Performance Of Multinational Corporations Research Articles

Integrating the Global with the Local: Performance Measurement in Multinational Corporations

For multinational corporations (MNC) operating as global businesses with global workforces, the challenge of managing diverse operations in diverse markets has never been greater. These MNCs are concerned with the constraints in integrating dispersed units without stifling local subsidiary initiatives while simultaneously facilitating cross-border transfers of resources and information. Both academics and practitioners have been urged to develop better metrics that ease the process of performance management. While rigorous research has been conducted in relation to generic performance measurement systems, little research has been done regarding the implications of measurement paradigms for MNCs. In order to align adequately the worldwide processes, decisions and actions with corporate goals, a cross-functional, cross-process and cross-border approach is needed. By addressing this deficiency, this paper explores the role of performance measurement within the context of managing MNCs, and presents an integrated framework for performance measurement, which is stated from the viewpoint of both the global headquarters and local subsidiaries. This framework incorporates both financial and non-financial measures, and gives the adequate consideration to intangible assets. This paper has practical implications on firms seeking international expansion.

Foreign direct investment and development: launching a second generation of policy research: avoiding the mistakes of the first, reevaluating policies for developed and developing countries

This volume is the culmination of Institute investigations on the relationship between foreign direct investment (FDI) and development. Today, more than one-third of world trade takes place in the form of intrafirm transactions--that is, trade among the various parts of the same corporate network spread across borders--and the bulk of technology is transferred within the confines of integrated international production systems. This means that FDI and the operations of multinational corporations have become central to the world economy at large. Nowhere is this more important than for developing countries. But as Theodore Moran argues in this new volume, FDI is not a single phenomenon. FDI has such different impacts in the extractive sector, infrastructure, manufacturing and assembly, and services--and presents such distinctive policy challenges--that each broad category of FDI must be treated on its own terms. Indeed, past studies that have aggregated all FDI flows together to try to find some unique relationship to host-country growth or welfare have led to unreliable substantive findings and, sometimes, mistaken policy conclusions. Moran examines each of the principal forms of FDI, extracts the best from previous analysis, and offers new findings and perspectives about how benefits from FDI in each sector can be enhanced and potential damages limited or eliminated.

CORPORATE CONTROL BY CHINESE MNCS OVER THEIR FOREIGN SUBSIDIARIES: COMBINING INSTITUTIONAL AND RESOURCE-BASED PERSPECTIVES

Chinese outward foreign direct investment (OFDI) has increased substantially in the last decade. This has resulted in the rapid growth of Chinese multinational corporations (MNCs). The performance of Chinese MNC's foreign subsidiaries can have significant impact on their parent corporation in terms of revenues, reputation, and sustainability, and on the host country's economy and welfare of local communities. However, there is little research so far on how Chinese MNCs control their foreign subsidiaries. Using institutional and resource-based views, this paper examines and delineates the major control mechanisms used by Chinese MNCs over their subsidiaries in the Australian mining industry. It also discusses the implications of the research findings. Data was collected from the websites of ten Chinese subsidiaries and their parent companies, as well as through interviewing five senior executives from four Chinese subsidiaries. The research found that Chinese MNCs relied heavily on ownership and insider control, particularly at the strategic level. They also preferred using expatriates for operational control in their foreign subsidiaries. These dependencies and preferences, however, are moderated by the Chinese MNCs' lack of experience and expertise in international management. Moreover, corporate governance in the Chinese subsidiaries is still weak in terms of independence and competence.

Radioactive Revenues: Financial Flows between Uranium Mining Companies and African Governments

For African countries, the revenue derived from the uranium mining operations of multinational corporations is despite the high price of uranium minimal, uncertain and volatile. The financial agreements that these countries make with the uranium producers regarding their share in the profits are the primary reason for this state of affairs. These contracts are often the result of negotiations that take place behind closed doors. This report analyses the financial aspects of uranium mining in the main African uranium producing countries Namibia, Niger, Malawi and South Africa and examines the activities of the four largest multinational uranium mining companies in Africa: the French AREVA group, the English-Australian Rio Tinto, the Australian Paladin Energy and the South-Africa-based AngloGold Ashanti. Currently, one-fifth of all uranium worldwide is mined in Africa, and production is expected to double in the next two years. Nevertheless, uranium mining remains an uncertain source of revenue for African countries given the unstable price of uranium and the dependence on corporate profits. The primary sources of revenue from uranium mining for African countries are corporate income taxes and royalties (a percentage of uranium sales). But the financial arrangements between multinational corporations and African governments vary widely. For example, Niger has acquired the right to sell a portion of the uranium produced itself rather than relying on AREVA to do so. In addition, Nigers royalties rate for uranium is higher than that in Namibia. Paladin Energy in Malawi and AngloGold Ashanti in South Africa pay less tax and other incentives per kilogram of uranium sold than Rio Tinto in Namibia and AREVA in Niger. The multinational corporations are also allowed to write off investments at an expedited rate, further reducing the value and certainty of revenues to host states. Over the past five years, total revenues received by host states amounted to only approximately 17% of the value of the uranium sold.

