Foreign Ventures Research Articles

The Most Important Directions Of Development Of Technology Convergence And The Basic Scope Of Nanoproducts

The author investigated the evolution of the process of production in a nanosphere, analyzes the features and achievements of production units of nanotechnology, nanomaterials and nano-products in various sectors of the Russian economy: electronics, medical and pharmacological industry, genetic engineering, production of construction materials, electric power industry. Considered sectoral and regional distribution of particular nanotechnologies and nanomaterials. Allocated Rupp leading countries of the nanospheres. As the proliferation of nanotechnology leaders selected USA, Japan, Germany and South Korea. In the next group of countries with high development of nanotechnology, with a lower level of activity states - Israel, Singapore, the Netherlands, Sweden and Switzerland. The next group consists of France, Britain and China, where the level exceeds the level of real nanoaktivnosti nanotechnology. Based on the Letter of the world and practice, the author of the nanotechnology sector is estimated to be the most attractive to venture capital. The problem lies in the expansion of the Russian practice of attracting foreign venture capital to fund research. One of the most realistic solution to this problem is in the framework of the strategy of cooperation between science, business and government, to accelerate the transition of technologies from laboratory to industrial nanomaterials from fragmentary studies to design innovation.

Acquisition of local market information in international joint ventures: service sectors

This research attempts to identify key factors affecting the acquisition of local market information in foreign majority-owned international joint ventures (IJVs). By using Spearman rank correlation coefficient and ordinary least squares regression, we reveal that most of the factors included in our model play a pivotal role in enhancing learning for foreign parents of IJVs. These results contribute to current knowledge by filling several research gaps and provide useful and practical implications for multinational enterprises.

Venture capital-backed foreign portfolio company's IPO

We contend that the likelihood of a new, foreign venture capital (VC) financed venture launching an IPO will be associated with the institutional characteristics of the venture’s home country including the national system of innovation and cultural dimensions, such as masculinity and power distance, as well as the commercial potential of its industry segment, and the stage of investment. A hazard model examining a dataset of 485 US VC-backed ventures in the healthcare (biotech and medical) industry operating in 12 countries provided support for our hypotheses.

Network configurations and R&D activities of the ICT industry in Suzhou municipality, China

This paper analyzes the network structure and R&D activities of the information and communication technology (ICT) industry in Suzhou municipality, known previously for its local state-directed Sunan model of development. Suzhou, however, has been undergoing dramatic restructuring to remake itself into a globalizing production center. We highlight the significance of the Chinese state and local/regional assets in shaping the trajectories of globalization and regional development, and the increasing importance of domestic markets and regional clusters/agglomeration for foreign ventures. We have found that Suzhou’s development path, heavily dependent on external forces, has made Suzhou a TNC (transnational corporation) satellite district. We also find that the ICT industry in Suzhou has a dual-structure, segmented between foreign-invested enterprises (FIEs) and domestic firms. TNCs tend to network among themselves and their interfirm networks are increasingly domestic and regionally embedded in the Yangtze River Delta, while the linkages between TNCs and local firms are weak. We argue that there is a series of technological, structural, spatial, and institutional “mismatches” that limits the establishment of “global pipelines” of knowledge exchange. We hold that the nature of global–local networks is contingent upon regional endogenous capacities and the specific ways in which global capital interacts with local institutions. Therefore, perspectives on TNCs’ local embeddedness must be positioned in their regional/external networks. We also analyze the constraints placed on Suzhou’s development into an innovative city and promote the integration of global and local/regional assets through development of indigenous capacities.

