Western Multinational Corporations Research Articles

The exodus of Western manufacturing corporations from Russia–the beginning

ABSTRACT This study aims to depict the dramatic exit of Western multinational corporations (MNCs) from Russia after the escalation of the Russia – Ukraine conflict and the beginning of military action between the two countries. The beginning of intensive military actions between Russia and Ukraine served as a pretext for strengthening Western sanctions that now not only include sanctions against Russian physical and legal persons but also the ban on trade with Russia, the ban on financial transactions, and strict control of value appropriation by foreign corporate centres of Western MNCs in Russia. We demonstrate how Western corporations selected candidates for divestment under pressure from their home countries and the strengthening demands of the Russian government towards both sides of the deal with foreign industrial assets. Moreover, the present study refutes several popular postulates on foreign divestment and indicates several promising directions for future studies.

The Electronic Boycott of Foreign Products and its Impact on the Purchasing Rate of the Jordanian Consumer for Products from Beirut Lights Company for Hygienic Paper Manufacturing

This study investigated the effect of an electronic boycott of foreign products on the purchasing rate of Jordanian consumers for products from Beirut Lights company for hygienic paper manufacturing. This study collected data from 310 consumers purchasing products from Beirut Lights Company for Hygienic Paper Manufacturing using questionnaires. This study employed the Partial Least Square Structural Equation Modelling (PLS-SEM) approach and analysed the data. The results revealed that electronic boycotts (consumer animosity, consumer ethnocentrism, consumer efficacy, and product judgment) have significant and positive effects on purchasing rates. The results revealed that a 1% increase in Consumer Animosity would lead to an 18.5% increase in Purchasing Rate. Additionally, the results demonstrated that Purchasing Rate would increase by 15.2 percent with a 1% increase in Consumer Efficacy. Also, the results revealed that a 1% increase in Consumer Ethnocentrism would lead to a 23.5% increase in Purchasing Rate. Similarly, the results revealed that a 1% increase in Product Judgement would lead to a 44.1% increase in Purchasing Rate. For Western multinational corporations focused on expanding their foothold in the world's biggest consumer market, this study's conclusions have crucial consequences for decision-makers and management. The suppressed and intense emotion of hostility, which is a remnant of past hostilities, needs much more attention from the Beirut lights firm, which manufactures hygiene paper in Jordan. In other hostile market scenarios, the conclusions of this examination may be applicable to a strategic study of the boycott model.

Marketing Agility in Subsidiaries: Market Orientation and Marketing Program Standardization as the “Twin Engines” of Performance

Multinational corporations (MNCs) must balance opportunity-seeking initiatives locally with global programs and imperatives. This balancing act between generating and responding to local insights and exploiting standardized marketing programs calls for some form of marketing agility. Under this lens, this study investigates the relationship between market orientation (MO) and marketing program standardization (MPS)—two critical marketing capabilities—and their dual effects on subsidiary performance. The authors compare the cases of Western MNCs’ subsidiaries operating in Japan and Turkey and inquire about the moderating role of a country's economic development (advanced vs. emerging market) and an industry's global competitive interdependence. Analyzing MO at the subcomponent level, they find a positive relationship between responsiveness and MPS in both markets. MPS also functions as a partial mediator between responsiveness and profitability in an advanced market. In an advanced market, both responsiveness and MPS are positively related to profitability and market share. In an emerging market, MPS is negatively related to profitability in support of adapting the marketing program. The results and follow-up discussions with executives from established MNCs support the conceptualization of MO and MPS as reflections of international marketing agility in subsidiaries.

