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Political aspects of MNE theory
Abstract
Political behavior by MNEs has usually been ignored, downplayed or passively treated in dominant economic models of the multinational enterprise. In order to remedy this lacuna. Dunning's eclectic paradigm is expanded to integrate political dimensions in the analysis of ownership, internalization and location advantages.© 1988 JIBS. Journal of International Business Studies (1988) 19, 341–363
... Studies often back claims that corruption raises the cost of investing, lowers earnings, and causes decline in investment inflows (Alshehry, 2020; Gasanova et al., 2017; Luu et al., 2018; Nizam & Liaqat, 2022; Zander, 2021). Lack of transparency in the business environment raises costs of international business operations, discourages investors from investing because risk reduction is regarded crucial in business (Boddewyn, 1988). ...
... Findings partly oppose the grabbing-hand theory by (Boddewyn, 1988), suggesting a direct and strong negative correlation between corruption and FDI. Although there is similarity in an overall negative impact, the obtained coefficient is statistically insignificant. ...
... Since "COR" and "SEZ" are both negative, presence of SEZ unambiguously reduces FDI inflows. However, raised significance in prior negative impact increases business cost and operational-inefficiencies, consistent with (Boddewyn, 1988) and (Wei, 2000) under hypothesis 1, where corruption moves towards "grabbing hand" for FDI. ...
... This does not need to be at the national border, but can also be at the subnational and supranational level. The multi-locational co-evolutionary relationship between location, politics, and the MNC which has also attracted the attention of business historians (Boddewyn, 1988;Jones & Khanna, 2006;Medina, Bucheli, & Kim, 2019). More recent research has built on past frameworks and approaches but also complemented them. ...
... IB research has predominantly conceptualized political aspects as external country-level constraints (or 'uncontrollables') to which firms must adapt (Delios & Henisz, 2003) rather than as enactable or negotiated factors (Boddewyn, 1988). For example, the early versions of the Integration- Responsiveness grid (Doz, Bartlett, & Prahalad, 1981;Prahalad, 1975; see Table 1) defined local responsiveness ''in terms of host government demands'' (Westney, 2021: 30). ...
... For instance, Kolk and Pinkse (2008) argue that considerable variation in national regulatory responses to global climate agreements has led to climate-related countryspecific advantages that induce MNCs to invest in countries with climate-friendly policies (see also Patala, Juntunen, Lundan, & Ritvala, 2021). Seminal works Hymer (1960), Vernon (1971Vernon ( , 1979, Robock, (1971), Kobrin (1979), Boddewyn, (1988) and Brewer (1992) Baysinger (1984), Hillman and Hitt (1999) and Hillman, Keim, and Schuler (2004) Banerjee (2008) Over time, IB has gradually conceptualized MNCs as active agents that shape and enact their political environments. This is not a completely novel discovery: the historical roots of this approach can be traced back to the literature on MNCgovernment relations (e.g., Vernon, 1971) because developing countries in particular regulated the entry of MNCs, thereby leading to MNC-host government bargaining (Ramamurti, 2001). ...
How has international business (IB) research evolved to account for the politicization of the context in which multinational corporations (MNCs) operate? To address this question, we review research at the nexus of location, politics, and the MNC from 2000 through 2021. Rooted in classic IB theories, our review reveals three directions in current IB research: (i) expansion of MNC agency in shaping the political environment, (ii) a wider diversity of actors involved in the business–government–society interface, and (iii) extension of the levels of analysis from country level to sub- and supra-national levels. This three-fold evolution has moved IB research closer to the field of political geography, but the shift has remained largely implicit and its theoretical linkages are few. Drawing on key theoretical insights from political geography, we discuss the opportunities and challenges of bringing political geography into IB research.
... Les relations politiques fondées sur une expérience gouvernementale sont créées lorsque les principaux décideurs d'une entreprise ont travaillé en politique ou en tant que hauts fonctionnaires du gouvernement, avant leur carrière professionnelle. Dans de tels cas, les décideurs de l'entreprise sont susceptibles d'avoir gardé des contacts au sein du gouvernement et d'avoir acquis les capacités de comprendre la façon dont le gouvernement fonctionne (Bertrand, Kramarz, Schoar, & Thesmar, 2006;Boddewyn, 1988;Kramarz & Thesmar 2013 ;Lester et al, 2008). Les relations politiques fondées sur un parcours commun sont établis lorsque les dirigeants d'entreprise et ceux du gouvernement ont le même niveau d'étude et ont étudié ensemble ou appartiennent à un réseau actif d'anciens qui compte (Kramarz et Thesmar, 2013;Siegel, 2007). ...
... Political connections based on government experience are created when a firm's top decision makers have worked in politics or as top government officials prior to their business career. In such cases, the firm's decision makers are likely to have kept contacts in the government and to have acquired capabilities related to understanding how the government operates (Bertrand, Kramarz, Schoar, & Thesmar, 2006;Boddewyn, 1988;Kramarz & Thesmar, 2013;Lester et al., 2008). Political connections based on common educational background are established when firm and government leaders share the same educational background and know each other from studying together at the same school or from belonging to a relevant and active alumni network (Kramarz & Thesmar, 2013;Siegel, 2007). ...
... Political connections based on government experience are created when a firm's top decision makers have worked in politics or as top government officials prior to their business career, in which case they likely keep contacts in the government and have acquired capabilities related to understanding how the government operates (Bertrand et al., 2006;Boddewyn, 1988; 82 Kramarz & Thesmar, 2013;Lester et al., 2008). Political connections based on common educational background are established when firm and government leaders share the same educational background and know each other from studying together at the same school or from belonging to a relevant and active alumni network (Kramarz & Thesmar, 2013;Siegel, 2007). ...
This dissertation is composed of the three essays, each contributing to address part of the puzzle regarding how different types of political connections affect firms’ international expansion strategies and performance. The first essay examines how political connections moderate the relationship between host country attributes and international strategy in a sample of greenfield investments in manufacturing during the 2003-2010 period. The second and third essays examine how political connections directly impact a firm’s international expansion strategies and performance. The second essay investigates the role of different types of political connections on a firm’s international investments amount and risk profile. Finally, the third essay analyzes the role of political connections as an explanatory factor of firms’ ability to accelerate the provision of funding and development of their project finance-based investments. Both the latter two essays rely on an original dataset on various political connections enjoyed by the largest French firms during the 2003-2012 period.
