Japanese Multinational Enterprises Research Articles

Knowledge Sharing vs. Knowledge Appropriation: A Case Study of Contingent Relationships in the Role of Boundary Spanners in Asian Subsidiaries of Japanese Multi-National Enterprises

In recent decades, Asian subsidiaries of Japanese manufacturing multi-national enterprises (MNEs) have faced heightened competitions from local firms to underscore the strategic importance of developing competent “host country nationals” (HCNs) to overcome their liability of foreignness. In addition, in recent literature on global MNEs, the importance of “boundary spanners” (BSs) has been pointed out in facilitating knowledge sharing across intra-organizational boundaries. Given these discussions, this study focuses on an interesting contingent relationship in the role of BSs observed in author’s interviews. i.e., In cases of “bad BSs,” “knowledge appropriation” can take place where newly promoted HCNs would monopolize their knowledge and information, and the mitigating processes of notion gap problem in grey areas management are heavily stagnated. Whereas in cases of “good BSs,” “knowledge sharing” would take place where newly promoted HCNs would be willing to share them with other members, and the mitigating processes of the notion gap problem are steadily progressed. The study proposes a framework illustrating conditions under which HCNs choose knowledge sharing over appropriation. The analysis identifies two key factors influencing this choice: dependence on personal skills and prospects for growth opportunities. The findings suggest a dynamic relationship where knowledge sharing leads to effective control and efficient knowledge transfer, fostering virtuous cycles, while knowledge appropriation results in inefficiencies, creating vicious cycles. The study calls for further research on dynamic aspects of this contingent relationship and suggests practical strategies for shifting from knowledge appropriation to sharing, thereby enhancing organizational performance in foreign subsidiaries.

Comments by Soohyung Lee on Resilience of Japanese Multinational Enterprise Production Networks during the COVID-19 Pandemic

Comments by Soohyung Lee on Resilience of Japanese Multinational Enterprise Production Networks during the COVID-19 Pandemic

Pollution Havens in South-East Asia: Examining Japanese Multinational Enterprises in the Philippines

Pollution Havens in South-East Asia: Examining Japanese Multinational Enterprises in the Philippines

Resilience of Japanese Multinational Enterprise Production Networks during the COVID-19 Pandemic

Abstract We use COVID-19 as an exogenous shock to analyze the impact of the COVID-19 pandemic on Japanese multinational affiliates’ performance, determining that the pandemic adversely impacted performance in general, but severe disruptions did not last longer than one year. The COVID-19 shock also affected global transaction networks, and affiliates’ total sales were severely affected by procurement challenges. Regarding heterogeneous effects, affiliates actively engaged in trade experienced worse conditions than local-oriented firms. Finally, we explore whether and which local backward linkages could mitigate such shocks, concluding that affiliates’ local procurement from companies beyond only Japanese firms could gain resilience.

Perlmutter visited. Japanese international business strategic orientation transformation in India: progress made and forces against

PurposeAlthough Asia's rise in the global economy is increasingly recognized, international business (IB) interactions between Japan and India remain under-commented. These interactions are especially salient due to the United Nations Sustainable Development Goal 17 (UN SDG 17), which focuses on partnerships. This study updates and analyzes the strategic orientation of Japanese multinational enterprises (MNEs) in India.Design/methodology/approachFollowing a subjectivist approach, this study employs a constructivist epistemology. Utilizing mixed methods, it obtains primary data from interviews and informal conversations with senior personnel from Japan and India and secondary data from archives. These data then undergo manual organic thematic analysis.FindingsThe study reveals instances of Japanese MNEs diverging from traditional ethnocentric orientations, such as senior management's growing commitment to India. The findings also indicate that the transformation to a polycentric orientation remains incomplete.Practical implicationsThe study uncovers themes impeding a polycentric transformation, offering insights for strengthening international partnerships and emphasizing the necessity of prioritizing local demands and cultural expectations.Social implicationsClues to strengthening IB contribute to attain UN SDG 17, especially given the advanced-emerging characteristics of the Japan–India dyad.Originality/valueThis study’s research makes a novel contribution to the literature on international strategic orientations by providing insights into a rare dyad – namely, Japanese MNE expansion in India. It is also a valuable and timely addition consistent with current beyond-China business diversification trends.

Multinationals’ intraregional geographic expansion and foreign subsidiary performance

This study investigates how the intraregional geographic expansion of a multinational enterprise (MNE) affects the performance of foreign subsidiaries in the region. While previous studies have primarily focused on the impact of intraregional expansion at the overall MNE level, this study explores its subsidiary-level effect. The non-linear relationship between intraregional geographic expansion and the performance of foreign subsidiaries in the region is examined by adopting a two-stage least squares model for a panel dataset of Japanese MNEs’ investments in three geographic regions. The findings demonstrate a curvilinear relationship between intraregional geographic expansion and the performance of foreign subsidiaries. Furthermore, the effect of intraregional geographic expansion on subsidiary performance depends on the attributes of foreign subsidiaries in the regional network of sister subsidiaries. Specifically, this study demonstrates that geographically isolated and small subsidiaries and those co-owned by local partner firms gain large benefits from intraregional expansion.