Globalizing Memory and the Struggle for Historical Justice in Aotearoa/New Zealand: A Reflection on ‘Memories without Borders?’

In his exploration of painful Hispanic pasts, Professor Jose Colmeiro examines several interfaces between national and international memories and (relatedly) processes of transitional justice. While acknowledging that the main factors impelling the quest for historical justice lie within national boundaries, he also asks how far the pursuit of claims for transitional justice can be assisted by the transference of knowledge about the past across international borders. His answer is cautiously positive: the recent escalation of globalizing tendencies, which have so much capacity for harming people and environment through (for example) the operations of multinational corporations, can also assist the propagation of revival of memory by past and/or presently oppressed groupings. Moreover, this globalized transfer of knowledge can have an applied effect for those groupings through their garnering of popular and official international support. Additionally, in some cases, reverse transfer of memory-knowledge from struggles in other jurisdictions - including methods of struggle, reconciliation and reparations - can add value to the quest for historical justice.

Chinese MNCs as China’s New Long March: A Review and Critique of the Western Literature

Chinese outward foreign direct investment (COFDI) has captured the imagination of international business academics, journalists, and analysts of Chinese foreign economic policy. While these students of COFDI have added greatly to our knowledge, they have not adequately considered the politico-economy of COFDI. Specifically, they have not sufficiently evaluated the degree to which COFDI is driven by political versus economic considerations, the extent to which political considerations influence the overseas operations of Chinese multinational corporations (MNCs), or the political ramifications of COFDI for host countries, international institutions, or China’s interactions with third parties. Reviewing the Western literature, this article provides useful background information about COFDI, distills two general schools of thought about the politico-economy of COFDI—i.e., the “Beijing as Puppeteer” camp and the “Business of Business is Business” camp, and highlights a number of shortcomings with each. As well, it suggests a number of ways in which the extant literature can move forward and makes clear the importance of tracking the development of Chinese MNCs.

Corporate Embeddedness and Control Choices

This paper examines the effect of corporate embeddedness on control choices of a multinational corporation over a wholly owned foreign subsidiary. Researchers and practitioners recognise that multinational corporation headquarters face significant challenges when controlling wholly owned foreign subsidiary operations due to physical distance and the need to adapt to operating in unfamiliar foreign markets. Despite this recognition limited research is available on this issue. Corporate embeddedness refers to the adaption of a subsidiary to other entities throughout the rest of the multinational corporation in terms of tangible and intangible resource flows. Corporate embeddedness appears a significant factor contributing to the viability and success of a wholly owned foreign subsidiary. Based on the transaction cost economies theory of management control this paper investigates the effect of corporate embeddedness on the headquarters’ choice of controls using Spekle (2001) control archetype framework. Specifically corporate embeddedness is linked to transactional attributes including uncertainty, asset specificity, opportunism and bounded rationality, to explore relationships with control archetype choice. The paper proposes that high corporate embeddedness is related to a machine control archetype. Data gathered from a case study of a highly corporately embedded subsidiary of a multinational corporation operating in a regulated consumer products sector is used to examine the link between corporate embeddedness and each of the transactional attributes, and their relationship with headquarters control choices. The evidence provides support to the proposition that high corporate embeddedness is related to machine control archetype. Although action and result oriented machine control archetypes are described separately by Spekle (2001), the controls used by the headquarters suggest a mix of both archetypes.

Entry Mode Strategies and Performance of Japanese MNCs in Australia and New Zealand: the Role of Japanese Employees

This study investigates different entry modes and staffing practices, and their influence on performance in Japanese subsidiaries in Australia and New Zealand. Data from 275 Japanese subsidiaries were derived from the Toyo Keizai data bank of Japanese overseas investments (Kaigai Shinshutsu Kigyou Souran) for the period from 2003 to 2008. The major assumption of this paper is that Japanese multinational corporations (MNCs) use their staffing policies as a means of exerting more influence on performance combined with other factors such as experience, industry, and the type of ownership. The study reveals that within the sample Japanese subsidiaries in Australia have a higher percentage of high performance companies than in New Zealand. The existence of Japanese employees, ownership and industry are shown as predictors of performance.