The valuation of privately held firms and litigation: a case study

PurposeThe purpose of this paper is to discuss the questions arising from the use of discounted cash flow (DCF) method in the context of the valuation of a Portuguese subsidiary of a German firm. The process ended up in courts. Expert valuation was called. Two points are of particular relevance. First, given the past performance of the company and the external environment it faced, what would be a reasonable growth rate for free cash flow in the residual value period. Second, what questions arise form the assumption of seeing the subsidiary as a going concern, given that the German parent company had been opening new factories in India, China, Romania and Slovakia, and its presence in Portugal was far from guaranteed.Design/methodology/approachThe paper is based on case study which rests on a real legal and financial business situation. The case is used to illustrate the conceptual questions related to the use of the DCF method in valuing closely held firms, particularly the very significant impact of terminal value in the process of equity valuation.FindingsIt was found that very small variations in the growth rate assumed for the residual value period make a great difference in share valuation. Thus, the work of experts had to be very finely balanced, and the judge, when deciding on the fair value to be paid to the plaintiff based on expert opinion, should give careful consideration to scenarios.Practical implicationsA relevant point of the paper is to highlight the effect on business valuation of potential growth rates forecasted for the perpetual growth phase. That rate is, in this case influenced by eventual location changes that can result from globalization of industrial activity. Portuguese shareholders in foreign controlled joint ventures, and all the other stakeholders are facing important challenges from a new world economic order, and this case clearly illustrates some characteristics of this trend.Originality/valueThe paper is useful for managers that deal with business valuation cases that end in courts, by highlighting cash flow based methods and its central assumptions, and exploring critical areas that influence the final outcome of a lawsuit that is based on differences of hypothesis used in financial forecasting.

Business Incubators in China: An Inquiry into the Variables Associated with Incubatee Success

Abstract This paper examines the association between the outcome of business incubation and the resources used by incubators, by using a small panel of science and technology business incubators (STBIs) in China. We find that while the number of firms graduating from an STBI is closely correlated with the infrastructure as well as the human and financial resources at the STBI’s disposal, the graduates’ firm sizes, in terms of employment and value added, as well as their labor productivity are unrelated to such resource inputs. We also find that the educational levels of incubator managers and the financial support given to their clients have significant impacts on the number of graduates. However, the number of graduates does not increase with the scale and diversity of the cities in which their STBIs are located or with the presence of foreign ventures and universities in the locality. We do not find that universitybased and government-established STBIs differ significantly in their incubation performance.

Venture funding for science-based African health innovation

BackgroundWhile venture funding has been applied to biotechnology and health in high-income countries, it is still nascent in these fields in developing countries, and particularly in Africa. Yet the need for implementing innovative solutions to health challenges is greatest in Africa, with its enormous burden of communicable disease. Issues such as risk, investment opportunities, return on investment requirements, and quantifying health impact are critical in assessing venture capital’s potential for supporting health innovation. This paper uses lessons learned from five venture capital firms from Kenya, South Africa, China, India, and the US to suggest design principles for African health venture funds.DiscussionThe case study method was used to explore relevant funds, and lessons for the African context. The health venture funds in this study included publicly-owned organizations, corporations, social enterprises, and subsidiaries of foreign venture firms. The size and type of investments varied widely. The primary investor in four funds was the International Finance Corporation. Three of the funds aimed primarily for financial returns, one aimed primarily for social and health returns, and one had mixed aims. Lessons learned include the importance of measuring and supporting both social and financial returns; the need to engage both upstream capital such as government risk-funding and downstream capital from the private sector; and the existence of many challenges including difficulty of raising capital, low human resource capacity, regulatory barriers, and risky business environments. Based on these lessons, design principles for appropriate venture funding are suggested.SummaryBased on the cases studied and relevant experiences elsewhere, there is a case for venture funding as one support mechanism for science-based African health innovation, with opportunities for risk-tolerant investors to make financial as well as social returns. Such funds should be structured to overcome the challenges identified, be sustainable in the long run, attract for-profit private sector funds, and have measurable and significant health impact. If this is done, the proposed venture approach may have complementary benefits to existing initiatives and encourage local scientific and economic development while tapping new sources of funding.