The impact of policy uncertainty on foreign direct investment: Micro‐evidence from Japan's international investment agreements

AbstractThis study proposes an empirical strategy to identify the impact of policy uncertainty (PU) at the host economy‐sector‐reservation level on foreign direct investment (FDI) by exploiting sectoral differences in PU before and after the entry into force of international investment agreements (IIAs). These sectoral differences arise because IIAs mitigate PU in host economies, but sectors included in negative lists of IIAs continue to face different degrees of PU owing to exemptions from certain obligations, such as national treatment and the most favored nation in IIAs. Using this empirical strategy, we evaluate how the activities of Japanese multinational enterprises and their foreign affiliates are affected by Japan's 22 IIAs, including bilateral investment treaties and economic partnership agreements with investment provisions, during 1995–2016 at the microdata level. We find that PU regarding a combination of national treatment and most favored nation has a negative impact on FDI. In particular, PU discourages the establishment of new foreign affiliates. However, PU does not necessarily induce affiliates to exit the market.

Temporal boundaries and expatriate staffing: Effects of parent–subsidiary work-time overlap

By integrating the boundary-spanning perspective with the expatriate staffing literature, we explore why and how temporal boundaries between multinational enterprise (MNE) parent and subsidiary locations affect MNEs’ deployment of expatriates in foreign subsidiaries. Temporal boundaries, defined as local work-time schedule differences, delimit the degree of work-time overlap between two locations. A lack of work-time overlap between MNE parent and subsidiary locations creates significant barriers in day-to-day, remote real-time communication, resulting in increased deployment of expatriates as intermediaries by parents to overcome these barriers. Conversely, greater parent–subsidiary work-time overlap enables more remote real-time communication via digital technologies, altering the cost–benefit analysis of deploying expatriates over local nationals, consequently reducing parents’ reliance on expatriates as intermediaries. Therefore, we posit a negative relationship between parent–subsidiary work-time overlap and the expatriate ratio in a subsidiary. Further, we posit that the negative relationship is weakened by home – host country distance in terms of information and communication technology development and linguistics because technological and semantic boundaries can reduce the effectiveness of parent–subsidiary real-time communication. Empirical analyses of 22,556 subsidiaries established by 5,912 Japanese MNEs operating in 31 host countries between 1990 and 2018 support our theorizing.

The impact of foreign direct investment on executive compensation: evidence from the Great Recession

ABSTRACT This study examines the causal effect of outward foreign direct investment (FDI) on executive compensation using compensation data of 2,391 Japanese multinational enterprises (MNEs). A negative demand shock caused by the Great Recession in 2008 is applied to identify the impact of FDI on annual payments to corporate executives. We find that firms engaged in FDI tended to decrease executive compensation in response to the crisis to a greater degree than firms with no foreign investment. The result is consistent with the view that FDI activities may explain the recent increase in executive compensation.

Intrafirm trade, input–output linkage, and contractual frictions: evidence from Japanese affiliate-level data

This paper revisits how vertical linkages between overseas affiliates and their parents are related to intrafirm trade by shedding light on variations in contractibility across sectors in the case of Japanese multinational enterprises based on affiliate-level data. We confirm that intrafirm trade is observed only in a limited fraction of affiliates. To include a large number of affiliates with zero intrafirm trade into our regressions, we estimate our model by Poisson Pseudo Maximum Likelihood. We find that Japanese multinational affiliates tend to export relatively more to their parents in vertically linked sectors especially if they trade goods with low contractibility. This relationship is evident for affiliates located in developing countries. This result indicates that input–output linkage is a significant determinant of intrafirm trade when the trade is affected by contractual frictions. We also confirm the robustness of the results regardless of the definition of contractibility indices by previous studies.

Moving out of China? Evidence from Japanese multinational firms

This study examines the firm-level and macroeconomic factors affecting foreign divestment in China. It employs a unique dataset of Japanese multinational enterprises (MNEs) from 1995 to 2016. Based on survival analysis, we find that affiliate size, profitability, labor productivity, and export proportion to Japan are negatively associated with MNEs’ divestment probability. Moreover, the probability of divestment increases with the size of the parent firm and its experience in the Chinese market but decreases with business relatedness between affiliate and parent firms, industrial minimum effective scale, and market concentration. We further examine the determinants of different divestment modes and post-divestment investment adjustment across regions and industries. Finally, we find that the Diaoyu/Senkaku Islands conflict and an increase in the minimum wage significantly raise the probability of Japanese divestment.

