Ownership Advantages Research Articles

State capitalism, economic systems and the performance of state owned firms

In this paper, we pursue two related research questions. First, we enquire whether state owned enterprises (SOEs) perform better than privately owned firms in a large variety of emerging markets. To test this, we develop a unique dataset using firm-level data from the World Bank Enterprise Survey (WBES), resulting in a sample of over 50,000 firms from 57 understudied countries including emerging capitalist, former socialist and state capitalist ones. Our results suggest that SOEs do display productivity advantages over private firms in these understudied economies. Our second research question asks whether the performance of state owned firms in these understudied countries is context specific, namely whether performance depends on the institutional system into which a country is classified. We refer to these systems as configurations. In particular, we are interested in whether state owned firms perform better in “state capitalist” countries including China and Vietnam. We find empirical support for the argument that the “state-led” configuration provides better institutional support for the ownership advantages of SOEs than others.

Kafrit Industries acquires Polyfil

This paper investigates whether and how Industry 4.0 innovation intensity, which is developed through patenting and which provides a firm-specific ownership advantage, relates to “relocation of second degree” (RSD) of manufacturing activities, i.e. the movement of previously offshored activities to either the home country (RHC) or a third country (RTC), thus representing a reconfiguration of the firm’s extant international exposure. Moreover, we analyse the role of Industry 4.0 policies adopted in the home country, which offers a location advantage that can possibly moderate this relationship. Our findings, based on a sample of 118 RSDs implemented by European companies, reveal that both Industry 4.0 innovation intensity (at the firm level) and policies (at home-country level) have an impact, with the former pushing firms towards RTC, unless the latter are in place at the home country, thus showing the pivotal role of Industry 4.0 policies in re-attracting Industry 4.0 innovative companies in their country of origin.

Determinants of financing of outward foreign direct investment by Indian MNEs

PurposeThe purpose of this paper is to investigate the determinants of financing the outward foreign direct investment (OFDI) by building a three-level framework residing on host country market imperfections, ownership advantages of parent firm investing abroad and the industry to which it belongs.Design/methodology/approachThe paper used random effects probit model.FindingsParent debt financing of OFDI by Indian parent firms is driven by the credit market development of the host country, the uniqueness of the industry to which parent firm belongs and systematic risk. Debt-oriented firms are found to invest more via parent debt.Research limitations/implicationsThe limitations of this study are as follows: –first, time period before 2008 could not be considered due to unavailability of data in the public domain. Second, the characteristics of foreign affiliates that spread across diverse host countries have not been factored in. Third, in the case of parent’s industry-level determinants, financial sector has not been included because the financing and risk-taking strategy of this sector are quite different from other sectors. Finally, the present study assumes financing decision to be centralized in the multinational system at the parent firm.Practical implicationsThe practical implications of this study are as follows: first, industry innovativeness must be taken as a guide by the Indian MNEs to finance their OFDI and they must provide equity. Second, the study suggests that Indian MNEs rely on their existing capital structure while financing their OFDI. Third, parent firms are found to follow the industry norms. Fourth, parent firms must finance their OFDI by considering the development of credit market in the host country. Fifth, host government must focus on improving the credit market development of their economy and not just reducing tax rates to attract FDI into their economy.Originality/valueEmpirically examining internal flows in a multinational system has limited the research in the area of financing the OFDI. The paper is one of the first attempts to formally develop a model of factors that shape financing of OFDI in case of one such emerging market – India.

Ownership strategies in knowledge-intensive cross-border acquisitions: Comparing Chinese and Indian MNEs

Drawing on the comparative ownership framework, we perform a comparative analysis of Chinese and Indian multinational enterprises (MNEs)’ ownership strategies in knowledge-intensive cross-border acquisitions (CBAs). Specifically, we claim that due to their lower comparative ownership advantage, and the consequent higher information asymmetry, Chinese MNEs are more cautious (than Indian MNEs) in their ownership strategy. We rely on a dataset of acquisitions undertaken by high and medium-high tech Chinese and Indian MNEs worldwide during the period 2000–2014. Results confirm that Chinese MNEs prefer lower equity control than their Indian counterparts. However, such a preference for lower equity decreases with higher home-host institutional distance and host country-specific previous experience. These factors do not seem to modify the ownership preference of Indian MNEs in the same way.