Doing Business in Emerging Market Economies: Challenges and Success Strategies for Western Multinational Corporations

The purpose of this paper was to investigate and analyze the negative impact of emerging economies’ institutional challenges on western multinational corporations (MNCs) operating there. The content analysis methodology was used. The paper reveals that emerging markets’ institutional voids affect western MNCs in terms of cost of doing business, strategy development and overall competitiveness. The conclusions derived from the analysis is that despite emerging economies investment opportunities, rapid economic and demand growth, their competitive landscape can negatively impact western MNCs ability to succeed in these markets. This is due to imprudent policies and inadequate governance structures implemented by emerging market policymakers. The article begins with a brief introductory background of emerging economies. This is followed by objectives of the paper, research method, and the theoretical underpinnings for the motivations of western MNCs to pursue overseas markets in emerging economies. It then provides an analysis of the role and significance of emerging economies in the global economy. This is followed by a critical review of MNCs strategies in emerging markets, and effects of emerging market institutional challenges on MNCs. Then, the implications for MNCs competitiveness in emerging markets are examined. Finally, recommendations for success for both prospective and current MNCs doing business in emerging economies are explored.

Editor's Note

Editor's Note

The past, the present, and the foreseeable future of Russian manufacturing subsidiaries of Western multinational corporations

This article retraces the development of Russian manufacturing subsidiaries of Western multinational corporations from the late 1980s until 2019. Using secondary sources and a unique handcrafted database on significant extensions of manufacturing facilities of Western multinational corporations in Russia during 2012–2018, we present the position of Russian manufacturing subsidiaries of Western multinational corporations before and after the beginning of sanctions. We also indicate the major strategic challenges that they currently face, including the necessity to maintain dual loyalty (to home country and host country authorities), manage the deteriorating quality of business regulations in Russia, and overcome the increasing shortage of qualified personnel at all levels. The data on the opening of new facilities in 2017–2018 reveal that such issues impede but cannot stop the quantitative development of foreign-owned Russian manufacturing facilities. At the same time, saving on managerial expenses and low “investments in non-current assets” of the established manufacturing subsidiaries may break down “the innovation engine” assembled in many Russian manufacturing subsidiaries of Western multinational corporations and bring them into the periphery of their corporate parents, where the attention and resources from the corporate center are lacking.

Holding On While Letting Go: Neocolonialism as Organizational Identity Work in a Multinational Corporation

This paper develops the idea of neocolonialism as organizational identity work in multinational corporations (MNCs). We argue that neocolonialism – the ethos and practice of colonialism and western superiority in contemporary society – is a means through which identity is worked on at MNC headquarters (HQ). In contrast to extant neocolonial studies of western MNCs, which focus on the subsidiaries (the colonized) and how their identities are shaped by the HQ (the colonizer), we analyse how the HQ is shaped by the subsidiaries. We elucidate two versions of neocolonialism at play: a traditional neocolonial ethos, which prevails at HQ, and a more contemporary version, which is silenced. Our findings show that nurturing a shared and enduring organizational identity across all units of an MNC is a quixotic task. Nevertheless, HQ managers in western MNCs keep attempting to do this, suggesting that neocolonial ethos and practice continue to be relevant in these organizations.

Third-party market cooperation under the Belt and Road Initiative: progress, challenges, and recommendations

Since 2013, the Belt and Road Initiative (BRI) has become China’s most important economic diplomacy agenda. While the initiative has made significant progress in trade and investment cooperation and contributed substantially to global development, it also faces skepticism and concerns from members of the international community, particularly developed countries. Third-party market cooperation is a relatively new international cooperation model that encourages Western multinational corporations (MNCs) to participate in BRI to address BRI’s current challenges. Due to support from the governments of China and developed countries, third-party market cooperation projects have been implemented and cooperation mechanisms established. Gradually, Chinese firms and MNCs moved towards more equal positions in project financing under this cooperation model. However, both Western MNCs and BRI countries still face some difficulties in seeking available projects and participating in relevant cooperation mechanisms. To improve the quality of third-party market cooperation, this article suggests that third-party market cooperation should become more transparent, rule-based, inclusive, and binding. By reducing barriers on MNCs and local firms from BRI countries, third-party market cooperation will continue to utilize international resources and ensure the high-quality development of BRI.

