Western MNCs Research Articles

Social Innovation and the Financial Risk of EMNCs - The Contingent Role of Institutional Legitimacy

This paper examines the influence of social innovation on financial risk of emerging economy multinational corporations (EMNCs). Traditionally, research has focussed on Western MNCs’ and their financial performance implications. However, the growing involvement of EMNCs in social innovation—albeit in environments characterized by institutional voids—and its effects on financial risk necessitate an in-depth examination. Drawing on stakeholder theory, we explored how EMNCs balance their social innovation initiatives with financial risks. To this end, we first examine how social innovation reduces the financial risk of EMNCs. Second, we examine the association between excessive social innovation and EMNCs’ financial risk. In addition, borrowing insights from institutional theory, we assess the role played by institutional legitimacy in this process, acknowledging institutional legitimacy’s potential to mitigate the financial risks associated with social innovation in emerging economies. We test our hypotheses based on data drawn from 90 EMNCs in 14 emerging economies, applying a panel regression model with robust standard errors and a rigorous robustness propensity score matching test. Our findings show that social innovation reduces EMNC financial risk, and challenge the assertions made regarding the potential negative implications of excessive social innovation on financial risk. Our results also demonstrate the intricate moderating effects of institutional legitimacy in balancing social innovation, excessive social innovation, and EMNC financial risk. Finally, we proffer critical implications for managers and policymakers in emerging economies.

MNC response to superstitious practice in Myanmar IJVs: Understanding contested legitimacy, formal–informal legitimacy thresholds, and institutional disguise

Superstition is a pervasive informal institution affecting the decision-making of organizational actors yet remains under-studied and ill-understood in international business research. We address this lacuna through examining how Western MNCs affect – and are affected by – the use of superstition among local subsidiary managers in an emerging Asian economy. Based on interviews, archival documents, and observation, our inductive investigation reveals a complex, changing, and surreptitious relationship between MNC practice and an informal institution which, while widely practiced, remains forbidden according to its formal institutional counterpart (Buddhism) and illegal according to Myanmar state law. Initial findings showed how MNCs endorsed, acquiesced, or rejected superstitious practice based on a configuration of construed reputational risk, corporate values adherence, degree of formal institution approval, and perceived local performance impact. Subsequent MNC engagement then shifted from accommodation to resistance to manipulation in response to local managers’ disguising their ‘superstitious’ practices as Buddhism, ‘blurring’ the formal–informal institution divide in the process to secure MNC public approval. Together, our findings serve to refine and deepen existing theory into how the MNC subunit can manage its legitimacy through balancing the incompatible demands of formal and informal constituents within a contested institutional dyad.

Opening the reverse innovation black box to pinpoint its drivers and challenges in Western MNCs

If hallmark examples of reverse innovation flourish, the micro-level drivers and challenges of this phenomenon remain understudied. The present paper aims at filling that gap by investigating the reversal process at stake to better tackle its managerial challenges. This conceptual paper first explores the market drivers/challenges associated to reverse innovation, leading to fine-tune the phenomenon by using the disruptive innovation lenses. In a second part, the article relies on international business literature, to characterise intra-MNC bottlenecks and configure enabling managerial practices. The analysis first outlines two types of reverse innovation (associated to different marketing and creative stakes) and then highlights their respective organisational conducive environments and major bottlenecks. Opening the reverse innovation black box and pinpointing its underlying process increases both the analytical power of the concept and the ability of Western MNCs to successfully run such global innovation strategies.

How Developed-Country Firms Make Standardization/Transfer and Adaptations Decisions in Relation to their Developing-Host-Country Operations?

Factors influencing firms’ standardization and adaptations decisions tend to be treated as static isolated entities in the extant literature. Further, the focus is predominantly on Western MNCs and product development or marketing functions with manufacturing firms and the emerging/developing country perspective underrepresented. We explore factors, as well as their interrelations that determine standardization and adaptations decisions when a developed country manufacturing firm establishes operations in a developing country. Purposefully, Italian manufacturing firms with operations in Vietnam are examined. We identify functions, processes, and practices that are standardized/transferred and those that are adapted. A theoretical model is developed based on the findings.

