Foreign Multinationals Research Articles

Estimation of foreign MNEs spillovers in Spain

ABSTRACTUsing Spanish firm-level data, we estimate productivity effects of spillovers from foreign multinationals to domestic firms in both manufacturing and service sectors. We find evidence of a positive productivity effect from multinationals on domestic firms operating in the same industry. Analyzing inter-industry linkages, we find evidence consistent with positive productivity spillovers from forward linkages (i.e. from suppliers to buyers) and negative productivity spillovers from backward linkages (i.e. from buyers to suppliers). Our main results hold when analyzing differences between multinational and domestic firms, and for periods of economic growth and recession, although some differences arise. Interestingly, we find evidence supporting a positive role of spillovers during the last recession period.

Beyond ribbon cutting: Lessons from Russian manufacturers on the nuances of opening ceremonies

Opening ceremonies for new manufacturing plants are commonplace and yet, they are surprisingly under‐documented. Although these ceremonies may, at first glance, appear to simply serve as celebrations to mark the successful completion of an industrial project, they are based on symbolic actions, and usually very well planned and executed. Consequently, their underlying meaning is more complex. A study of the opening ceremonies of 56 manufacturing facilities in Russia by foreign multinationals shows that opening ceremonies also serve to demonstrate mutual acceptance of the differing motives of both the foreign investors and the local authorities for building the plant. The analysis points to recommendations regarding the timing and design of the ceremonies, as well as participants’ behavior, that can ensure that such events contribute to the attainment of organizational goals.

Elaine Dewar, The Handover: How Bigwigs and Bureaucrats Transferred Canada’s Best Publisher and the Best Part of Our Literary Heritage to a Foreign Multinational

Elaine Dewar, The Handover: How Bigwigs and Bureaucrats Transferred Canada’s Best Publisher and the Best Part of Our Literary Heritage to a Foreign Multinational

Inward Foreign Direct Investment and U.S. Public Opinion on Immigration

I investigate how the direct investment of foreign firms in the United States affects public opinion on immigration. On one hand, when foreign firms invest in the United States, local residents may have job opportunities and a better understanding of foreign cultures following social and work‐related interactions with foreign employees at multinationals. As a result, American workers may have a positive attitude toward immigration. On the other hand, when local residents see foreign investment as a foreign acquisition of American assets, or if they experience any unpleasant interactions with foreign nationals at multinationals, foreign investment may result in a negative impact on public perception on immigration. My empirical test of inward investment's impact on public opinion demonstrates the aforementioned contrasting impacts: While more local employees working at foreign multinationals lead to positive sentiments on immigration, the existence of more local affiliates of foreign firms has a negative impact on public opinion of immigration.

INDUSTRIAL TRANSFORMATION WITH HETEROGENEOUS LABOR AND FOREIGN EXPERTS

This paper develops an endogenous growth model with industrial transformation and a stylized foreign expert-based internalization advantage framework to determine the composition of heterogeneous foreign multinationals in a developing host economy. A key feature of the model is the introduction of a dichotomous relationship between domestic and foreign firms, where the latter perceives heterogeneity among the productivity of domestic workers. This results in the skills acquisition decision and foreign subsidiaries' operational mode choice to be determined along the same ability distribution of the host economy. This subsequently determines the shares of the different types of multinationals in a host economy. Parameterized for Malaysia, policy experiments are conducted. A balanced investment liberalization measure for all foreign firms is found to outperform measure targeting only selected types, though there is a threshold doing-business cost value below which such a standalone Foreign Direct Investment (FDI)-promoting policy does not generate positive growth effect. This then calls for composite program that maximizes the policy complementarities between human capital and FDI-promoting policies.

