to location-specific resources and skills are critical antecedents for a company's ability to build export-related resources and capabilities in order to improve export performance. The geographic location of a company has a considerable and beneficial impact on human resource capability (β =0.67, p=0.001). Information capability was not significantly influenced by human resource capability ((β =0.082, P=0.259). Information capability ((β =0.656, p=0.001) is significantly influenced by organizational planning capability ((β =0.452, p=0.001). Satisfaction Export Performance ((β =0.431, p=0.01) has been significantly and positively influenced by information capability. New Product Development Capability influences strategic export performance significantly and positively ((β =0.330, p=0.001). Strategic export performance ((β =-0.035, P= 0.820) and satisfaction with export performance ((β =0.050, P= 0.625) were not affected by relationship capability. These data suggest that when it comes to exporting, rural businesses face significantly greater obstacles than those in metropolitan areas. The outcomes of this study will assist managers of remote-area businesses in developing equally appealing recruitment and reward practices in order to compete with businesses in urban areas. Furthermore, the outcomes of this study advise that export firm managers think carefully about the resources and capabilities required to improve their export performance.

Multi-Sided Digital Platforms’ Application in SMEs’ Fashion Brands Internet-Enabled International Marketing

Purpose: While the multi-sided digital platforms (MSPs) enjoy increasing interest regarding their business models and internationalisation, little research has been done on the application of MSPs in firms` foreign expansion. Specifically, it is unclear how MSPs can support small and medium enterprises` (SMEs) international marketing. The aim of this paper is to identify models of MSPs application in the Internet-enabled international marketing of SMEs’ fashion brands. Design/Methodology/Approach: As the research method a multiple-case study was used. Data were obtained from both in-depth interviews with managers of four Polish SMEs – owners of fashion brands, whose products are sold in the foreign markets via MSPs, and secondary sources. Findings: Studied companies offer their products via international MSPs originating from foreign markets and home country. It may be initiated both by platform`s operators, brand owner and a foreign distributor. Responsible for the relations with MSPs and in control over international marketing via MSPs may be both brand owner and a foreign distributor. Practical Implications: Presented models of MSPs application in international marketing can be used as a basis for shaping marketing strategies in this area. Originality/Value: This paper contributes to the better understanding of SMEs` Internet-enabled international marketing using MSPs.

The influence of industrial clusters on SMEs earliness and postentry speed: Exploring the role of innovation activities

AbstractDespite the existing contributions on the economic and social relevance of industrial clusters in the firms' internationalization, research on these topics is still scarce and, particularly, controversial at an empirical level. This study contributes to the extant literature on international development, proposing to explore the impact that industrial clusters and innovation activities exert in the most relevant temporal dimension of the firm's foreign expansion—internationalization speed (earliness and postentry speed). Further, this research seeks to ascertain whether the relationship between industrial clusters and internationalization speed is significantly different for low and high‐technology businesses. Based on a sample of 3,537 Portuguese firms, collected in the SABI database, the results suggest that firms belonging to industrial clusters and developing innovation activities tend to exhibit a higher postentry speed, not observing the same impact in terms of early internationalization. The findings also reveal that low‐technology firms have an additional incentive to become involved in industrial clusters, since these actions will be reflected to a greater extent in their postentry speed than those of high‐technology firms.

Japan-Southeast Asia Relations Amid US-China Competition in East Asia

Japan has emerged as a critical strategic actor in East Asia amidst intensifying US-China structural competition since 2010. Southeast Asia/ASEAN is an important dimension of Japan’s foreign policy expansion. This paper argues that Japan’s foreign policy is driven by the aim of becoming an alternative source of strategic stability in Southeast Asia/ASEAN as opposed to the United States and China. This is explained by analysing Japan’s foreign policy in regional balance of power and ASEAN-led multilateralism.

GEOGRAPHICAL DIVERSIFICATION AND LONGEVITY RISK MITIGATION IN ANNUITY PORTFOLIOS

ABSTRACTThis paper provides a method to assess the risk relief deriving from a foreign expansion by a life insurance company. We build a parsimonious continuous-time model for longevity risk that captures the dependence across different ages in domestic versus foreign populations. We calibrate the model to portray the case of a UK annuity portfolio expanding internationally toward Italian policyholders. The longevity risk diversification benefits of an international expansion are sizable, in particular when interest rates are low. The benefits are judged based on traditional measures, such as the Risk Margin or volatility reduction, and on a novel measure, the Diversification Index.