Opening the reverse innovation black box to pinpoint its drivers and barriers in Western MNCs

Opening the reverse innovation black box to pinpoint its drivers and barriers in Western MNCs

Perspectives of Manufacturing Subsidiaries of Foreign Companies in Russia: Frontier, Faubourg or Sticks?

We present the dynamics of the position of Russian manufacturing subsidiaries of Western MNCs in 2012-2016. The analysis is based on interviews with the heads of subsidiaries, a repeated survey of plant managers and on secondary data on subsidiaries’ activities. We propose a new portfolio model that desalinates “the core” and “the periphery” of the corporation and further allocates peripheral subsidiaries into several classes depending on intensity of value transfer from and to a subsidiary and the possibility to apply a “standard” set of instruments for capital allocation decisions. We argue that in the current situation of the Russian economy the only possibility for Russian manufacturing subsidiaries to remain close to the corporate core is to demonstrate high net profitability of assets. Otherwise subsidiaries are downgraded into “sticks”. That position enables subsidiary managers to enjoy high autonomy and wide subsidiary mandates, but endanger the long-term perspectives on maintaining innovativeness and competitiveness of subsidiaries.

Expanding horizons and expatriate adjustment

PurposeExpatriate management is a popular theme in the field of international human resource management in light of the fact that expatriates play a crucial role in a MNC’s global operations. The purpose of this paper is to explore how MNCs select, train, deploy and support expatriate managers during and after their international assignment in the United Arab Emirates (UAE).Design/methodology/approachThis qualitative study is based on in-depth interviews with 22 Western expatriate managers who are presently based in the UAE. However, in order the ensure a diverse sample among the participants with regards to their age, professional experience, gender and nationality, purposeful sampling was utilized while selecting the participants.FindingsThe results of the present study cast light on many shortcomings of the overall expatriation process as they are implemented by MNCs in the UAE. Accordingly, there is a pressing need for MNCs in the UAE to develop strategic expatriation processes, involving the following critical factors: the selection of the right person for the right job; specific and relevant pre-departure and post-arrival cross-cultural training (CCT); practical support for the expatriate employees and their trailing spouses in the host country; and lastly, a clear repatriation strategy to mark a successful conclusion of foreign assignments in the UAE.Research limitations/implicationsIt is acknowledged that the results of this purely qualitative study, based on a relatively small sample size, cannot claim to represent the management theories, practices and realities of all the Western MNCs in the UAE. Moreover, these findings narrate the views and perceptions of this particular cohort of expatriate executives with relation to their selection, pre-departure CCT, adjustment in the UAE and the support and repatriation policies utilized by their companies for doing business in the UAE.Practical implicationsThis study points to the fact that technical skills are mostly considered to be the predominant selection criteria for the expatriate selections in the MNCs. Other abilities, such as language skills and relational and perceptual adjustability are considered to be less important and do not feature overtly in the selection criteria for expatriate positions. The results demonstrate that distinctive features of adjustability, which include expatriates’ willingness to communicate, their social orientation, dynamic anxiety resistance and openness ability are all critical to the adjustment in the host country and should be given more emphasis.Originality/valueRegardless of the presence of numerous MNCs in the UAE, it is indeed surprising to see that the topic of the expatriation management process in MNCs in the UAE has received little research attention. The objective of this study is to address this deficiency. Additionally, it is hoped that these findings may also be valuable to MNCs and consultants who are preparing expatriates for international assignments, especially in the Middle East and in particular in the UAE.

The Impact of National Context Effects on HRM Practices in Russian Subsidiaries of Western MNCs

ABSTRACTThis article contributes to the research on comparative human resource management by providing a model of the Russian business system and its effect on human resource management practices at Russian subsidiaries of Western multinational companies. Whitley’s approach was adopted to illustrate the links between institutional arenas, business systems, and human resource management practices. The empirical part is based on interviews with senior human resources managers of Western multinational companies operating in Russia. The findings provide insight into the interaction between the national business system and human resource management practices in Russia.

