Multinational Service Research Articles

Trade and foreign direct investment‐related impacts of Brexit

AbstractWe offer a general‐equilibrium analysis of Brexit incorporating the state‐of‐the‐art differences in productivity and firms' selection within manufacturing sectors à la Melitz (Econometrica, 2003, 71, 1695) and multinationals in services. Our results suggest that trade, output and average productivity diminish across most sectors in the UK and the Rest of the European Union (REU), as well as GDP, welfare, wages and capital remuneration. However, the UK loses more due to the missing preferential access to the huge EU market. Significant welfare losses along the extensive margin occur in the UK due to the lost imported varieties produced by highly productive European firms. These cannot be compensated by the new varieties of less productive domestic firms that enter the British market due to increased protectionism and reduced import competition. In addition, the emergence of barriers against multinationals, which is often ignored in previous studies, explains approximately one third of the negative effect in both the UK and REU. Furthermore, we show that the Brexit impact is about only half if we do not include both foreign direct investment barriers and Melitz structure. Thus, previous studies without these important model features would underestimate the Brexit impact significantly.

Information Technology Operational Risk: A Teaching Case

ABSTRACT IT operational risk refers to any threat that could lead to the inappropriate modification, lack of availability, destruction, or theft of IT assets. This paper presents a real-world teaching case study, based upon an actual consulting engagement of risk assurance professionals working at a multinational professional services provider, to bring practical experience with managing IT operational risk into the classroom. Guidance for implementing this teaching case within an Information Systems course is provided. Students may work in teams, assuming the role of consultants, to provide recommendations involving an organization’s IT operational risks in operations, financial reporting, and compliance. Feedback from participating students revealed that the learning objectives of the case were met. These finding confirm that the Global CyberDerma Solutions case is a useful tool to teach students, who will be entering the workplace, about IT operational risks confronting organizations.

“Outside in”: Global demand heterogeneity and dynamic capabilities of multinational enterprises

We conceptualize the dynamic capabilities of multinational enterprises (MNEs) as learning and adaptation capabilities that address the pressure of global integration and local responsiveness. Complementing the extant literature on dynamic capabilities, which is focused on the supply side, our study draws attention to the demand-side influences, especially in terms of global demand heterogeneity. We propose that global demand heterogeneity provides pressures and opportunities for MNEs to learn and adapt and, thus, positively relates to the development of MNE dynamic capabilities. However, external sources per se may be insufficient. Firm-specific advantages, particularly human capital (at the managerial and employee levels), facilitate the internalization of external knowledge and pressure into the development of dynamic capabilities. An empirical study of Chinese multinational service firms strongly supports these arguments.

