US MNCs Research Articles

Achieving internal legitimacy and job satisfaction in UK and US multinational corporation subsidiaries in Nigeria: Do acculturation strategies matter?

The ever-increasing organizations’ quest for multinational investments despite cross-border tensions and cultural diversity in the international business environment necessitates acculturation research. This research aims to determine the nature of acculturation strategies adopted among local workers in UK and US MNCs’ subsidiaries in Nigeria and how the acculturation strategies relate to internal legitimacy and job satisfaction among the workers. Utilizing a quantitative research design, the study uses a structured questionnaire to draw data from 454 Nigerians working in UK and US multinational corporations’ subsidiaries in Nigeria. The research finds that Nigerian workers in UK and US MNCs’ subsidiaries in Nigeria predominantly adopt the integrated acculturation strategy. The study further finds that the integration strategy significantly results in internal legitimacy and job satisfaction among the local workers. Contrary to expectations, assimilation, separation, and marginalization acculturation strategies insignificantly relate to internal legitimacy and job satisfaction. We highlighted the acculturation strategy the UK and US MNC subsidiaries in Nigeria can use to achieve internal legitimacy and job satisfaction among local employees.

The consequences of the 2017 US international tax reform: a survey of the evidence

The 2017 US tax legislation—widely referred to as the Tax Cut and Jobs Act (TCJA)—fundamentally transformed the US system of international taxation. It ostensibly ended worldwide taxation but introduced, for instance, a new tax on “Global Intangible Low-Taxed Income”. This paper surveys the emerging empirical literature on the impact of the TCJA’s international provisions. It documents five robust findings in this empirical literature. First, the TCJA led to a general decline in US MNCs’ foreign acquisitions. Second, the TCJA increased US MNCs’ investment in routine foreign tangible assets. Third, the reform did not lead to any change in profit shifting by US MNCs beyond the magnitude that would be expected based on the TCJA’s tax rate reduction. Fourth, The TCJA appears to have reduced the market value of US MNCs relative to domestic US firms. Fifth, the TCJA does not appear to have had any detectable impact on domestic US investment and wages (although there are some contrary results for capital expenditures). The welfare implications of these findings depend crucially on whether US MNCs’ are viewed as having engaged in too much or too little foreign activity prior to the TCJA. This depends on the choice of theoretical framework and the relevant normative benchmark, and cannot readily be resolved empirically.

Do liberal and conservative-leaning CEOs approach de-internationalization differently? Zooming in on the onset of the 2022 Russia/Ukraine crisis

We explore multinationals’ de-internationalization at the onset of the 2022 Russia/Ukraine crisis, based on their CEO's political ideology. Using motivated cognition logic, we propose that the differences between conservative- and liberal-leaning CEOs regarding their attitudes toward change and social justice influence their receptivity to stakeholders’ demands regarding divestment. Using a sample of US MNCs, we find support for our arguments. This research is of scholarly importance as this crisis may intensify the terrains of contestation which multinationals represent for stakeholders that are making claims over their location decisions, often perceived as a sign of acceptance into a country's political actions.

Linking investment opportunities, credit market development and dividend repatriation policy

This study aims to examine the impact of investment opportunities and the global financial crisis on dividend repatriation policy. Additionally, it investigates the interaction effect of credit market development on the association between investment opportunities and dividend repatriation policy. The current study uses secondary data concerning the foreign subsidiaries of US MNCs in 50 countries during the period 2005–2016. Dynamic panel generalised method of moments (GMM) estimator is applied to estimate the dynamic dividend repatriation models. The findings reveal that investment opportunities in the host country significantly negatively influence the dividend repatriation policy. However, credit market development in the host country significantly positively interacts the link between investment opportunities and dividend repatriation policy. This implies that credit market development reduces the negative impact of investment opportunities on the dividend repatriation policy. Further, the findings suggest that dividend repatriation by US MNCs increased significantly during the global financial crisis.

Internationalizing firm innovations: The influence of multimarket overlap in knowledge activities

Building on insights from the multimarket competition and knowledge management literatures, this paper explores how multimarket overlap in knowledge activities influences firm decisions to internationalize their home-country generated innovations. I argue that higher multimarket overlap in knowledge activities with industry rivals pushes firms to internationalize and protect their innovations. At the same time, I argue that this strategic response will be attenuated for higher value firm innovations and in industries with higher global knowledge concentration across countries. Empirical results from a comprehensive panel of US MNCs and their worldwide family patents provide support for these arguments. While a higher overlap in knowledge activities with home and foreign rivals pushes firms to internationalize their innovations, this main strategic response is attenuated for higher value firm innovations and when industry knowledge is concentrated in fewer countries. Taken together, this paper extends the knowledge management literature by exploring how knowledge threats from home and foreign rivals impact the decisions of firms to transfer their innovations to foreign countries, while at the same time expanding the multimarket competition literature by offering new ways of identifying credible knowledge threats by rivals.