... Часто ці дослідження розглядали різноманітні економічні змінні, а також соціальні та демографічні змінні, на відміну від попередньої практики групування країн за географічним принципом. Деякі автори досліджують міжнародні маркетингові дані, включаючи інформацію про політичні умови, торгівлю, транспорт, зв'язок та споживання [8][9][10][11][12][13]. Використовуючи систему аналізу BC Test, це дослідження виявило кластери пояснювальних змінних та країн, продемонструвавши взаємозв'язок між кластерами змінних та кластерами країн. ...
... Було визначено шість скупчень країн, а деякі країни не могли бути пов'язані з певним скупченням. Ці висновки демонструють, що очевидні взаємозв'язки між змінними не завжди мають місце, і що географічна близькість як подання подібності вводить в оману [8][9][10][11][12]. ...
... Here are some suggestions on a way forward and a question for you to answer. 1 (2017) recently claimed that "the central business of MNEs is politics by other means." This phenomenon has long been recognized in the theorization of the MNE and of its relations with governments (Boddewyn, 1988(Boddewyn, , 2016 as well as in the emerging perspectives of corporate political activity, political CSR, and non-market strategy. Nevertheless, despite considerable progress in framing the political relations between international firms and external institutions, the dynamic processes through which MNEs take political initiatives remain obscure. ...
... Here are some suggestions on a way forward and a question for you to answer. 1 Stewart Clegg (2017) recently claimed that "the central business of MNEs is politics by other means." This phenomenon has long been recognized in the theorization of the MNE and of its relations with governments (Boddewyn, 1988(Boddewyn, , 2016 as well as in the emerging perspectives of corporate political activity, political CSR, and non-market strategy. Nevertheless, despite considerable progress in framing the political relations between international firms and external institutions, the dynamic processes through which MNEs take political initiatives remain obscure. ...
This article is part of the AIB Insights interactive lead article series. The question raised in this article is: Should your IB research deal with power? Although much work has been published on the political relations between MNEs and external institutions, it is noted that “the dynamic processes through which MNEs take political initiatives remain obscure.” The article discusses possible reasons for this lack of knowledge in the literature, sketches out interesting angles IB researchers can take to explore the topic, and presents some tools for analyzing power in MNEs.
... In developing economies, government policies and initiatives affected local MNE operations through, for example, expropriations, limitations on profit repatriations, demands on technology transfer and licensing, and local employment and content rules. MNEs, in turn, attempted to influence home and host country governments and external stakeholders, using lobbying for preferential treatment, alliances with other firms, bribery, and public relations campaigns to further their goals in various markets (Boddewyn, 1988). Conflicting interests oftentimes led to friction and also clashes between the interests of national governments and MNEs (e.g., Dunning, 1998;Knight & Chapman, 2004;Merrett, 2007;Sandvik & Storli, 2013). ...
This paper first traces the evolution of the Tech Cold War to multipolarization in the context of major developments in the global economy, i.e. the ascent of China in the 21st century, antagonistic rivalry for technological supremacy between the United States and China, and the impending bifurcation of the world economy and its consequences. The paper then discusses the implications of the aforementioned developments for international business (IB) research and practice. Research topics include the Global North-South divide, nonmarket influences, government-MNE relationships, industrial policy and techno-nationalism, innovation in a multipolar world economy, the rise of middle powers, and innovation under geopolitical pressure.
... Cui et al. (2023) point to the prohibitive costs of such a bifurcated world which, in their opinion, will make such a scenario unlikely. However, the literature on R&D internationalisation so far has neither explicitly addressed the impact of politics on decisions about international R&D projects, nor has it addressed the role of MNEs as political entities in the spirit of the works of Kobrin (1979), Boddewyn (1988) and Child (2018). ...
... This effect was later investigated by Domke-Damonte (2000) with the use of the resource-based theory supported by the OLI model. Examining the political dimension of MNEs behavior was examined by integrating and expanding the political aspect of MNEs into the Dunning's eclectic paradigm of ownership, internationalization, and the location advantages (Boddewyn, 1988). The Dunning's eclectic paradigm model reveals that the market and efficiency seeking are the Chinese provincial firm's main motive of investing in foreign countries (Chen, 2015). ...
Socially responsible mutual funds (SRMF) and the "antisocially conscious", Vitium Global Fund Barrier Fund (formerly known as the Vice Fund, the term used in this paper) returns, volatility patterns, and causal effects are examined in this study within the context of the lessons learned from the 2008 Global Economic and Financial Crisis (GEFC). In times of a new and unprecedented crisis due to the COVID-19 pandemic, a look back to our recent past reveals that volatility patterns on daily stock returns presented some level of predictability on prices for both types of funds. The research findings are significant as funds' potential predictability could help market players when designing their investment strategies. More specifically, an increase in volatility persistence is found after the GEFC, together with an increase in the Vice Fund's resilience to market shocks. Although all funds, without substantial differences, take time to absorb the shocks. A noteworthy outcome relates to SRMF that was able to achieve higher returns and exhibited lower volatility levels during the crisis period. Whereas the Vice Fund revealed long-run sustainable performance offering fund managers and investors investment opportunities that are endorsed by the fund performance over the period. Furthermore, unidirectional causality was found running from the Vice Fund to the SRMF, exhibiting a clear dominance during the GEFC period. The research findings contribute to the debate on the future of socially responsible investment, indicating that SRMF appears to be driven by "antisocially conscious" funds signaling limited rewards for investors inclined to invest in funds that are considered socially responsible.
... [Insert Figure 1 here] Few studies in this area seek to integrate different types of risks and examine managerial risk management. For example, Boddewyn (1988), Fitzpatrick (1983, Mascarenhas (1982), Miller (1992), and Quarantelli (1988) outline strategies for responding to risk, and Baird and Thomas (1985) propose new approaches for identifying the relationship between specific riskssuch as environmental, industry, organizational, strategic problems, and risks associated with decision-making -and risk-taking behavior of firms. However, much of this work was published at least three decades ago, and not many of these studies thoroughly address risk in the context of MNEs. ...
