Large Multinational Enterprises Research Articles

Born globals and international business: Evolution of a field of research

Knight and Cavusgil’s award-winning article has played an important role in the development of the growing body of research on companies that internationalize early and rapidly. These “born global” firms represent important contributors to many economies, often as key players in ecosystems that support large multinational enterprises. Despite their growing importance, our understanding of how and why these firms develop and implement their internationalization strategies, and what makes them successful, remains incomplete. Addressing such questions has contributed substantially to the development of the research domain of international entrepreneurship (IE), which focuses on entrepreneurial aspects of doing business across borders, in the context of both small and large firms. While IE is much broader than born globals, these firms are central to the IE domain and the impact of the Knight and Cavusgil paper has helped to develop a stronger awareness of the important linkages and intersections between IE and the wider international business research community. We reflect on the important contribution of this paper, and suggest some directions for the future development of research into firms that choose to operate internationally practically from the start of their operations.

Individual competencies for managers engaged in corporate sustainable management practices

Corporations increasingly acknowledge the importance of sustainable practices. Corporate social responsibility is therefore gaining significance in the business world. Since solving corporate social responsibility issues is not a routine job, every challenge in corporate social responsibility requires its own approach; and management competencies are crucial for designing appropriate approaches towards the realization of sustainable solutions. On the basis of seven corporate social responsibility competencies synthesized from the extant literature, this research provides an empirical analysis of which of these competencies managers need in order to achieve corporate social responsibility goals within their specific context; and at which specific stage of the implementation process. The data sources are interviews with corporate social responsibility managers – whose positions and circumstances share many similarities – at four large multinational enterprises. The empirical analysis reveals that managers undertake four corporate social responsibility core tasks: I) orientation, II) reaching common ground, III) performing pilot projects, and IV) embedding results. Within the context of the analysis, the competencies: Systems Thinking, Embracing Diversity and Interdisciplinarity, Interpersonal Competence, Action Competence, and Strategic Management were found to be necessary. The Embracing Diversity and Interdisciplinarity competence was identified as the most relevant. This study contributes to the corporate social responsibility (education) literature by introducing an empirical test of which competencies are considered necessary for managers in various stages of corporate social responsibility implementation. Linking these competencies to core tasks makes them more concrete and increases the chances of interpreting them unambiguously, which in turn can aid learning trajectories in both business and education.

How do business-level strategies affect multiple market servicing modes in the foreign country?

Purpose– There is considerable literature on the firm's market servicing mode (MSM) when it enters the foreign country. However, scant research has been conducted to examine how business-level strategies (BLSs) affect internationalised firms to choose a multiple rather than single post-entry MSM. The purpose of this paper is to test the effect of three BLSs on firms’ selection of multiple MSMs.Design/methodology/approach– Survey responses of 165 internationalised Greek small- and medium-sized enterprises (SMEs) were collected capturing the types of BLSs they used during 2008-2010 and their number of MSMs in a particular foreign country in 2011. The data were analysed using logistic regression.Findings– The findings suggest that firms that implement collaborative and differentiation strategies are more likely to use multiple rather than single MSMs. Firms that implement penetration pricing strategies are more likely to use single MSMs, although this effect is marginally significant. Overall, the validity of the strategic choice model regarding the choice of multiple MSMs is confirmed.Originality/value– Despite its importance, the effect of BLSs influencing MSMs has not seemingly been investigated, especially in the context of internationalised SMEs as opposed to large multinational enterprises; and, for post-entry as opposed to initial modes. The findings underline the BLS significance on internationalised SME adoption of multiple vs single MSMs in the host country.

Foreign market entry mode choice of small and medium-sized enterprises: A systematic review and future research agenda

Despite significant differences between small and medium-sized enterprises (SMEs) and large multinational enterprises (MNEs), the majority of extant foreign market entry mode choice literature has focused on MNEs. The current state of knowledge regarding SME foreign market entry mode choice is equivocal. The present paper reviews the current state of SME foreign market entry mode choice literature and maps future research directions. To this end, we systematically analyze 33 relevant journal articles for their theoretical frameworks and contextual dimensions. Based on this review, we identify gaps in the literature and develop an agenda to guide future scholarship in this important domain of research in taking SME-specific characteristics into consideration.

