Host Country Experience Research Articles

Augmenting versus exploiting entry modes in soft services

Purpose – The purpose of this paper is to address foreign market entry mode as a way to enhance firm’s knowledge base, providing new insights into traditional explanations of entry mode choice for soft services. The authors offer an alternative knowledge-based approach to assess foreign investment decisions by considering the role of resource-augmenting (direct investment) and resource-exploiting strategies (licenses). In addition, the authors untie the type of experiential knowledge, i.e., host country and mode experience, to analyze its interactions with environmental uncertainties such as cultural distance. Design/methodology/approach – Based on a customized database of the Spanish Global Hotel industry covering practically all foreign entries until 2012, the authors use regression analysis to test the proposal. Findings – The authors demonstrate how in hotel chains (a) cultural distance influences the use of high resource-augmenting modes, due to both the difficulties in transferring the knowledge to third parties but also the imperative need of learning from local markets and (b) how strong brands tend to use resource-augmenting modes in their first steps abroad as a strategy to achieve a minimum level of resource basis to exploit it in a later stage. Originality/value – The findings question the appropriateness of prior assumptions from traditional internationalization process theories for soft services MNE and provide an alternative approach to assess entry mode choice in this context.

Foreign Subsidiary Performance: Evidence from Ghana

The objective of this study is to examine the influence of selected ownership, location, and internalization-specific factors on performance of foreign subsidiaries in Ghana. Our analysis was based on 75 manufacturing investments made by MNEs from different countries in 1994–2008. The results indicated that market size, host country experience, greenfield establishment mode, and joint venture ownership mode had positively impacted performance of foreign subsidiaries independent of the measure of performance. Furthermore, international experience and cultural distance had influenced performance when the total performance measure was used. Finally, the ownership mode significantly influenced performance only in greenfield investments, and not in acquisition mode.

The Influence of Host Country Experience on Backward Venturing

This study argues that with the increased operational uniqueness and complexity of international joint ventures (IJVs) associated with backward venturing, the host country experience of foreign firms may be less beneficial or even harmful to IJV performance. In support of this argument, our analysis using data on IJVs in Japan shows that when IJVs are associated with backward venturing, the effect of host country experience heterogeneity and host country experience within the IJV industry on reducing IJV failure rates decreases, while greater host country experience outside the IJV industry increases the IJV failure rates.

Influence of Experiential Learning on Subsidiary Performance of Emerging Multinationals

This paper explores how accumulated international experiences of emerging multinationals (EMNCs) aid successful international expansion. Pursuing a subsidiary level analysis, this study advances and tests the relationship between parent firm’s experiential knowledge (i.e. general international experience and host country specific experience), subsidiaries’ own experience, and the performance of its foreign subsidiaries of EMNCs. By integrating the learning theory, organizational capability and knowledge transfer literature, this study predict: 1). An inverted U-shaped relationship between subsidiary experience and focal subsidiary performance, 2) An overall U- shaped relationship between parent firm’s general international experience and host country experience and focal subsidiary performance. These predictions are tested empirically with proprietary, longitudinal data from 787 foreign subsidiaries within 253 Indian MNCs (those were a part of the BSE 500 index as on November, 2013) for three years, starting from 2010-11 to 2012-13. The results of this study strongly support the hypothesized relationships between different experience profiles and foreign subsidiary performance.

"Host Country Network, Experiences, and International Alliances Formation in Emerging Markets"

We theorize that a foreign firm’s position in alliance networks in a host country and its experience in the industry in general and in the host country in particular, jointly influences its attractiveness and willingness to form strategic partnership with firms from the home and host country for different reasons. Through a longitudinal analysis of a population of U.S. venture capital (VC) firms that invested in mainland China during 1997 and 2010, we find that their network centrality in China has an inverted U-shaped relationship with the likelihood of syndication with Chinese/the other U.S. VC firms. Moreover, their experience moderates this relationship. While their general experience in the VC industry moderates their partnership with the other U.S. firms, their host country experience moderates their partnership with Chinese firms.