The Record of Weak U.S. Merger Enforcement in Big Tech

The term “Big Tech” is often used to describe the five largest multinational online service or computer hardware and software companies: Amazon, Apple, Facebook, Google, and Microsoft. These companies hold five of the top six slots, by market value, for publicly traded firms. The growth of Big Tech over the past three decades is a function of numerous forces. These range from economic phenomena such as network effects and winner-take-all markets, organic growth resulting from innovative business models and technologies, to expansion through a series of acquisitions of smaller, potential, or nascent rivals. While Big Tech has undoubtedly produced benefits, significant concerns have coalesced around it. The growth of Big Tech has created controversy over the companies’ role in our society and raised a suite of competition issues that are attracting attention from Congress and enforcers. These include effects on innovation and market entry; incentives to compete on price and non-price dimensions of competition such as privacy; and the potential for artificial intelligence-driven algorithmic pricing to facilitate coordinated conduct. The debate over the size and alleged dominance of Big Tech companies has promoted wideranging proposals to use the antitrust laws to break them up. But few of these proposals are driven by a methodological, fact-based analysis. Such analysis would explore the strategic competitive abilities and incentives that are specific to different Big Tech business models, how the companies compete in a variety of individual markets and clusters of related markets, and how alleged conduct potentially runs afoul of the U.S. antitrust laws. Breakup proposals therefore “put the cart before the horse” and fail to provide needed support for more vigorous antitrust enforcement and beneficial reform proposals. This American Antitrust Institute (AAI) White Paper offers a fact-based analysis of one important component of a broader assessment of the competitive issues surrounding Big Tech. It focuses on Big Tech’s acquisition of over 720 smaller, potential, and nascent rivals over almost the last three decades. As is typical of M&A activity, only a portion of these transactions were reportable to the U.S. antitrust agencies under the Hart Scott Rodino Act (HSR) federal premerger reporting requirements.8 A closer look at enforcement data for one major Big Tech industry category reveals that while the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) appear to have subjected a higher than average number of transactions to more extensive agency investigation, only one deal has been challenged in federal court. It does not come as a surprise therefore that the record of U.S. merger enforcement in an important Big Tech industry category is far lower than the record across all sectors, as defined by the rate of merger challenges in federal court. This statistic warrants further inquiry. This White Paper does not investigate whether serial acquisitions by Big Tech companies have created dominance in certain markets, or if they engage in conduct that violates the antitrust laws. Those questions should be the subject of appropriately framed merger retrospectives and antitrust agency inquiries, including the DOJ’s reported investigation into Google. Rather, the analysis herein explores the various reasons why enforcement might be weaker in Big Tech and the policy implications raised by those explanations. The AAI has provided independent, in-depth legal, economic, and policy analysis of antitrust and competition issues for over 20 years. The organization has been outspoken on the issue of competition in the tech sector through its research, education, and advocacy agenda and initiatives. This White Paper begins with an empirical review of the acquisition history of Big Tech and the U.S. antitrust agencies’ limited record of merger enforcement in a major industry area in which many Big Tech firms operate. It then unpacks the limited merger enforcement record and examines why it can and should be invigorated.

The intrapreneurship reactor: how to enable a start-up culture in corporations

Start-ups successfully deliver creative results, and their success highlights the need for corporate engagement with innovation (Weiblen and Chesbrough in California Management Review 57(2): 66–90, 2015). To assess insights on corporate high-involvement innovation activities, we developed and applied an intrapreneurship model within a multinational financial services corporation in Germany. Successful implementation requires that individuals have the autonomy to act as corporate entrepreneurs (i.e., intrapreneurs). To this end, we introduced a model for implementing and analysing intrapreneurship so corporations could develop a start-up culture. The corporation studied hosted an innovation competition called the Appathon, where competing teams developed app prototypes, and the winning team received funding for continued development. Afterwards, we completed qualitative and quantitative research by interviewing and surveying the competition participants to examine practical intrapreneurship and corporate and individual innovation. Our findings highlight the challenges surrounding the development of high-involvement innovation management routines (Bessant in High involvement innovation, 2003).

Antecedents and Consequences of Multinational Service Ventures’ Social Responsibility Engagement with Local Allies: A Focus on Propositional Development

Antecedents and Consequences of Multinational Service Ventures’ Social Responsibility Engagement with Local Allies: A Focus on Propositional Development

Brexit: Everyone Loses, but Britain Loses the Most

This paper examines 12 economic simulation models that estimate the impact of Brexit. We provide their range of results and explain their associated assumptions and methodologies (macroeconometric models, computable general equilibrium [CGE] models, or mixed approaches). CGE models simulate the operation of market economies, solving for changes in equilibrium prices and quantities (production, employment, demand, and international trade) for all sectors in the economy. Macroeconometric models focus on economic aggregates and macro shocks, such as interest rates, the exchange rate, inflation, risk, uncertainty, and government expenditure/revenue. Most of the studies find adverse effects for the UK and the EU-27. The UK's GDP losses from a hard Brexit (reversion to World Trade Organization rules due to a lack of UK-EU agreement) range from –1.2 to –4.5 percent in most of the models analyzed. A soft Brexit (e.g., Norway arrangement, which seems in line with the nonbinding text of the political declaration of November 14, 2018 on the future EU-UK relationship) has about half the negative impact of a hard Brexit. Only two of the models derive gains for the UK after Brexit because they are based on unrealistic assumptions. We analyze more deeply a CGE model that includes productivity and firms' selection effects within manufacturing sectors a la Melitz (2003) and the operations of foreign multinationals in services. Based on this latest model, we provide a complete overview and explanation of the likely economic impact of Brexit on a wide range of macroeconomic variables, namely GDP, wages, private consumption, capital remuneration, aggregate exports, aggregate imports, and the consumer price index.