The Impact of Entrepreneurial Orientation on Foreign Market Entry: the Roles of Marketing Program Adaptation, Cultural Distance, and Unanticipated Events

Scholars assert that firms with a strong entrepreneurial orientation (EO) should enjoy an advantage in foreign market entry. However, extant theory, particularly the dominant logic and adaptation frameworks, as well as supporting empirical research outside the domain of foreign market entry, suggests that the positive impact of a strong EO on foreign market entry is likely to be situational. Per the dynamic capabilities perspective, the authors first propose that marketing program adaptation (MPA) is a mediator of the EO-foreign market entry relationship. They further propose two moderators of the EO-MPA relationship, both of which are related to foreign market uncertainty: cultural distance (which increases uncertainty but is known prior to entry) and unanticipated events (which increases uncertainty but by definition are not known prior to entry). A study of 245 US MNCs supports the thesis that MPA is strongly related to foreign market entry success and that EO is an important contributor to foreign entry success when cultural distance is high and unanticipated events occur during launch but is less relevant in the opposite scenarios. There are important implications for firms entering foreign markets.

The Globalization of Production and the Politics of Dispute Initiation at the World Trade Organization

AbstractThe aim of this article is to show how the degree of integration into so‐called global value chains (GVCs) affects World Trade Organization (WTO) members’ decision to initiate a dispute at the WTO. Many potential violations of WTO law remain unchallenged, raising the question under which conditions WTO members complain about particular allegedly‐WTO‐incompatible policies. Controlling for alternative explanations, we demonstrate that decision‐makers are generally more likely to try and eliminate barriers to cross‐border trade by tabling a WTO complaint, when they are facing pressures to do so by firms and sectors highly integrated into such GVCs, especially when these are multinational corporations with sourcing interests in the defendant country. We test our hypothesis by comparing data from trade barrier reports with actual dispute initiation data from the US and find that, all else equal, trade barriers are more likely to be filed as disputes at the WTO in sectors with US MNCs highly integrated into GVCs. In light of the anti‐WTO rhetoric of the current US administration and its attempts to undermine its functioning and legitimacy, this analysis suggests that GVCs activate relevant societal actors that have an interest to uphold existing multilateral trade commitments, even in the efface of reluctance from their own political leaders.

Combinative Capabilities, Internal Global Sourcing and Technology Diversification in MNCs

Although MNCs are in the best theoretical position to tap into and combine diverse technology that exists across their operations, extant research offers very little to help us understand technology diversification within MNCs. This paper explores how increased manufacturing capabilities and specialization in foreign operations contributes to technological diversification in MNCs that can lead to innovations that combine new technology domains from the local host country market with existing MNC technology domains. A unique dataset that combines comprehensive data on the worldwide operations of US MNCs from the Bureau of Economic Analysis (BEA) with data on the worldwide patents of these firms from the Derwent Worldwide Patent Index (DWPI), confirms that those foreign operations that provide more inputs and final products to parent and third country operations are significantly more likely to generate innovations that combine new technology domains with existing MNC technology domains. Overall, this paper...

The Consequences of the TCJA's International Provisions: Lessons from Existing Research

This paper discusses the potential consequences of the international tax provisions of the recent Tax Cut and Jobs Act (TCJA), drawing on existing research. The TCJA’s dividend exemption provision is expected to eliminate distortions to the amount and timing of dividend repatriations. However, the efficiency gains from increased repatriations – which are primarily expected to increase shareholder payout – are likely to be modest. The paper uses the observed behavior of firms during the repatriation tax holiday implemented in 2005 to infer the relative magnitudes of the burdens created by the repatriation tax under the old (pre-TCJA) regime and by the TCJA’s new “Global Intangible Low-Taxed Income” (GILTI) tax. It concludes that the TCJA increases the tax burden on US residence for many, and perhaps most, US MNCs. The paper also argues that the GILTI and “Foreign-Derived Intangible Income” (FDII) provisions are likely to create substantial distortions to the ownership of assets, both in the US and around the world. Overall, the scholarly evidence implies that the international provisions of the TCJA can reasonably be expected to create potentially large efficiency losses.

The Consequences of the TCJA's International Provisions: Lessons from Existing Research

This paper discusses the potential consequences of the international tax provisions of the recent Tax Cut and Jobs Act (TCJA), drawing on existing research. The TCJA’s dividend exemption provision is expected to eliminate distortions to the amount and timing of dividend repatriations. However, the efficiency gains from increased repatriations – which are primarily expected to increase shareholder payout – are likely to be modest. The paper uses the observed behavior of firms during the repatriation tax holiday implemented in 2005 to infer the relative magnitudes of the burdens created by the repatriation tax under the old (pre-TCJA) regime and by the TCJA’s new “Global Intangible Low-Taxed Income” (GILTI) tax. It concludes that the TCJA increases the tax burden on US residence for many, and perhaps most, US MNCs. The paper also argues that the GILTI and “Foreign-Derived Intangible Income” (FDII) provisions are likely to create substantial distortions to the ownership of assets, both in the US and around the world. Overall, the scholarly evidence implies that the international provisions of the TCJA can reasonably be expected to create potentially large efficiency losses.