Production and R&D networks of foreign ventures in China: Implications for technological dynamism and regional development

This paper analyzes the nature of FDI local networks in production and R&D activities in China and discusses their implications for technological dynamism and regional development. We investigate foreign ventures (or foreign-invested enterprises, FIEs) in the information and communication technology (ICT) industry, based on a large-scale survey of ICT firms conducted in three mega-city regions of China: Beijing, Shanghai–Suzhou, and Shenzhen–Dongguan. Our data show that FIEs in China are gradually localizing their production, but the extent of local embeddedness is contingent upon home country effects, local specific contexts and FDI–host region relationships. We have also found significant influence of industrial agglomeration on FDI location and network decisions. Beijing tends to have broader FDI sources and better integrated global–local networks, while in those regions dominated by FDI such as Suzhou and Dongguan, FIEs are thinly embedded with local economies and tend to establish global–local networks among themselves; local embeddedness is limited by a series of technological, institutional, spatial, and structural mismatches. Shanghai and Shenzhen are in between. More efforts are still needed to better integrate FDI with local economies and strengthen China’s local innovative capacities.

No Strategy is an Island to Itself

The first-mover strategy for foreign investment is examined to determine under what conditions a significant effect exists when it is combined with other foreign investment strategies like partner selection, geographical market focus, joint-venture control, and resource commitment strategies. Using official audited data and survey data from Sichuan, the results reveal that there are significant interaction effects. The interaction effects can eliminate first-mover advantage, create a first-mover effect that previously didn’t exist, or change the direction of the effect. Consequently, the author argues that it is better to analyze strategies as a set that is formed by a series of strategic decisions made by managers as they establish foreign joint ventures and wholly owned subsidiaries.

Foreign Direct Investments in Small Business of Transition Economies

Public notion usually attributes superior qualities to foreign direct investments in transition economies. According to a common belief they are equipped with modern technology, possess up-to-date managerial capacities, use state-of-the-art management practices, are more effective than local companies and show better financial performances. These qualities clearly distinguish foreign ventures from domestic ones. There is an empirical evidence that proves existence of these differences. Still, what applies to foreign investments in general is not necessarily applicable to all ventures, to all types and groups of foreign-owned companies. Up till now little attention has been paid to FDI in small business. A question automatically rises: are small foreign ventures in the same advantageous position as their large multinational counterparts? Obviously, there must be substantial differences, since small companies do not possess those scale and scope advantages that multinational companies do. The single most important result of this research was the discovery of similarities between domestic and foreign-owned small and medium sized enterprises (SMEs) in five transition economies. General hypotheses (based on surveys of primarily big business) of FDIs operation were not supported. Performance measures, capitalization, the evaluation of obstacles of growth and business environment, possibilities of obtaining bank loans were in most cases very similar for domestic and foreign SMEs. A possible explanation of this is that foreign SMEs behave more like domestic SMEs than like big foreign (multinational) businesses. Registration and licensing as a barrier to entry affected domestic and foreign firms similarly, basically posing no serious problem for them. Those areas where business was negatively affected were identical for domestic and foreign firms: high taxes and social security payments, lack of transparency and frequent changes of economic regulations. Capitalization of foreign ventures was not usually higher than that of domestic ones. Major differences were found only in the source structure of capital. Not surprisingly, foreign suppliers' commercial credits as well as mother companies' capital transfers played a significant role in the case of FDIs. Interestingly, the share of bank credits was very low in all countries in the finance of all types of capital needs. Profitability and growth expectations of FDIs were not especially outstanding compared to expectations, either. Still, both the average employment and the average asset value increased substantially in all surveyed countries, indicating a vigorous growth of foreign companies.

Location Decisions and Network Configurations of Foreign Investment in Urban China*

This article studies location decisions and network configurations of foreign direct investment (FDI) in Nanjing, the capital of Jiangsu Province, located in the northwest of the Yangtze River Delta (YRD). Built on the perspective that China's economic transition can be conceptualized as a triple process of globalization, marketization, and decentralization, this article outlines four structural changes of the Chinese economy that are underlying the location and networks of FDI: decentralization and the empowerment of local states, marketization and the increasing importance of places, globalization and the emergence of globalizing city regions, and urban spatial restructuring. The study has uncovered substantial intraurban differences within Nanjing and the significance of the Chinese state, location within the YRD, and intraurban context in the location decisions for FDI. We have also found that foreign ventures overwhelmingly serve as production facilities for either the Chinese or world markets, and maintain close production relations with other foreign firms in the YRD. Finally, regression models have identified the significance of national-level development zones, access to ports, and industrial land in the location of foreign ventures.