A corporate entrepreneurship perspective of pre‐entry strategies for internationalization: A case study of a Chinese business conglomerate

The international expansion of Chinese firms is a remarkable phenomenon of contemporary international business. However, international expansion is particularly challenging for firms expanding from emerging market economies such as China because they have relatively few ownership advantages and suffer disadvantages. We apply a corporate entrepreneurship perspective to explore this under‐researched topic via a longitudinal case study of a large Chinese business conglomerate. Thirty‐one semistructured interviews and seven focus‐group discussions were conducted with 55 informants; company documents were also analyzed. We found sophisticated pre‐entry entrepreneurial initiatives are critical for successful internationalization, as they enable emerging market firms to overcome some constraints, leverage their assets, and build competences for international venturing.

Bodo Moeller extends its distribution coverage to Kenya

This paper investigates whether and how Industry 4.0 innovation intensity, which is developed through patenting and which provides a firm-specific ownership advantage, relates to “relocation of second degree” (RSD) of manufacturing activities, i.e. the movement of previously offshored activities to either the home country (RHC) or a third country (RTC), thus representing a reconfiguration of the firm’s extant international exposure. Moreover, we analyse the role of Industry 4.0 policies adopted in the home country, which offers a location advantage that can possibly moderate this relationship. Our findings, based on a sample of 118 RSDs implemented by European companies, reveal that both Industry 4.0 innovation intensity (at the firm level) and policies (at home-country level) have an impact, with the former pushing firms towards RTC, unless the latter are in place at the home country, thus showing the pivotal role of Industry 4.0 policies in re-attracting Industry 4.0 innovative companies in their country of origin.

Towards an understanding of the nature of dynamic capabilities in high-velocity markets of China

Dynamic capabilities are arguably of more value in the internationalization process, particularly of multinational companies (MNCs) that operate in highly dynamic international markets. Yet there is a scarcity of research on the nature of dynamic capabilities in such highly relevant contexts. This exploratory study presents observations of dynamic capabilities of MNCs operating in ten tightly-defined high-velocity industries of China that shed light on the nature of the concept. The findings suggest that (1) dynamic capabilities of MNCs in high-velocity markets are analytic, strategically planned high-frequency processes and routines, (2) they are highly complicated, and (3) they rely extensively on combined knowledge derived from global and local knowledge. They are likely influenced by diverse sources of environmental velocity and the degree of the MNC's ownership advantages. The complexity and sophistication observed have led us to propose a way to conceptualize dynamic capabilities of MNCs in high-velocity markets.

Opportunities and challenges of foreign direct investment utilisation and its impact on construction sector in developing countries

PurposeForeign direct investment (FDI) inflows to both developed and developing countries have increased over the past three decades. However, investigation of opportunities and challenges associated with FDI on the host economy and its impact, especially on the construction sector through empirical assessment, have received scant attention. The purpose of this study is to address this gap in knowledge within the Nigerian context and examine the trend of FDI inflows to the construction sector for the period 2000-2013 inclusive. Relationships between contributions of the construction sector to Nigeria’s gross domestic product (GDP) are also studied.Design/methodology/approachThe study adopted a literature review, a questionnaire survey and archival data culminated in data analysis. The survey targeted financial experts in Nigerian financial institutions/local banks. Archival data included the annualised data extracted from the Central Bank of Nigeria statistical bulletins. The period examined witnessed stable economic conditions. Data collected were analysed using mean score, factor analysis and correlation.FindingsEight identified opportunities of using FDI were grouped into three principal factors: knowledge spillovers, capital for new investment and resilience during financial crises. The ten identified FDI challenges were grouped into three major factors: loss of ownership advantage and additional costs, crowding-out of-national firms and administrative bottleneck and overdependence. Based on the hypotheses tested, the study found a significant relationship between the contributions of FDI inflows in the construction sector and the total GDP of the host country.Practical implicationsThis study provides greater insight on the effects of FDI on a host economy in developing countries, which would help policymakers to examine existing policies and look for new ways of increasing foreign investment flow, especially in the area of Construction Facility Investment.Originality/valueThis study is important because it would enable policymakers in developing countries at large to promote FDI with special considerations for the construction sector of the economy.