Does it really matter? Understanding the impact of engagement and beliefs on immigrant ethnic minority entrepreneurship

This research considers the importance of ethnic minority immigrant entrepreneurs’ engagement within and beliefs surrounding their host country experiences, and how this impacts on entrepreneurial action. The relevance of such research is highlighted by an ever increasingly global economy and as a consequence greater emphasis has been placed on understanding the entrepreneurial behaviour of persons moving across cultural, economic and national borders. This paper is derived from a grounded theory study of narratives from ethnic minority immigrant entrepreneurs in New Zealand, and resulted in a conceptual framework which considers the impact of engagement and beliefs on actions within the entrepreneurial process. The conclusion of this study is that there is an interdependent relationship which warrants further investigation and this paper offers insights into that relationship and a framework for further empirical study.

Greenfield or Acquisition Entry? The Roles of Policy Uncertainty and MNE Legitimacy in Host Countries

Political constraints shortages in host countries facilitate policy changes and, hence, imply policy uncertainty for multinational enterprises (MNEs). I examine how such uncertainty influences MNEs' choice between wholly owned greenfield and full acquisition entry by combining real options and MNE legitimacy theory. I argue that acquisitions require MNEs to buy the needed external assets immediately upon entry while greenfields allow them to buy these assets sequentially, causing greenfields to temporarily have a real options advantage over acquisitions if policy uncertainty resolves unfavorably after the initiation of an entry. I expect the value of this advantage and, hence, the likelihood of greenfield entry, to increase with the level of policy uncertainty. I also expect this increase to be smaller for subsidiaries with greater expected legitimacy, since greater subsidiary legitimacy reduces the chance of adverse shifts in policy preferences and, therefore, the threat posed by a given political constraints shortage. I find support for most of these expectations in a sample of 172 foreign entries by Dutch MNEs, measuring policy uncertainty by Henisz's reverse‐coded POLCON index and a subsidiary's expected legitimacy by its planned autonomy level, its parent's host country experience, its industry's expected performance, and its parent country's religious closeness. I conclude that the POLCON index is an incomplete indicator of the policy threats faced by MNEs because it does not account for subsidiaries' legitimacy.

Joint Venture Formation and Internationalization: A Japanese MNEs' Perspective

This article investigates the dynamics of joint venture formation and performance during the internationalization process, using data on the international joint ventures formed by the 22 largest Japanese multinational enterprises (MNEs) over a 16-year period. Three themes emerged: (a) large multinational enterprises do not necessarily seek a controlling equity holding in their subsidiaries, (b) the number of partners is affected by the risk profile of the targeted host country and previous international experience, and (c) controlling equity ownership and the greater the number of partners in the joint venture increase the likelihood of survival but do not significantly influence financial performance.

Internationalization of Taiwanese manufacturing firms: The evolution of subsidiary mandates and capabilities

We explore the internationalization of Taiwanese manufacturing firms by studying the evolutionary trajectories of their subsidiaries. Building upon the literature, we formulate and apply dimensions capability development and mandate expansion to explain the evolutionary paths of Taiwanese foreign direct investment. Subsidiaries are categorizable into groups from low to high performance: Pure Implementer, Capability Contributor, Mandate Extender and Global Innovator. Using data from Taiwanese firms’ foreign expansion, we find that subsidiaries with longer host-country experience and founded by parent firms with higher geographic dispersion are more likely to expand their mandates and/or develop new capabilities, which in turn lead to better subsidiary performance.

Institutional distance, host country and international business experience, and the use of parent country nationals

This study examines how the institutional distance between a host country and a home country influences foreign subsidiary staffing, and how overseas business experience moderates the effect of institutional distance. Hypotheses regarding the effect of institutional distance on foreign subsidiary staffing are empirically tested using a sample of 2,980 foreign subsidiaries of Japanese firms. This study shows that although the ratio of parent country nationals to subsidiary employees decreases when firms face greater institutional distance, the absolute number of parent country nationals assigned to the subsidiary increases. This study also shows that firms with more overseas business experience replace host country nationals with parent country nationals when there is greater institutional distance.