Does knowledge base complexity affect spatial patterns of innovation? An empirical analysis in the upstream petroleum industry

Using network analysis, we investigate if an industry's complex and integrated knowledge base leads to a higher spatial concentration (or dispersal) of innovative activities. This is important because the extant literature provides competing claims about how knowledge base complexity impacts on the spatial distribution of industrial innovation. To help empirically resolve this issue, we draw on longitudinal data (1970–2010) on the upstream petroleum industry and build indexes of entropy and complexity to render knowledge base dynamics, assess the spatial concentration of innovation, and study industry structural transformations. We first find a correlation – once a crucial distinction between variety and systemic complexity is drawn - between increasing knowledge base complexity and higher concentrations of innovation at national level. In addition, we find that this increase was accompanied by a rising share of non-country of origin inventions owned by multinational companies, and that globally integrated service multinationals were best placed to manage this complexity and the integration of complementary knowledge fields. These findings, therefore, nuance the competing claims about the relationship between knowledge base complexity and spatial patterns of innovation. Furthermore, they reveal that although leading innovators may operate globally, their core innovative activities still remain located in a few key countries.

The emerging Cloud Dilemma: Balancing innovation with cross-border privacy and outsourcing regulations

The pervasive adoption of outsourcing and Cloud technologies proceeds apace, but the challenges and risks inherent in Cloud arrangements are causing concern amongst regulators globally. How well prepared are financial services multinationals for regulatory compliance? Cloud based Fintech companies are disrupting traditional banking models, signaling that highly regulated firms must adopt Cloud technologies. The paper focuses on understanding specific risks in relation to Cloud adoption, and the regulations and penalties for non-compliance being put in place. From the findings, we theorize a framework for deciding when to engage strategically with, or avoid Cloud technologies. This helps executives balance the need to innovate with the need to manage compliance risk. We then detail emerging effective practices for managing Cloud based innovation on a sustainable basis. While we focus on global financial services, the analysis applies to all regulated industries, wherever Cloud based innovations impact materially on business-critical services.

Wpływ dużych firm sektora nowoczesnych usług biznesowych na innowacyjność mikro, małych i średnich przedsiębiorstw – analiza na przykładzie województwa zachodniopomorskiego

Dyskusja dotycząca roli międzynarodowych korporacji, w tym centrów usług, w regionalnych gospodarkach, choć żywa, wciąż oparta jest na szczątkowych argumentach, pomijających wiele efektów, które są związane z występowaniem centrów usług w regionalnych gospodarkach. Celem artykułu jest dodanie argumentów do tej dyskusji poprzez pokazanie efektów zewnętrznych generowanych przez centra usług, które przenikają do regionalnych gospodarek i wpływają na zachowania biznesowe małych i średnich firm. W szczególności wskazany jest wpływ centów usług na innowacyjność MMSP. Przeprowadzona analiza pozwala wnioskować, że rozwój nowoczesnych usług biznesowych ma pozytywny wpływ na akumulację wiedzy w regionie i pozwala lokalnie funkcjonującym podmiotom na czerpanie z niej. Wskazuje się, że małe firmy korzystające z wiedzy pozyskanej w ramach transferu (np. poprzez transfer ludzi) z firm sektora nowoczesnych usług biznesowych osiągają statystycznie lepsze wyniki w zakresie innowacyjności niż te, które z takiej wiedzy nie korzystają. Dotyczy to zarówno wiedzy związanej z kapitałem ludzkim, jak i z kapitałem materialnym, a znaczenie mają bezpośrednie i pośrednie kanały transferu. Analiza przeprowadzona została w oparciu o dane ilościowe pozyskane na podstawie badań wykonanych na próbie reprezentatywnej małych i średnich firm województwa zachodniopomorskiego.