Introduction

Intrafirm competition, production relocation and outsourcing define crucial ways of organising and reorganising the cross-border operations of multinational corporations. What is more: these organisational activities put severe pressure on established economic coordination and governance both in developed as well as in developing countries. However, despite their organisational, political and economic salience, rather little is known about these processes and in particular about their socio-political dimensions. To this end, the contributions of this special issue aim at exploring, first, who the relevant actors are, what their interests are and how their strategies can be captured in intrafirm competition, production relocation and outsourcing. Second, the contributions discuss the wider socio-economic implications of firm-level processes by discussing, for example, the impact of outsourcing and relocation on employment fragmentation. Finally, the importance of public discourses is highlighted with regard to their role in both legitimating and promoting intrafirm competition, production relocation and outsourcing.

Globalisation and resource development in Africa: assessing the facilitator–protector roles of international law and international institutions

A significant feature of globalisation in Africa is the scramble for resources, especially petroleum and solid minerals, through foreign direct investment by multinational companies. This paper explores the role of international law, which protects the investor from regulatory and political risks but offers no such protection to host communities suffering from the social and environmental impacts. The paper argues that there is no valid reason for the difference in treatment, but rather there are compelling grounds for equal protection of communities from the impacts of the operations of multinational corporations, especially as the very investment protection laws place constraints on the sovereign regulatory powers of the state.

MANDATING CORPORATE SOCIAL RESPONSIBILITY: EMERGING TRENDS IN NIGERIA

This paper discusses the emerging trend in the regulation of issues pertaining to corporate social responsibility (CSR) in Nigeria. The trend is examined in the context of problems raised by the operation of multinational corporations (MNCs). The paper discusses conceptual issues relating to the regulation of externalities caused by MNCs’ operations. It thereafter elaborates upon recent legislative attempts in Nigeria that may have impact on CSR practices of corporations including MNCs. The paper notes that the emerging trend in Nigeria underscores the importance of the law in shaping CSR practices by corporate actors.

Transnational corporations from Asian developing countries: The internationalisation characteristics and business strategies of Sime Darby Berhad

There is limited empirical research on the internationalisation processes, strategies and operations of Asian multinational corporations (MNCs), particularly MNC's based in Malaysia. The emergence and development of an MNC from this developing country represents a significant addition to the literature on this topic which augments and supplements the information already available with regard to nascent MNCs from Asian Newly Industrialised Countries (NIC's). Drawing on primary data from in-depth interviews with 12 key executives from Sime Darby Berhad (SDB), a developing Malaysian-based MNC, this paper will examine and investigate the firm's internationalisation process, its characteristics and strategies, including motivations, patterns, and sources of competitive advantage. The empirical findings, limitations and areas for further research are discussed.

Repertoires of Trust: The Practice of Trust in a Multinational Organization amid Political Conflict

Sociologists and other social scientists have recently renewed their interest in the concept of trust. Multidisciplinary studies have identified social psychological, economic, and structural determinants of trust; traced its development in interpersonal relationships; and explored its transformation in response to modernization. Drawing on ethnographic research at a multinational corporation operating in a politically charged environment, we reexamine these approaches to trust. We explore trust relations between Israeli and Jordanian managers in an Israeli-Jordanian industrial site. Trust, always tenuous in multinational collaboration, poses formidable challenges to this fragile relationship between former enemies. Comparing trust relations during normalization and political unrest provides a natural experiment for observing how forms of trust change in response to a transformed political environment. We show how Jordanians and Israelis apply different forms of trust alternately and interchangeably, transcending cultural dichotomies such as tradition and modernity and deviating from presupposed developmental paths. Following practice theory, our “trust repertoires” approach depicts actors as knowledgeable agents who select, compose, and apply different forms of trust as part of their cultural repertoires. By applying forms of trust, actors demarcate the boundaries of their social relationships. At the same time, actors' strategies are inextricably intertwined with the power structure and political context. In the conclusion, we consider the implications of this analysis for control and coordination in the workplace, including labor process theories.

The effect of firm's experience, diversification strategy and entry mode on performance: electrical and electronics industry in Thailand

The objective of this study is to assess the entry mode selection decision and performance of Multinational Corporations (MNCs) in Thailand, subsequent to Thai government's revision of the system to promote Foreign Direct Investment (FDI) after the financial crisis. MNCs in electrical and electronic industry that chose the Joint Venture (JV) were found to, on average, perform better than those that chose Wholly Owned Subsidiary (WOS) option, even though these performance differences were minimal. Regarding stability of the firm, WOS is financially more stable than JV. Results also indicated that performance of WOS and JV varied depending on the time under study and the performance measures being used. It was also found that a firm's degree of experience and its diversification strategy were the significant factors in determining its entry mode choice.

