This study hypothesizes and tests whether the degree to which managers exercise earnings discretion relates to their value system (i.e., culture) as well as the institutional features (i.e., legal environment) of their country. We find that uncertainty avoidance and individualism dimensions of national culture explain managers' earnings discretion across countries, and that this association varies with the strength of investor protection. This study extends prior literature by documenting that both national culture and institutional structure are important factors that explain corporate managers' earnings discretion practices around the world, and that the influences of these factors on earnings discretion are conditional on each other.
Foreign operations are becoming increasingly important for US companies. We investigate whether the market's valuation of foreign earnings is a function of the firm's geographic segment disclosures. Specifically, we examine the effects of an increase in the number of geographic segments disclosed and the inclusion of earnings measures in geographic segment disclosures following the adoption of SFAS 131. We find strong evidence that our proxies for increased disclosure are positively associated with the valuation of foreign earnings. Our results are robust to a number of sensitivity analyses. Taken together, our results suggest that the pricing of foreign earnings is associated with important aspects of the firm's information environment. Journal of International Business Studies (2009) 40, 421–443. doi:10.1057/jibs.2008.72
In recent years the international trade literature has focused on the effects of exporting and its benefits in an open economy. Scholars note that engaging in trade enhances knowledge spillovers, and results in income growth and income convergence among trading partners. Although the macro-literature has long addressed economic convergence, there has been relatively little research examining the effect of exporting on ex post firm performance. Likewise, there has been little research that examines the differential learning-by-exporting effects across industries. In this paper we build upon the convergence literature to argue that engaging in exporting provides firms, especially firms in technologically lagging industries, the opportunity to benefit disproportionately from knowledge spillovers. Using a sample of Spanish manufacturing firms from 1990 to 1997, we investigate empirically how exporting differentially influences the innovative outcomes of firms in technologically leading vs lagging industries. We find evidence that firms in technologically lagging industries (in which Spain lags the global technology frontier) learn more from exporting than those firms in technologically leading industries (in which Spain is at, or near, the global technology frontier). The results enrich the traditional convergence argument by suggesting that industry heterogeneity matters to knowledge transfer, and stands to play a substantial role in reducing knowledge gaps. Journal of International Business Studies (2008) 39, 132–150. doi:10.1057/palgrave.jibs.8400320
This Perspective brings together the remarks written by the authors (or designates) of 16 new JIBS Decade Awards, given in 2009 to the most influential articles published in the journal for 1970 through 1985. The authors briefly discuss the core insights of their articles and assess the relevance of their work for today's scholars. A short history of the JIBS Decade Award precedes these mini-retrospectives. Journal of International Business Studies (2009) 40, 1581-1590. doi: 10.1057/jibs.2009.67
The objective of this study is to evaluate the various aspects of the business opportunities and peculiarities of negotiating in the People's Republic of China as viewed by businessmen who attended the recent Canton Trade Fairs. Many of the peculiarities still remain, as attested to by the respondents of the self-administered questionnaires that were mailed to 218 businessmen. However, these businessmen indicate that the Chinese are becoming more flexible in their negotiations and are sincerely interested in expanding their trade with the United States.
To date, trade between the two countries is limited in both volume and value; and it has been characterized by a negative balance with the United States. Businessmen feel that as the United States' demand for many of their resources and labor intensive products increases and the trade position of the Chinese improves, their demand for American capital equipment and other goods will result in increasing business opportunities with the People's Republic of China.