The internationalization of African firms: Opportunities, challenges, and risks

There has been a marked increase in the internationalization activities of African firms over the last two decades or so, resulting in the emergence of regional challenger firms that are aggressively competing with foreign multinationals in terrains historically dominated by the latter. However, our understanding of this phenomenon is limited, as empirical research examining the nature of internationalization of African firms is scarce, and research directly investigating drivers, outcomes, and boundary conditions of the internationalization of African firms is lacking. The goal of this special issue, therefore, is to contribute to the scholarly understanding of the increasingly prevalent internationalization of African firms. This guest editorial provides a summary of the six articles in this special issue, and highlights three broad thematic issues: internationalization opportunities for African firms (accelerated private‐sector development and regional integration, and ability to overcome institutional voids); internationalization challenges (global competitiveness challenges, limited management and cross‐cultural capabilities, and overcoming the liability of Africanness); and internationalization risks (losing focus on home markets and over‐internationalization).

Innovation in and from India: The who, where, what, and when

Research Summary: Most Indian organizations operate within the technological frontier and focus on lowering costs, sometimes through frugal innovation orjugaad, to meet the constrained affordability of Indian consumers. Process and organizational innovations abound more than product or supply chain management innovations. Foreign multinationals, the major contributor of patents in India, appear to be uninhibited by the current state of the IP protection regime, although this has deficiencies in enforcement. A new noteworthy trend is the rise of start‐ups that hold promise as a source of product and business model innovations. Our analysis of the (limited) extant literature indicates a general dearth of empirical research on this topic relative to work on China; as such, there is scope for further research.Managerial Summary: This article offers a perspective on innovation in India by both Indian and foreign companies. Using an inward‐outward lens, we conclude that while many Indian organizations have been the source of myriad process and incremental—as well as frugal—innovations that have cumulatively created value for companies and consumers, much of this has happened within the technological frontier and has been focused on lowering costs to meet the constrained affordability of Indian consumers (inward lens). At the same time, foreign multinationals have played an important role in initiating patent‐creating R&D activity, mostly for global products (outward lens). Spillovers from these entities have, in part, fueled the emergent rise of start‐ups, many of which are pursuing product innovation and, in some instances, frugal innovation.

Multinational Firms, Labor Market Discrimination, and the Capture of Outsider’s Advantage by Exploiting the Social Divide

We theorize that foreign multinationals wield a particularly significant competitive weapon in host markets: as outsiders, they can pinpoint social schisms in host labor markets and exploit them for competitive advantage. Using two data sets from South Korea, we show that multinationals improve profitability and productivity by aggressively hiring an excluded group, women, in the local managerial labor market. We predict and find that foreign multinationals in South Korea are in a unique position to identify social schisms, implement practices designed to support and enhance the hiring and promotion of female managers, hire and promote members of the socially excluded group to positions of managerial leadership, and enjoy a net profitability benefit from doing so despite the real risk of backlash from some regulators, customers, suppliers, and employees from the socially dominant group in society. Many multinationals, even those whose home markets discriminate against women, appear to have recognized the strategic opportunity of what we call the outsider’s network advantage. The gradualness of the host market’s shift toward a new equilibrium freer of discrimination presented multinationals a multiyear competitive opportunity for outsider’s advantage. Our study extends understanding of the multinational enterprise by showing how its competitive opportunities include identifying and exploiting social schisms in a host country’s labor market.

Distance and the Multinational Wage Premium

Combining administrative data on German workers with commercial data on German firms, we find evidence for a distance effect on the multinational wage premium: Foreign multinationals pay lower wages than German multinationals if the ultimate owner is located in close proximity to Germany, whereas the opposite is true if the ultimate owner is located further away. In addition to this so far unexplored effect, our results confirm previous evidence that on average foreign multinationals and domestic multinationals pay wages of similar size, with both types of firms paying a premium relative to other local firms. To provide a rationale for this pattern, we develop a theoretical model in which wages are firm-specific and firms can serve the foreign market via exporting or via FDI. In case of FDI, they face uncertainty about the wages to be paid abroad, and due to this uncertainty, firms that pay high wages at home are more likely to seek foreign investment. In the model, the observed distance effect on the multinational wage premium occurs since the alternative of exporting is less attractive for distant locations, and firms are therefore more willing to accept higher wages for foreign production in locations that are further away from their headquarters.

