Multinational Enterprise Headquarters Research Articles

Babel and Gender: The Relationship between Identity, Clusters and Status

This study explores the role of identity attributes that influence an individual’s association with language-based clusters within multinational enterprises (MNEs). Current research on language in international business has shown that language is a core element of one’s social identity and employees in MNEs can form homophily-based clusters with those who share their native language, and such clusters can significantly influence communication and knowledge sharing within MNEs. However, research assumes that clusters are static and does not take into consideration the role of attributes other than language that could influence individual association with these clusters and the resultant dynamics. We conducted a qualitative comparative case study of two MNE headquarters in India and found evidence of language-based meta- clusters in both organizations and discerned that employees’ linguistic identities often intersect with identities related to gender, regional dialects and education. Our data revealed cleavages in language-based meta-cultures based on dialect-based status differences as well as disassociation from clusters by female employees which seems to be driven by gender-based stereotypes and associated in- and out-group biases. Based on these findings, we develop a process model to explain the dynamic processes by which these identity attributes change the composition of language-based clusters over time. These changes have important consequences for communications and group dynamics within organizations, particularly as they relate to power, status and affect. Keywords: Gender; language; language-based clusters; regional dialects; social identity; status; stereotypes.

Reverse FDI and knowledge-and-physical-capital model: empirical evidence from emerging economies

PurposeThe main aim of this paper is to verify whether the modern mainstream economic theory of multinational enterprise that explains foreign direct investment (FDI) from developed countries is also able to account for investment decisions of multinational enterprises (MNEs) from emerging economies.Design/methodology/approachUsing Knowledge-And-Physical-Capital (KAPC) model as an analytical framework and Poisson-pseudo maximum likelihood estimation technique, the authors identify determinants of FDI flows from emerging economies. The data set consists of 38 home and 134 host countries during the period 2000–2012. Empirical evidence supports high explanatory power of KAPC model. Further, compared with the earlier Knowledge-Capital (KC) model, results confirm the importance of physical capital.FindingsThe estimation results confirm the hypothesis that mainstream economic theory can explain FDI flows from the emerging economies by highlighting the roles of total market size, skilled-labor abundance, investment and trade costs and geographical distance between two countries.Research limitations/implicationsThis study casts doubt on the alternative way that the KAPC model suggests to distinguish between horizontal and vertical FDI. The argument that horizontal MNE headquarters would be relatively more abundant than vertical MNE headquarters in countries that are abundant in physical capital relative to skilled labor seems reasonable but the idea of variable specification in the estimated equation should be revised.Practical implicationsFirms should be allowed to move their resources freely into and out of specific activities, both internally and internationally across border. To reach that goal, governments of potential host countries can adopt several measures, most importantly remove restrictions on payments, transfers and capital transactions and open previously closed industries to welcome foreign investment. In addition, to improve investment climate in general, governments need to pay attention to enhancing security of property rights, regulating internal taxation (i.e. corporate income tax), guaranteeing adequacy of infrastructure, efficient functioning of finance and labor markets and fighting against corruption.Social implicationsThe location choice of emerging investors set priority on similarity in economic size, geographical and cultural proximity. It is because shared borders or common official languages would reduce information costs and enhance information flows. Also, investors consider horizontal FDI (with motivation to expand market demand) as one of main modes of entry into a foreign market and a substitute for export. Likewise, distance is often understood as an important investment friction.Originality/valueThe outstanding contribution is that the research has uncovered the positive and statistically significant effect of physical capital on FDI activity, which has not been discussed in the earlier KC model. However, at the same time, the study casts doubt on the KAPC model's argument that relative abundance in physical capital to skilled labor between two countries determines FDI types and suggests that this argument and its empirical model specification should be carefully reviewed.

