Home Country Effects Research Articles

THE HOME COUNTRY EFFECT ON BETWEEN- AND WITHIN-FIRM PERFORMANCE DIFFERENCES

This study estimates the home country effect on multinational firm performance using data from 117 home countries (28,079 firms) and 123 host countries (85,579 affiliates) from 2010 to 2019. Using a variance decomposition approach, we find that the effect explains a sizable portion of variance between firms but is mostly trivial for performance differences among foreign affiliates within firms. These findings complement and improve research on location effects, informing the debate on the conceptualization of the home country effect. We revise assumptions about the transferability of homegrown advantages and highlight the importance of aligning theory and empirics in understanding performance differences globally.

International collaboration leading to high citations: Global impact or home country effect?

Scientific research has become more collaborative, which brings a number of advantages including higher citation rates. This study examines the factors contributing to higher citations by distinguishing between the quality of work and the home country effect. Using international co-authorship as a key variable, we analyze citation patterns across a diverse range of fields over a 10-year period, and differentiate between citations accrued in the authors’ countries and citations received in other countries. The results demonstrate the presence of both global impact and a home country effect. Specifically, publications with international co-authorship receive significantly more citations from abroad, which strongly implies that international collaboration fosters high quality research and positively impacts citation rates, especially when considering the relatively smaller foreign community size once the authors’ home countries are excluded. On the other hand, it is also observed that domestic citations from authors’ countries increase faster than foreign citations and the effect is more pronounced over a longer period of time, which suggests that home country effect plays an important role in accumulating citations through the increased visibility in the domestic research community. The study confirms the pivotal role of international collaboration in research impact and highlights the significance of network building.

Exploring host and home country effects on industrial relations in Chinese multinational enterprises – Evidence from Ireland

This paper explores the industrial relations (IR) experiences of Chinese multinational enterprises (MNE) in Ireland, with particular focus on the impact of host and home country institutions on IR policies and practices. The study adopted a qualitative methodology of semi-structured interviews with managerial respondents from eight Chinese MNEs located in Ireland and personnel in other relevant public and private organisations. Our results indicate that host country IR institutions (e.g. trade unions, employment legislation and government support) largely explain the IR practices of Chinese MNEs in Ireland. This study also identifies home country effects mostly relating to a hierarchical managerial approach and the development of a culture of harmony and collaboration. Finally, our results also call attention to some emerging ‘convergence’ and ‘divergence’ between Chinese MNEs and other MNEs in Ireland in terms of their IR experiences and responses.

Managing upward and downward through informal networks in Jordan: The contested terrain of performance management

AbstractThis study explores how local managers, in practicing Human Resource management (HRM), may pursue their own interests that are out of line with the agendas of headquarters in multinational companies (MNCs). It is widely acknowledged that informal networks have an impact on HRM practices in emerging markets. While these networks are often regarded as beneficial for organizations in compensating for institutional shortfalls, they may also lead to corruption, nepotism, or other ethical transgressions. Indigenous scholarship on informal networks in emerging markets has highlighted how their impact occurs through a dynamic process; powerful placeholders deploy informal networks to entrench existing power and authority relations when managing people. Qualitative data were gathered through 43 in‐depth interviews and documentary evidence from MNCs operating in Jordan. MNCs are subject to both home and host country effects; we highlight how, in practicing HRM, country of domicile managers deploy the cultural scripts of wasta informal network to secure and enhance their own relative authority. HRM practices are repurposed by actors who secure and consolidate their power through wasta. They dispense patronage to insiders and marginalize outsiders; the latter includes not only more vulnerable local employees but also expatriates. This phenomenon becomes particularly evident during the performance appraisal process, which may serve as a basis for the differential treatment and rewards of employees. Consequently, this further dilutes the capacity of MNCs to implement—as adverse to espousing—centrally decided approaches to HRM.

How Much Does Domestic Location Matter for B2B Firms’ Export Intensity? A Variance Decomposition Study

Business-to-business (B2B) firms leverage the advantages of their domestic location to export goods and services. However, little empirical research has examined the extent to which domestic location effects explain variation in B2B firms’ export intensity, despite their potentially critical role. In this study, the authors explore this question with a variance decomposition analysis, an approach that allows them to quantitatively examine the relative contribution of domestic location and other effects on B2B firms’ export intensity. Their analysis uses a large longitudinal sample of 7,465 European B2B firms over 15 years (2004–2018). Splitting domestic location effects into the home country and subnational region (a geographic space within a country) effects, they find that each explains a substantial portion of the variation in export intensity. Notably, the results show that the examined effects are more critical for small and medium-sized enterprises than for larger B2B firms. Domestic location factors also matter more for B2B manufacturing firms than for B2B service firms. The findings enhance scholarly and managerial understanding of the application and predictive power of domestic location effects in explaining firm internationalization through exports.