Internationalization of African SMEs: Context, Trends and Challenges

There has been an important increase in the international and inter-continental operations of African SMEs over the last decade, because of the emergence of regional “champions”, able to compete with foreign multinationals, present in the continent since many decades, but also because of the emergence of innovative and creative SMEs, capable to meet the market needs of various consumers of Africa. Understanding the particular international business landscape in Africa draws attention to several ignored research questions and research aspects, requiring further research and exploration, to contextualize the SMEs’ internationalization of African firms. This paper highlights relevant areas/aspects needed while studying the internationalization of SMEs, by bringing back the historical context of the continent. Next, this paper contributes to the understanding of the internationalization of African SMEs by analyzing the trends and opportunities of the research in this field. Finally, the challenges and the risks of the internationalization of African firms will be analyzed, in order to set the limits of the nature of internationalization of the continent’s SMEs.

Dangers of Residual Dependency in State-permeated Capitalism: The Case of Brazil during Labor Party Rule

In contrast to China and India, Brazil shows some marked deviations from the model of a state-permeated economy. While it shares a focus on a large domestic market, crucial institutional complementarities and a substantial ability for coordination between state and business, it still suffers from the remaining residual dependency on Western capitalism. From this perspective, Brazil moved into a promising direction during the rule of the Labour Party. However, the Labour Party governments were unable to fully unfold the institutional complementarities in state-permeated capitalism in order to make the Brazilian economy more independent from external pressures. They suffered from a limited ability to use the large domestic market for the support of domestic Brazilian companies, from negative consequences of financialization, and from numerous frictions for domestic economic coordination due to the forceful presence of foreign multinationals in economic sectors that are key for productivity development.

Multinationals and Skills Policy Networks: HRM as a Player in Economic and Social Concerns

AbstractThis paper uses an embeddedness framework to reconceptualize HRM agency over the external labour market, and in so doing bring into focus the societal implications of HRM. Drawing on qualitative data from 53 key informants in two English regions, we identify the ways in which the subsidiaries of foreign multinationals (MNCs) engage with labour market skills actors. Our findings reveal how power structures are mobilized by local economic actors to align labour market skills with MNCs’ demand priorities. We show that multinationals may seek to partially endogenize (i.e. take ownership of) the resources of local labour markets when their competitive value is redefined in social as well as economic terms, and demonstrate that the social structure of sub‐national institutional governance arrangements and firm strategic action on skills creates the conduit through which resource endogenization may occur. Theoretically, this paper identifies the social structure of networks as a casual mechanism to bridge divergent skill interests, which is mobilized when network actors have the capacity to frame fields within the social structure of the network around ideas on economic sustainability and moral interest.

US Global Cities as Hubs for Foreign Transnational Corporations

Despite the acknowledgment of the global city concept and the importance of transnationalization processes in their formation, the debate regarding global city identification methods continues. The article stresses the need to change our approach in evaluating global cities by primarily looking at them as locales for foreign multinational corporations. By analyzing the location decisions of foreign TNCs included in the Forbes 2000 rankings two things become apparent: the “nodality” of US global cities and their hierarchical pattern. Moreover, the article recognizes the key role that Alpha global cities play by leading the country’s international business relations, examined through foreign TNCs. Using our methodology and data on foreign TNCs we defined five uneven groups of cities are defined in the study: city-hegemon New York, leading cities, heavyweight cities, middleweight cities and cities-outsider. The article defines some key factors that determine city’s attractiveness for foreign multinationals: its geo-economical power, functional specialization, location, historical and cultural ties, position on different sectoral markets. The study of US global cities as hubs for foreign transnational corporations seems to be especially useful for Russian cities, especially Moscow and St. Petersburgh, which aim to increase the attractiveness for foreign investment.