Managing “forced” technology transfer in emerging markets: The case of China

Abstract This paper explores how foreign multinational corporations (MNCs) manage risks associated with “forced” technology transfer (“FTT”) policies in emerging markets. Although MNCs are increasingly exposed to appropriability risks from these policies, how they respond is relatively understudied in international business (IB) research. We explore this topic based upon a survey and interviews with Western MNCs doing business in China, as well as a discussion about the recent US-China trade war. We find that, as traditional IB theory would predict, internally-oriented strategies (e.g., internalization, maintenance of informal intellectual property (IP), and control of technological centrality and sophistication) are often used to respond to FTT policies; however, the risks from such policies can sometimes be more efficiently managed by externally-oriented strategies (e.g., non-market activities and reliance on formal IP). We discuss how the co-evolution of MNCs' risk management strategies alongside changing value chains, IP institutions, and conditions determining the leverage of FTT policies appear to contribute to this phenomenon. We argue that IB research should more prominently recognize the role of externally-oriented strategies, not only internally-oriented ones, in managing the complex IP-related institutional challenges present in emerging markets today.

Westernization or localization of human resource management practices in CIS countries? Evidence from Kazakh firms

PurposeThe purpose of this paper is to investigate the peculiarities of human resource management (HRM) practices in Kazakh firms and identify the factors that influence them. Attention is paid to analysis of the country-specific environment, which shapes the peculiarities of HRM and provides discussion on the respective Westernization or localization perspectives.Design/methodology/approachThe paper argues that HRM practices are influenced by a number of factors, some of which are rather specific to Kazakhstan and some are common in a Commonwealth of Independent States’ context. The study uses exploratory research which includes the conduction of a survey, consisting of blocks of questions, for data collection.FindingsThe results show that despite dynamic economic growth of Kazakhstan’s economy, HRM practices are still in transition from those of Soviet heritage to ones that exist in Western multinational corporations. They cannot fully match the country’s needs for HRM development. Several recommendations for the future development of HRM in Kazakhstan are made.Originality/valueThe study examines the adaptation of HRM practices to the business environment in Kazakhstan.

The knowledge protection paradox: imitation and innovation through knowledge sharing

Western multinational corporations (MNCs) that want market access in China have to share knowledge with Chinese partners. This may expose them to imitation, so MNCs prefer to protect knowledge resulting in a strategic paradox: MNCs have to both share and protect knowledge. To analyse this paradox, we developed a theoretical conceptual model capturing the tensions and feedback cycles of this paradox. Next, based on data from the shipbuilding industry, a system dynamics model was developed to simulate the long-term effects of sharing and protecting strategies. The results indicate that protection is detrimental to long-term success, because it undercuts the trust of the Chinese supplier and irreparably reduces innovation rates. Knowledge protection thus reduces instead of increases the ability to share (new) knowledge in the future. A sharing strategy increases imitation, but also trust and knowledge sharing by the Chinese partner, such that it enhances the MNC's innovation rate and long-term performance.

The cul-de-sac of foreign industrial investments to Russia

The aim of this article is to determine the rationale for the ‘irrational’ investment behaviour of multinational corporations (MNCs) in Russia. During the on-going recession in a number of major sectors, MNCs have undertaken only a very limited number of divestments and, instead, have commissioned a record number of new manufacturing facilities (by opening new plants and expanding the capacities of existing plants). To explain this phenomenon, we first provide an overview of existing theoretical and empirical studies on investments in difficult locations and divestments of foreign subsidiaries, and identify the major weaknesses of the prevailing approaches and underlying assumptions of such studies. Next, we present a detailed picture of both industrial investments and divestments in Russia from January 2015 to March 2017. Finally, we indicate how a combination of systemic and contingent factors (pressure from the host country’s government, subsidiaries’ orientation towards the host country’s markets, and the absence of potential local and international acquirers for existing Russian manufacturing facilities of Western MNCs) has created ‘cul-de-sac’ conditions for foreign-owned industrial assets in Russia.