Variance decomposition analysis: What is it and how to perform it – A complete guide for B2B researchers

Variance decomposition analysis allows partitioning the total variance in an outcome variable, e.g., firm performance, into several components. Such partitioning allows identifying groups of factors (e.g., firm-, industry-, and country-specific) that explain a significant portion of the variation in firm performance, thus helping researchers, managers, and policymakers better understand the sources of competitive advantage. The present study aims to inform scholars, particularly those in business-to-business (B2B) marketing, about the benefits of utilizing variance decomposition analysis and draw scholarly attention to the relevant statistical techniques needed to produce accurate estimates. We specifically point to multilevel modeling techniques due to their significant advantages over other approaches to decompose the variance in a given outcome variable. We provide a detailed step-by-step guide as well as the related Stata codes on conducting variance decomposition analysis with multilevel modeling techniques. Using a 10-year (2009–2018) dataset comprising 7281 distinct European B2B firms operating in 348 industries and 29 countries, we empirically examine the relative importance of firm, industry, country, year, and residual effects in driving firm performance for B2B firms. Our analysis shows that firm-specific factors have the highest relative importance for B2B firms' performance, followed by home country and industry effects.

Multilevel analysis of firm, industry and home country effects on firm performance

Literature suggests that firm effect dominates over industry and country effects, as far as firm performance is concerned. However, these effects have invariably been operationalized as dummy variables or random effects only. A complete analysis must include both fixed and random effects, and specific firm, industry and country characteristics. This study analyzed both fixed and random effects on firm performance using a sample consisting of sixty three countries and twenty four industries and found that industry and home country fixed effects are as strong as firm fixed effects.

The energy consumption-environmental quality nexus in BRICS countries: the role of outward foreign direct investment.

This paper examines the role of outward foreign direct investment on energy consumption and environmental quality in BRICS from 1990 to 2019. Most of the previous research considered foreign direct investment mainly focused on the environmental impact on the host country effect and ignored the home country effect. Therefore, the current study examines the home country effect of environmental pollution. We use various methodologies like cross-sectional dependence and the Pesaran-Yamagata slope homogeneity for the diagnostic test. After confirming the diagnosis test, we employ second-generation panel unit root tests, which confirms that all elements are stationary at first difference. The pooled mean group (PMG), Westerlund cointegration, two-step generalised method of moments (GMM), panel fully modified ordinary least square (FMOLS), and dynamic ordinary least square (DOLS) model have been used to determine the short-term and long-term association among the variables. The cointegration and PMG results confirm that the short-run and long-run association exists among the considered variables. The results reveal that developing countries produced environmental pollution at the early stage of development and checked in the long run. The study used the STIRPAT model to build an extended carbon dioxide emissions model by incorporating outward FDI, GDP per capita, and technology to achieve our objectives. The empirical results hold up the environmental Kuznets curve hypothesis, implying that outward FDI and energy consumption help expand greener technology to host countries’ environmental improvement in the long run and confirm that an inverted U-shaped linkage exists. Hence, the study suggests that developing countries should pay more attention to sustainable development and technological development that encourages more eco-friendly and environment-friendly technology.

Foreign Banks in Central and Eastern Europe: The Good, the Bad and the Ugly

Foreign banks have played a major role in Central and Eastern European economic landscape over the last decades. They have spurred banking intermediation and fuelled economic growth for years. However, the global financial crisis unveiled the other side of the coin. This article analyses foreign banks' lending behaviour in Central and Eastern Europe over the period from 2000 to 2016. It aims to investigate the nexus between bank loan growth, cross-border bank claims and the cycle period. Moreover, it captures the impact of the financial cycle on foreign banks' credit behaviour and highlights whether foreign bank ownership is influenced by host- and home-country effects. Our findings reveal the strong nexus between foreign banks' loan growth and cross-border bank claims. Also, we emphasize the pro-cyclicality of foreign banks' loan growth and cross-border bank claims. Furthermore, we see clear differences related to foreign banks' lending behaviour during normal and turbulent times, triggered by host- and home-country effects. These results raise policy challenges regarding the right bank ownership balance and the use of prudential regulation.