HiSPEED: a system for mining performance appraisal data and text

Performance appraisal (PA) is a crucial HR process that enables an organization to periodically measure and evaluate every employee’s performance and also to drive performance improvements. In this paper, we describe a novel system called HiSPEED to analyze PA data using automated statistical, data mining and text mining techniques, to generate novel and actionable insights/patterns and to help in improving the quality and effectiveness of the PA process. The goal is to produce insights that can be used to answer (in part) the crucial “business questions” that HR executives and business leadership face in talent management. The business questions pertain to (1) improving the quality of the goal setting process, (2) improving the quality of the self-appraisal comments and supervisor feedback comments, (3) discovering high-quality supervisor suggestions for performance improvements, (4) discovering evidence provided by employees to support their self-assessments, (5) measuring the quality of supervisor assessments, (6) understanding the root causes of poor and exceptional performances, (7) detecting instances of personal and systemic biases and so forth. The paper discusses specially designed algorithms to answer these business questions and illustrates them by reporting the insights produced on a real-life PA dataset from a large multinational IT services organization.

Global mobility of professionals and the transfer of tacit knowledge in multinational service firms

PurposeThe use of expatriates to transfer individual and organizational know-how and knowledge is a practice widely used by multinational enterprises (MNEs). However, for service firms, the mobility of employees across national borders depends on the commitments made by countries under the General Agreement on Trade in Services (GATS). In particular, the Mode 4 form of supply under GATS can limit the ability of professionals to enter a particular country and can restrict the intra-organizational transfer of knowledge in multinational service firms. The purpose of this paper is to investigate how MNEs attempt to overcome these barriers and transfer knowledge through their global network.Design/methodology/approachUsing Nonaka and Takeuchi’s SECI model of knowledge transfer, the authors study the intra-organizational knowledge transfer practices of an Indian multinational service firm. Semi-structured interviews were conducted with 20 key informants involved with the organization.FindingsThe company uses global teams to transfer tacit knowledge and facilitates inpatriation through an internship program that helps the firm overcome nationality requirement that restricts the movement of their managers to other countries, which in turn limits their ability to transfer knowledge in the intra-organizational setting. The company uses the services of a not-for-profit youth organization that helps recruit interns for the program and also facilitates the relationship with the Indian Government, which provides support for this initiative by reducing barriers to entry for the interns.Originality/valueThis study takes the unique approach of studying barriers to movement of professionals and a firm’s strategic response. It identifies the pressures and barriers that companies face in the global economy and highlights the role of government agencies and other stakeholders in facilitating or restricting the transfer of knowledge within a firm’s international network. The paper articulates the implications for policy and practice, and a future research agenda.

Trade and FDI-Related Impacts of Brexit

We offer a general equilibrium analysis of Brexit incorporating the state-of-the-art differences in productivity and firms’ selection within manufacturing sectors a la Melitz (2003) and multinationals in services. Trade, output and average productivity diminish across most sectors in the UK and the Rest of the European Union (REU), as well as GDP, welfare, wages and capital remuneration. However, the UK loses more due to the missing preferential access to the huge EU market. Emergence of barriers against multinationals explains approximately one third of the negative effect in both the UK and REU. Other regions remain nearly unaffected.