Research in international business emphasizes the importance of market and non-market risks such as economic/financial and political/institutional risks in firm internationalization. While political and institutional risks are important non-market factors affecting location and ownership decisions and the performance of multinational enterprises (MNEs), there are growing concerns about emerging non-market risks such as natural disasters, technological disasters, political conflicts, and social conflicts. The challenges facing MNEs in dealing with these emerging non-market risks are likely to grow. To understand these emerging non-market risks better, this chapter explains their characteristics and factors determining MNE awareness of, preparedness for, and response to those risks. The chapter concludes with recommendations for future research agendas.
... In fact, a number of scholars (e.g., Coate, Higgins, & McChesney, 1990;Faith, Leavens, & Tollison, 1982;Mehta, Srinivasan, & Zhao, 2020;Neven, Papandropoulos, & Seabright, 1998) consider antitrust outcomes to be -at least partially -subject to political pressure. Yet, foreign firms suffer from a liability of foreignness when attempting to influence national authorities, as they are simply less capable and legitimate as compared to domestic firms in terms of employing the political economic mechanisms that yield privileges via corporate political strategy (Boddewyn, 1988;Grosse, 2005;Hymer, 1976Hymer, [1960; Kindleberger, 1969;Zaheer, 1995). Accordingly, antitrust authorities face political pressure to provide some leniency that favors domestic investors (Rodriguez & Menon, 2010). ...
The literature on quality-management standards has generally focused on the drivers, motivations, and performance effects of adopting such standards. Yet the last decade has witnessed a substantial degree of decertification behavior, as organizations have increasingly decided to voluntarily withdraw from quality-management standards by not recertifying. While the drivers of the decision to initially adopt quality-management standards have been extensively studied, the drivers of the decision to decertify have received scant scholarly attention. We argue that innovative organizations are generally prone to retaining quality-management certification and thus exhibit a tendency to not abandon certification; however, radically-innovative organizations are more prone than incrementally-innovative organizations to discontinue quality-management standards and thereby exhibit a tendency to withdraw from quality certification. We compile World Bank data surveying facilities based in 50 countries and 103 industrial sectors across the 2003 to 2017 period. Taking advantage of the data’s panel properties yields a dataset composed of up to 1,755 facility-level observations of recertification decisions for empirical analysis. Our empirical testing employs a probit estimation technique that accounts for the appropriate fixed effects and generates results that support our theoretical priors regarding decertification behavior.
... We believe that there are ample opportunities for use of other theories and frameworks in the Indian setting including but not limited to competitive dynamics, upper echelons theory, resource dependence theory, signaling theory, dynamic capabilities, liability of foreignness, and transaction cost economics (TCE). For instance, political aspects of MNE theory underscore the crucial role of political connections of key organizational actors as a source of competitive advantage (Boddewyn, 1988), and could be used to explore how political connections are also crucial for firm performance (Peng & Luo, 2000) in India. Recent studies also reveal that as in China , the context of India can help develop new theories in strategic management. ...
In 1991 India embarked on far-reaching economic, financial and regulatory reforms, which led to not only a surge in economic growth, but also spurred scholarly interest in Indian firms, their strategies, and their business environment. As it has been almost three decades since the reforms were initiated, we believe that it is an appropriate time to take stock of the research on strategic management in the Indian setting. Our scoping review finds three dominant themes in extant research: impact of environment (specifically liberalization) on firms, strategies of firms, and the different ownership structures of firms. We discuss the key findings within these domains and identify the theories and methods that scholars have used to address their research questions. We assert that the unique Indian context — a mix of public and private economy operating within a democratic system — provides a rich environment for not only testing existing theories in strategic management but also generating new theories. We conclude by identifying several important areas of research and urging strategy scholars to engage with the opportunities offered by the evolving Indian business environment.
... When we added political connection and institutional distance as control variables into model 5 and model 6, the goodness of fit of the model increased (R 2 increased from 0.873 to 0.875). In model 7, political connection has a negative and significant impact on the relationship between R&D investment and green innovation (β = − 0.006, p < 0.1), which means that when R&D investment is low, political affiliation can bring more policy, capital, and information support to enterprises (Boddewyn 1988;Bonardi et al. 2005;Rodriguez et al. 2005). Political connection moderates the negative effect of R&D investment on green innovation in the initial stage of cross-border M&A; when the R&D investment of enterprises is high, they pay a large amount in return costs for the government funding of R&D resources, crowding out green innovation resources. ...
In the economic transition process, emerging markets are recognizing the importance of accessing sophisticated technologies to green innovation. After cross-border merge and acquisition (M&A), research and development (R&D) investment has become the basic condition for acquiring mature market technologies. Many studies suggest that R&D can promote green innovation. However, in the context of cross-border M&A, the relationship between R&D and green innovation is more complicated. Based on the knowledge-based view and stakeholder theory, this paper takes 230 cross-border M&A events at Chinese enterprises as samples. The conclusions show that instead of a linear relation, the influence of R&D input on green innovation performance after cross-border M&A is in an “S-shape”; the political connection and institutional distance of enterprises play a negative role in promoting the relationship between R&D input and green innovation performance after cross-border M&A.
... This effect was later investigated by Domke-Damonte (2000) with the use of the resource-based theory supported by the OLI model. Examining the political dimension of MNEs behavior was examined by integrating and expanding the political aspect of MNEs into the Dunning's eclectic paradigm of ownership, internationalization, and the location advantages (Boddewyn, 1988). The Dunning's eclectic paradigm model reveals that the market and efficiency seeking are the Chinese provincial firm's main motive of investing in foreign countries (Chen, 2015). ...