Reputation of multinational companies

PurposeThe purpose of this paper is to use stakeholder theory as the theoretical reference framework to study the influence of internationalization (geographic international diversification) and social performance on multinational companies’ (MNCs) reputation.Design/methodology/approachThe authors confirm the research hypotheses using a sample of 113 US MNCs in the chemical, energy and industrial machinery sectors during the period 2005-2010.FindingsThis study contributes to the literature in three ways. First, it incorporates literature on internationalization to study the possible connection between geographic international diversification and social performance in MNCs. Second, it sheds light on the debate between corporate social responsibility (CSR) and the reputation of MNCs in a very diverse transnational context in which MNCs must meet the needs of stakeholders at both local and global levels. Third, it incorporates the mediating role of social performance in the relationship between geographic international diversification and the firm’s reputation.Originality/valuePrior studies have hardly analyzed this relationship, which becomes especially relevant for MNCs, since their implementation of advanced CSR practices in the different markets in which they operate will gain them a good reputation, not only in specific local contexts but also globally, benefitting the organization as a whole and enabling it to gain internal consistency (improvement in internal efficiency), transparency and legitimacy.

Is There a Multinationality Effect? A Replication and Reexamination of the Multinationality-Performance Relationship

We revisit the empirical relationship between multinationality and performance by attempting to replicate the widely cited S-shape relationship reported in Lu and Beamish (2004). Using a longitudinal and comprehensive database on the population of US MNCs from 1989 to 2007, we find no evidence of an S-shaped relationship; nor do we see a moderating effect of intangible assets. Although our results do show a marginally significant U-shaped association between multinationality and performance for a subsample of manufacturing firms, this relationship disappears once we account for the endogeneity of multinationality. Our study contributes to empirical research on the multinationality-performance relationship, highlighting the need for caution in generalizing results across countries and the importance of controlling for the endogeneity of multinationality when assessing its effect on performance.

The Global Family Patents of Multinational Corporations

Building on insights from the multi-market competition and knowledge management literatures, this paper explores how firm and competitor scope of activities influences the timing and extent of knowledge diffusion by MNCs. Using a newly created panel of US MNCs and their worldwide operations that I have merged with the Derwent global family patent data, I identify three mutually exclusive types of family patents based on when (or whether) firm knowledge is diffused, including: single-country patents, foreign equivalent family patents and born global family patents. Comparisons across the three family patent categories show that higher firm and competitor scope encourages firms to diffuse their knowledge more quickly, but also reveals that the category with the quickest diffusion (born global patents) are on average less valuable than single country patents. Overall, this paper contributes to our understanding of the global knowledge generation and global knowledge diffusion by providing a comprehensive loo...

High-investment HR values and firm performance among local firms and U.S. MNCs’ subsidiaries in South Asia: a comparative study

Grounded in institutional theory, this study investigates the differential adoption and internalization of high-investment human resource (HR) values by local companies and by subsidiaries of US firms located throughout South Asia; and the impact of these HR values on firms’ performance. In line with our predictions, results suggest that US subsidiaries have a greater rate of adoption of high-investment HR values compared to local South Asian firms. Contrary to our predictions, however, both types of firms are similar in the level of internalization of their respective HR values. Finally, while greater levels of high-investment HR value adoption is associated with firm performance across the board, this relationship tends to be stronger for US MNCs’ subsidiaries compared to local South Asian companies. Theoretical and practical implications for the transfer and diffusion of high-investment HR values in institutionally and culturally distant contexts are discussed.

Corporate Inversions - Background, Causes, and Policy Options

Corporate inversions have been front page news during most of 2014. In addition to providing background on inversions, this presentation discusses why inversions are occurring and various policy options.What is the primary driver of inversions? Contrary to many public reports, the 35% US corporate tax rate is not the cause. Rather, US MNCs have shifted so much income to tax havens that they have a liquidity issue (i.e., the lock-out effect). In addition, US MNCs may also be worried the SEC and their external auditors could start questioning their assumption that foreign earnings are indefinitely reinvested.Treasury Notice 2014-52 puts some fingers in the proverbial dike, but the bottom line is that inversions are going to continue until the US modifies its tax system. US MNCs want a territorial system with minimal base erosion protections, while others would accept a territorial system with strong base erosion protections. Both options have major issues. The ideal solution would be to attempt to equalize the tax burden of US MNCs, foreign MNCs, and domestic US businesses. This could be accomplished if the US viewed itself as a source country and based its tax on the volume of sales to US customers. Many US states have effectively adopted this approach because of the fierce tax competition among states.

