Foreign Parent Companies Research Articles

How does clean energy transition promote original design manufacturers? A three-party evolutionary game analysis

Clean energy transition is the new driving force promoting low-carbon emissions in the manufacturing industry. It brings huge economic opportunities as well as challenges for manufacturers and the government. Original design manufacturers (ODMs) are regarded as a special group of manufacturers in clean energy transition due to their close partnership with foreign parent companies (FPC) in research, design, production, and most importantly, decision making along the supply chain. ODMs are usually restricted by contracts with FPCs and clean energy policies of the local government. To analyze the influence of technology sharing and leakage, investment mode, accountability mechanism, and penalty sharing mechanism, especially static or dynamic energy policies on the clean energy transition, this study constructs a tripartite evolutionary game model composed of ODMs, FPCs, and the local government. The model discusses the guiding effect of multiple policies on ODMs' clean energy transition and FPCs' investment behaviors with the study of stable points, double stable states, and unstable states of the evolutionary game. The results reveal that the conformity effect in clean energy transition would enable ODMs and their FPCs to achieve a win-win result in the process of the transition. The dynamic policy has also been designed considering the proportion of ODMs using clean energy to economize government resources, and the basic subsidy to the transition poses a reverse “U” shape instead of a monotonous effect on ODMs' choices. This paper concludes an optimal clean energy transition strategy for ODMs under the dual pressure of FPCs and governments, while providing theoretical support for the dynamic policy design.

Skill and Deskilling in Two Automotive Assembly Plants in South Africa

This article presents research on skills development and workplace change complexities within two automotive assembly plants in Pretoria, South Africa. Auto assembly companies are also termed Original Equipment Manufacturers (OEMs). Since 1995, South African OEMs have become fully integrated into the global networks of their foreign parent companies. As South Africa’s leading manufacturing sector, the automotive industry’s increasing importance is reflected in its exports, investments, and contribution to the country’s gross domestic product. The two companies are global multinationals situated in one of South Africa’s most globally integrated sectors that have undergone significant mechanization and automation since the 1990s. Therefore, these companies present a relevant site for studying changes in the labor process and the tendencies of deskilling in these workplace environments.
 The research is based on a qualitative research design that used semi-structured interviews with workers, supervisors, and managers across two plants that assemble motor vehicles in South Africa. The objective of the research was to understand the nature of changes to workplace production methods that influence the character of skills amongst the workforce. This paper studies workers’ experiences on how changes in work processes have impacted their work skills and contributed to the processes of deskilling. Present studies of skills in South Africa have prioritized large-scale labor market aggregate data analysis or reforms in education and training policies of the state. This paper brings a perspective on the labor process changes that are informed by concrete analysis of the production process and how technological changes shape the character of skills formation within automotive assembly plants. The value of such an approach is that it brings to the discussion of technology and workplace change a more specific set of experiences that transcends the often speculative and mythical discussion about the impact of technology on work. This article highlights the importance of understanding workers’ voices, shift supervisors, and managers on the contested nature of skills development within capitalist enterprises. The findings illustrate the contradictory nature of technological change and skills development. This is shown by discussing the following themes that emerged from the findings: 1) worker responses to the introduction of robots in the workplace environment, 2) the deskilling challenge on the two plants, and 3) grappling with the turnover times of capitalist production. I conclude the paper by revisiting the key findings of the research and showing the implications for future studies of deskilling in contemporary capitalist enterprises. The significance of these findings ultimately points to the importance of locating labor processes and deskilling in the context of the political economy of the capitalist mode of production and how it is reshaping the content of work in modern automotive assembly plants.

Liability of the Parent Company of MNEs for the Debts of Its Subsidiaries

In the context of today's global economic development environment, the most basic and widely adopted internal organizational structure of multinational companies, as the most important economic entities in the process of continuous expansion, is in the form of parent and subsidiary companies. Under this structure, the parent and subsidiary of a multinational corporation are legally separate legal persons, while in practice the subsidiary is often under the integrated control of the foreign parent company based on the global strategy. The contradiction between this form of law and physical control makes it highly likely that MNEs will pursue their global strategies while circumventing their legal responsibilities and infringing on the interests of subsidiaries, their creditors, and even the host country. Therefore, how to deny the independent legal personality of the subsidiary in a timely manner, so that the parent company of the multinational company can bear the debt liability of the subsidiary in a specific situation, deserves in-depth study. China has not made a limited principle exception to the issue of the liability of the parent and subsidiary of multinational companies under specific circumstances so in practice, some multinational companies maliciously take advantage of the gap in China's legal system to avoid liability. Therefore, through the in-depth discussion of the principle of responsibility and the comparative study of the time of various countries, China should formulate relevant legal systems in line with China's national conditions and the current world economic situation as soon as possible, so as to effectively regulate the behavior between the parent and subsidiary companies of multinational corporations and better protect the legitimate interests of multinational subsidiaries and their creditors in China.