Motives of Inward FDI and Subsequent Outward FDI: Subnational Evidence from China

Literature on inward-outward FDI relationship is inconclusive, even though the topic is under studied. This research attempts to understand the relationship by considering the heterogeneity of IFDI, namely the motives of IFDI. Different motives of inward investment vary in knowledge content and their interaction with local firms, which affects the efficiency of FDI knowledge spillover. We theorize the nature of inward-outward FDI relationship by emphasizing on the role of FDI knowledge spillover and the Ownership advantage accumulation of local firms. To test the hypotheses, we collect Chinese provincial IFDI data with industry and entry mode specifications from 2000-2010, combing with the firm level evidence from Annual Report of Industrial Enterprise Statistics (ARIES) and OFDI project list. The results should assist government and corporate leaders to understand what kinds of inward FDI are beneficial for local business development, and how various types of inward FDI affect the local firms’ “go global” strategies differently.

Emerging market multinationals and the concept of ownership advantages

PurposeThe purpose of this paper is to re-assess the concept of ownership advantages in the light of successful international expansion of multinationals from emerging economies (EMNEs) and explore how these advantages are built.Design/methodology/approachThe paper presents a viewpoint based on analysis of the successful international expansion of a sample of Chinese EMNEs where success is measured their ability win share in overseas markets. This allows us to identify their ownership advantages, the antecedents of these advantages and how they were built using dynamic capabilities.FindingsEMNEs have “non-traditional” ownership advantages that have been built by finding innovative ways to leverage the locational advantages of their home countries. The conversion of locational advantages into ownership advantages requires that firms build dynamic capabilities that enable them to innovate in the use of the locational advantages they enjoy.Research limitations/implicationsThe study is limited to a small sample of EMNEs from China who have succeeded in winning market share in the initial phases of their international expansion. In the light of these limitations, the authors discuss the question the sustainability of their competitive advantage as well as the likely applicability of our findings to EMNEs from other EMNEs.Originality/valueThe authors revisit the paradox that despite the growth and success of multinationals from EMNEs in the past decade they are assumed to lack ownership advantages. The authors show that EMNEs’ ownership advantages differ from the traditional advantages such proprietary technologies and brand equity that are enjoyed by incumbent multinationals.

OLI PARADIGM AND INVESTMENT POSITION OF GEORGIA

The article focuses on the role of FDI in Georgia’s and the upgrading of the country’s location advantages, on the one hand, and with the development of domestic firms’ownership advantages on the other hand. economic development. Based on Investment Development Path, research shows that Georgia is on the second level of its development (see chart 1), which means that inflow investments are prevailing on outflow investments and the country is still progressing based on non­modern technologies based economy. It can largely explain the role of the Government of Georgia in the evolution of the competitiveness of Georgian enterprises and of Georgia as a production location. It also predicts the direction of Georgian outward FDI to neighbor countries and highlights the relevance of the two­way relationship between inward FDI Attracting FDI to Georgia is an issue of major importance nowadays. Georgia has a lot of advantages to promote its economy; however, the small efforts done for the promotion of local savings to transform it to the investments is hinder the economic development of the country. Foreign Direct Investment works as a locomotive to enlarge the transfer of technology, skills and access to export markets. It can decrease unemployment and increase employment; contribute to a higher GDP through higher levels of productivity.