E-commerce in the internet-enabled foreign expansion of Polish fashion brands owned by SMEs

PurposeThe aim of this paper is to identify ways and motives of application of e-commerce in the foreign expansion of small and medium enterprises (SMEs) fashion brands.Design/methodology/approachA multiple case study was used as the research method. Data were obtained from primarily in-depth interviews with managers of four Polish SMEs –fashion brands owners, whose products are sold in the foreign markets using e-commerce, and secondary sources.FindingsThrough this study the authors identified both strategic-proactive and market-reactive motives of e-commerce applications in SMEs’ fashion brands in the internet-enabled foreign expansion and three different models of usage of e-commerce in the foreign expansion of SMEs.Research limitations/implicationsThe research was based on the multiple case study of only Polish SMEs in the fashion industry. The conclusions of this study can be applied by fashion companies in their internet-based foreign expansion.Originality/valueThis study contributes to the existing body of literature on the internationalization process of SMEs, and particularly on the application of cross-border e-commerce in the foreign internet-enabled expansion of fashion SMEs by identifying three various models of applying e-commerce, in the internet-enabled foreign expansion and their both proactive and reactive motives.

Top management team’s formal network and international expansion of Chinese firms: The moderating role of state ownership and political ties

This article explores the role of the formal network centrality of top management teams (TMT) for foreign expansion, looking at the case of Chinese firms. The former is defined by the degree to which top managers are connected with TMTs of other firms in formal ways, through service as independent board members. We explore boundary conditions, comparing state ownership with political ties. The analysis of a panel data of 489 firms expanding to 72 developed and developing host markets in the period 2000–2012 confirms that network centrality facilitates internationalization. We found that TMT network centrality had a stronger effect on internationalization in developed than emerging markets. Conversely, state ownership had a positive moderating effect in the latter and political ties a negative effect in developed ones. The literature on comparative institutional analysis suggests that formal ties are more important in developed economies, and informal ties in emerging ones. However, formal political ties and/or links to the Chinese state may be more of value in internationalizing into other emerging markets, where the balance of diplomatic power may be more skewed in China’s favor.

Global banking: Endogenous competition and risk taking

When banks expand abroad, their riskiness decreases if foreign expansion happens in destination countries that are more competitive than their origin countries. We reach this conclusion in three steps. First, we develop a flexible dynamic model of global banking with endogenous competition and endogenous risk-taking. Second, we calibrate and simulate the model to generate empirically relevant predictions. Third, we validate these predictions by testing them on an original dataset covering the activities of the 15 European global systemically important banks (G-SIBs). Our results hold across alternative measures of individual and systemic bank risk.

ТРАНСГРАНИЧНАЯ МИГРАЦИЯ И ОБРАЗОВАНИЕ ДИАСПОР : КИТАЙЦЫ ВО ФРАНЦИИ

The prerequisites and stages of formation of the modern Chinese diaspora in France are considered as part of the global process of development of cross-border migration and its transition to a new quality - the formation of diasporas. The ties of diaspora with China and their perception in the French society are characterized. The dual attitude towards China in France is emphasized: fear of its foreign economic expansion, on the one hand, and assessment of the prospects of economic relations, on the other hand. The composition and characteristics of the Chinese diaspora are analyzed. The prerequisites for the business success of the Chinese are revealed, and contradictory attitudes to them in French society are stated: «a model minority (mêdel minority)» in public opinion and «racism of resentment» in the «collective unconscious».

Internationalization of Polish enterprises. A comparative analysis of family and non-family businesses

Purpose: The study aimed to determine whether family businesses in Poland are as involved in international activity as non-family businesses. Moreover, the intention was to identify differences in the forms of foreign expansion employed by family and non-family firms. Design/methodology/approach: The objectives were pursued based on primary research conducted in 188 family firms and 223 non-family firms operating on the Polish market. Findings: The analysis of the results indicates that family firms conduct business activity outside the domestic market significantly less frequently than non-family firms. The most common form of internationalization chosen by Polish family firms is export and import. Generally, these firms are not interested in joint ventures with foreign partners. Compared to non-family firms, Polish family firms establish divisions abroad significantly less frequently. However, they engage in non-equity cooperation more often than non-family firms. Practical implications: Knowledge about the involvement of family and non-family firms in international activity and their preferred forms of internationalization can be used by business environment institutions. Originality/value: The study results enrich the knowledge on the activity of Polish family firms on foreign markets as compared to similar activity of non-family businesses

The Rise of Transnational Corporations from Developing Countries in the Second Half of the 20th Century