A Comparative study of Organizational Culture in Indian Multinationals and Foreign Multinationals of India

Since organizational culture is an important dimension to be considered for approximately all aspect of the organization, the present project has taken up this issue for studying and analyzing the cultural similarities and differences between Indian multinationals and foreign multinationals. It has been generally observed that the organizational culture and climate differ a great deal from one organization to another and this is seen more clearly in Indian multinationals and foreign multinational organizations. The present study was concerned with the organizational culture of two multinationals and two nationals companies. For the purpose of the studies we have analyze four major dimensions organizational culture and twelve underlying factors of the organizational culture in Indian multinational as well as foreign multinationals. Analyses of both Indian multinationals and foreign multinationals have shown rich organizational culture in terms of all dimensions of culture. It was hypothesized that multinational companies will perform better than national companies in terms of their organizational culture. The findings of the studies generally supported the hypotheses. Multinational companies have scored high in organizational culture in all the dimensions of organizational culture. The study is having great impact in understanding the dimensions of organizational culture in Indian multinationals and foreign multinational and area of improvement to enrich the culture in both kinds of organizations.

Vertical and Horizontal Spillovers from Foreign Direct Investment: Evidence from Malaysian Manufacturing

Given developing countries’ dependence on foreign direct investment (FDI) in manufacturing, it is important to assess the benefits that accompany FDI, given the cost of incentives that are used to attract foreign investments. We empirically analyze FDI spillover effects in Malaysia using unpublished establishment-level data, accounting for domestic firm size, the market orientation of local firms and foreign multinationals, and firm technology level and absorptive capacity. We find weak evidence of horizontal spillovers; backward and forward spillovers are negative in most cases. Because these results raise concerns about the technological capability of local firms, government policies on technology, human resource, education, and R&D should address this.

From awareness to action: Sudbury, mining and occupational disease in a time of change.

BACKGROUND:Miners work in highly hazardous environments, but surprisingly, there are more fatalities from occupational diseases, including cancers, than from fatalities from injuries. Over the last few decades, the mining environment has become safer with fewer injuries and less exposure to the toxins that lead to occupational disease. There have been improvements in working conditions, and a reduction in the number of workers exposed, together with an overall improvement in the health of miners.OBJECTIVES:This study attempted to gain a deeper understanding of the impetus for change to reduce occupational exposures or toxins at the industry level. It focuses on one mining community in Sudbury, Ontario, with a high cancer rate, and its reduction in occupational exposures. It explored the level of awareness of occupational exposures from the perspective of industry and worker representatives in some of the deepest mines in the world. Although awareness may be necessary, it is often not a sufficient impetus for change, and it is this gap between awareness and change that this study explored. It examined the awareness of occupational disease as an impetus to reducing toxic exposures in the mining sector, and explores other forces of change at the industrial and global levels that have led to an impact on occupational exposures in mining.METHODS:From 2014 and 2016, 60 interviews were conducted with individuals who were part of, or witness to the changes in mining in Sudbury. From these, 12 labour and 10 industry interviews and four focus groups were chosen for further analysis to gain a deeper understanding of industry and labour’s views on the changes in mining and the impact on miners’ health from occupational exposures. The results from this subsection of the data is the focus for this paper.RESULTS:The themes that emerged told a story about Sudbury. There is awareness of occupational exposures, but this awareness is dwarfed in comparison to the attention that is given to the tragic fatal injuries from injuries and accidents. The mines are now owned by foreign multinationals with a change from an engaged, albeit paternalistic sense of responsibility for the health of the miners, to a less responsive or sympathetic workplace culture. Modernization has led to the elimination, substitution, or reduction of some of the worst toxins, and hence present-day miners are less exposed to hazards that lead to occupational disease than they were in the past. However, modernization and the drop in the price of nickel has also led to a precipitous reduction in the number of unionized miners, a decline in union power, a decline in the monitoring of present-day exposures, and an increase in non-unionized contract workers. The impact has been that miners have lost their solidarity and power to investigate, monitor or object to present-day exposures.CONCLUSIONS:Although an increase in the awareness of occupational hazards has made a contribution to the reduction in occupational exposures, the improvement in health of miners may be considered more as a “collateral benefit” of the changes in the mining sector. Multiple forces at the industrial and global level have differentially led to an improvement in the working and living environment. However, with the loss of union power, the miners have lost their major advocate for miner health.