Innovation in risky markets: ownership and location advantages in the UK regions

This article analyses the relationship between firm’s perception of market risk and engagement in innovation. We conceptualise this relationship by integrating insights from the management literature on innovation barriers with those derived from the international business and economic geography perspectives on the interplay of ownership and location advantages. By exploiting a firm-level panel dataset based on the UK Innovation Survey for the period 2002–2008, we test the relationship between perception of market risk and innovation behaviour in relation to firm ownership—i.e. multinational enterprises (MNEs) versus single domestic enterprises—and location—across regional contexts characterised by different degrees of technological dynamism. Our main results show that ownership advantages operate as a moderator by fundamentally affecting the direction of the relationship: while MNEs react positively to risk perception, single domestic firms reduce their innovation engagement as a strategy to cope with market uncertainty. Yet, ownership advantages play a pivotal role only in relatively inert or stable contexts, as in technologically dynamic regions differences between domestic firms and MNEs disappear.

Do MNEs from developed and emerging economies differ in their location choice of FDI? A 36-year review

This study examines the extent to which MNEs from developed (DMNEs) and emerging (EMNEs) economies differ in Location behaviour. Studies on MNE location choices have failed to capture the changing FDI landscape and leave the inconsistent findings unexplained. We address this gap by systematically reviewing the extant literature on location choices of DMNEs and EMNEs over the past 36 years – from the introduction of the OLI model to 2016. Key themes emerging from the review reflect a comprehensive picture, capturing the impact of multiple factors affecting location choices of DMNEs and EMNEs. Future research is challenged by: a. adopting an integrated approach examining three levels – individual (managerial), firm (ownership structure, type of FDI, internationalisation stages, and the different nature of ownership advantage), and context of location decisions (home, host, sub-national, regional, supranational, and networking); b. refining or developing theories to capture the dynamic picture of MNE internationalisation.

Effects of financial constraints on export performance of firms during the global financial crisis: microeconomic evidence from Korea

ABSTRACTThis study uses a manufacturing firm-level panel data set of South Korea for 2006–2013 to investigate the effect of financial constraints on the export performance of firms, with particular emphasis on the corporate ownership structure. The empirical results show that foreign multinational corporation (MNC) subsidiaries are not affected by financial constraint during both crisis and noncrisis periods, implying advantages of foreign ownership. However, domestic firms suffer more from financial constraints on exports during crisis years. In particular, domestic firms without parent firms are financially constrained during both crisis and noncrisis periods. However, those with parent firms do not experience financial constraints during noncrisis periods, although they too suffer from them during crisis periods. Thus, parent–subsidiary linkage among domestic firms plays an important role in alleviating financial constraints on export activity in noncrisis years but not as much during crisis years. Therefore, domestic parent firms exhibit less resilience to the global financial crisis, in comparison to foreign MNC parent firms.

Recombination for innovation: performance outcomes from international partnerships in China

This paper examines the relationship between different types of international partnerships and innovation performance. By drawing on a conceptual framework which outlines how new bundles of transferrable and nontransferrable ownership advantages are created from such partnerships (Collinson and Narula, ), we analyze empirical evidence from a large‐scale survey of 320 individual company responses from the China‐based operations of foreign multinational firms alongside in‐depth case studies. Our study reveals that different types of collaborative partnerships (cooperative vs. competitive) are associated with different innovation performance outcomes (product vs. process innovation). In addition, we find that a sustainable, reciprocal relationship between collaborative partners can generate superior innovation performance. Contextual factors including the role of government and industry characteristics have an important bearing on innovation performance in collaborative partnerships in China. We conclude with implications for researchers, managers, and policymakers.

Why Chinese Companies Go Abroad? A Theoretical Model to Explain the Drivers of the Internationalization Strategy of Chinese MNEs

China is today considered the second power in the world after the USA and recently many Chinese companies became global leaders in their specific industries. This success is also realized thanks to the expansion strategy adopted by many Chinese multinationals that have realized FDIs both towards other developing countries and towards advanced economies. What are the determinants that push the Chinese companies to go abroad? Are the traditional internalization theories based on the concept of ownership advantage able to explain the internationalization of Chinese MNES? Accordingly aim of this paper is to describe the determinants that induce the Chinese companies to realize FDIs and the characteristics that distinguish their internationalization strategy by the strategy adopted by developed countries multinationals.