Performance shortfalls and outward foreign direct investment by MNE subsidiaries: Evidence from China

Foreign subsidiaries of multinational enterprises (MNEs) have been conducting outward foreign direct investment (OFDI) into new overseas destinations. Drawing upon the behavioural theory of the firm, we explain that such OFDI can occur in response to performance shortfalls relative to aspirations. When performance shortfalls in subsidiaries are attributed to the institutional distance between them and the home country of the parent firm, these subsidiaries select institutionally closer destinations for their own OFDI. Our study goes beyond the direct investment of MNE headquarters and advances the internationalisation process model by investigating the underexplored, secondary and springboard-based internationalisation, and by underscoring the value of a subsidiary’s OFDI behaviour.

Exploring reverse knowledge transfer and asset augmentation strategy by developed country MNEs: Case study evidence from the Indian pharmaceutical industry

Using an in-depth qualitative longitudinal case study approach, we examine strategic asset and knowledge augmentation strategies of an advanced economy multinational enterprise (MNE). Our study is unique as it is contextualized in the knowledge-intensive pharmaceutical industry within the changing institutional landscape in India. And, in contrast to previous studies, it focuses on RKT from a newly acquired subsidiary where the protocol for knowledge transfer and relationship between MNE headquarters (HQ) and subsidiary does not exist. We contribute to the evolving literature on reverse knowledge transfer (RKT) which assumes that MNEs extract knowledge from their existing subsidiaries to strengthen their competitive advantages. We also reveal that MNEs design an architecture, that is reflected in the mechanism, governance structure, and timing, for efficient transfer and effective absorption of the knowledge and assets acquired. We introduce a novel concept of ‘reverse asset augmentation’ (RAA) to capture the MNE’s behavior of strategic asset seeking from emerging economies. RAA is parallel to and entwined with RKT conceptualization as knowledge is embedded within certain physical assets, other assets, such as brand name/image, may not embody knowledge. Thematic and processual analysis of interview data, collected in three phases, suggests that RAA complements RKT and that both concepts together capture the unconventional strategies of advanced economy MNEs acquiring emerging economy MNEs in search of strategic assets and knowledge.

Ties that bind: Ethnic inventors in multinational enterprises’ knowledge integration and exploitation

Geographically dispersed reservoirs of knowledge represent significant opportunities for multinational enterprises (MNEs), both in terms of feeding the firm's innovation process, as well as adapting technology to new markets. They face serious challenges in accomplishing these tasks, due to the well-known barriers associated with the transfer of knowledge out of its local context. We argue that ethnic inventors might play a role in alleviating these challenges, by acting as a bridge between their countries of origin (CoO) and the MNE headquarters. Using USPTO data on internationally connected patents granted to US-based MNEs operating in knowledge-intensive industries over the period 1975–2009, our empirical exercise shows that patents involving ethnic inventors from a given CoO are associated with greater integration of knowledge originating from that CoO in the MNE innovation process. Further investigation indicates that this effect is probably limited to knowledge developed within the MNE's network, suggesting that ethnic ties – per se – might not be sufficiently powerful to overcome the joint barriers of national borders and organizational boundaries. Finally, our analysis reveals that ethnic inventors may also be associated with knowledge exploitation in their CoO. This mainly seems to occur in CoOs plagued by market-related institutional voids.

National cultural distance, organizational culture, and adaptation of management innovations in foreign subsidiaries: A fuzzy set analysis of TQM implementation in Saudi Arabia

This paper examines the effects of organizational culture and national cultural distance between the headquarters and the subsidiary on the adaptation of management innovations in multinational enterprises (MNEs). Data on Total Quality Management (TQM) implementations were collected from a sample of 126 MNEs operating in Saudi Arabia and analyzed using fuzzy-set qualitative comparative analysis (fs-QCA). The findings highlight the critical roles that national and organizational cultures jointly play in the adaptation of a management innovation. The results suggest that different configurations of organizational culture and national cultural distance result in different levels of fidelity and extensiveness of the implementation when management innovations are transferred from MNE headquarters to subsidiaries. More specifically, our findings show that a greater level of national cultural distance is not necessarily a barrier to the transfer of a management innovation within an MNE and that the organizational culture can offset the effect of national cultural distance.