From the Communism of Capital to Capital for the Commons: Towards an Open Co-operativism

Two prominent social progressive movements are faced with a few contradictions and a paradox. On the one side, we have a re-emergence of the co-operative movement and worker-owned enterprises which suffer from certain structural weaknesses. On the other, we have an emergent field of open and Commons-oriented peer production initiatives which create common pools of knowledge for the whole of humanity, but are dominated by start-ups and large multinational enterprises using the same Commons. Thus we have a paradox: the more communist the sharing license used in the peer production of free software or open hardware, the more capitalist the practice. To tackle this paradox and the aforementioned contradictions, we tentatively suggest a new convergence that would combine both Commons-oriented open peer production models with common ownership and governance models, such as those of the co-operatives and the solidarity economic models.

From the Communism of Capital to Capital for the Commons: Towards an Open Co-operativism

Two prominent social progressive movements are faced with a few contradictions and a paradox. On the one side, we have a re-emergence of the co-operative movement and worker-owned enterprises which suffer from certain structural weaknesses. On the other, we have an emergent field of open and Commons-oriented peer production initiatives which create common pools of knowledge for the whole of humanity, but are dominated by start-ups and large multinational enterprises using the same Commons. Thus we have a paradox: the more communist the sharing license used in the peer production of free software or open hardware, the more capitalist the practice. To tackle this paradox and the aforementioned contradictions, we tentatively suggest a new convergence that would combine both Commons-oriented open peer production models with common ownership and governance models, such as those of the co-operatives and the solidarity economic models.

Host-country Headquarters of U.S. Firms in China: An Empirical Study

Recent studies show that large multinational enterprises (MNEs) adopt an organizational unit, called host-country headquarters (HCHQ), in key foreign countries (Ma and Delios, 2010; Ma, Delios and Lau, 2013). In this study, we examine the factors that are associated with the establishment of an HCHQ by US firms in China. We hypothesize that an HCHQ is associated with both firm-specific factors and host country-specific factors. We find that an HCHQ is associated with the firm's scope diversification and degree of internationalization, and the strategic importance of foreign host country and subsidiary diversification in that host country. The findings are based on archival data of U.S. Fortune 500 firms. The findings add to the understanding of an important organizational structure of large U.S. firms in China, and possibly to MNE structures more widely in key foreign countries.

Governing Software Process Improvementsin Globally Distributed Product Development

Continuous software process improvement (SPI) practices have been extensively prescribed to improve performance of software projects. However, SPI implementation mechanisms have received little scholarly attention, especially in the context of distributed software product development. We took an action research approach to study the SPI journey of a large multinational enterprise that adopted a distributed product development strategy. We describe the interventions and action research cycles enacted over a period of five years in collaboration with the firm, which resulted in a custom SPI framework that catered to both the social and technical needs of the firm's distributed teams. Institutionalizing the process maturity framework got stalled initially because the SPI initiatives were perceived by product line managers as a mechanism for exercising wider controls by the firm's top management. The implementation mechanism was subsequently altered to co-opt product line managers, which contributed to a wider adoption of the SPI framework. Insights that emerge from our analysis of the firm's SPI journey pertain to the integration of the technical and social views of software development, preserving process diversity through the use of a multi-tiered, non-blueprint approach to SPI, the linkage between key process areas and project control modes, and the role of SPI in aiding organizational learning.

The Enforcement of Merger Control in China: A Critical Analysis of Current Decisions by MOFCOM

The Anti-Monopoly Law in China took effect in 2008, and it is unquestionable that it has led to a meaningful transformation of economic policy. Chinese competition law has been understood as a constitution for free and fair competition and also an important means of creating a price-driven market economy. In particular, since China is one of the world’s largest economies, its adoption of a competition law has drawn the attention of trading partners and large multinational enterprises. When examining the current enforcement of competition law in China, it is noteworthy that most cases involve the enforcement of merger control rather than cartels or abuse of market dominance, and the number of merger cases continues to increase significantly. Therefore, understanding merger control is important for an overall understanding of competition policy in China. The Chinese competition regime has improved the techniques for merger assessment, but it also appears to have some problems due to a lack of experience. This article aims to introduce and analyse the recent enforcement and development of Chinese merger control. It also acknowledges fundamental differences between the objectives of Chinese competition law and the objectives of competition law in Western countries, and explains how this eventually results in dissimilar outcomes. Lastly, this article provides proposals for establishing a better merger policy based on the competition-priority principle rather than socio-political values.