Over the past few decades, large numbers of literatures in behavior finance have examined firm's internationalization motives, with focused on how host country's risk components affect investment inflow. But the effects of home country risk on investment outflow remain unexamined. Therefore, based on the conceptualization of FDI escapism and the combine frameworks of Dunning's eclectic paradigm and internationalization theory, the objectives of this study are twofold: First, to examine and explain the effects of home country composite risks (which encompasses economic risks, financial risks, political risk) on firms' internationalization motive through outward FDI. Second, to determine which components of home country risk "pushes" firms to initiate the FDI escapism phenomenon in global market. Findings reveal that home country composite risk has moderate adverse effect on investment flow abroad, contributed by both the political and financial risk components, which may give rise to escaping FDI. These findings suggest that firm may initiate outward FDI as a partial escape strategy to address the political and financial challenges in their home country. These results are robust to endogeneity issue and have several substantial implications for policy design to reduce country risks in order to achieve firm's specific objective and government policy goals.
... Firms navigating domestic institutional voids may accrue operational and managerial experiences that enhance their competitive advantage. These can be leveraged in host markets with similar or complementary institutional characteristics; i.e., where institutional distance is low (Ahmadjian, 2016;Boddewyn, 1988;Landau et al., 2016). This perspective emphasises the importance of relative rather than absolute institutional quality as potential push and pull factors that enable firms to better internalise country risk (Darby et al., 2010). ...
This paper employs blended research methods to identify and evaluate the importance of the push and pull factors driving internationalisation by five African firms. It draws upon substantive new primary case-study evidence from structured interviews with senior managers of firms from three countries (Kenya, Nigeria and South Africa) in three sectors (consumer goods; financial services and banking; and mobile telephony). These are analysed and evaluated to test two propositions regarding the extent to which the principal push and pull factors conform to extant theory. Support is found for the push factors while two new pull factors are identified – Network Links and Diaspora Demand. The qualitative findings are validated using quantitative techniques to test the significances of differences in these push and pull factors between firms, home countries and sectors. Cluster analysis reveals internal firm mediation between the principal factors driving internationalisation.
... Obično korupcija ima negativan uticaj na SDI--e u zemljama koje su uspostavile institucije tržišta, a pozitivan u zemljama u tranziciji koje još nisu uspostavile odgovarajuće institucije tržišta. Međutim, istraživanja koja nisu pronašla negativnu vezu između korupcije i SDI-a su radovi autora: Henisz (2000), Boddewyn i Brewer (1994), Wheeler i Mody (1992), Boddewyn (1988). Goel i Budak (2006) su ispitivali korupciju u tranzicionim zemljama. ...
... [Insert Figure 1 here] Few studies in this area seek to integrate different types of risks and examine managerial risk management. For example, Boddewyn (1988), Fitzpatrick (1983, Mascarenhas (1982), Miller (1992), and Quarantelli (1988) outline strategies for responding to risk, and Baird and Thomas (1985) propose new approaches for identifying the relationship between specific riskssuch as environmental, industry, organizational, strategic problems, and risks associated with decision-making -and risk-taking behavior of firms. However, much of this work was published at least three decades ago, and not many of these studies thoroughly address risk in the context of MNEs. ...
Research in international business emphasizes the importance of market and non-market risks such as economic/financial and political/institutional risks in firm internationalization. While political and institutional risks are important non-market factors affecting location and ownership decisions and the performance of multinational enterprises (MNEs), there are growing concerns about emerging non-market risks such as natural disasters, technological disasters, political conflicts, and social conflicts. The challenges facing MNEs in dealing with these emerging non-market risks are likely to grow. To understand these emerging non-market risks better, this chapter explains their characteristics and factors determining MNE awareness of, preparedness for, and response to those risks. The chapter concludes with recommendations for future research agendas.
... Political uncertainty in a potential host country may unexpectedly change the rules of the game under which businesses operate (Butler and Joaquin 1998). Adverse consequences have a profound influence on multinational corporations (MNCs) (Boddewyn 1988). An unstable government or monetary and fiscal policies lead to greater uncertainty about investment outcomes and detract from firm value (Brewer 1983). ...
The chapter depicts the cultural landscape of Bangladesh society in the
light of cultural theory as propounded by Thompson et al. (1990) and Hofstede
(1997, 2001), in a bid to comprehend how the dominant culture affects the
society and body politic of Bangladesh. What is the cultural configuration of
Bangladesh society? What is the dominant way of life as posited by Thompson?
Where does Bangladesh stand with respect to Hofstede’s four national cultural
dimensions? How do the broad cultural attributes of Bangladesh society
influence and shape political institutions and the behavior of politicians and
other major groups? Questions like these are addressed in this paper.
... The literature on bargaining between MNEs and host government argues that political behavior must be linked to the goals of MNEs because, even if the MNE's goals remain economic, it is obvious that they use political means to pursue them (e.g., Boddewyn, 1988). ...
Based on real options theory and institutional factors, we develop a theoretical framework for investment in the presence of corruption and use a sample of private firms in 13 European countries over 2001–2013 to carry out the first large-scale analysis of the impact of the level of corruption and uncertainty about corruption on post-entry investment of MNE subsidiaries. We employ several waves of managerial surveys (the Business Environment and Enterprise Performance Survey; BEEPS) to construct local- rather than merely country-level measures of corruption level and uncertainty. In combination with a large European firm-level database (Amadeus), we show that corruption uncertainty and corruption level do not have an effect on the investment of MNE subsidiaries. We next carry out the analysis on the sample of domestic firms and find a negative investment effect that is driven primarily by corruption uncertainty rather than corruption level. We also show that investment of domestic firms that are similar (matched) to MNE subsidiaries is unaffected directly by corruption, but is affected by uncertainties related to finances and judiciary. Our results are robust to controlling for various types of uncertainty, and they provide new insights into the effects of corruption on investment.
... This will in turn increase the understanding of the complex phenomenon of multi-stakeholder partnerships between MNCs and the UN, which is an area that has received limited research among both political science scholars (Pappi and Henning, 1998) and international business scholars (e.g. Boddewyn, 1988;Hadjikhani, 2000;Ljung, 2014). ...