Functional vestibular disorders: Findings from neuro-imaging studies

Geographically dispersed reservoirs of knowledge represent significant opportunities for multinational enterprises (MNEs), both in terms of feeding the firm's innovation process, as well as adapting technology to new markets. They face serious challenges in accomplishing these tasks, due to the well-known barriers associated with the transfer of knowledge out of its local context. We argue that ethnic inventors might play a role in alleviating these challenges, by acting as a bridge between their countries of origin (CoO) and the MNE headquarters. Using USPTO data on internationally connected patents granted to US-based MNEs operating in knowledge-intensive industries over the period 1975–2009, our empirical exercise shows that patents involving ethnic inventors from a given CoO are associated with greater integration of knowledge originating from that CoO in the MNE innovation process. Further investigation indicates that this effect is probably limited to knowledge developed within the MNE's network, suggesting that ethnic ties – per se – might not be sufficiently powerful to overcome the joint barriers of national borders and organizational boundaries. Finally, our analysis reveals that ethnic inventors may also be associated with knowledge exploitation in their CoO. This mainly seems to occur in CoOs plagued by market-related institutional voids.

Micro-processes of translation in the transfer of practices from MNE headquarters to foreign subsidiaries: The role of subsidiary translators

Recent research has increasingly emphasized the micro-foundations of knowledge transformation in multi-national enterprises (MNEs). Although the literature has provided ample evidence of the enablers of and barriers to the translation of practices, less is known about the activities and efforts of translators that lead to specific types of translation in the context of the transfer of practices initiated at a MNE’s headquarters (HQ) to foreign subsidiaries. We apply a Scandinavian institutionalist approach to examine the translation of corporate social responsibility reporting, an HQ-initiated practice that is transferred to five foreign subsidiaries of a UK-based MNE. Our paper builds from a preliminary framework based on extant research to develop an extended framework of the micro-processes of translation. By theorizing the sequence of the micro-processes undertaken by translators, identifying the conditions under which they occur, and connecting them to the three types of translation, we provide a deep understanding of the micro-foundations of translation when transferring practices from HQ to subsidiaries. Our paper shows that translation is an evolving phenomenon and illuminates the importance of attending to the social, spatial, and temporal situatedness of translators. It also brings insights into the individual experience of institutional distance and its effects on translation.

Germany: Rowa Lack – pigment preparations in PMMA & PVC

Using an in-depth qualitative longitudinal case study approach, we examine strategic asset and knowledge augmentation strategies of an advanced economy multinational enterprise (MNE). Our study is unique as it is contextualized in the knowledge-intensive pharmaceutical industry within the changing institutional landscape in India. And, in contrast to previous studies, it focuses on RKT from a newly acquired subsidiary where the protocol for knowledge transfer and relationship between MNE headquarters (HQ) and subsidiary does not exist. We contribute to the evolving literature on reverse knowledge transfer (RKT) which assumes that MNEs extract knowledge from their existing subsidiaries to strengthen their competitive advantages. We also reveal that MNEs design an architecture, that is reflected in the mechanism, governance structure, and timing, for efficient transfer and effective absorption of the knowledge and assets acquired. We introduce a novel concept of ‘reverse asset augmentation’ (RAA) to capture the MNE’s behavior of strategic asset seeking from emerging economies. RAA is parallel to and entwined with RKT conceptualization as knowledge is embedded within certain physical assets, other assets, such as brand name/image, may not embody knowledge. Thematic and processual analysis of interview data, collected in three phases, suggests that RAA complements RKT and that both concepts together capture the unconventional strategies of advanced economy MNEs acquiring emerging economy MNEs in search of strategic assets and knowledge.