Global Sourcing and Foreign Knowledge Seeking: A Formal Model and Empirical Analysis

This study examines the antecedents of firm global sourcing choices, focusing on the role of foreign knowledge seeking in this context. We develop a formal model showing that firms that invest in foreign R&D are driven to increase their levels of offshore integration, especially when they have strong capabilities, and from developed countries. In contrast, firms that do not invest in foreign knowledge seeking are more likely to pursue offshore outsourcing in response to cost pressures, especially when they have weak capabilities, and when they are able to better monitor third party suppliers through investments in information technology. We find support for these insights analyzing a unique and comprehensive firm-level panel of cross-border product transfers by US MNCs from 1989 to 2004. Our paper thus highlights the effect of foreign knowledge seeking on firm global sourcing choices, while distinguishing between the antecedents of offshore integration and offshore outsourcing.

Antecedents and evolution of the Bartlett and Ghoshal transnational typology

PurposeThe purpose of this paper is to systematically describe the evolution of Bartlett and Ghoshal's transnational typology within an appropriate historical context, and to additionally review key antecedent works of other authors who contributed to its evolutionary nature.Design/methodology/approachThe paper presents a comprehensive review of the literature by combining an evolutionary perspective with a Chandlerian business history approach.FindingsThe paper shows how Bartlett and Ghoshal's transnational solution concept was developed in light of the global economic changes of the 1970s and 1980s, as well as the managerial and strategic challenges faced by US MNCs. It shows how the transnational solution concept should not be seen as a single work, but rather the outcome of an academic discourse which lasted over a decade. The review of Bartlett and Ghoshal's stream of work since the mid 1980s also shows how the transnational solution concept developed gradually into its present form and through the integration of several antecedent concepts.Originality/valueThis paper describes not just the actual evolution of Bartlett and Ghoshal's transnational typology, but also systematically identifies and analyzes key antecedent works by other authors. This analysis has been overlooked and is at the same time key to the understanding of their typology. The employed evolutionary and business history perspectives within this paper are new to the international management literature. They should be especially valuable for graduate students and scholars who employ Bartlett and Ghoshal's typology, or anyone who wishes to understand the Zeitgeist of the time articulated by this seminal work, which will soon celebrate its 25th anniversary.

Business in troubled waters: Does adverse attitude affect firm value?

This paper investigates the relationship between US MNCs' valuations and anti-Americanism in countries where MNCs' foreign subsidiaries are located. We find that MNCs suffer value-destruction when they enter markets where people express severe anti-Americanism. However, we uncover that geographic diversification into these high anti-Americanism countries significantly increases firm value if the MNC has high levels of intangibles such as technological know-how and marketing expertise. Our findings are consistent with the notion that the advantages from internalizing the cross-border transfer of intangibles are greater when barriers to competition are higher.

Testimony of J. Richard (Dick) Harvey, Jr. Before the U.S. Senate Permanent Subcommittee on Investigations May 21, 2013

Apple is an iconic US multinational corporation. In addition to demonstrating excellence in designing, building, and selling consumer products, Apple has been very successful at minimizing its global income tax burden. This expert testimony describes how Apple:• allocates approximately two-thirds of its global income to Ireland, a country where only 4% of its employees and 1% of its customers are located,• minimizes Irish tax by creating an Irish entity that is managed and controlled in the US, and• avoids the US Subpart F rules.More generally, the testimony illustrates techniques used by US MNCs to shift income overseas and avoid the US Subpart F rules designed to tax passive income.Finally, the testimony makes several tax policy recommendations.Expert Witness Testimony Submitted on May 21, 2013 for the US Senate Permanent Subcommittee on Investigations.

The Impact of Parent Firm Knowledge Transfers on Foreign Subsidiary Innovation

In this paper, I examine how three knowledge transfer mechanisms, including managerial knowledge transfers, product transfers and technology transfers, impact the innovation output of foreign subsidiary operations. I argue that the combination of tacit and explicit transfers of parent firm knowledge through expatriate managers and product and technology transfers respectively will result in conditions that are more conducive to new knowledge generation in foreign subsidiaries. Empirical results from a comprehensive panel of US MNCs show that conditional on foreign operations doing R&D, the combined effect of knowledge transfers through parent products and expatriate managers significantly impacts foreign subsidiary knowledge generation. By exploring how a combination of tacit and explicit knowledge transfer mechanisms can encourage knowledge extension and generation, this paper contributes to the knowledge management literature while also showing how a comprehensive database of US MNCs link their operations to extend their knowledge assets.