... Furthermore, in internalizing transactions with the authorities when they are also co-owners of the project, the level of complexity of the interactions is reduced, which lowers the risk of possible language misunderstandings (Piekkari, Welch, & Welch, 2014). Finally, government ownership can increase the legitimacy of the project (Boddewyn, 1988), and lower discrimination costs (Zhou & Guillen, 2016), leading to opportunities to collaborate and interact with a wider range of local agents. As a result, the project owners will not only have a greater understanding of the available local agents, but also discretional power to choose the most convenient (Jiménez et al., 2019), leading to lower linguistic-related problems. ...
This paper investigates the impact of within-country linguistic diversity on the performance of private participation infrastructure projects. In view of the relevance of language heterogeneity in Asia, we first test a sample of 2921 projects in 7 countries in this region from 1990 to 2013. The findings indicate that higher linguistic diversity is associated with a lower likelihood of project success, and that this negative effect is weakened when the project is greenfield. In contrast, we find no significant effect for projects that include government ownership. Subsequently, we explore the differences between domestic versus foreign projects, as well as a larger sample of countries worldwide. The study contributes to the current debate in the literature by pointing out that within-country linguistic diversity can be a threat to private participation projects, offering useful managerial recommendations on how to reduce this threat.
... FSDs can be turned into FSAs if government helps foreign expansion by offering low cost funding, relaxing regulatory barriers that would otherwise prevent building up relevant domestic strengths, reorienting official principles to help internationalisation, facilitating the acquisition of supporting activities in the foreign countries and negotiating to get positive edge with foreign governments as done by Chinese government to assist Chinese firms entering into emerging economies (Rugman and Verbeke, 2003). However, it becomes easier for firms to exploit opportunities by creating supporting environment for internationalisation when corporate entrepreneurship couples with government efforts (Moran, 1985;Boddewyn, 1988;Child and Rodrigues, 2005). Chinese firms have secured worldwide advantages from national and regional market leaders to global leaders through the combination of opportunity seeking and strategic behaviour along with the encouragement of their government (Hitt et al., 2001;Child and Rodrigues, 2005). ...
This paper investigated country- and firm-specific positions of
different MNE (multinational enterprises) types. A matrix has been developed
based on the country- and firm-specific positions. Then, we have carried out 20
case studies and identified their positions in our matrix. Based on our findings
we have installed five key propositions. Those propositions suggest that MNEs
are more equipped with Firm-Specific Advantages (FSAs) whereas Emerging
Market Multinationals (EMMs) have more Country-Specific Advantages
(CSAs). MNEs are mostly persistent dominators and potential dictators and
EMMs are mainly emerging operators and regional players. Finally, Micro
Multinational Enterprises (mMNEs) are low on both CSA and FSA and they
are mostly operation consolidators.
... Mere existence of a broader range of partner nations is likely, over time, to result in exposure to a more diverse set of contexts, ideas, and opportunities. As the scope of such exposure broadens, even despite the extent to which the innovative ideas may represent an uncomfortable challenge culturally, experimentation with or adoption of novel ideas and practices will be likely to increase over time, even if only tentatively at first (Bird and Stevens, 2003;Berry, 2008;Caldwell and Millen, 2008;Husted, 2003;Boddewyn, 1988;Ralston et al., 1993;Ralston et al., 2006;Webber, 1969). Consequently, our final hypothesis is: ...
Why might nations vary in whether and how fast to adopt potentially disruptive innovations? Our study investigates this issue, specifically how a nation's adoption of creatively destroying innovations is related to two previously unexplored variables: cultural looseness, which is a norm-based measure of informal institutions, and global connectedness. To highlight potential contributions from these new variables, we control for within-nation contextual variables examined in prior research, including formal institutions, Hofstede's dimensions of cultural values, socioeconomic attributes, and between-nation economic grouping. Our empirical analysis of a specific disruptive innovation, agricultural biotechnology adoption, covers 47 nations over a 14-year period and provides broad support for the usefulness of cultural looseness and global connectedness for understanding innovation adoption. Cultural looseness is significantly related to adoption of agricultural biotech. Global connectedness dimensions of depth and breadth are not directly related to adoption, only interactively with cultural looseness. These findings highlight the role of informal institutions and global connectedness in shaping complex interactions between disruptive innovation and industrial evolution within and across nations. The findings also have implications for what public policy makers might do to influence the extent of adoption of such innovations.
... United Nations figures show dramatic liberalization of foreign investment regimes, where over 95 percent of legislative changes favor the foreign investor, suggesting a precipitous decline in the bargaining power of most states, especially developing ones. Multinational corporations bargain with multiple host country constituencies, more often than not from a power position (Boddewyn, 1988;Moran, 1985). According to The Economist (2000), many people think of multinationals as more powerful than nationstates and see them as bent on destroying livelihoods, destroying the environment, driving others out of businesses, or, in general, using predatory business practices. ...
The cultural distance metaphor dominates international management research, promoting a sterile, detached view where static antecedents in the form of artificially constructed differences serve as the dominant lens through which culture is viewed and its impact assessed. We examine culture and its positivist treatment in the foreign direct investment literature using the theoretical and real-world lenses. Adopting a social constructionist approach, we propose cultural friction as a substitute metaphor centered on the actual encounter of cultural systems within a context of power relations and potential conflict between a multinational enterprise and its host country constituencies.
... Political economists long believed that the interaction between business and government is a complicated, dynamic, and interdependent process in which the government sets rules that firms must follow, whereas firms strive to formulate government policies (Boddewyn, 1988;Meyer and Rowan, 1977;Moran, 1985). Institutions affect economic performance by affecting the costs of transactions and production (North, 1990). ...
This study explores how China’s regulative, normative, and cognitive institutional constraints and support affect its firms’ outward foreign direct investment (OFDI) strategies at the subnational level. Our model assumes that the main motivation for firms’ OFDI is to escape the home country’s institutional constraints. Moreover, the institutional support of the home country’s government works as a moderator that accelerates the speed at which firms escape.
We collected 26,411 firm-year observations, including 7,098 FDIs conducted by 2,401 firms between 2007 and 2017. The logit and panel regression analysis methods measure the effect of institutional constraints and support on Chinese firms’ OFDI.