Determinants of sustainability reporting: Empirical evidence from East African Countries

Sustainability reporting is gaining attention among industry professionals and academics. However, it has been criticized since it fails to represent the proper reporting practices of firms, with this being described as symbolic in form. Regardless of this criticism, management of firms in East Africa is increasingly adopting sustainability reporting, despite being voluntary. Therefore, the paper analyzed the determinants of sustainability reporting of East African firms. Eight years of annual reports of 74 listed firms in Kenya, Tanzania, and Uganda were used. Random and fixed effect regression techniques were employed for the estimates. The study found that firms’ specific characteristics such as size, Tobin’s Q, industry affiliation, and ownership structure have a positive and significant influence on firms’ management to adopt sustainability reporting practices. In addition, it was suggested that firms with a more considerable asset and Tobin’s Q provide more sustainability reporting than those with smaller assets and Tobin’s Q. The results further showed that firms’ age and return on assets do not influence sustainability reporting. The evidence further demonstrated that firms with foreign parent companies significantly disclosed more sustainability information than local firms. The paper concludes that the firm-specific characteristics influence their sustainability reporting practice. The study provides policy implications because it can assist the governments and regulators in these countries in guiding the firms’ reporting practices.

Profit distributed from Czech construction subsidiaries to foreign parent company

Profit distributed from Czech construction subsidiaries to foreign parent company

The peculiarities of taxation of permanent representations of foreign companies in accordance with the agreements on the avoidance of double taxation in the Russian Federation

The subject of this research is the taxation of permanent representations of foreign companies, while the object is the permanent representations of foreign companies. The author examines such aspects of the topic as the impact of international agreements on the avoidance of double taxation upon the conduct of activity by the permanent representations in the territory of the Russian Federation, calculation of profits of permanent representations, and potential conflict situations due to the differences in the Russian tax legislation and the concluded tax agreements. The article explores the methods of transferring expenses confirmed by the accounting source documents, from permanent representations to the foreign parent companies in for the purpose of reduction of tax basis as well as presents the relevant arbitrage practice on the topic. The scientific novelty is substantiated by the use of permanent representations by both Russian and foreign companies, relevant problematic of their taxation in the Russian tax jurisdiction, which is the result that tax agreements contain only general norms and principles of calculating the tax basis for permanent representations. As a conclusion, the author makes proposals on specification of tax agreements with regards to toughening the requirements to calculation profits of the permanent representations and its redistribution, proof of expenses that could be unlawfully used or transferred to the foreign parent company to reduce the tax basis of the permanent representations.

Challenging the cross-national transfer of diversity management in MNCs: Exploring the ‘identity effects’ of diversity discourses

I develop a critique of the cross-national transfer of diversity management in multinational companies. Adopting a critical approach to diversity management, and considering diversity as a discourse, I examine how and why employees in an overseas subsidiary challenged the diversity practices transferred by their foreign parent company. Drawing on a case study of a Sri Lankan knowledge work firm that was in the process of implementing its Western parent company’s Diversity Management agenda, which they had had little input in shaping, I highlight how challenge is triggered by a desire to reject unfavourable subject positions attributed to individuals in transferred discourses of diversity and to reposition the self more favourably. My contribution involves showing how dynamic power relations between parents and subsidiaries shape the global transfer of diversity across MNCs, depicting subsidiary employees as agentic subjects as opposed to passive recipients.

Vertical Industry Linkages and the Location of Foreign Direct Investment in Poland

We study the determinants of locational choice for new foreign affiliates across Polish regions with special focus on the role of agglomeration externalities using a conditional logit framework and firm-level data from the Amadeus database and a Polish dataset on regional and industry-region characteristics at the NUTS 2 level. The estimation results show that higher local demand agglomeration increases the probability that a foreign parent company founds an affiliate in a certain Polish region, whereas adverse labor market conditions, which manifest themselves in high unemployment and low wage rates, negatively affect the location probability.