Regional disparities, firm heterogeneity, and the activity of Japanese manufacturing multinationals in India

This paper empirically explores the determinants of Japanese multinational enterprise (MNE) activity in India using firm-level data, with particular focus on the country or regional characteristics predicted from a North–South firm-heterogeneity model featuring foreign direct investment (FDI), the exchange rate, and endogenous wages. We identify the economic variables and country or regional characteristics that significantly affect the activity of Japanese MNEs. We show the importance of accumulating human capital and improving infrastructure to raise the sales level of Japanese MNEs in India.

National Identity, Othering and Resistance: Host Country Manager’s Experience at a Japanese Multinational Enterprise in India

National identity has been found to be a basis for othering and resistance in host country managers at multinational enterprises overseas’ affiliates. An original model of employee’s resistance using national identity has developed a nuanced understanding of how resistance manifests. This research tests this original model in a multinational enterprise’s office in the emerging market and power distance accepting India. A case study design was adopted. Interpretive analysis of the data indicates that the newly developed model could apply to Indian situations, and collateral inductive reasoning proposes a further refinement to this model. Thus, besides verbal othering, it is found that the use of space and rituals can also be used in the acts of resistance and further it is proposed that such acts are not necessarily continuous, but can manifest intermittently. Hence, the practising international human resources manager now has a broader lens to assess resistance manifestation, facilitating sooner remedial countermeasures. The cross-cultural study is among the pioneers in studying national identity as a means of resistance in a power distance accepting context in general, and the under-researched advanced economy, emerging market Japan–India international business dyad specifically. It contributes to cross-cultural management (CCM) literature by surfacing the darker side of globalization—the power retained by the parent company and concomitant subordination of the host country manager that results in resistance. This study adds to the under-researched India–Japan global business scholarship.

Parent-subsidiary temporal closeness and expatriate staffing: the communication synchronicity effect

This study draws insights from media synchronicity theory (MST) to understand why and how temporal closeness between multinational enterprise (MNE) parent and subsidiary locations may affect MNEs’ employment of expatriates in their foreign subsidiaries. Parent-subsidiary temporal closeness, indicated by the working time overlap between the parent and subsidiary location, determines the extent to which synchronicity can be achieved in day-to-day communication directly at a distance. Such communication synchronicity enables MNE parents to excise control and maintain effective knowledge exchange with subsidiaries without having to rely on costly expatriates. As such, we posit a negative relationship between parent-subsidiary temporal closeness and the deployment of expatriates in a subsidiary, such that the expatriate ratio decreases with an increase of overlapping working time between the parent and subsidiary location. Furthermore, we posit that the negative relationship can be further moderated by factors enabling or constraining parent-subsidiary synchronous communication such as digital accessibility and linguistic distance. Empirical analyses of a sample of 3,500 subsidiaries of 1,801 Japanese MNEs between 1990 and 2009 support our theorizing. Theoretical and practical implications for MNEs’ global operations are discussed.

One way or another? An international comparison of expatriate performance management in multinational companies

AbstractDue to the high costs and strategic importance of expatriate assignments, expatriate performance management (EPM) plays an increasingly important role for multinational enterprises (MNEs). However, research on EPM is still in its infancy. Drawing from the convergence/divergence debate in international human resource management, this study investigates and compares EPM strategies and practices across MNEs from three different country clusters to better understand whether EPM practices tend to converge, diverge, or crossverge (i.e., show aspects of both). Results from surveying 132 Anglo‐Saxon, Germanic, and Japanese MNEs reveal prominent differences (divergence) at the EPM strategic level such that Japanese MNEs tend to pursue more ethnocentric staffing strategies and design EPM systems specifically tailored to expatriates. On the practice level, we found both commonalities and differences between Japanese and Anglo‐Saxon and Germanic MNEs, pointing toward crossvergence. Theoretical and practical implications of our results are discussed.

Taking advantage of institutional weakness? Political stability and foreign subsidiary survival in primary industries

PurposeThis paper aims to investigate the extent to which locating primary industry subsidiaries in politically unstable countries impacts their survival. The authors argue that foreign multinational enterprises in less stable political environments can shape policies that are impactful on the costs of operating in primary industries and avoid compliance with more stringent policies at home.Design/methodology/approachUsing a sample of 753 primary sector investments of Japanese multinational enterprises during the period 1986 to 2013, the authors conduct a parametric survival analysis of the relationship between political stability and subsidiary survival.FindingsPolitical instability has a slight, curvilinear relationship with subsidiary survival, such that both high and low stability are associated with lower exit hazard, while moderate levels of stability increased exit hazard. This nonlinear relationship is stronger for efficiency-seeking subsidiaries, and weaker for market-seeking subsidiaries.Originality/valueThis research contributes to the debate around the pros and cons of globalization by examining the extent to which firms benefit by offshoring primary sector investments to avoid more costly legal requirements at home. The results suggest that this non-market strategy should be mitigated through appropriate policy measures and provides evidence that those policies already implemented are effective.