When to offshore? A multilevel analysis of strategic timing and cost saving.

Despite the prevalence of cost reduction as reasoning behind offshoring, the understanding of the factors influencing cost savings through offshoring remains limited. To address this gap, we provide a multilevel contingency perspective proposing that the timing of offshoring activities affects the degree of cost savings and that the relationship is contingent on activity and firm-level factors. Using data on 639 offshoring activities at 214 firms, we find evidence of an early-mover cost advantage in offshoring. In addition, we find that this relationship is stronger in the case of labor rather than knowledge-intensive functions. We further propose that firms’ breadth and depth of geographical experience (i.e. international and host country experience) are important firm-level contingencies. Results indicate that the depth dimension of geographical knowledge affects the influence of timing on cost savings, but not the breadth dimension. Thus, our study highlights that the multilevel dynamics between activi...

The ownership structure of foreign subsidiaries and the effect of institutional distance: a case study of Japanese firms

This study investigates how institutional distance between a home country and a host country affects the ownership structure of foreign subsidiaries. Using a sample consisting of foreign subsidiaries of Japanese firms, the effect of institutional distance on the ownership structure of foreign subsidiaries is tested. The results indicate that Japanese firms reduce equity shares in foreign subsidiaries as institutional distance increases. The study also finds that internationally experienced Japanese firms tend to have large equity ownership in institutionally distant countries. In addition, this study shows that complementing host country experience with international experience further mitigates uncertainty arising from institutional distance.

Modes of acquiring host-country experience and performance of international joint ventures in Japan

Drawing upon organizational learning literature, we examine how different modes of acquiring host-country experience (HCE) affect international joint ventures (IJV) performance. Our study suggests that HCE improves IJV performance by reducing the liabilities of foreignness and cross-national collaboration confronting foreign firms. However, due to the difficulty of learning from experience, HCE may not always benefit IJV performance and may even harm it, depending on how it was accumulated. Our analysis of IJV survival and growth using data on IJVs in Japan between 1985 and 2000 supports this argument. Our findings have practical implications for leveraging HCE and suggest that the performance benefits of HCE should not be overstated.

Managerial ties with local firms and governments: an analysis of Japanese firms in China

This study explores how managerial ties between foreign firms and local firms and those between foreign firms and local government officials affect the performance of firms operating in transition economies. Using survey data collected from Japanese firms operating in China, this study finds that managerial ties between foreign firms and both local firms and local government officials are positively associated with the performance of Japanese firms in China. The study also examines how attributes specific to foreign firms operating in transition economies moderate the positive effect of managerial ties on the performance of foreign firms. Three significant moderators: host country experience, strategic orientation, and local market knowledge of foreign firms, are highlighted in the analysis.

Comment on “Are Asian Sovereign Wealth Funds Different?”

Comment on “Are Asian Sovereign Wealth Funds Different?”

English

Previous studies on investment location focused on local environmental factors, but tended to overlook the fact that firms’ host-country experience might have an impact on their location strategies and influence the investment performance. This study categorized location strategy in the breadth and depth of foreign investment and hotspots for investment to compensate for the inadequacy of relevant studies. This study chose 120 listed Taiwanese electronics companies that had invested in China between 1999 and 2007, as the research data, to examine the impact of host-country experience on the three types of location strategies and the impact of a specific location strategy on investment performance. This study discovered that as firms increased their host-country experience, the breadth, and depth of their foreign investment increased, as well as their investment in hotspots. In addition, the wider the range a firm’s foreign investments were, the better their investment performance would be. The impact of diversity on investment performance had a deferred effect. However, if firms invested in foreign hotspots, their potential profit might decrease, due to strong competition that detracted from investment performance. Key words: Host-country experience, location strategy, Taiwan IT companies, China.