Beyond public relations: bringing the rule of law to corporate codes of conduct in the global economy

PurposeThis paper aims to examine the impact of a US law, called Alien Tort Statute (ATS), on the overseas operations of multinational corporations with regard to human rights abuses. The law has the potential of creating substantial financial liabilities and operational risks for the multinational corporations (MNCs) by allowing foreign citizens to bring cases in the US courts for acts committed in a foreign country.Design/methodology/approachThe paper reviews the relevant case law and the decisions of the US highest court in outlining the expanding scope of corporate culpability and financial liability.FindingsThe paper undertakes a careful critique of the arguments made by the MNCs as to the scope and reach of the law. It concludes that these arguments are not tenable in terms of MNCs' own professed commitment to protecting human rights. It also finds that the law's intent as interpreted in various decisions of the US federal courts has led to further clarity and specificity as to obligations of the MNCs.Originality/valueMNCs must take concrete steps to ensure that their overseas operations are not implicated in human rights abuses. Specific approaches are suggested to comply with the law.

Order of Entry and Performance of Multinational Corporations in an Emerging Market: A Contingent Resource Perspective

Drawing on the resource-based view, this study examines the contingency effects of industry- and firm-level variables on the first-mover advantages and effective follower strategies in an emerging-market context. Using hierarchical regressions, the authors analyze a large data set of foreign investors in China. Contingency models that include the interactions of entry order with the moderating variables have better fit of the data than the main-effect models. Industry growth and competition, firm size, entry mode, resource commitment, and marketing intensity have significant moderating effects on first-mover advantages. After the authors correct for multicollinearity bias using ridge regression, it seems that pioneers still enjoy a small advantage in market share but not in profitability, indicating a trade-off between the two. Furthermore, followers may augment performance by increasing resource commitment and marketing intensity. These findings have significant implications for entry-order strategies and for improving foreign direct investment performance in foreign markets; they also suggest meaningful directions for further research.

How Multinational Corporations Deal with their Socio-political Stakeholders: An Empirical Study in Asia, Europe, and the US

In this paper, the interactions of German Multinational Corporations (MNCs) with their socio-political stakeholders are analysed. An empirical study in two Asian countries (China and India), three European countries (France, Germany and Russia) and the US demonstrates that the operations of MNCs are influenced by several socio-political interest groups. Among them central government has the highest relevance, followed by state government. The media, industrial associations and local government are of average relevance, while the importance of non-governmental organizations and supranational organizations is relatively low. The results differ significantly between the six countries. To deal with their socio-political stakeholders and the issues raised by them, MNCs use several instruments of public affairs management. The most important instrument in China appears to be lobbying, followed by bribery; while in India, the reverse order is found. Both countries differ considerably from other countries in the study, where codes of conduct, public relations and sponsorship are much more important, and bribery is insignificant.

Empirical asymmetries in foreign direct investment and taxation

This paper assesses the sensitivity of the operations of multinational corporations (MNCs) to host country taxation. The empirical analysis is based on two different measures of MNC activity by U.S. majority-owned foreign affiliates: panel data for aggregate real gross product in manufacturing that originates in a given host country and micro data for a single year regarding the likelihood of a firm locating in a given host country. The empirical estimates indicate that investment geared toward export markets, rather than the domestic market, is particularly sensitive to host country taxation, that this sensitivity appears to be greater in developing countries than developed countries, and that it is becoming greater over time.

On the Marketing of Nations

Deciding on how and where to begin a new regional expansion is a highly important and complex task for multinational companies. The importance and complexity stems from the fact that these decisions involve relatively high uncertainty (i.e., risk) and, at the same time, require an intensive multidimensional evaluation process. Many countries, however, particularly in emerging markets, work to encourage multinational companies to establish a base of operations there or to enlarge existing regional headquarters. Consequently, multinationals and countries have a common interest in identifying key elements in this multidimensional decision process and estimating the likelihood that a particular country will be more suitable to fill this task than others. In order to gain a deeper understanding as to the attractiveness of a host country for establishing a base of operation (BOO) of multinational corporations, we explore the perceptions of corporate managers of different Mediterranean countries. Our analysis highlights the different country characteristics that contribute to the difference in perceptions. In addition, we find specific attributes that contribute the most to these differences. We conclude with a discussion of actions that can be taken by a specific country to close, or expand, some perception gaps.

Does market orientation matter?: a test of the relationship between positional advantage and performance

AbstractA recent series of articles in the Strategic Management Journal has discussed the potential value of an organization developing a market orientation in its quest to achieve success. We posit that market orientation can enhance success, but that its potential value should not be considered in isolation. Specifically, we draw on the resource‐based view of the firm to suggest that four capabilities—market orientation, entrepreneurship, innovativeness, and organizational learning—each contribute to the creation of positional advantages for some firms. The data used are drawn from 181 large multinational corporations (MNC). The results indicate that positional advantages arising from the confluence of market orientation, entrepreneurship, innovativeness, and organizational learning have a positive effect on MNC performance (five‐year average change in ROI, income, and stock price). Overall, the results support the contention that market orientation can enhance success, albeit within the context of other important phenomena. Copyright © 2001 John Wiley & Sons, Ltd.