Understanding immigrant entrepreneurship: a home-country entrepreneurial ecosystem perspective

PurposeGiven the importance of immigration and immigrant entrepreneurs in advanced economies, the authors take an entrepreneurial ecosystem perspective to study the home-country benefits possessed by immigrant entrepreneurs and how home-country entrepreneurial ecosystem factors affect immigrant entrepreneurial motivations, activities and outcomes.Design/methodology/approachThis conceptual research paper follows McGaghie, Bordage and Shea's (2001) four-step new theory creation process, which suggests that new theories can be created through facts extraction from the extant literature.FindingsThe authors propose that although immigrant entrepreneurs are unable to take full benefit of the host-country entrepreneurial ecosystem due to blocked mobility, they do have capabilities to access and use their home-country entrepreneurial resources and opportunities. The authors further propose that home-country entrepreneurial capital can be systemically analyzed through the framework of the entrepreneurial ecosystem. The results imply that immigrant entrepreneurship as a social and economic phenomenon can be studied more holistically from both host- and home-country perspectives compared to the traditional research boundary of the host-country only.Research limitations/implicationsThe research focuses on the identification of home-country effects on immigrant entrepreneurship through the lens of the entrepreneurial ecosystem. Testable propositions provide directions for future empirical research on the field of immigrant entrepreneurship from a home-country perspective. The research concludes that a holistic immigrant entrepreneurship study should consider dual (host- and home-country) entrepreneurial ecosystems.Practical implicationsImmigrant entrepreneurs benefit from both host- and home-country entrepreneurial ecosystems. This paper suggests co-effects of dual entrepreneurial ecosystems lead to a high rate of entrepreneurship and business success within some immigrant groups. Policymakers can increase economic activities by developing and deploying programs to encourage immigrants to embed in host- and home-country entrepreneurial ecosystems.Originality/valueBased on the framework of the entrepreneurial ecosystem, this paper brings a novel perspective to examining home-country effects on immigrant entrepreneurship. It theoretically conceptualizes that immigrants have higher entrepreneurship rates than native-born populations because they have access to extra home-country entrepreneurial capital.

Variations and differences in the application of HR policies and practices by US hotel multinational firm’s subsidiaries across coordinated and transitional periphery economies: a case approach

In this study, we explore how, and to what extent, home country effects on HR practice in hotel industry MNEs might diminish when host country institutional mediation is weak or uneven. This study centres on the case of luxury hotel chain subsidiaries of a US multinational firm operating across advanced coordinated and transitional periphery economies. It focuses on employee resourcing, training, reward and performance management practices, and draws on in-depth interviews, participant observation and document analysis thereby enabling triangulation of results. Through qualitative analysis, we conclude that the reduction in home country effects in subsidiaries operating in uncertain environments of transitional periphery economies reflects not only the extent to which prominent foreign players may be subject to closer regulatory scrutiny even when enforcement capabilities are weak but also the operation of extended clan-based networks of support.

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.

Strategic-Asset-Seeking Foreign Direct Investment by Chinese Firms

We examine the relationship between business group affiliation of Chinese firms and their foreign acquisitive behaviour in terms of technology and brand-oriented strategic assets. Drawing on new internalization theory and the business group literature, we assert that Chinese business group affiliated firms will more likely pursue foreign acquisitions to seek patents but less likely to pursue foreign acquisitions to seek trademarks. Patents have non-location-bounded (NLB) properties which mean they can be exploited by the business group – not just the firm - back in the domestic market, while trademarks have location bounded (LB) properties which mean they are less easy to exploit by a business group domestically. Using a sample of 779 Chinese cross-border acquisitions between 2006 and 2015, we find support for our hypothesis relating to patents but not for trademarks. Additional tests identify the importance of private-ownership and the presence of an R&D centre within the business group as determinants of member firms’ patent- and trademark seeking through foreign acquisition. The findings reveal the importance of a key home country effect – business group affiliation – on how firms in emerging economies seek strategic assets abroad as part of their drive to overcome latecomer disadvantages and technological backwardness.

Japanese investment location choice in the US: a home-country firm bandwagon effect

ABSTRACT This study examines the relationship between home-country firm concentration and investment location decision, using data from a sample of Japanese subsidiaries established in the US between 2003 and 2017. Results show that when Japanese firms consider locating operations in the US, they give priority to states where other Japanese firms are already established, over any other firm- or location-specific determinants. Furthermore, industry concentration exerts a moderating effect on the co-national bandwagon effect under study, suggesting that the social network of established Japanese firms becomes a deciding factor in the absence of other attractive economic attributes.