We extend the stages model of internationalization to incorporate a sophisticated consideration of temporal and cross-national variation in the uncertainty of the policy environment. Using a sample of 6465 international expansions of 665 Japanese manufacturing firms in 49 countries, we develop arguments from internationalization and bargaining power perspectives to show how Japanese firms manage policy uncertainty in host country environments through the within-country sequencing of investments. Although a distribution to manufacturing entry sequence tends to prevail in countries with low levels of policy uncertainty, as uncertainty in the policy environment increases, initial entry by distribution is increasingly likely to be eschewed in favor of an initial entry by a joint venture manufacturing plant. We suggest that this change in investment sequence occurs as firms shift from an emphasis on developing knowledge about local markets and consumers in low-hazards markets to an international expansion strategy in uncertain policy environments that places knowledge development of the policy environment at the forefront of a firm's strategy. Journal of International Business Studies (2003) 34, 227–241. doi:10.1057/palgrave.jibs.8400031
We use an interdisciplinary approach to investigate multinational banks’ foreign activities. We bridge core concepts from the stages theory of internationalization to internalization theory, to extend the literature on the defensive expansion hypothesis. Unlike the primarily aggregate levels of analysis employed in previous research on multinational banking, we utilize a firm-level analysis of the internationalization experiences of 21 Japanese banks in the period 1980–1998. We find that banks undertake foreign direct investment to secure internalization benefits by following their existing clients, and to achieve economies of scale in the application of their intangible assets in international markets. The magnitude of these relationships, however, is contingent upon the level of a bank's experience in the host countries. Consistent with predictions from internationalization theory, we find that the motivations for international expansion can change over time. Journal of International Business Studies (2008) 39, 231–248. doi:10.1057/palgrave.jibs.8400317
In this paper we examine foreign location choices of the top 100 US multinational corporations (MNCs) in 1980 and 2000. We first ask whether there has been a change in MNC foreign location choice in this two-decade period. Second, we explore the underlying reasons of location change by focusing on country-level factors, accounting for firm-, industry- and regional-level explanations. Our findings suggest, first, that the extent of MNCs' activities around the globe is more extensive than assumed by regionalists' arguments and well beyond Ohmae's TRIAD, but still less widespread than claimed by the globalists – the two main traditions within the globalization–regionalization debate. Second, we uncover an interesting de-location pattern in this period. Third, we develop an integrative framework where both economic and institutional-cultural arguments are shown to influence MNCs' foreign location choice in different ways. We conclude with a discussion of our findings, and provide suggestions for future research. Journal of International Business Studies (2007) 38, 1187–1210. doi:10.1057/palgrave.jibs.8400307
Although several studies have shown that inward foreign direct investment (FDI) often leads to greater host country productivity, researchers have yet to determine the relative importance of direct technology transfer and competitive pressure. To assess the relative importance of the two channels, we examine the US auto-component industry between 1979 and 1991. During this period, Japanese automobile assemblers began to produce vehicles in North America, and began to purchase inputs from US auto-component manufacturers. Those US manufacturers that sold components to Japanese transplants would be the direct recipients of any technologies transferred from the Japanese. Although we find that the direct investment by Japanese assemblers was associated with overall productivity improvement in the US auto-component industry, we find little evidence of direct technology transfer. The productivity growth of US suppliers affiliated with Japanese assemblers was no greater than that of other, non-affiliated US suppliers. Further, we find that the Japanese assemblers tended to purchase components from less productive US suppliers and, moreover, that low-productivity suppliers that sold goods to Japanese assemblers had a higher survival rate than low-productivity suppliers that did not sell to Japanese firms. The results suggest that increased competitive pressure in the auto-sector was the main cause of overall productivity improvement, at least during the initial stages of FDI of the 1980s. Journal of International Business Studies (2003) 34, 199–218. doi:10.1057/palgrave.jibs.8400017
Based on the concepts of North's (1990) political economy of national institutions and economic behavior, we investigate how formal and informal institutional features influence the likelihood that a cross-border acquisition deal will be completed, as well as the time taken for its completion after announcement. Additionally, we study how past experience with completed acquisition deals moderates the effects of institutional differences. We focus on a relatively new context – the pre-completion stage of acquisition processes. We test our hypotheses using data from 2389 announced cross-border acquisition deals in the international business service industry (1981–2001). We find that differences in national formal and informal institutions explain part of the variation in the likelihood that an announced cross-border acquisition deal will be completed, as well as the duration of the deal-making. In addition, organizational learning moderates the effects of institutional distance: past experience with completed cross-border acquisition deals increases the likelihood of a subsequent deal completion in institutionally closer environments, but shortens the deal duration in institutionally distant environments.