The Effect of Cross-Border Group Taxation on Ownership Chains

ABSTRACTThis study investigates the influence of taxation on ownership chains and specifically on the location decision for intermediate holding companies. By examining the effect of the introduction of a cross-border group taxation regime in Austria in 2005 on ownership chains of European multinational firms, I find evidence that foreign parent companies already invested in Austria restructured their ownership chains in order to meet the requirements of the group taxation regime. This effect is larger for foreign parent companies with loss-generating subsidiaries. Collectively, the empirical findings suggest that, when evaluating the effect of cross-border group taxation regimes, companies follow a detailed tax planning strategy that takes tax-base effects into account.

The Relationship between the EU Parent-Subsidiary Directive (2011/96) and Tax Treaties under Italian Case Law: Is Double Non-Taxation Always Undesirable?

In this note, the author examines the decision of the Italian Supreme Court of Cassation in Case No. 23367/2017, given on 6 October 2017, regarding the application of a tax treaty provision to dividends received by a foreign parent company benefiting from the provisions of the EU Parent-Subsidiary Directive (2011/96) and considers the implications of double non-taxation.

Supreme Court Clarifies Fixed Place Permanent Establishment Requirements

This case note explains the Supreme Court’s decision in Assistant Director of Income Tax-I v. M/s E-Funds IT Solution Inc., which held that, in order to establish a fixed place permanent establishment in India, a fixed place of business, which is at the disposal of a foreign company, and through which the business has been carried on, must exist in India. A close association between a foreign parent company and its subsidiary company in India is irrelevant to the determination of a fixed place PE.

Omezení nabídky úvěru solventní otevřené ekonomiky v rámci implementace kapitálových požadavků Basel III

The article deals with constraint of credit supply consistent with external solvency of economy and solvency of banking sector under negative international investment position, foreign ownership of banking sector and growing bank´s capital and stable funding requirements. The target is to define main parameters of sustainable supply of funding of external capital providers and to test the relationships among determinants of external solvency, foreign sources of funding the economy and banking sector and credit aggregates in the Czech Republic using unrestricted ARDL ECM model. The results show growing inflow of debt funding motivated by export led growth, the Czech FDI investments and lack of euro liquidity due to CNB foreign exchange interventions. The debt provided by foreign parent companies could overcome a constraint of home banking sector´s credit supply. Growing export causes investments to production capacity financed by equity of foreign holders. The cost of negative NFA is driven by profitability of exporters which is positively correlated with GDP growth. The bank´s capital incl. reinvested profits do not reflect a credit cycle due to excess of capital in the Czech banking sector.

Are Spanish companies involved in profit shifting? Consequences in terms of tax revenues

AbstractIn this paper the authors analyze the existence of profit shifting between Spain and other OECD and EU countries. Using a sample of 1,169 Spanish subsidiaries owned by foreign OECD and EU parent companies and a sample of 317 EU subsidiaries owned by Spanish parent companies, taken from the AMADEUS Database for the period 2005 to 2014, and a simple tax rate difference as a measure of the tax incentive, the authors obtain a negative effect of corporate income taxes on reported profits. When the tax rate differences between Spain and the foreign countries vary by one percentage point, reported profits vary by approximately 2.7 to 3%. This is consistent with profit shifting activity by corporations and matches the empirical results in the literature. Furthermore, the authors calculate the impact of this activity on Spain’s tax revenues from the sample of Spanish subsidiary companies. They obtain that the tax revenues vary from year to year, depending on the level of taxation of the main investor countries in Spain in comparison to the Spanish tax rate.

Impact of Globalization on the Czech Banking

The current paper has focused on the foreign owned Czech banking sector and potential risks which has been nowadays more and more discussed within the context of past crises. A possible transformation of Czech subsidiaries, Czech banks, to the branch offices of their foreign parent companies in the near future will mean decrease of government's income from taxes that could affect the whole Czech economy. Aim of the current paper is to examine how negatively could change the role of Czech banks’ parent companies whose ownership can impact on the development of the government debt in the Czech Republic. In this study, it was found significant negative relationship between growth rates of the both, government debt and taxes from banks’ earnings. From results of this article it is made future implications for the monetary as well as fiscal policy.