Macroeconomic Drivers of Chinese ADRs: Home Country vs. US Effects

The potential connections between macroeconomic variables and the stock market becomes less straightforward for shares issued in one country but traded in another. Whereas past work has suggested that cross-listed stocks respond to country-specific sentiment factors in the location of trade, in this article we show how Chinese ADRs also generally respond more to U.S. macroeconomic developments than to home-country influences. Following the application of Markov-switching analysis, we find that Chinese macroeconomic effects become relatively more important during times of crisis, however. Particularly large responses to Chinese macroeconomic variables are seen in the case of a Chinese closed-end fund that trades in the United States, but invests directly in Shanghai A-shares.

Anglo-American Multinationals in Europe: The Curious Case of Hudson’s Bay Company Taking over Galeria Kaufhof

Multinational corporations are undeniably the driving force of globalization and regional economic integration. A convenient institutional framework (Hall and Soskice, 2001) to apply when comparing multinationals from different host countries is the well-travelled road of dividing capitalist economies into coordinated market economies (CMEs) and liberal market economies (LMEs). This article aims to elucidate the tensions between centralized human resources practices and labour union avoidance usually exhibited by multinationals from so-called Liberal Market Economies (LMEs) when they expand into coordinated ones (CMEs). Specifically, it examines the recent acquisition of the German retail giantGaleria Kaufhofby the Canadian multinational Hudson’s Bay Company (HBC).The article shows that HBC has settled into an uneasy acceptance of the CME institutions, while its investment motives vacillate between a long-term, market-enlargement strategy and a short- to medium-term one, based on the rapidly increasing real estate value of its downtown flagship stores. The article encourages researchers in IR to retain three principal conclusions for the literature and for further study. First, without predetermining outcomes by looking at host-country or home-country effects alone, institutionalist frameworks do present a convenient backdrop for conceptualizing movements of multinationals across jurisdictions. Secondly, concepts such as bricolage, recombining of institutional elements and institutional entrepreneurship, stemming from the institutional change literature, should routinely figure in one’s analytical toolbox, in any attempt at non-deterministic institutional analysis. Finally, sector-level actors, such as trade unions and employers’ associations, can play an essential role in any successful adaptation of collective bargaining institutions in the context of globalization by developing, maintaining and carefully utilizing their repertoire of strategic capabilities.

Subnational Institutions and Location Choice of Emerging Market Firms

Abstract I examine how subnational institutions of emerging markets affect the location choice of emerging market firms. I argue that the weak institutions in emerging markets push firms to acquire the skills needed for survival in unfavorable institutional environments. When they start their international venturing, such knowledge, skills, and capabilities will become their unique advantage, which makes them more resilient to red tape, nepotism, and corruption in the host countries. Using a sample of 143 outward FDI events of Chinese multinationals, I test the relationship between subnational institutions at home and firm propensity to enter a target market with weak institutional systems and found robust empirical support for the use of different estimation strategies. Further, my results demonstrate that the effect of subnational institutions at home on location choice is more pronounced in private enterprises compared to state-owned enterprises. This study reveals the importance of home country effects in location choice research and tests empirically the existence of institutional advantage.

Home-country Turbulence as a Trigger for Outward FDI

South Africa faced considerable turbulence in the second half of the 20th century. This turbulence resulted partly from institutional change, specifically the weakening and then restoration of the property and political rights of the full population. Turbulence also resulted from the widespread resistance to Apartheid and associated social instability. By longitudinally examining the South African case from 1956 to 2012, it is clear that turbulence, more than the weakness of institutions, triggered outward FDI (OFDI). In fact, OFDI was high even once social stability had returned but during institutional reforms, suggesting that firms avoid complex, rapid change in the environment. This study contributes to the growing body of literature on home-country effects in the internationalization of firms by providing empirical evidence of the hitherto overlooked role of home-country turbulence in the internationalization of emerging market MNEs.

FDI Expansion Speed

Focusing on home-country effects, we investigate how FDI expansion is influenced by home government governance, government as a shareholder, and home country’s political relations with host countri...

Internationalization strategy and the home-regionalization hypothesis: The case of Australian multinational enterprises

In this study, we set out to, first, replicate the classification of multinational enterprise (MNE) types proposed by Rugman and Verbeke in the Australian context. Second, we explore how a firm’s international experience influences the degree of its home regionalization and how industry affects the international experience–home regionalization relationship. We find that while home regionalization is still a dominant regionalization strategy for Australian MNEs, the proportions are different from those of Rugman and Verbeke. In particular, the share of home-regional firms is less pronounced and the share of host-regional firms is higher than Rugman and Verbeke’s findings. We also find that a firm’s international experience is negatively related to home regionalization, and that this relationship is further moderated by the firm’s industry. Our findings suggest that more attention be devoted to uncovering both home-country effects and the differential impact of international experience on home regionalization across industries.