The influence of multinational enterprises on subsidiaries: context matters

PurposeThe purpose of this paper is to examine how differences in the institutional environments of a multinational enterprise (MNE) shape the role of management control systems (MCSs) and social capital in the headquarter (HQ)-subsidiary relationship of an emerging economy MNE.Design/methodology/approachA case study design was adopted in this research in order to understand how the differences in the institutional environments of an MNE shape the design and use of MCSs. Data were gathered by means of semi-structured interviews, document analysis and observations. Interviews were conducted at the Nigerian HQ and UK subsidiary of the Nigerian Service Multinational Enterprise (NSMNE).FindingsThe study found that the subsidiary operated autonomously, given its residence in a stronger institutional environment than the HQ. Instead of the HQ depending on MCSs means of coordination and control, it relied on social capital that existed between the HQ and subsidiary to coordinate and integrate the operation of the foreign subsidiary studied.Research limitations/implicationsThe evidence from this research indicates that social capital could be effective in the integration and coordination of multinational operations. However, where social capital becomes the main mechanism of coordination and integration of HQ-subsidiary operations, the focus may have to be, as in this case, on organisational social capital and the need to achieve group goals, rather than specifically designated target goals for the subsidiary. The implication of this is that it may limit the potential of the subsidiary to explore its environment and search for opportunities. These are important insights into the relationship between developed country-based subsidiaries and their less developed countries-based HQs.Practical implicationsA practical implication of this research is in the use of local or expatriate staff to manage the operation of the subsidiary. While previous studies on the MNE, from the conventional perspective of multinational operation, suggest that expatriates may be sent to the subsidiary to head key positions so as to enable the HQ to have control of the subsidiary operation, it is different in this case. The NSMNE has adopted a policy of using locals who have the expertise and understanding of the UK institutional environment to manage the subsidiary’s operation.Social implicationsThis research sheds some light on how development issues associated with a multinational institutional environment may shape the business activities and the relationship between the HQ and subsidiary. It gives some understanding of how policies and practices may have different impacts on employees as businesses attempt to adjust to pressures from their external environment(s).Originality/valueThe reliance on social capital as a means of coordination and control of the foreign subsidiary in this study is significant, given that previous studies have indicated that multinational HQs normally transfer controls and structure to foreign subsidiaries as a means of control. Also, while previous studies have suggested that MNEs HQ have better expertise that enables them to design and transfer MCSs to foreign subsidiaries, this study found that such expertise relates to the institutional environment from which the HQ is operating from. Through the lens of institutional sociology theory, these findings directly contribute to the literature on the transference of practices and control systems in international business discourse.

Collaborative workplaces for innovation in service companies: barriers and enablers for supporting new ways of working

The paper aims to provide a systematic overview of the barriers and enablers that contribute to the success or failure of collaborative workplaces initiatives aimed at fostering innovation in service companies. The study is based on semi-structured interviews with innovation managers, human resource managers and facility department executives from a sample of multi-national service companies. Its primary focus is on the workplace initiatives carried out in their Spanish subsidiaries. The paper contributes to the extant research by identifying a conceptual model for collaborative workplaces and by providing a systematic overview of the related barriers and enablers. From the interviews, these factors were organized within a framework usable by practitioners for analysis. This paper is of interest to companies that aim to design collaborative workplace strategies to justify associated investments. It can also provide their managers with guidelines to lead the company in the transition toward new ways of working based on higher employee collaboration and flexibility.

Examining the Effectiveness of Corporate E-Learning in Global Talent Management

<p>The purpose of this study is to examine the effectiveness of corporate e-learning in the context of talent management on a global scale. It begins with a discussion of the importance of talent management, the challenges in global talent management, and the role of corporate e-learning in global talent management. Data collected via an online survey from 74 students (global leaders from a multinational IT provider with more than 90,000 employees across 50 countries) enrolled in a customized corporate e-learning program is presented and discussed. The findings suggest that corporate e-learning can be used to develop talent attributes and skills such as problem solving, analytical, communication, research, and time management skills. Specifically, analytical, communication, and time management skills are important predictors of overall corporate e-learning experience, while analytical and research skills are important predictors of job performance. As part of global talent management, companies can enroll their A-players, high performers or high potentials into relevant corporate e-learning programs that can be used to effectively address the training challenges of a scattered workforce and improve coordination among internal and outside collaborators and partners in complex business processes and projects. The sample for this study was limited to a multinational IT services provider. Future research should extend the scope of data collection to include talents from a variety of organizations, as well as a variety of geographies and industries to further investigate the generalizability of these findings.</p>