A multi-level framework for understanding global talent management systems for high talent expatriates within and across subsidiaries of MNEs

PurposeResearchers and practitioners are interested in developing frameworks that can improve the understanding of the emerging field of global talent management (GTM) within and across the subsidiaries of multinational enterprises (MNEs). A few studies have proposed such frameworks but only implicitly include constructs at different levels of analysis. This paper is a step toward bridging the gap. Grounded in multi-level theory, international human resources management (IHRM) frameworks, and the ability-motivation-opportunity model, the purpose of this paper is to develop a multi-level framework that describes the processes through which antecedents at four levels of analysis affect a subsidiary’s GTM system, which in turn directly affects outcomes at three levels of analysis.Design/methodology/approachThis paper develops a multi-level framework that describes the processes through which antecedents at four levels of analysis affect a subsidiary’s GTM system. Along with including four levels of analysis and highlighting cross-level interactions in our proposed multi-level framework, several testable propositions are offered.FindingsThe framework developed in this paper depicts the causal relationship between the subsidiary IHRM strategy (subsidiary level) and subsidiary GTM system (subsidiary level), and the several moderating variables that specify conditions under which the subsidiary IHRM Strategy affects a subsidiary GTM system. The moderator variables include national culture distance (country level), MNE headquarters (HQ) orientation (MNE HQ level), and the required dynamic cross-cultural competencies (expatriate level). In addition, the framework shows the outcomes of a subsidiary’s GTM system across three levels: knowledge transfer (MNE HQ level), localization (subsidiary level), and cross-cultural learning (expatriate level). In the context of multi-level analyses (the authors discuss this next), the framework shows several top-down processes (e.g. P2, P4 and P5) and several bottom-up processes (e.g. P3 and P7).Research limitations/implicationsThe proposed multi-level framework describes important antecedents and outcomes of a subsidiary’s GTM system, and proposes several propositions for future empirical and theoretical research that could be the focus of a systematic research program and agenda on GTM in subsidiaries. In addition, the proposed framework enables us to advance the GTM literature by improving the understanding of and offering insights about the GTM system of a subsidiary, and specifically contribute to research in IHRM and GTM in a number of ways.Practical implicationsExisting scholarly GTM frameworks used by practitioners do not take into account the multi-level complexities that exist when a subsidiary IHRM strategy may not align with the subsidiary GTM system. As such, both practitioners and researchers would benefit by adopting a multi-level framework that accounts for these complexities and how they interact with one another to influence the way subsidiaries manage their expatriate talent.Originality/valueBy using multi-level theory to examine subsidiary GTM systems, the authors advance both the GTM literature and the IHRM literature. Overall, this paper attempts to shift the focus of each subsidiary’s GTM system to a broader, multi-level perspective and contribute to new theory building in GTM research, specifically in subsidiary GTM-MNE research and provide some thoughtful suggestions for HR practitioners wanting to enhance the effectiveness of their MNEs.

Bribery in MNEs: The Dynamics of Corruption Culture Distance and Organizational Distance to Core Values

We examine how corporate bribery is impacted by cultural distance between multinational enterprises (MNEs) home and host countries, and organizational distance to core values between MNE entry modes and MNE headquarters. Tension between external and internal legitimacy helps to explain why cultural and organizational distances will affect MNE bribery. The empirical analysis used data from cross-border transactions by MNEs that were sanctioned by US regulatory officials between 1978 and 2011. We find statistical support for all hypotheses capturing main and moderating effects and suggest that MNEs may be seriously risking their legitimacies from transactions in corruption-prone host countries.

MNE subsidiaries’ adoption of gender equality and women empowerment goal: A conceptual framework

This article explores the possible response types of multinational enterprise (MNE) subsidiaries in adopting the gender equality and women empowerment goal, number 5 of the 17 United Nations Sustainable Development Goals (SDGs). MNE headquarters’ commitment to gender equality does not necessarily get translated to their subsidiaries’ priority because of the strategic value the subsidiaries see and the legitimacy pressure they experience. Drawing on institutional theories and the literature on the transfer of organizational practices in MNEs, we propose a two-dimensional (value added to strategy and legitimacy pressure) framework describing four major types of subsidiary response – resistance, compliance, conformity and commitment. Understanding these response categories would help global agencies and host-country governments adjust their efforts to enhance local legitimacy for SDG adoption. Our simple typology could also facilitate scholarly and practical discussion. We end our discussion with some suggestions for future research.