Production and R&D Networks of Foreign Ventures in China: Implications for Technological Dynamism and Regional Development

This paper analyzes the nature of FDI local networks in production and RD local embeddedness is limited by a series of technological, institutional, spatial, and structural mismatches. Shanghai and Shenzhen are in between. More efforts are still needed to better integrate FDI with local economies and strengthen China’s local innovative capacities.

Business Incubators in China: An Inquiry into the Variables Associated with Incubatee Success

This paper examines the association between the outcome of business incubation and the resources used by incubators, by using a small panel of science and technology business incubators (STBIs) in China. We find that while the number of firms graduating from an STBI is closely correlated with the infrastructure as well as the human and financial resources at the STBI's disposal, the graduates' firm sizes, in terms of employment and value added, as well as their labor productivity are unrelated to such resource inputs. We also find that the educational levels of incubator managers and the financial support given to their clients have significant impacts on the number of graduates. However, the number of graduates does not increase with the scale and diversity of the cities in which their STBIs are located or with the presence of foreign ventures and universities in the locality. We do not find that university-based and government-established STBIs differ significantly in their incubation performance.

The Effects of Economies of Scale and Diversification on the Cost Structure of the Malaysian Non-life Insurance Industry

Using a sample of Malaysian non-life insurers over the period 2000-2007, I develop and test a model that explains the expense ratio as a function of output level, line-of-business diversification and other variables. Using various proxies for scale and line-of-business diversification, the empirical results show the existence of an interactive and non-linear relationship with cost. The findings suggest that there is no single minimum efficient scale level for all insurers; rather, it is contingent on the insurer's degree of line-of-business diversification and vice versa. I also find that costs for newly consolidated insurers and motor insurance are relatively higher and fail to find evidence that foreign-owned insurers or foreign joint venture insurers are more cost efficient.

Foreign Market Entry Strategies in Retail Banking: Choosing an Entry Mode in a Landscape of Constraints

International expansion by retail banks can involve different modes of foreign entry, the most common being acquisitions, start-ups and joint ventures. But there is only limited consensus over which represents the best option, and banks choose the same or different modes when entering different countries. This article investigates the question of how managers make these choices by testing a mode selection model based on the perceptions of managers involved in 124 foreign market entries. The model considers their control and resource objectives, their willingness to trade off control for access local resources and the constraints on their entry: levels of local regulation, home/host country differences and entrants' resources. The results show that internationalizing banks choices of entry mode are influenced by managers' desire for control over their foreign ventures and by their local market resource requirements, as well as by foreign regulatory constraints and the differences between home and foreign markets - but not by entrant's size. Identifying the factors influencing banks' entry mode choices allows us to point out a number of key factors managers should take into account when planning their internationalization strategies.

Institutions and the internationalization of US venture capital firms

In recent years, venture capital firms have increasingly turned to foreign countries in search of investment opportunities. The cross-border expansion of venture capital firms presents an interesting case of internationalization, because they are at variance with both conventional portfolio and direct investment models. Given the specific nature of venture capital investing, a new theoretical perspective is needed to understand foreign venture capital investments. This paper contributes to international business research by examining the features of the institutional environment that influence venture capital firms’ foreign market entry decisions, and how their effect changes as firms acquire experience. We report results on 216 American venture capital firms potentially investing in 95 countries during the 1990–2002 period. We find that venture capital firms invest in host countries characterized by technological, legal, financial, and political institutions that create innovative opportunities, protect investors’ rights, facilitate exit, and guarantee regulatory stability, respectively. We also find that as firms gain more international experience, they are more likely to overcome constraints related to these institutions.