MNC's competitive strategies, experiences, and staffing policies for foreign affiliates

This study investigates the relationship between the strategic role of a multinational corporation's (MNC) foreign affiliates and its international staffing policy. Specifically, this study examines how an MNC's decision on expatriation is affected by strategic roles assigned to foreign affiliates: global integration of activities versus local market seeking. An empirical study is conducted using a sample of 808 foreign affiliates of Japanese firms. The research findings suggest that strategic roles of foreign affiliates alone may not adequately explain the international staffing policies of Japanese MNCs. Rather, we found a significant moderating effect of international as well as host country experience on staffing practices for foreign affiliates. While the staffing policies of MNCs striving for improving global efficiency of their operation are moderated by both international and host country experience, those seeking a specific local market position are influenced only by host country experience.

Location Decision of Korean Manufacturing FDI: A Comparison between Korean Chaebols and Non-Chaebols

This study analysed the location selection determinants of Korean foreign direct investment (KFDI) from the perspectives of OLI paradigm and resource- and knowledge-based views. The study involved a sample of 1911 Korean multinational enterprises (MNEs) and their 3095 foreign subsidiaries during the period of 1999–2004. Specifically, the study compared the differences of foreign direct investment (FDI) location decisions (1) between less-developed and developed countries (LDCs and DCs) and (2) between chaebols and non-chaebols. The results showed that the partitioned sample model of chaebols versus non-chaebols was found to have more detailed effects on the location decision between the two regions than the combined full sample model. In addition, the results showed that there are clear, effectual differences for subsidiary scale and prior host country experience between chaebols and non-chaebols.

Barriers to blood donation in African communities in Australia: the role of home and host country culture and experience

An influx of African migrants and refugees can strain a host country's blood services, because often migrants have unique blood needs that cannot be sourced from local donors. To increase blood donation by the new migrants, host country blood services need to understand how blood and blood donations are viewed by immigrant communities, because recruitment models that are not culturally adapted may have limited success. Nine focus groups representing a cross-section of Australian-based African communities were conducted in multiple languages, facilitated by bilingual workers. The qualitative protocol was guided by the literature on blood donation by African migrants and communities in Africa. Thematic analysis identified the relevance of issues previously included in the literature and whether other issues facilitated or prohibited blood donation. Home country cultural issues were not generally raised as barriers to donation, and respondents were positively disposed toward donation. Home country experiences shaped respondents' views in Australia. Participants focused on assisting "individuals in need," rather than giving to a blood service that many viewed with suspicion because of issues in their home country. There was a lack of knowledge about the donation process in Australia. More importantly, respondents perceived that their blood would not be wanted, based on a perception of host country mistrust and discrimination. Developing an intervention that encourages migrants to donate blood needs to be culturally focused. It appears that addressing perceptions based on home country experiences is essential. Overcoming a general perception of discrimination is beyond any blood service, but there can be an attempt to ensure that blood donation is seen as an inclusive process-blood from everyone, for everyone.

Travelling a thousand miles: Hong Kong Chinese students’ study abroad experience

This study focused on Chinese students’ goals, experiences, and learning outcomes associated with their participation in study abroad. Data were drawn from survey responses from 214 undergraduates of a university in Hong Kong who studied or engaged in overseas internships/volunteer work in 20 countries. To explore the data, an experiential intercultural learning model was proposed. This model views study abroad as an active learning process in which study abroad goals motivate students to engage in experiences likely to enhance their intercultural, disciplinary/career, and personal competences. The findings suggested interrelatedness of students’ study abroad goals, host country experiences and learning outcomes. Specifically, alignment between students’ learning outcomes and study abroad goals was identified through a comparison of results from content analysis of students’ perception of important things learned (an open-ended item) and the descriptive statistics on students’ perception of achievement of study abroad goals. Correlation analysis indentified close relationships between students’ achievement of study abroad goals (i.e. personal development goals, intercultural development goals, and disciplinary/career development goals) and host country experiences (i.e. study/work experiences, intercultural experiences, and personal changes as a result of the experiences). Personal changes were correlated with intercultural experiences and with study/work experiences. The findings implied that for optimal student development via study abroad, students need to be encouraged in setting goals relating to intercultural, personal and academic/career development, and to orient actions toward such goals.