A foreign hotel in London – the history of Hilton’s negotiation of legitimacy in the Swinging Sixties

Abstract Whilst theories of business internationalization assert that foreignness poses challenges to multinational companies’ subsidiaries operating abroad, historical study of Hilton International’s expansion in the 1960s suggests otherwise. In its early internationalization Hilton International transferred abroad its institutional ownership advantages including corporate philosophy and culture, its practices, policies, processes and work systems and product design. Despite claims of social embeddedness, the London Hilton was perceived to be a typically American hotel. Analysis of Hilton’s expansion strategy suggests that the company used its foreignness as a differentiating factor. This article contributes towards the limited business history research in the area of internationalization and knowledge transference. Historical analysis of Hilton’s internationalization contradicts the institutionalism’s assumption that multinationals must adapt to local institutional settings. This article enhances the notion that playing the ‘foreignness’ game can lead to a comparative global advantage.

Dynamics of Comparative Ownership Advantage: The Interplay of Home and International Sphere

This study extends the notion of comparative ownership advantage (COA) by proposing a more dynamic model of COA in the context of internationalization. Based on the case of Chinese mining firms, we...

How do linking, leveraging and learning capabilities influence the entry mode choice for multinational firms from emerging markets?

PurposeBased on the linkage-leverage-learning (LLL) framework developed by Mathews (2006), the purpose of this paper is to examine how linking, leveraging and learning capabilities influence the choice of foreign-entry mode, and the way such influences are contingent on context factors in the emerging markets.Design/methodology/approachContrary to a prior literature applying the LLL framework, which mainly used case studies, this paper adopts a quantitative approach and is based on a sample of 321 Chinese listed companies to test the hypotheses.FindingsThe results show that multinational firms from emerging markets (EMFs) with stronger LLL capabilities are more likely to choose the wholly owned mode in foreign entries. In addition, the relationship between linking capability and wholly owned entry mode choice is weaker at higher levels of cultural distance between home and host country. At the same time, the relationship between learning capability and wholly owned entry mode choice is weaker at higher levels of cultural distance between home and host country, and of institutional distance between prior entries and the focal entry.Research limitations/implicationsAn entry mode strategy for firms without ownership advantages and the identification of boundary conditions for applying different LLL capabilities are recommended. The generalizability of the findings from a single-country setting still needs further validation with other emerging economies.Originality/valueThis paper treats internationalization of firms from emerging countries with a different perspective. The underlying idea in this study is that internationalization is not only a process for EMFs to utilize externally accessible assets abroad, but also a process of simultaneously combining internationalization with experiential learning and capability utilization in overseas markets. In addition, the authors also contribute to the literature by providing strong empirical evidence for validating the LLL model and extending the existing entry mode studies.

Issue competition and presidential debates in multiparty systems: evidence from the 2002, 2007, and 2012 Korean presidential elections

ABSTRACTWhich issues do political parties emphasize in campaigns? Selecting the issues to emphasize in campaigns is treated with the same importance as policy positioning. Nevertheless, little attention has been paid to understanding parties’ strategies of issue competition in presidential elections under multiparty systems. By analyzing statements of presidential candidates in the 2002, 2007, and 2012 Korean presidential debates, we find that presidential candidates use their issue emphasis strategies differently in presidential elections according to party size and ideological relationships with other parties. Specifically, a small party’s candidates have been more likely than mainstream parties’ candidates to pursue their issue ownership advantage. In addition, a mainstream party’s candidates have emphasized the issues of a small party more than those of his own party when the two parties have had a similar ideological foundation, whereas, when there were no such ideological similarities, a mainstream party’s candidate has only focused on issues of the mainstream party. Our results imply that the political communication used by political parties and candidates is conditioned not only by political contexts such as electoral systems or party systems but also by the size and ideology of parties.