Corporate sustainability reporting in Japanese multinational enterprises: a threat to local legitimacy or an opportunity lost for corporate sustainability practices?

PurposeThis paper aims to investigate whether Japanese manufacturing multinational enterprises (MNEs) maintain local legitimacy in their host countries through adequate informing of local stakeholders with targeted corporate sustainability (CS) reporting.Design/methodology/approachThe paper first identified specific CS activities that were considered important in four Association of Southeast Asian Nations host countries, through semi-structured interviews with 58 participants of 16 Japanese manufacturing MNEs. The degree of establishment of local legitimacy was then measured through the number of references made to these CS activities and other activities specific to the respective host countries in the CS reports of the MNEs across a five-year period.FindingsThe majority of MNEs in the sample were under-reporting items of specific interest to localhost country stakeholders potentially undermining the MNEs’ image. There were found to be differences on the topics published in CS reports compared to those mentioned in the interviews indicating potential issues with regard to internal communication between the subsidiary and headquarters offices.Originality/valueA novel approach is taken to investigate the degree of local legitimacy established by MNEs through comparing the contents of interviews held at subsidiaries with their respective CS reports. This paper highlights the importance of considering MNE subsidiaries when addressing Target 12.6 of the Sustainable Development Goal 12: responsible consumption and production.

Networks of foreign affiliates: Evidence from Japanese micro‐data

AbstractThe paper provides evidence of the investment patterns of Japanese multinational enterprises (MNEs) across countries and industries and analyses the main drivers of their location strategies, using detailed micro‐data on Japanese parents and their affiliates including the final destination of affiliate sales. The breakdown of affiliate sales by destination market reveals that Japanese MNEs establish services affiliates primarily to maximise proximity to local customers, while foreign affiliates in manufacturing sectors tend to engage more widely with third countries. Yet, some economies emerge as strategic gateways to other destinations in their region. The empirical analysis delves into the drivers of host country attractiveness for FDI seeking new markets, production efficiency and to act as regional or global platforms. Important factors shaping Japanese FDI decisions include trade and investment policies in goods and services, deep FTAs, as well as streamlined customs procedures. Furthermore, well‐calibrated rules for digital commerce and investments in digital infrastructure and innovation contribute to attracting MNEs. Overall, the paper stresses the factors behind better integration into global production networks and the policy priorities to attract various types of FDI inflows.

Japanese expatriates' management in global assignments: A review and research agenda

AbstractJapanese firms and their management practices (including those related to expatriate management) have been of interest to international business researchers for decades. The international human resource management literature highlights the critical role expatriates' family play in the success or failure of global assignments. However, this issue has not been prominent in the literature on Japanese expatriates, despite the emphasis on collectivism and culture. This study uses the integrative literature review method to consolidate the research on Japanese work practices and expatriation issues in Japanese multinational enterprises, with emphasis on Japanese family issues in expatriate management. Using family systems theory as the analytical lens, we identify themes that have been covered in the literature on Japanese global assignees and their families. Current gaps in the literature are highlighted, and we provide a future research agenda with broad themes that can contribute to the academic writing and practices of Japanese expatriate management.

The effect of non-conventional outbound foreign direct investment (FDI) on the domestic employment of multinational enterprises (MNEs)

Using a sample of 787 Japanese MNEs operating in 60 countries from 1996 to 2010, this study examines the impacts of MNEs’ three most commonly observed forms of non-conventional outbound FDI (i.e., as a means to counter trade barriers, to achieve a financial hedge, or to obtain tax breaks) on domestic employment levels of MNEs at home. We build on a conceptual classification of ‘motivation-activity’ of MNEs as a theoretical framework, and evaluate the impacts of MNEs’ non-conventional outbound FDI on their domestic employment levels in relation to the MNEs’ specific combination of ‘motivation’ and ‘activity’ as they conduct outbound FDI in host countries. The 3SLS regression results show strong evidence that non-conventional outbound FDI in core business activities reduces MNEs’ domestic employment levels when the investment is primarily for responding to country-specific conditions, such as circumventing host country restrictions (e.g., FDI to counter trade barriers) or escaping from home country restrictions (e.g., FDI for tax incentive packages), while FDI in non-core business activities (e.g., FDI for financial hedging or FDI in tax havens) has either a positive or insignificant effect on MNEs’ domestic employment levels depending on whether it aims to develop FSAs or not. We conclude the study with public policy implications from these findings.