Vertical Spillover Effects of Multinationals on Chinese Domestic Firms via Supplier–Customer Relationships

AbstractForeign direct investment (FDI) can benefit domestic firms in the host country. Using firm‐level data for China, we find statistically positive vertical spillover effects of multinational enterprises on the performance of domestic firms through backward and forward supplier–customer relationships. The spillover effects are mainly from large multinational enterprises and are greater for state‐owned firms and in poor regions. Our results are robust for both parametric regression and nonparametric matching techniques. Our findings have strong policy implications: while regulations relating to building business relationships with domestic firms when seeking foreign direct investment should be established, such policies should be aimed at private firms, big multinationals and less developed regions.

Comment on “ASEAN's New Frontiers: Integrating the Newest Members into the ASEAN Economic Community”

Pomfret (2013) is a highly informative, well-written paper and a very useful introduction to the recent economic histories of Cambodia, Laos, Myanmar, and Vietnam (CLMV) emphasizing the role of regional and subregional integration. On one of the paper's broad themes, the mix of unilateral action and involvement in broader regional and global organizations which characterized the development experiences of the traditional Association of Southeast Asian Nations (ASEAN) economies, the contrast with CLMV is striking. When the organization was founded in the 1960s, with the exception of the small emirate of Brunei, the other original ASEAN members or ASEAN5 (Indonesia, Malaysia, the Philippines, Singapore, and Thailand) all were pursuing import substituting industrialization strategies. Following the examples of Taiwan and South Korea, Singapore subsequently changed tack and adopted an outward oriented approach which was then emulated by the other ASEAN members. This outward-oriented development strategy was by no means the global norm in the 1970s, but the region's openness paved the way for the development of a horizontal division of labor and the creation of the highly articulated cross-border supply chains collectively dubbed Factory Asia today. An open question is whether the ASEAN5's relationship with the private sector, specifically their openness to the large multinational enterprises from outside the region that have played such a large role in the region's supply chains, is likely to be reproduced in CLMV, or whether the latter will remain in a more defensive crouch. The tension created by the divergence in the attitudes and capacities of the old and new ASEAN members may become more acute as the organization tries to deepen its level of formal commitment while at the same time integrating the new members which are at a much lower level of development than the old members on virtually every metric. The risks are that ASEAN will adopt, but not consistently enforce, more rigorous standards, calling into question the organization's integrity, or explicitly adopt a multispeed model with derogations and exceptions. Either option poses its own risks, as the example of the European Union vividly demonstrates. Arguably, demonstration effects and emulation have been more important in Southeast Asia's contemporary economic history than in formal institutions. Nevertheless, the latter have a role. On the issue of external anchors or drivers, the paper leans toward the view that the East Asian and Trans-Pacific Partnership (TPP) tracks of integration are in opposition when, in fact, the logic of competitive liberalization could make the tracks complementary. Marrying the two agreements together could fulfill the Bogor Declaration, creating the Free Trade Area of the Asia–Pacific, and avoid “drawing a line down the middle of the Pacific” in the words of former American Secretary of State James Baker. In the short run, the East Asian track will generate larger benefits for participants due to the higher levels of existing protection and hence greater potential for liberalization. In contrast, much of the trade among members of TPP is already covered by “high quality” agreements. In each case, much of the initial benefit will come through preferential access to the US and Chinese markets, respectively, and “old ASEAN” countries such as Singapore and Malaysia, and “new ASEAN” Vietnam, that might participate in both tracks early on, would be prime beneficiaries. Ultimately, the logic of enlargement will mean that the USA and China will be among the few countries without preferential access to both large markets, and will hence face an incentive to integrate the two schemes. From this perspective, both sets of negotiations should clearly frame region-wide free trade as the ultimate objective, the dialogue between the two tracks should be intensified, and explicit efforts should be made to reduce the differences between the TPP and East Asian templates. Again, some ASEAN countries, including potentially Vietnam, could play an important bridging role in this regard.

Talent management in medium-sized German companies: an explorative study and agenda for future research

This study seeks to make a contribution to our conceptual and empirical understanding into the nature of talent management (TM) in German small and medium-sized enterprises (SMEs), an under-researched area in the field. The approach of this investigation recognizes that TM may vary significantly between different types of companies and national contexts. The findings are based on data collected from 700 SMEs in Germany. Three distinct clusters of TM intensity profiles are identified (highly engaged talent managers, reactive talent managers and retention-based talent managers), which vary according to annual sales volumes, industry affiliations, cooperative behavior with respect to human resource (HR) and TM networks, the long-term focus of TM and future HR and TM budgets. In summary, most of the investigated companies place a high importance on TM reflecting a developmental approach which fits well with the German business system. One key finding of the study was the preference of most German SMEs to choose a more inclusive approach to TM and target all or most employees, in contrast to large multinational enterprises where a more elitist approach is favored. Another major finding was that TM cooperation with other firms and institutions was used as a strategy to cope with the war for talent in a country, which despite the Global Financial Crisis is characterized by strong economic growth and important demographic challenges. Based on these findings and the contextual approach to TM, a comprehensive agenda for future research areas in TM is outlined.