Indian Healthcare Segment: A Challenge to Human Security in 21st Century

During the last three decades, the pharmaceutical sector has shown an explosive growth all over the world. After eatables, cosmetics and textile, pharmaceutical are rapidly surging ahead to become the third largest industry in several developed countries, thanks to health awareness propagated by World Health Organization (WHO).1 India has not lagged behind. Indian Pharmaceutical Industry in spite of tough competition, have got entrenched in eastern, mid-eastern and in several western markets. Some of our pharmaceutical multinationals have already acquired an edge over several well established foreign multinationals. Our pharmaceutical export revenue is increasing year after year. The researcher has highlighted the issue concerning the heath issues of the people of developing nations like India as a challenge for 21st century.

Strategic entry or strategic exit? International presence by emerging economy enterprises

By proposing an integrated strategic choice framework, we theorize the distinctive dynamics of international expansion by emerging economy enterprises. Specifically, we explicate how these firms build international presence based on combined strategic entry (i.e., prompted by internal capabilities such as innovation and diversification) and strategic exit (i.e., pushed out by external handicaps at home such as institutional obstacles and market competition). Further, a firm’s cooperative ties with foreign multinationals in the former’s home country fortify the strategic entry intent, while ties with home government institutions weaken the strategic exit intent. We also demonstrate that building international presence helps bolster firm performance, highlighting the economic catch-up consequence of international expansion. Analyses of a two-year imbalanced panel data of 2136 firms statistically support our hypotheses.

A general equilibrium analysis of FDI growth in Chinese services sectors

This paper analyzes one of the features of the Chinese economic transition, namely, the impact of foreign direct investment (FDI) accruing to advanced services sectors. To that aim we use an innovative computable general equilibrium (CGE) model that includes, in a multi-regional setting, foreign multinationals operating in monopolistic competition. The model is based on data that split the world economy in 2016 into 11 regions (China - US - EU27 - Great Britain -other advanced economies - India - Japan - South East Asia - Latin America - Middle East - Sub Saharan Africa) and 21 sectors. We provide quantitative evidence on several characteristics of the 21 sectors in China, EU27 and the US, as well as other data on the role of China in the global stage, including its evolution since 2004. Several scenarios focusing on the increase of FDI inflows in services, because of the reduction of its FDI barriers, are simulated deriving short and long run results. We find that the impact of more foreign multinationals in services is positive for China but smaller than the one that had been obtained in other previous studies on FDI in manufactures. This is due to the still limited role of services in the Chinese economy and to a crowding out effect that domestic firms experience after the entry of foreign multinationals. On the whole the impact is, however, slightly positive for China, because manufactures benefit from the entry of foreign services multinationals. The rest of regions are unaffected or benefit very slightly, due to the fact that services production is less export oriented and more devoted to private consumption than in the case of manufactures. However, their manufacturing sectors are slightly harmed by the stronger Chinese competition. Many of them manage to more than offset this latter trend through higher exports or FDI in services directed to China.

The Impact of Multinational Presence on Domestic Investment: Firm‐Level Evidence from South Korea

In order to analyze the effects of foreign multinationals' presence on domestic firms' investment, we use a detailed firm level data set from South Korea for the 2006–2014 period. We combine it with the input‐output tables provided by the Bank of Korea to construct industry level measures of multinational presence in sectors that are horizontally and vertically linked, and estimate dynamic investment equations that are augmented with these foreign presence measures. We find a positive and significant effect of foreign presence in both horizontally and vertically linked industries on domestic firm's investment rate, with larger effects arising from multinational presence in the supplying sectors. Quantitatively, a 2 percentage point increase in the presence of multinational suppliers increases the domestic firm's investment rate by 3.24 percentage points. We also find that this effect is larger for small and medium firms, private firms, nonexporters, firms that are not part of a chaebol, and for firms in external finance dependent industries. A similar 2 percentage point increase in the foreign presence in downstream sectors increases the investment rate of domestic suppliers by 0.55 percentage points. This effect is larger if the domestic firm is part of a chaebol, or is in a less external finance dependent industry. Investment increase by 0.53 percentage points following a 2 percentage point increase in horizontal linkages.