The results show that institutional constraints positively affect Chinese OFDI, confirming that the higher the institutional constraints in China are, the more likely it is that the firm will escape, and as the constraints increase, the faster they will do so. The institutional support for domestic development has positive effects on Chinese OFDI, which is contrary to expectation, while institutional support for internationalization has a positive effect on Chinese OFDI. Additionally,
institutional support for domestic development and internationalization positively moderate the relationship between institutional constraints and the speed and number of OFDIs.
This study analyzes the concept of “escape OFDI” empirically by examining the effects of subnational institutional constraints on OFDI activities at the firm level. This study advances the understanding of the motivations for OFDI activities by recognizing the existence of both institutional constraints and support in shaping the internationalization strategies of firms from developing countries, thus addressing an important gap in this field. Furthermore, it is a novel
attempt to examine the impact of these two kinds of support on firms’ OFDI, which provides a new lens for understanding the internationalization of firms from developing countries.
... Smith pointed out that exchange rate risk has a greater impact on enterprises' overseas investment, and further divided it into exchange and transaction risks [7]. On the basis of a large number of empirical studies, Boddewyn proposed that the factors which are likely to lead to political risks should be considered, including national sovereignty and interests [8]. Click analyzed the actual cases and data of American companies' foreign investment, and found that the country risk and financial risk of the host country can easily lead to political risks [9]. ...
With the implementation of China’s “Going Out” strategy and “Belt and Road Initiative” (BRI) as well as the shortage of domestic hydropower market, the scale of hydropower investment along BRI by Chinese companies has expanded rapidly. However, these countries have great differences in politics, laws, economy, hydropower potential, social development and environmental constraints. Due to the inappropriate choice of countries for investment, many failure cases have also occurred. To specifically evaluate hydropower investment in these countries, this paper proposed a six-dimensional indicator system which can represents the characteristics of hydropower investment along BRI based on the analysis of the typical cases of overseas investment by Chinese enterprises. Furthermore, a fuzzy optimal model based on the Delphi-Entropy weight was constructed to evaluate the hydropower investment of 65 countries along BRI as well as a list of countries and corresponding investment grades are proposed. The result indicates that politics and hydropower industry factors are the key determinants of choosing the countries for conducting investment while legal, economic, social and environmental factors should also be covered. In conclusion, the optimal choices for China’s hydropower investment along BRI are Russia, Pakistan, Malaysia, Kazakhstan and Indonesia and the strategy has been given accordingly. Moreover the policy recommendations from the perspective of nation and enterprise level have also been proposed.
... The eight studies analyzing developed countries addressed the cases of Italy (Mariotti and Piscitello, 1995;Mudambi and Navarra, 2003;Majocchi and Presutti, 2009), the USA (Friedman et al., 1996;Nachum, 2000;Bobonis and Shatz, 2007;Chung and Alc acer, 2002) and Canada (Anderson and Sutherland, 2015) The 1995 article on Italy, a small, decentralized country with marked internal diversity, focuses on transaction costs and uses IB Theory with special mention of the Eclectic Paradigm, while in the article from 2003, the authors recognize the importance of the Eclectic Paradigm and use Boddewyn (1988) to support their analysis of intangible factors (political culture). Dunning and Lundan (2008) also drew on Boddewyn when addressing the influence of politics on MNE activity. ...
Purpose
This study aims to advance a sub-national perspective within the OLI Paradigm by analyzing how and to what extent the Eclectic Paradigm can serve as a general model to capture region-specific aspects of the location determinants of FDI, encompassing institutional effects that extend beyond the quality of institutions.
Design/methodology/approach
The authors conducted a systematic literature review of 41 selected papers published between 1990 and 2019. Using inductive content analysis, they investigated the theoretical choices used to support analyses of the effects of institutional factors on MNEs' location decisions at the sub-national level.
Findings
It was found that, when changing from the national to the sub-national level of analysis, there is no need to change the main assumptions used in the literature, although a different perspective must be adopted. The Eclectic Paradigm permeates most of the studies revised and can serve as a general model to capture the sub-national perspective. It offers a foundation for new perspectives on the dynamics of institutional and political factors and their effects on location strategies and determinants at the sub-national level. Adopting the OLI Paradigm with a sub-national approach could widen the IB literature's prevailing focus on traditional economic factors and institutional quality.
Research limitations/implications
The authors contribute to extant International Business literature Their paper enhances the literature on FDI location determinants by providing a more specific approach to development of a sub-national perspective within the OLI Paradigm, extending the institutional effects to capture more region-specific factors influencing the location of FDI. Study limitations are related to our analytical focus on the location dimension, excluding motives for FDI or firm-level location strategies. Rather than limiting analysis to quantitative studies, future research that includes qualitative studies and also covers the other dimensions of the OLI Paradigm could open additional new research avenues for advancing the sub-national perspective within the field of IB.
Practical implications
The authors’ main findings suggest that MNEs' location strategies should include a sub-national perspective, which means that firms need to assess different levels of the location and understand their interaction with nationwide constraints and limitations, as it may affect firms' ability to effectively conduct their value-adding activities. They also contribute elements that can support sub-national governments' actions and policies aiming to enhance locational advantages to attract and retain FDI.
Originality/value
This review specifically analyzes the location determinants of FDI at the sub-national level, in studies published in a broad set of journals, from a variety of fields, prioritizing articles that investigate sub-national institutional determinants. The authors derive implications for the International Business literature and propose that the sub-national dimension should be incorporated into the Eclectic paradigm in order to better understand the influence of institutional sub-national determinants.
... As scholars have long argued, the interaction between business and government is a complex, dynamic, and interdependent process in which the government creates the rules by which business abides and shapes relevant policies [40][41][42]. It is indeed difficult to ascertain, without further research, whether the Chinese government influences China's OFDI and other economic activities too much. ...
Outward foreign direct investment (OFDI) from developing countries, like China, has been growing significantly so far. However, there is surprisingly little research on the effects of OFDI on the home county’s entrepreneurship. In this paper, we initially examine the characteristics of China’s OFDI during the country’s economic reform and opening up. We subsequently test for the hypothesis that Chinese OFDI, along with the Chinese entrepreneurial institutional environment and inward FDI, impacted entrepreneurial activities from the year of 2004 to 2015. We find that OFDI has an inverted “U” effect on entrepreneurial activities, and that the impacts of inward FDI as well as the foreign trade are different in the coastal and non-coastal cities. We conclude by discussing the implications of our findings for researchers and policymakers as well as the limitations of our data.