Employer perceptions of self-initiated expatriate employability in China

Purpose– The purpose of this paper is to offer an employer perceptive on the employability of self-initiated expatriates (SIEs) by contrasting SIEs with other identified staffing groups available for the staffing of MNC subsidiaries in China.Design/methodology/approach– This qualitative study is based on in-depth interviews with 24 Westerners with direct staffing responsibilities in subsidiaries of western MNCs located in China. The employability of each identified staffing group was assessed using the person-to-environment fit approach from four-fit perspectives (person-to-job and to-group, organisation and cultural context).Findings– The study revealed how from the employer perspective SIEs do not form a heterogeneous group, but instead there are two groups with different fit profiles. The study illustrates how western SIEs are an uncommon and under-used staffing group in cross-cultural staffing settings in China due to their low employability in comparison to alternative staffing groups. The study also revealed the prevalent bipolarity (the Westerners vs the Chinese) and heterogeneity within the identified staffing groups.Research limitations/implications– The study recognises the lack of employer perspective in SIE literature and also that SIEs are an under-represented group in the staffing literature.Practical implications– The findings help explain how MNC staffing is culturally bound and how the staffing process should incorporate more than just an assessment of job-related qualifications. The findings also help explain the challenges SIEs can experience in cross-cultural career settings.Originality/value– The study is one of the first to provide an employer perspective on SIE careers and contrast SIEs to the other alternative staffing groups available to MNC subsidiaries in China.

Transferability of western MNCs human resource management practices: A case study

Transferability of western MNCs human resource management practices: A case study

Modernizing Without Westernizing: Social Structure and Economic Action in the Indian Financial Sector

In seeking to understand whether the transition by Asian countries to market economies mirrors the path taken by the West, we ask how embedded network ties between equity analysts and the CEOs of the firms they follow in India influence the accuracy of analysts’ earnings forecasts. We contrast traditional institutions of caste and regional language with contemporary institutions such as universities as the locus for such ties. We posit that CEOs from the post-economic-reform generation in India are more likely to transfer material private information via their school ties while pre-reform generation CEOs favor caste or language ties. We then contrast domestic business groups (BGs) with western MNCs as organizational contexts and argue that BGs legitimate the transfer of private information along particularistic ties, whereas MNCs mitigate such transfers. Our conceptual framework is supported by analyses that draw on a sample of 1,552 earnings forecasts issued from 2001 to 2010 by 296 equity analysts. Our findings suggest that the embeddedness perspective should be broadened to incorporate the influence of larger historical social structures within which economic action is embedded, and to view BGs as carriers and repositories that blend modern management practices with particularistic behavioral patterns among top executives.

Clanism

Abstract: * The objectives of this paper are: (1) to present and develop clanism as an indigenous management concept in Central Asia, and (2) to analyze the effect of clanism on a specific management function--human resource management (HRM)--in the concrete context of Kazakhstan. * This exploratory study employs a qualitative research. The data indicate that the degree to which clanism affects HRM practices depends, to a great extent, on the type of company. Clanism's effect is strong in state-owned companies and moderate in privately held companies, while it is weak in the subsidiaries of multinational companies. Furthermore, the influx of western MNCs has influenced Kazakhstani HRM in general and lessened the influence of clanism on HRM. However, some characteristics of the local labor market may strengthen the effect of clanism on HRM practices. * The paper proposes a definition of clanism; discusses the reasons for clanism's existence; investigates how clanism differs from other indigenous concepts, such as blat and guanxi; and analyzes how clanism affects HRM practices in Kazakhstan, a country that is strategically important for international management. Keywords: Clanism * Kazakhstan * Human resource management * Indigenous concept Introduction If newly developed economies (e.g., in Asia, South America, and Eastern Europe) are novel contexts that differ from the regions in which the bulk of management theories originated, research in these contexts must involve some contextualization if the limits of existing theories are to be discovered or if new theories to explain local phenomena are to be developed. (Tsui 2007, p. 1357) Why are indigenous management concepts essential to an understanding of management practices in emerging markets and transitional economies? The institution-based view of international business suggests that the formal institutions in emerging markets and transitional economies have less of an impact than the informal institutions that organize and govern those societies. Although some combination of formal and informal institutional frameworks shapes strategic choices (North 1990), advocates of the "third leg"[1] in the strategy tripod argue that "in situations whereby formal institutions are weak, informal institutions, such as norms governing interpersonal relationships, rise to play a larger role in driving firm strategies and performance" (Peng et al. 2008, p. 927). Therefore, in order to truly understand management practices in these economies, we must consider the powerful role of informal interpersonal social networks; how those networks adapt and change over time; and how they create, affect, constrain or undermine management practices in firms operating in these environments. Thus far, much of the literature has focused on the importance of such indigenous concepts as guanxi in China and blat in Russia. Indian dharma and South African ubuntu have also entered the discussion. One indigenous concept that is essential for understanding management practices in the emerging region of Central Asia has not yet attracted the attention of management scholars. Western political scientists refer to this concept as clanism (see e.g., Schatz 2004; Collins 2006). In the political science literature, a clan is defined as an informal organization comprised of a network of individuals linked by immediate and distant kinship, and by fictive kin identities. While kinship ties (blood ties) are rooted in the extended family, fictive kinship ties include individuals that are part of a network as a result of marriage, family alliances, school ties, long-lasting friendships or neighborhood affiliations (Collins 2006). Clanism has never been developed as a management concept and its implications for managerial practices have not been studied. This is unfortunate, as we believe that a deeper understanding of clanism as an indigenous management concept will contribute to debates on whether western managerial practices, ideas and concepts can coexist with local practices. …