FDI Motivations and Productivity Premium of Multinational Services Firms

In the context of the services-based global economy and FDI shift to service sectors,it is of more importance to analyze FDI motivations and productivity premium of multinational services firms.However,the service sectors and multinationals themselves are neglected in previous studies of FDI motivations.Based on these defects,this paper focuses on multinational services firms themselves,and employs a large sample of services firms of 135 countries including China from the World Bank from 1999 to 2012 to analyze the FDI motivations and productivity premium of multinational services firms and then compare them with manufacturing enterprises.The results are as follows:firstly,the FDI motivation of multinational services firms is mainly based on market-seeking,but the efficiency-seeking motivation is more significant in the higher income host countries;secondly,most of multinational services firms have significant productivity premium of efficiency-seeking FDI at the whole,nation and industry levels,namely compared with market-seeking FDI,multinational services firms seeking efficiency have higher productivity;thirdly,the FDI motivation of multinational manufacturing firms is mainly based on efficiency-seeking,but multinational services firms have higher strength of efficiency-seeking FDI motivation and productivity premium.The conclusions above-mentioned imply rich policy implications for China's FDI inflows and outflows in service sectors from the perspectives of institution design and advantages exertion.

Does offshore outsourcing impact home employment? Evidence from service multinationals

This paper investigates the impact of offshore outsourcing across 5746 European service multinational enterprises (MNEs) on employment at home. We estimate labour demand equations and specifically isolate the global financial crisis (GFC) by undertaking analysis through our longitudinal 19-year panel data, separately for the pre- (1997–2007) and crisis period (2008–2016). We distinguish between offshoring to high and low income countries, as well as between service industry groups. We show that there is some evidence that offshoring by location intensive service firms is associated with employment growth at home during the crisis period, while offshoring in information intensive industries in high income countries is associated with a reduction in employment at home, as firms offshore to be nearer to the client. Overall, our findings suggest that the crisis period has lessened the impact of offshoring service FDI on employment at home.

A general equilibrium analysis of FDI growth in Chinese services sectors

This paper analyzes one of the features of the Chinese economic transition, namely, the impact of foreign direct investment (FDI) accruing to advanced services sectors. To that aim we use an innovative computable general equilibrium (CGE) model that includes, in a multi-regional setting, foreign multinationals operating in monopolistic competition. The model is based on data that split the world economy in 2016 into 11 regions (China - US - EU27 - Great Britain -other advanced economies - India - Japan - South East Asia - Latin America - Middle East - Sub Saharan Africa) and 21 sectors. We provide quantitative evidence on several characteristics of the 21 sectors in China, EU27 and the US, as well as other data on the role of China in the global stage, including its evolution since 2004. Several scenarios focusing on the increase of FDI inflows in services, because of the reduction of its FDI barriers, are simulated deriving short and long run results. We find that the impact of more foreign multinationals in services is positive for China but smaller than the one that had been obtained in other previous studies on FDI in manufactures. This is due to the still limited role of services in the Chinese economy and to a crowding out effect that domestic firms experience after the entry of foreign multinationals. On the whole the impact is, however, slightly positive for China, because manufactures benefit from the entry of foreign services multinationals. The rest of regions are unaffected or benefit very slightly, due to the fact that services production is less export oriented and more devoted to private consumption than in the case of manufactures. However, their manufacturing sectors are slightly harmed by the stronger Chinese competition. Many of them manage to more than offset this latter trend through higher exports or FDI in services directed to China.

Rise of Born Globals and Their Association with High Technology Intensity or Services Sector— Myths or Reality?

Literature suggests that the proportion of born globals—firms entering foreign countries soon after birth—has increased significantly over time and that such firms are associated with high-technology-intensity or services sector. However, there is little empirical support for these claims. To address this gap, this article presents an empirical analysis of age at the first global entry of US manufacturing and service multinationals that entered foreign countries in the last century. Only manufacturing showed a significant rise in the number of born globals. Being born global was not correlated with either having a high-technology-intensity or being a service firm.