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.

Privatization, the Role of Enterprises and the Implementation of Social and Economic Rights: A Comparison of Rights-Based and Administrative Approaches in India and China

From the middle of the last century, socio-economic rights have been bound up in the ideology of the state within national legal orders and through the construction of an important edifice of public international law and institutions. Globalization may be changing both the focus and locus of socio-economic rights, adding a private sector dimension to what had been an almost purely public institution project. The state and public international organizations have been making room for the multinational corporation and global civil society. In lieu of a hierarchically arranged global system of public power managing socio-economic rights, governance fracture and polycentricism have complicated the regulatory landscape, making it sometimes harder to see where public law ends and private affairs begin. This study examines the ways in which the development of socio-economic rights has moved beyond the state in two of the most important emerging free market economies — China and India. After introducing the current formal division of human rights between political and civil rights (a focus of the Global North discourse) and social and economic rights (a focus of Global South discourse), Part II of this Article briefly focuses on the way in which social and economic rights are understood within India and China. Part III then considers two case studies as a means of structuring discussion; the first from India, involving two large multinational enterprises and the rights-based approach; the second from China, involving the development of complex administrative and rules-based private corporate social responsibility (CSR) codes of conduct. Part IV concludes with some general observations about globalization, privatization, and the advancement of human rights regimes. In China, privatization is grounded in state obligation, administrative approaches, and private rule systems. In India, privatization is grounded in individual rights-based and civil and political rights-based judicial approaches. Though both incorporate international norms, they achieve this incorporation in substantially different ways. These examples will serve to suggest the ways in which both privatization and corporate actors now play an increasingly important role in realizing socio-economic rights, and the way approaches to economic and social rights are fracturing at the private as well as the public law level. Indeed, within the forms of privatized frameworks for the development of economic and social rights, India and China evidence the ways in which political division has now also been privatized and replicated — providing an additional space within which the tensions, already quite evident in the state system’s difficulties with human rights, may be replayed.

In Search of a Prince: An INV's quest for a strong tie with an MNE

Given the paucity of research on network outcomes (i.e. network ties as the dependent variable) and specific sources of social capital in studies on international new ventures (INVs), we ask: How does an internationalization-seeking new venture successfully forge a strong tie with a large MNE? Specifically, we identify ties with large multinational enterprises (MNEs) as an important but under-researched source of social capital for internationalization-seeking start-ups – in other words, aspiring INVs. Based on an inductive longitudinal case-study in Bangalore, India, our central argument is that an aspiring INV could build and leverage valuable MNE links through the interplay between their network actions and uncertainty reduction, which are engendered by the clarity of its strategic intent. Specifically, we identify the combined effects of network broadening actions and egocentric uncertainty reduction as potentially leading to the formation of an optimal partnering relationship with an MNE subsidiary. ...

Transnational Corporate Constitutionalism: The Emergence of a Constitutional Order for Economic Enterprises

The convergence of public and private law has emerged as one of the great legal issues of the 21st century. It touches everything from the regulation of state activity, to the character and effect of the activities of non-state actors — and particularly those amalgamations of authority organized as juridically distinct persons. At its core, it implicates issues of the character and nature of the state, the state system, and the division of power — political, economic, religious, social and cultural — among a number of actors of which the state is only one. Economic entities are increasingly seen as state-like actors requiring regulation at a transnational level; states seek to participate in domestic and foreign markets as economic rather than as political actors. Large multinational enterprises are increasingly able to self regulate. Simultaneously, the nature of the legal order among states and the principles within which states may constitute themselves have become increasingly regularized — the community of nations has begun to move from an acceptance of constitution as a means of organizing political communities to constitutionalism as a system for the regulation of the organization of non-state communities with political authority. This paper engages emerging principles of transnational constitutionalism as a basis for the organization and integration of economic enterprises. For that purpose, the paper considers the role of two influential efforts in the construction of a global enterprise constitutionalism — the United Nations Global Compact system and the Organization for Economic Cooperation and Development Guidelines for Multinational Enterprises. The paper starts with context, examining the rise and character of the conceptual elements of transnational constitutionalism and its applicability to functionally distinct communities — like that of business enterprises. It then examines the development of and current efforts to ‘operationalize’ the Global Compact and the Guidelines for Multinational Enterprises as two related substantive regulatory frameworks for the transnational governance of economic actors. It also sketches the normative elements of these efforts and their potential limitations as constitutionalist frameworks. The paper ends with an analysis of the utility and effectiveness of these related normative frameworks as a basis for the elaboration of a transnational enterprise constitutionalism and as a regulatory framework for its implementation.