The Political Perspective of Corporate Social Responsibility: A Critical Research Agenda

ABSTRACT:I here advance a critical research agenda for the political perspective of corporate social responsibility (Political CSR). I argue that whilst the ‘Political’ CSR literature is notable for both its conceptual novelty and practical importance, its development has been hamstrung by four ambiguities, conflations and/or oversights. More positively, I argue that ‘Political’ CSR should be conceived as one potentialformof globalization, and not as aconsequenceof ‘globalization’; that contemporary Western MNCs should be presumed to engage in CSR for instrumental reasons; that ‘Political’ CSR should be associated with a corresponding ‘political’ model of corporate governance; and that both a ‘Rawlsian’ and ‘Habermasian’ perspective of Political CSR are different from ‘Political’ CSR. In concluding, I use these four critiques to identify a number of areas within which increasingly robust and sophisticated positive and normative theories of Political CSR are required.

Examining the Moderating Effects of MNCs’ Country of Origin in the Relationship between Degree of Inter-Firm Technology Transfer and Local Firms’ Performance

The main objective of this paper is to empirically examine the moderating effect of MNCs’ country of origin (Western vs. Asian MNCs) in the relationships between degree of inter-firm technology transfer and two dimensions of local firms’ performance: corporate and human resource performances. Using the moderated multiple regression (MMR) analysis, the theoretical models and hypotheses in this study were tested based on empirical data gathered from 128 joint venture companies registered with the Registrar of Companies of Malaysia (ROC). The results revealed that MNCs’ country of origin has significantly affected the relationships between degrees of technology transfer and local firms’ corporate performance; where the relationship was found stronger for Asian MNCs as compared to Western MNCs. However, MNCs’ country of origin did not significantly moderate the relationship between degree of technology transfer and local firms’ human resource performance. The study has bridged the literature gaps in such that it offers empirical evidence and new insights on the significant moderating effects of MNCs’ country of origin in the relationships between degree of inter-firm technology transfer and local firms’ performance technology using the Malaysian sample.

India and China as partner of choice for the Western multinational companies in the era of globalisation

By the Patent Amendment Act 2005, India approved Trade Related Aspect of Intellectual Property Rights (TRIPs) Agreement of the World Trade Organization (WTO) and implemented product patent protection for pharmaceutical and biopharmaceutical products. China, too, at the end of 2002 enacted regulations to strengthen pharmaceutical and biopharmaceutical patents. The change in the patent regimes demand that both these countries biopharmaceutical industries which are basically generic industries to shift from generic manufacturing to novel drug manufacturing. Although due to generic manufacturing base, these countries are able to offer cost-efficient discovery research, testing and manufacturing support to western multinationals. On the other hand, the rising cost and continuous risk involved in drug development process making the western MNCs to head towards Asia for collaboration. The paper explores the best partner of choice between India and China for the multinational companies by analysing the relative strength of the parameter suggested by John Dunning for making the foreign investment.