We identify inward investment as an important impetus to outward investment, supplemental to the impetuses depicted in conventional internationalization frameworks. By incorporating both the spillover and competition effects of foreign entrants, we develop an integrated framework of the inward–outward investment relationship for different investment modes and different home-country and host-country pairs. Our analysis of venture capital (VC) investments worldwide from 1985 to 2007 shows a positive spillover effect on outward investment for inward co-investments and a negative competition effect on outward investment for inward standalone investments. We find the strongest effects when the host country is a laggard in the VC industry and the home country is a leader.
The evolution of foreign entry in the form of joint ventures and wholly owned manufacturing operations is examined as a staged process shaped by experience and imitation dynamics at the firm, group, and industry levels of analysis. The expansion of South Korean firms into China between 1987 and 1995 lends support to the staged view of foreign entry. Over time, technology-intensive firms are more likely to abandon joint-venture entry modes, owing to contractual hazards. Firms in the same business group are found to imitate each other's choice of joint ventures and wholly owned plants. Firms in the same industry mimic each other's choice of wholly owned plants, though not of joint ventures. Journal of International Business Studies (2003) 34, 185–198. doi:10.1057/palgrave.jibs.8400016
This study uses a unique sample to evaluate changes in shareholder wealth from announcements of expansion by US firms into 18 transition economies, through four entry modes, from 1987 to 1999. On average, expansion in transition economies is associated with significant positive wealth effects. Results show that value creation is most significantly associated with expansion through less risky entry modes into host countries that are in the more advanced stages of market liberalization and structural reform. Sample firms with lower profitability also experience significantly higher abnormal returns, while significant value creation documented for firms entering transition economies in 1989, 1990, and 1992 suggests first-mover advantages. Journal of International Business Studies (2006) 37, 179–195. doi:10.1057/palgrave.jibs.8400187
In the current study, expansion of foreign investment in transition economies such as China is analyzed as an organizational selection process in a community ecology setting. Insights from organizational ecology are used to explain how institutional forces constrain ecological processes, together driving the evolution of the population size of foreign-invested enterprises (FIEs), privately held domestic firms, and state-owned domestic organizations. We argue that the variation in the relative forces of ecological processes and institutional constraints across FIEs and their domestic rivals accounts for the expansion of FIEs in China. On the one hand, in many transition economies, institutional constraints are imposed on foreign enterprises by regulation that limits FDI opportunities. On the other hand, after entry, foreign enterprises can benefit from their competitive advantages in their ecological struggle against domestic rivals. This logic produces different sets of hypotheses as to foreign enterprises’ density and sales growth, in interaction with domestic organizations. Using a data set of the Chinese construction industry in 29 provinces over the 1993–2006 period, estimation of a partial adjustment growth model produces support for our theoretical claim.