Do foreign owners favour short-term profit? Evidence from Germany

Comparing domestic- and foreign-owned firms in Germany, this paper finds that foreign-owned firms are more likely to focus on short-term profit. This influence is particularly strong if the local managers of the German subsidiary are not sent from the foreign parent company. Moreover, the physical distance between the foreign parent company and its German subsidiary increases the probability of focusing on short-term profit. These findings conform to the hypothesis that foreign owners facing an information disadvantage concerning the local conditions of their subsidiaries are more likely to favor short-term profit. However, we do not identify differences in “short- termism” between investors from “Anglo-Saxon” and other foreign countries; rather, results point in the direction of more general features of international business investment.

Do Foreign Owners Favor Short-Term Profit? Evidence from Germany

Comparing domestic- and foreign-owned firms in Germany, this paper finds that foreign-owned firms are more likely to focus on short-term profit. This influence is particularly strong if the local managers of the German subsidiary are not sent from the foreign parent company. Moreover, the physical distance between the foreign parent company and its German subsidiary increases the probability of focusing on short-term profit. These findings conform to the hypothesis that foreign owners facing an information disadvantage concerning the local conditions of their subsidiaries are more likely to favor short-term profit. However, we do not identify differences in short-termism between investors from Anglo-Saxon and other foreign countries; rather, results point in the direciton of more general features of international business investment.

Transfer Pricing Adjustment on Issuance of Shares to Overseas Parents Leaves Companies Shell-Shocked

The author considers the latest transfer pricing controversy to originate from India, namely the attempt by the tax authorities to tax the discount on shares issued to a foreign parent company, as well as the assertions made by taxpayers and the tax authorities to defend their positions.

Market discipline during crisis: Evidence from bank depositors in transition countries

The Central European banking industry is dominated by foreign-owned banks. During the recent crisis, for the first time since the transition, foreign parent companies were frequently in a worse financial condition than their subsidiaries. This situation created a unique opportunity to study new aspects of market discipline exercised by non-financial depositors. Using a comprehensive data set, we find that the recent crisis did not change the sensitivity of deposit growth rates to accounting risk measures. We establish that depositors’ actions were more strongly influenced by negative press rumors concerning parent companies than by fundamentals. The impact of rumors was especially perceptible when rumors turned out ex post to be founded. Additionally, we document that public aid announcements were primarily interpreted by depositors as confirmation of a parent company’s financial distress. Our results indicate that depositors react rationally to sources of information other than financial statements; this discovery has policy implications, as depositor discipline is usually the only viable and universal source of market discipline for banks in emerging economies.

Knowledge transfer and the role of local absorptive capability at science and technology parks

Purpose – This paper aims to investigate to what extent knowledge inflows have taken place among professional Malaysian workforces and what the significant employee‐related factors of knowledge transfer are. The development of technology parks at Technology Park Malaysia (TPM), Kulim High Tech Park (KHTP) and Multimedia Super Corridor (MSC) is the focus of the discussion.Design/methodology/approach – Data were collected through a self‐administered survey to 300 local professionals; and 51 percent responded. A multiple regression was used to identify the significant determinants of transfer of knowledge.Findings – Knowledge transfer from foreign expatriate, parent and peer subsidiary companies to local professionals is at a moderate level. The overall multiple regression shows that workplace learning, personal time management, symptom of replication, adaptation and innovation, and work experience significantly contribute to the transferring of expertise to local professional employees.Research limitations/...

Path-dependent evolution of compensation systems in Central and Eastern Europe: A case study of multinational corporation subsidiaries in the Czech Republic, Poland and Hungary

Summary This article presents the results of an embedded case study of compensation practices in the subsidiaries of a multinational corporation (MNC) in the Czech Republic, Poland and Hungary. We explore the path dependence of compensation systems in Central and Eastern European (CEE) countries prior to transformation and after the fall of state-socialist regimes. The results show that while major complementary institutions such as extensive state-socialist-type social welfare systems, which enhanced the developmental path during the state-socialist period, are non-existent during transformation, several factors on the macro, organisational and individual levels preserve the path. In addition, there are indications that the path dependence of pay practices in the region studied is moderated by a number of exogenous and endogenous sources of change, namely foreign parent companies of international subsidiaries, international management consulting companies, the growing importance and skill levels of HR professionals and generational change.