Robustness and flexibility of human resource management practices

PurposeThe purpose of this paper is to retrace the sources of robustness of the operations of Russian manufacturing subsidiaries of western multinational corporation (MNC) during the downturn, from the point of view of applied human resource management (HRM) practices.Design/methodology/approachA repeated survey of heads of Russian manufacturing plants of western MNCs was implemented. The same respondents aswered the similar questions in 2014 and in 2016.FindingsThe current evolution of HRM arrangements in the Russian manufacturing subsidiaries of MNCs can be explained by an attempt for ambidexterity. On the one hand, managers of the Russian manufacturing subsidiaries of MNCs attempt to prevent employee alienation. Thus, they retain permanent contracts and preserve guarantees of home-take pay. On the other hand, there is the elimination of several social benefits. In the author’s opinion, the cost-minimization approach has been used excessively. The authors speculate that the system of social benefits will need to be adjusted again to transform the system from one that is “crisis-proof” to one that is “stagnation adapted.”Originality/valueThe findings provide a basis for a broader discussion on mutation of HRM systems in manufacturing subsidiaries of MNCs facing deteriorating market conditions.

Images of the “other”

This article explores the relationship between Pan American World Airways (Pan Am) and Latin America to understand the role of Western multinational corporations in the historical processes of postcoloniality—that is, the representation of the non-Western “other” to Western audiences. Informed by postcoloniality and the use of a critical hermeneutics method, we draw on 64 years of archived materials from the Pan American World Airways Collection 341, housed at the Otto Richter Library at the University of Miami, as well as numerous histories of the airline. Our findings show how Pan Am gained a powerful position, both politically and economically, which facilitated its ability to construct influential images of Latin American employees, citizens, and the idea of Latin America. Although Pan Am ceased operations in 1991, its years of dominance in South America had the capability to contribute and provide insights into our understanding of the continued postcolonial processes and the idea of (North) “Americanism.” More importantly, our article demonstrates how using a postcolonial framework can assist organizational and business scholars to better understand the role that historical patterns play in organizations still today. We hope that using alternative methodologies and theories such as postcolonialism to examine contemporary management culture, we will better be able to understand how history has been “written” in an effort to lessen “Western” ideologies and include diverse epistemological perspectives.

Current Strategic Actions of Russian Manufacturing Subsidiaries of Western Multinational Corporations

ABSTRACTThis article provides a critical analysis of the current strategic actions of Russian manufacturing subsidiaries of Western multinational corporations. The authors retraced the content of strategic actions in various aspects of subsidiary management implemented during 2015–16 and the activities of strategists of different ranks. The authors found that some actions that multinational corporations in Russia implemented during 2014–16 represent standard strategic practices during downturns. In contrast, other strategic practices (facilities expansion against negative market dynamics and reluctance to change the system of permanent job contracts and abundant employee social benefits) generally contradict with the textbook solution for company strategies during downturns.

Who cut the ribbon? A quantitative analysis of formal opening ceremonies of new plants of multinational corporations in Russia

This paper reports on a study of formal opening ceremonies of new plants of multinational corporations in Russia. We argue that such ceremonies have profound symbolic meanings, namely managing anxiety and signaling commitment, as well as practical importance, particularly when top executives of corporate parents meet with top officials from the host countries at such ceremonies. The database embraces the entire population of public opening ceremonies of new plants of western multinational corporations (MNCs) in Russia from 2012 to 2016. The analysis revealed that in 2016, the unwillingness of both corporate CEOs and local governors to participate in plant opening ceremonies began to increase. More than one-third of plant opening ceremonies in 2016 were low-profile ceremonies ignored by top officials from corporate parents and local authorities from the host country. The growing absence of local governors is attributed to the smaller size of newly opened plants and the impact of sanctions imposed on Russia by the United States and European Union following the inclusion of Crimea into Russia in 2014. This paper also indicates a promising direction for further studies – a replication study that should embrace public opening ceremonies of new plants of foreign MNCs in China, India, and Brazil.