Capital Structure of Foreign Direct Investments: A Transaction Cost Analysis

Transaction cost theory (TCT) plays a major role in theorizing about the boundaries of the multinational enterprise (MNE), and is increasingly being applied to intra-MNE governance. We apply TCT to capital structure decisions for MNE subsidiaries. According to TCT, equity and debt are not just financial instruments, but alternative governance structures. Equity is useful for projects involving specific assets that do not serve well as collateral, and for knowledge intensive activities where information asymmetry and public good issues make external financing more costly. We study under what conditions MNE headquarters may wish to partially re-introduce market mechanisms inside the MNE through the use of external or internal debt to finance subsidiaries. This can allow economizing on governance costs and strengthen subsidiary manager incentives, but may be inappropriate if subsidiary assets are MNE-specific or subsidiary-specific. Empirically testable propositions are developed.

MNE Headquarters Disaggregation: The Formation Antecedents of Regional Management Centers

AbstractThis research examines region‐bound headquarters disaggregation in multinational enterprises (MNEs). We link the formation of regional management centres – both dedicated regional headquarters (RHQs) and regional management mandates (RMMs) granted to operating subsidiaries – to the complexity argument underlying organizational information processing theory. We demonstrate how different dimensions of complexity associated with the number and dispersion of an MNE's subsidiary network in a focal region affect whether, and in which form, region‐bound headquarters disaggregation takes place. Additionally, we consider boundary conditions affecting RMC formation based on within‐region experience, global MNE footprint, and between‐region effects. Empirically, we utilize a large global dataset of Japanese MNE foreign investments between 1992 and 2014, which allows us to perform event history analyses.

Stakeholder Pressure on MNEs and the Transfer of Socially Irresponsible Practices to Subsidiaries

In this study, we explain how multinational enterprises (MNEs) respond to pressure to conform to their stakeholders' expectations for greater attention to corporate social responsibility (CSR). We invoke institutional theory to propose that mounting stakeholder pressure in an MNE's home country leads to the transfer of socially irresponsible practices from its headquarters to its overseas subsidiaries. This transfer is more pronounced when a subsidiary is apparently unconnected to an MNE, yet is controlled by an MNE's headquarters through the appointment of the subsidiary's board members; the institutional environment of the MNE's home country enforces compliance; and the degree of institutional enforcement, vigilance, and sanctions for noncompliance in the subsidiary's host country is low. Our hypotheses are empirically supported using panel data on 269 subsidiaries in 27 countries belonging to 110 MNEs from 22 countries. Results are robust to alternative measures, explanations, and sample.

Rationality vs ignorance: The role of MNE headquarters in subsidiaries’ innovation processes

It has been recognized that innovation processes in multinational enterprises (MNEs) are largely context-specific, local activities carried out at the subsidiary level (e.g., Andersson, Forsgren, & Holm, 2007; Asakawa, 2001; Birkinshaw & Hood, 1998; Doz & Prahalad, 1981; Ghoshal & Bartlett, 1988; Hedlund, 1986; Rugman & Verbeke, 2001). As a consequence, the ability of corporate headquarters (HQ) to influence these widely dispersed processes has become a major issue in contemporary research on MNEs. What is the role of HQ in these processes? To what extent can it participate in and play an active role in specific innovation processes? What are the performance implications when it gets involved? These questions, which have not yet established answers, warrant further research. In addition, studies aimed at finding the answers have not yet debated the validity of alternative perspectives related to the knowledge asymmetry between the potential participants in innovation processes.