... As a company may be involved in business relationships to different kinds of actors, also so called non-business or political actors, for example the government, media or public opinion (Boddewyn, 1988;Hadjikhani & Ghauri, 2001), there can be different kinds of business relationships, and consequently also connections between different kinds of business relationships. Business relationships following a 'vertical' production chain are essential for the production of the main product or service to work, but also business relationships to other actors can be of utmost importance for the business to work. ...
In the 1990s and at the turn of the millennium, big changes took place among the Swedish ITrelated
companies as a large number of such companies were founded during this period, but also
since many went bankrupt, merged or were acquired. Such events are likely to affect the
companies that have been engaged in doing business with the IT-providers, and the turbulence
among the Swedish IT-related companies is seen, in this work, as events that are likely to cause
change of the relations between companies.
This licentiate thesis is based on a business network approach, in which the interaction between
companies is seen as long-term and mutual business relationships. These relationships are
connected to each other in the sense that they affect each other, and together the connected
business relationships form what is called business networks. The many events among the ITproviding
actors are likely to affect the business network as actors, and thereby relationships,
disappeared or transformed. But change in business networks has previously been studied mostly
as incremental processes, mainly dealt with through adaptation within the existing business
relationships. This study, however, is interested in structural aspects of business networks, which
means that it is the composition of business networks that is in focus.
The aim of this thesis is to develop a technique for studying structural change of business
networks, and the ‘structuration technique’ designed is quite different from the traditional
research methods used to study business networks. By performing structurized coding of metadata,
based on news items from 1994-2003 that concerns mergers, acquisitions or bankruptcies
involving at least one Swedish IT-related company, a quite extensive amount of organized data
can be obtained. The coding scheme includes aspects concerning both the events and the
relations between actors, as the news items often mention, for example, some important
customers of the IT-providers involved.
To be able to capture structural change of business networks, subsets of networks are addressed,
since entire business networks can hardly be studied. These subsets are referred to as ‘network
elements’, and it is change in the composition of such network elements that the structuration
technique has been designed to study, something that can be difficult to do with traditional
methods. Although only a part of the intended data has been structurized so far, the technique
seems promising both, as indicated, in the large amount of data that the news items yield, and in
the flexible potential for analysis of the structurized data. It is, thus, left for future studies to work
out strategies for analysing the data in order to find structural change of business networks.
... In fact, a number of scholars (e.g., Coate, Higgins, & McChesney, 1990;Faith, Leavens, & Tollison, 1982;Mehta, Srinivasan, & Zhao, 2020;Neven, Papandropoulos, & Seabright, 1998) consider antitrust outcomes to be -at least partially -subject to political pressure. Yet, foreign firms suffer from a liability of foreignness when attempting to influence national authorities, as they are simply less capable and legitimate as compared to domestic firms in terms of employing the political economic mechanisms that yield privileges via corporate political strategy (Boddewyn, 1988;Grosse, 2005;Hymer, 1976Hymer, [1960; Kindleberger, 1969;Zaheer, 1995). Accordingly, antitrust authorities face political pressure to provide some leniency that favors domestic investors (Rodriguez & Menon, 2010). ...
Motivated by the potential for antitrust and competition policies to be protectionist in effect, we formulate the theoretical prior that merger policy deters foreign acquirer participation in local M&A markets. The policy risk and policy uncertainty characteristic of merger review may negatively affect foreign acquirers more so than domestic acquirers, thereby disadvantaging foreign acquisitions of local firms and deterring future cross-border investment activities. We test this prior by employing sector-level data on U.S. merger policy investigations and foreign acquirer presence in U.S. M&A markets over the 2002–2017 period. Our panel-data methodological approach indicates that the risk and uncertainty characteristic of U.S. merger policy disproportionately deters the acquisition activities of foreign investors. The empirical results also suggest that the application of competition and merger policies in other national jurisdictions – where there is less of a strong commitment to antitrust principles – might also be effectively protectionist.
... One particular strategy associated with the IBVis adaptation based upon greater reliance on political ties with government actors as a coping mechanism when institutional support is weak (Albino-Pimentel et al., 2018b;Dieleman and Boddewyn, 2012). For example, Boddewyn (1988) and Sun et al. (2012) have argued that foreign subsidiaries can, in practice, proactively shape formal institutions and augment market oriented strategic objectives by interacting with government actors through such activities as negotiation, cooperation, coalition building, and co-optation. These boundary-spanning mechanisms can provide advice and important information when elements of a legal service sector are considered weak (Dieleman and Widjaja, 2019). ...
Purpose
The purpose of this study is to apply the institution-based view and resource dependence theory in arguing that perceived deficiencies in a legal service sector where a foreign subsidiary operates will influence the intensity of its political ties with actors in both the regulatory and legal arenas. The authors further theorized that these relationships will vary across governance environments.
Design/methodology/approach
The research context for this study was multinational enterprises (MNE) wholly owned foreign subsidiaries and international joint ventures (IJVs) operating in the Philippines and Thailand. Data for most variables in this study came from primary survey data collected in 2018 from senior managers of MNE WOSs and IJVs operating in the Philippines and Thailand.
Findings
The authors’ analysis of 352 foreign subsidiaries operating in the Philippines and Thailand show that, in a flawed democracy, perceived deficient legal services enhance the intensity of foreign subsidiary political ties with government actors in both the regulatory and legal arena. However, in a hybrid regime, perceived deficient legal services enhance only the intensity of foreign subsidiary political ties with government actors in the regulatory arena. The authors’ findings also suggest that the relationship between perceived deficiencies in legal service sector and the intensity of political ties is stronger for foreign subsidiaries that operate in heavily regulated industries across both a flawed democracy and hybrid regime. Conversely, the authors do not find the market orientation of these foreign subsidiaries to play a role in this process.