Eastern versus Western Culture Pricing Strategy: Superstition, Lucky Numbers, and Localization

Eastern versus Western culture pricing practices differ with respect to price endings; however, Eastern cultures are increasingly influenced by Western multinational corporations. At the same time, increasing antiglobalization sentiment suggests the use of localization strategies in these markets. The authors investigate whether pricing practices still differ in this new environment, examine the role of superstition, and ask whether Western brands can benefit from localizing pricing practices. They explore the use of lucky number price endings and consumer responses to such pricing strategies in Singapore, an Eastern culture that is strongly exposed to Western multinational influence. Using a content analysis of newspaper advertisements and two experiments, the authors find that superstitious pricing practices continue, especially with high-priced items and brands of Eastern (vs. Western) origin. In the experimental studies, they find that superstitious pricing has a positive effect on price attractiveness and that foreign brands that localize their prices benefit from a more positive brand attitude.

Rana Plaza Fieldwork and Academic Anxiety: Some Reflections

The Rana Plaza collapse, which took place in Bangladesh in 2013, killed and injured at least 1135 and 2500 people respectively. Although the structural fault with the building had been identified before the collapse, the owner of the building and five garment factories housed in Rana Plaza had forced workers to continue production for 31 Western multinational corporations (MNCs). It was the deadliest structural failure in modern history, and resulted in a horrific rescue operation. First, the fire brigade did not have the necessary training and equipment to rescue the victims, and so the general public also participated in the rescue operation. Second, when victims were rescued, it was found that many of them had lost their limbs or suffered severe internal injuries, including internal organ failure, due to several days without water. After the completion of the rescue, the victims received neither appropriate compensation nor rehabilitation to overcome their psychological trauma and physical disabilities.

Evolution of international and Chinese anti-bribery and corruption compliance programs

Purpose The purpose of this study is to explore the regulatory framework in China and the extent to which Chinese multinationals have implemented and disclosed their anti-bribery and corruption (ABC) compliance practices. This is done against the backdrop of the evolving international ABC compliance standards. Design/methodology/approach This study is based on detailed reviews of the ABC compliance standards of international organizations; legislation passed by the USA, the UK and Chinese Governments; seven semi-structured interviews with leading experts in the field; and comparisons of ABC program disclosures of four Chinese with four best-in-class western multinational corporations. Findings A high level of convergence was found in the ABC standards published by the international organizations. Several positive features were found in the Chinese ABC regulatory frameworks but our findings indicate that there is minimal disclosure around ABC compliance program practices. This paper shows that a transparent disclosure would represent an easy win for Chinese multinational corporations and contribute to raising their reputations internationally. Research limitations/implications While there are numerous studies in the law literature on ABC compliance standards and the extent to which they are effective in achieving their objectives, this is an emergent area in management research, to which our study makes a contribution. Future research could explore how other emerging economies are tackling this important issue. Practical implications By proactively adopting ABC compliance practices, corporations can seize the ethical high ground and build solid reputations with their stakeholders. Originality/value It is believed that this study is the first academic study that compares Chinese and international ABC standards.

Against the wind – new factories of Russian manufacturing subsidiaries of Western multinational corporations

Using a series of interviews with the heads of Russian subsidiaries of Western multinational corporations and a unique database registering the openings of their new manufacturing plants in Russia during 2014–2015, we trace the changing demography, geography, and economics of foreign direct investments in industrial assets in Russia. We demonstrate that foreign companies in general were capable of overcoming the adverse economic conditions of 2015 and were able to complete their projects of installation of new factories that were launched in 2012–2013. More importantly, economic sanctions caused accelerated completion of previously started industrial works. Such new and upgraded factories not only target current opportunities and market niches in consumer markets but also aim at exploring possibilities in core industrial markets, including mining equipment, transportation equipment, and other types of industrial equipment. We also highlight the emergence of a new type of industrial project known as “fenced field projects,” which are new manufacturing facilities within the existing industrial sites of successful Russian firms. This new type is particularly attractive for companies in the machine-building and chemical industries. Fenced field projects can be either wholly owned subsidiaries or joint ventures, but the main feature of such projects is the active use of the developed physical and business infrastructure of the “hosting” Russian company. We demonstrate not only the changes in the geographic distribution of foreign direct investments in Russia but also the impact on medium-sized industrial towns (200,000–400,000 inhabitants), the most frequent location for industrial projects by foreign multinationals.