The article highlights three stages of the formation of multinationals from developing countries. Although first Argentine TNCs appeared at the turn of the 19th — 20th centuries, in the majority of the Global South countries TNCs appeared in the 1960s — 1980s. With the collapse of the bipolar world order, which in many developing countries was accompanied by significant internal political and economic transformations, the second stage of foreign expansion of TNCs from the Global South began. Indeed, in 1990 they accounted for 6 % of global outward foreign direct investment stock, while the figure was 10 % by the end of 2005. We date the beginning of the third stage to the financial and economic crisis of 2007—2009, since multinationals from developing countries as a whole are more successfully overcoming the period of turbulence in the global economy. By the end of 2020, they accounted for 22 % of global outward foreign direct investment stock, and during the COVID-19 pandemic crisis they generally exported more than 50% of the capital. The modern foreign expansion of such TNCs has many reasons, differs greatly from country to country, and often differs slightly from the specifics of Western multinationals. At the same time, initially, “late internationalization” in developing countries had two main vectors — the use of new opportunities for South — South cooperation and overcoming, through the creation of subsidiaries in highly developed countries, the shortcomings of the business environment of “catching up” countries.

Big data analytics (BDA) and degree of internationalization: the interplay between governance of BDA infrastructure and BDA capabilities

In order to face the challenges of internationalization and to cope more efficiently with the uncertainty of foreign expansion, firms are called to analyze an increasing amount of real-time semi-structured and unstructured datasets. In this sense, big data analytics (BDA) can become strategic in stimulating the international growth of small and medium-sized enterprises (SMEs). However, the specific relationship between BDA and internationalization has been analyzed fragmentarily within the mainstream literature. With the purpose of shedding light on this relationship, the authors drew on resource-based view (RBV) and collected data through a questionnaire directed to CEOs of 266 SMEs, receiving 103 responses. A quantitative analysis based on an Ordinary Least Squares (OLS) regression showed that the relationship between governance of BDA infrastructure and the degree of internationalization (DOI) is not significant, while the direct effect of BDA capabilities as well as the interaction term between BDA infrastructure and BDA capabilities are positive and significant. This suggests that the governance of BDA per se is not enough for enhancing internationalization in SMEs. On the contrary, this article points out the relevance of developing specific BDA capabilities and the existence of a positive interplay between governance of BDA infrastructure and BDA capabilities that can exploit the new knowledge coming from BDA in SME international growth.

중국은행의 국제화: 입지 및 진입모드 선택

In response to the lack of research on Chinese banks in the context of multinational banks (MNB), this study may be the first empirical study of the factors influencing a Chinese bank’s location and entry mode strategies in the process of globalization from the strategic behavior perspective. This study uses two binary logistic regression models to investigate the impacts of the determinants on the width and depth of foreign expansion activities. The results provide significant evidence that Chinese banks follow their existing customers and global industry leaders when they expand abroad rather than seek local market opportunities, though the two distance factors representing the cost result from cross-border investment and post transaction integration influence the country-level decision to involve in an acquisition. In terms of the follow-the-customer hypothesis, the sign on FDI is both positive and significant. The follow-the-leader variable related to strategic interactions is defined at the global industry level. Chinese banks are more likely to enter a host country in which one of the host country’s banks already established a branch in China, as an “exchange-of-threat.” In terms of the follow-the-customer hypothesis related to the location of entry through acquisition, the coefficient on the FDI and overseas chinese variables are both positive and significant. In terms of entry mode strategy, the coefficients on geographic and cultural distance variable are both significant, but with different signs. It is reflects the fact that Chinese banks are active in acquisitions in less developed countries with higher cultural approximation. At the bank level, the influence of their past acquisition experience is also significant. The study provides further support to the argument that the eclectic paradigm and strategic reaction perspectives can offer complementary explanations of FDI by foreign banks from developing countries.

Bank globalization and efficiency: Host- and home-country effects

Analyzing 126 countries for 1995–2013, we investigate the link between bank globalization and efficiency from the perspective of both host and home countries. We find strong and consistent evidence that foreign bank entry is associated with lower efficiency in host countries (host-country effect), while foreign expansion in the banking sector improves the efficiency of banks at home (home-country effect). We further observe that the effect of bank globalization is dependent on the regulatory and institutional regimes of the respective host (home) countries. Specifically, stringent activity restrictions, tight supervision, fewer limitations on foreign banks, lower market entry barriers, and less government interference all help mitigate the efficiency loss from foreign bank entry. Less supervision power, multiple supervisors, more restrictions on foreign banks, and a competitive banking market are all conducive to the higher efficiency gain of incumbent domestic banks from the respective country’s outward investments in the banking sector. Moreover, we find that the adverse impact on efficiency from foreign bank presence is less pronounced for less risky, more profitable, and larger banks, while banks that are more efficient, more profitable, taking on more risk, and/or smaller gain more efficiency from their country’s foreign expansion.