Some argue that corporate finance and governance practices were among the root causes of the Asian crisis. It is alleged that high and increasing corporate debt ratios were partly to blame. This claim is overstated: only South Korea and arguably Thailand had leverage ratios significantly above the G7 range, and only South Korea had an income-gearing ratio higher than the G7. Although the reliance on short-term debt was high, there was no drastic change in the maturity structure of debt before the crash. However, conventional factors are relatively more successful in explaining leverage for firms that were less closely connected to the relationship-based financing system. Our paper links to ongoing research on investor protection, cronyism, connections between business and government, and business groups. It ends by commenting on the 2008 financial crisis, currently engulfing the world, and highlights some similarities and paradoxes. Journal of International Business Studies (2009) 40, 990–1004. doi:10.1057/jibs.2009.13
Culture is a critical variable in international business (IB), and Leung, Bhagat, Buchan, Erez and Gibson (2005) enrich our understanding of its role. However, that said, their framing of this variable conflates the role of national culture (NC), a particular form of culture, with culture itself, a more pivotal, holistic and central construct. This paper, by commenting on and critiquing their approach, seeks to shift the theoretical center of gravity from a NC-centric paradigm to a culture-centric, constructivist one, and from a top-down, bottom-up view to a flatter, glocalized one. Implications are provided which suggest that research should address cultural processes of patterning and production, as well as cultural forms, such as global communities and global culture (GC), which share with or even capture the spotlight from NC as a focus for studying and developing IB cultural theory. Journal of International Business Studies (2009) 40, 237–254; doi:10.1057/palgrave.jibs.8400410
The purpose of the study is to shed light on the antecedents and consequences of tension felt during international business negotiations. A total of 176 American and Chinese executives participated in simulated international business (buyer–seller) negotiations. The negotiations were videotaped, and the participants completed questionnaires. Each participant was also asked to review his/her videotaped negotiation, rate the tension felt on a videotape review form, and briefly describe the antecedents of the tension felt. The data collected were then analyzed using first a structural equations approach and then a more exploratory content analysis. Both Chinese and American executives felt tension during the negotiations. For the Chinese, greater levels of tension led to an increased likelihood of agreement, but also led to lower levels of interpersonal attraction and in turn lower trust for their American counterparts. For the Americans, tension felt decreased marginally the likelihood of an agreement, did not affect interpersonal attraction, but did have a direct negative effect on trust. A series of other cultural differences are also reported. The measure of tension felt developed in the study appears to be useful methodologically, theoretically, and practically. Journal of International Business Studies (2006) 37, 623–641. doi:10.1057/palgrave.jibs.8400215
We are pleased that Dunning et al. have provided macro (country) level data demonstrating the increased internationalization of many nations over the past decade. We also appreciate their findings lending support to our perspective on the regional nature of world business. Our work was based solely on micro (firm) level data. Both country-level data and firm-level data have methodological problems, which we attempt to reconcile in this commentary. We also address the broader conceptual issues of how to interpret country-level vs firm-level data. Journal of International Business Studies (2007) 38, 200–205. doi:10.1057/palgrave.jibs.8400242
A retrospective by John H. Dunning on location and the MNE, written in the form of responses to questions posed by Rajneesh Narula in an interview recorded at the University of Reading which was shown at the JIBS Decade Award session at the AIB annual meetings in Milan, June 2008. Journal of International Business Studies (2009) 40, 20–34. doi:10.1057/jibs.2008.75
Our study shows that preferred leadership prototypes held by female leaders differ from the prototypes held by male leaders, and that these prototype differences vary across countries, cultures, and especially industries. In general, female managers prefer participative, team oriented, and charismatic leadership prototype dimensions more than males. Contrary to popular belief, both males and females valued humane-oriented leadership equally. Gender egalitarianism and industry type were important moderators of the gender–leadership prototype relationship. Gender egalitarianism increased females' desire for participative leadership, while prototype differences between genders were magnified in the finance and food industries.
Entry mode choice is a critical ingredient of international entry strategies, and has been voluminously examined in the field. The findings, however, are very mixed, especially with respect to transaction-cost-related factors in determining the ownership-based entry mode choice. This study conducted a meta-analysis to quantitatively summarize the literature and empirically generalize more conclusive findings. Based on the 106 effect sizes of 38 empirical studies, the meta-analysis shows that the findings of the existing studies are moderated to varying degrees by both study-setting factors and statistical artifacts, although the combined overall effects of transaction cost-based determinants are consistent with the predictions of transaction cost economics. We extensively discuss the implications of meta-analytical results, especially moderating effects of location, country of origin, industry type, and statistical artifacts, highlight the measurement adequacy, equivalence, and multidimensionality of transaction cost determinants, and present our suggestions to improve theoretical inquiries and empirical verifications on entry mode choice. Journal of International Business Studies (2004) 35, 524–544. doi:10.1057/palgrave.jibs.8400106