How law, politics and transnational networks affect technology entrepreneurship: Explaining divergent venture capital investing strategies in China

This article identifies three distinct patterns of investment behavior by venture capital firms investing in technology sector start-ups in China. The first pattern is the service-oriented, technology-light investment behavior exhibited by the foreign venture capitalist firms not founded by ethnic Chinese. The second pattern is the technology creation investment pattern exhibited by foreign firms founded by ethnic Chinese and embedded in ethnic Chinese communities. The third pattern consists of local state-funded Chinese venture capital firms that choose either to invest in state-directed projects or opt out of investing in technology start-ups entirely. What explains the differences in behavior between the strictly foreign and the ethnic Chinese-embedded foreign firms are the different legal environments in which these firms honed their skills. The different learned experience gained from operating in different environments explains why the foreign firms avoid investing in technology-generating activities in China whereas the ethnic Chinese firms are willing to do so despite China’s notorious weak intellectual property rights regime. The political factors influencing the distribution of finance in China explain the behavior and essential failure of the local state-run venture capital firms. These findings demonstrate that several distinct, separate and non-clashing institutional arrangements are concurrently operating within China and shaping the behavior of venture capital firms there.

The internationalisation strategies of Chinese firms: Lenovo and BOE

Theories of overseas investment and forms of internationalisation are reconsidered in the face of two exploratory, ‘critical instance’ case studies collected in China from Lenovo and BOE. The two cases tentatively suggest refinements to conventional OFDI theories that see internationalisation in two important MNEs from China as being driven by factors such as ownership advantages and low labour costs at overseas locations. In terms of entry modes, it would appear that latecomer multinationals from emerging economies may aim to build global strategic linkages, seek new markets and obtain advanced technology, through foreign ventures that are accelerated quickly through entry modes towards acquisitions.

Does Enforcement of Intellectual Property Rights Matter? Evidence from Financing and Investment Choices in the High Tech Industry

Financing of and investing in R&D are prone to risks of appropriation by competitors, information asymmetry, and agency problems. Although legal protection of intellectual property (IP) rights at the national level is necessary to encourage investing in R&D, we show that the effective enforcement at the local level is also critical. We concentrate on the impact of provincial level IP rights enforcement on the financing of and investing in R&D, using a unique and rich sample of high technology firms. These firms are located in twenty-eight provinces/districts throughout China. The enforcement of IP rights differs at the provincial level, although the firms are under the same set of national and international laws. Controlling for provincial institutional factors such as economic development, banking system development, legal system performance, and local government corruption, we find that the enforcement of IP rights positively affects firms' ability to acquire new external debt (including formal and informal financing) and external equity. The firms in provinces with better enforcement of IP rights invest more funding in R&D, generate more patents, and produce more sales from new products. We also find better enforcement of IP rights helps mitigate the problem of appropriation by local partners in foreign and ethnic joint ventures. To deal with the problems of reverse causality and omitted common variables, we adopt the instrumental variable method and the approach used by Rajan and Zingales (1998), and the impact of IP rights enforcement is robust to different specifications. Our evidence confirms that enforcement of IP rights matters even in China. Furthermore, our results support that the enforcement of IP rights affects the growth in the economy via the channels of financing of and investing in R&D.

Country of Origin Effects in Capital Structure Decisions: Evidence from Foreign Direct Investments in China

We investigate the role of managers' country of origin in leverage decisions using data on foreign joint ventures in China. By focusing on foreign joint ventures in a single country, we are able to hold constant the financing environment, eliminate the effects of formal institutions in the foreign managers' home country, and consequently reveal the effects of informal institutions such as national culture on corporate finance decisions. Using cultural values of embeddedness, mastery, and uncertainty avoidance to explain country of origin effects, we find that national culture has significant explanatory power in the financial leverage decisions of foreign joint ventures in China. Country-level variation is evident in capital structure and appears to work through choices of firm characteristics, industry affiliation, ownership structure, and region of investment.