Diversity management in India: A study of organizations in different ownership forms and industrial sectors

AbstractStrategically managing workforce diversity is a value‐adding HR function that enhances organizational performance. Managing diversity is a complex and unique HR issue in India due to its religious and cultural diversity and the use of legislation by the Indian state to tackle societal inequities and complexities. This paper contributes to existing knowledge on diversity management and strategic HRM in the Indian context through an in‐depth case study of 24 firms of different ownership forms in a number of industries in India. The main method of data collection was semi‐structured interviews with 110 managers at various levels and 102 non‐managerial employees. Each interview was conducted individually. This paper takes the U.S.‐originated concept of diversity management in the HRM context as a starting point. It uses this as a guide to investigate how the concept is understood and operationalized in several leading business organizations across different ownership forms and industrial sectors in India. Results reveal the differences between Western MNCs and Eastern firms as well as the varying views of Indian managers and employees on issues related to diversity management. © 2010 Wiley Periodicals, Inc.

Talent management of western MNCs in China: Balancing global integration and local responsiveness

Since the beginning of its market economy and open-door policy in 1978, China has extensively promoted foreign direct investment. Consequently, many western MNCs have entered the country in search of new business opportunities. Today, one of the greatest challenges facing these organizations is finding talented people who are needed to run their businesses. Although the strategic importance of talent management has been acknowledged in recent years, few studies analyze the talent management of western MNCs in China. Building on qualitative data from seven case studies, our paper therefore seeks to explore how western MNCs in China identify, develop and retain their talented employees. The paper shows that MNCs transfer their talent management practices to China without many changes, focusing specifically on the development of talented employees and the creation of an organizational culture. Nevertheless, the results also indicate that integrated and strategic talent management strategies have not yet been fully implemented.

Is Guanxi still working, while Chinese MNCs go global? The case of Taiwanese MNCs in the UK

Guanxi has been well studied in Chinese management as a vital factor associated with business strategy and HRM in Chinese communities. However, Guanxi may not be crucial anymore, because Chinese MNCs are rapidly becoming global players since they have started to merge with and acquire Western MNCs, but not through the guanxi related to international strategy. Recently, “a Chinese company bought IBM Personal Computers lock, stock and barrel. Chinese corporations have bought Thomson and RCA televisions, Dirt Devil etc.” (James Dyson, 2005). This paper investigates Taiwanese MNCs pursuing an internationalisation strategy, and discusses implications for the way third world MNCs manages their international employees. Interview data from twenty four Taiwanese-owned companies are used to identify how the Chinese cultural value of guanxi, underpins their management style in the British context. The paper finds that there are sectoral differences between the IT and financial service industries in terms of the way guanxi affects recruitment and company location decisions. It is concluded that national culture is still an important factor to influence the international strategy and HRM practice in MNCs of third world origin.

Guanxi and supplier search mechanisms in China

Supply localization is an expressed desire among western MNCs with manufacturing subsidiaries in the People's Republic of China (PRC), but poor information coding and diffusion poses problems in identifying suitable local supply firm partners. This article investigates the mechanics of personal connections, and in particular guanxi, in local supplier search and appraisal within a large sample of UK-and US-invested manufacturers in China. The results emphasize the importance of business rather than family and community connections as sources of guanxi, supporting Guthrie's (1999) view that industrialization and modernization has reduced the importance of traditional forms of guanxi. The results also suggest that social networks derived from relational contracting and the expatriate community are important sources of information. On the basis of this analysis we make a number of recommendations for improvement of firms' supplier search capabilities.

The effects of trust and shared vision on inward knowledge transfer in subsidiaries’ intra- and inter-organizational relationships

Drawing on the social capital literature, this study examines the relationship between trust and shared vision and inward knowledge transfer to subsidiaries from both the subsidiary's corporate and external relations. Previous literature has acknowledged and theoretically suggested that potential differences may exist in knowledge transfer between intra- and inter-organizational relationships, it has not yet been well examined empirically. The study provides some initial insights into the literature by theoretically suggesting that the effects of trust and shared vision on inward knowledge transfer differ in importance in intra- and inter-organizational relationships. Hypotheses were tested on data collected from 75 Western MNCs’ subsidiaries located in China. The study represents an effort towards a better understanding of the context where trust and shared vision are more of vital importance.