Value in the Eye of the Beholder: The Valuation of Intangibles for Transfer Pricing Purposes

This article assesses the desirability of our current, arms' length based, transfer pricing regime by analyzing its theoretical and practical effectiveness in application to transfers of intangibles. A detailed analysis of the practice of valuation of intangibles, which is the key component in the application of this regime, exposes its weaknesses that result in undesirable market incentives. These incentives create a strong bias in favor of large multinational enterprises, yet, even if one favored such bias, it is achieved using an uncontrollable, costly and wasteful legal mechanism. The article particularly criticizes the regime's disregard of the unique characteristics of intangibles that make them difficult to valuate; its disregard of the differences between types of intangibles; and its extraordinary narrow and limited approach to valuation. The article demonstrates that the undesirable reliance of our transfer pricing regime on the arms' length principle is the primary reason for the grim picture portrayed, and therefore advocates its replacement with a formula-based regime. The article's contribution in this regard is the argument that it is not only practically more desirable and less costly, but that it is also more coherent and natural to our general international tax regime; therefore, in terms of design, transfer pricing reform should take into account the basic premises of such regime. Some of the criticism and conclusions of this article are about our general transfer pricing regime, while the analysis is limited to the valuation of intangibles' aspects, yet, since this is probably the area that presents the most acute challenge to the current regime, so building upon it may be an important step towards reform.

Why the Home Region Matters: Location and Regional Multinationals

Much of the literature in international business analysing the multinational enterprise uses the country as the relevant environmental parameter. This paper presents both theoretical and empirical evidence to demonstrate that country‐level analysis now needs to be augmented by analysis at the ‘regional’ level of the broad triad markets of Europe, North America and the Asia Pacific. The great majority of the world's 500 largest firms concentrate their activities within their home region of the triad. This study uses variance component analysis and finds that this home region effect outperforms the country effect. Together, the regional and industry effects explain most of the geographic expansion of multinational enterprises (MNEs), whereas country, firm and year effects are very minor. The new data and variance component analysis on the activities of large MNEs reported here suggest that new thinking is required about the importance of large regions of the triad as the relevant unit of analysis for business strategy to supplement the conventional focus on the country.

The Chinese Local Administrative Measures for Building Up the ‘Headquarter Economy’: a comparison between Pudong and Shenzhen

Why do large domestic and multinational enterprises choose one Chinese city over the others in which to set up their company headquarters? What could the Chinese local governments do in order to attract enterprises to establish headquarters in their localities? Following the Chinese commonly used term ‘headquarter economy’ and investigating the issue mostly from the local governments' perspective, this research examines two cases, Pudong and Shenzhen, to see how they have capitalized on their local advantages and attracted different types of large investments. Both the Pudong and Shenzhen governments provide preferential policies and administrative reforms to build a good investment environment and to develop a ‘headquarter economy’. Their preferential policies are similar in design but different in content, so as to attract different target investors. Their administrative reforms are similar in direction but with variations in pace and design for implementation. Our conclusion shows that ‘headquarter economy’ is a concept flexibly used and wisely adopted by Chinese local governments to develop local economies.

Firm-specific advantages, inward FDI origins, and performance of multinational enterprises

Using original data on large Korean multinational enterprises (MNEs), this paper examines the impact that their firm-specific advantages (FSAs) have on performance as and when they receive inward direct investment from foreign countries. Two types of FSAs are examined: innovation capabilities measured by research and development (R&D) intensity and marketing capabilities measured by selling, general, and administrative (SGA) intensity. It is found that both FSAs affect diverse MNE performance in a non-linear U-shaped fashion, and that the home region origin of the inward foreign direct investment (FDI) moderates the curvilinear relationship between the two constructs into an inverted U-shaped one.