Research limitations/implications
The authors’ study was unable to control for whether managerial perceptions of deficient legal services were well informed at the local or federal level. This issue raises the question of will the presence of an in-house legal department influence managerial perceptions with regard to deficiencies within a legal service sector? Based on these limitations, the authors suggest that future research can further extend political ties research by using a fine-grained analysis in investigating the antecedents of managerial perceptions of legal services within different legal jurisdictions.
Originality/value
The political ties literature has largely argued that political ties are more prevalent in environmental contexts comprising institutional voids as MNEs attempt to mitigate volatility associated with the lack of developed institutional infrastructure (e.g. Blumentritt & Nigh, 2002; Bucheli et al. , 2018). However, the concept of institutional voids is very broad and still rather abstract in nature. Hence, scholars have yet to fully understand what types of institutional voids may drive MNE foreign subsidiary political tie intensity in varying governance contextsThe authors’ study attempts to contribute to this important line of research by investigating how one type of institutional void, namely, perceived deficiencies in the legal service sector, can influence the intensity of political ties in varying governance environments.
... In recent years, the recognition that the internationalization of companies is as much an economic as it is a political endeavor, in which market and nonmarket strategies intertwine (Boddewyn, 1988;Oliver, 1991), has led to the emergence of an 'institution-based view' of international business (Peng, 2002;Peng, et al., 2008). The institution-based view "focuses on the dynamic interaction between institutions and organizations, and considers strategic choices as the outcome of such interactions" (Peng, et al., 2008, p. 922). ...
This article examines how MNE subsidiaries develop nonmarket strategies to create a fit between a global market strategy and a local nonmarket framework. Derived from an analysis of archives and interviews on eBay’s expansion into France, our findings suggest that MNE subsidiaries engage in defensive and proactive self-categorization to create their nonmarket strategic fit. Specifically, through the purposeful use of labels, rhetoric and narratives, self-categorization enables subsidiaries to strategically position themselves vis-à-vis both regulators and local incumbents, thereby exercising agency to influence the nonmarket environment in their preferred direction. The findings contribute to the institution-based view of international strategy by shedding new light on the interaction between MNE subsidiaries and local institutional authorities in a context of international expansion. Furthermore, we theorize how subsidiaries use self-categorization to transfer global organizational practices to the host country.
... These findings give rise to the question whether this effect only applies to such economic core locations or also to political core locations, especially national capital cities 1 . When a firm undertakes an inception, it enters the political market of the host country and engages with host government actors 2 as suppliers of public policies (Boddewyn, 1988;Bonardi, Hillman, & Keim, 2005;Bonardi, Holburn, & Vanden Bergh, 2006;Hillman & Keim, 1995). Interactions between MNEs and host government actors are shaped by spatial proximity (Meyer, Mudambi, & Narula, 2011) and capital cities constitute a unique environment in which these interactions can occur . ...
A multinational enterprise develops its subsidiary portfolio by investing in new foreign markets and subsequently pursuing further investments within these host countries. We find that firms which locate their first equity investment closer to the national capital city can subsequently expand their subsidiary portfolio within the host country at a higher speed. This effect is particularly strong in emerging economies. Further analyses of various contingencies support the robustness of our findings. We discuss different theoretical mechanisms which could cause these effects, in particular face-to-face interactions with governmental actors and opportunities to develop political connections. Our research contributes to the literature on internationalization processes by analyzing how the initial location choice affects the development of the subsidiary portfolio.
... FSDs can be turned into FSAs if government helps foreign expansion by offering low cost funding, relaxing regulatory barriers that would otherwise prevent building up relevant domestic strengths, reorienting official principles to help internationalisation, facilitating the acquisition of supporting activities in the foreign countries and negotiating to get positive edge with foreign governments as done by Chinese government to assist Chinese firms entering into emerging economies (Rugman and Verbeke, 2003). However, it becomes easier for firms to exploit opportunities creating supporting environment for internationalisation when corporate entrepreneurship couples with government efforts (Moran, 1985;Boddewyn, 1988;Child and Rodrigues, 2005). Chinese firms have secured worldwide advantages from national and regional market leaders to global leaders through the combination of opportunity seeking and strategic behaviour along with the encouragement of their government (Hitt et al., 2001;Child and Rodrigues, 2005). ...
... Detailing how to actively adapt to hostcountry public policy, practice-relational research can reveal how EMFs respond to institutional changes and build legitimacy over time. Although IB scholars have focused on political aspects of MNCs (Boddewyn, 1988;Stevens et al., 2016), the impact of these efforts on mainstream theorybuilding and research has been limited, especially when it comes to the micro-political dynamics within EMFs (Deng, 2013). For example, we can explore labor issues to better understand political dynamics, by addressing the question of how local labor relations trigger the relocation of jobs internationally (Weng & Peng, 2018). ...
The growth of outward foreign direct investment from emerging markets has led to increased scholarly attention on the internationalization of emerging market firms (EMFs). We break from the recent strategic approach on internationalizing EMFs to develop a problematization approach, which permits us to introduce a geographic relational perspective. We use this perspective to highlight process thinking, complex social realities, and relational practice as means by which to better develop theory on the internationalization of EMFs. Our emergent approach emphasizes the need to view EMF internationalization as deeply situated in multifaceted contextual influences, as influenced by path dependence and as manifested in practice. These three relational tenets (contextuality, path dependence, and practice) are central to our geographic relational approach’s ability to generate new challenging research questions for understanding EMF internationalization. Consequently, we add novelty to the international business domain by bringing space and process to the forefront of the EMF research agenda.
... 2.2.2 Governments' support to promote corporate entrepreneurship activities (helping hand model). According to political economy theory, governments create rules by which businesses must abide (Boddewyn, 1988;Kofele-Kale, 1992). Specially, governments may employ policies, national strategic planning, financing and other regulations to stimulate firms' certain activities (Hoskisson et al., 2000;Sun and Liu, 2014). ...
Purpose
The purpose of this paper is to examine the current state of corporate entrepreneurship (CE) of emerging market firms (EMFs) and provide direction for future research on the topic.
Design/methodology/approach
The authors specifically review the recent literature between the years 2000 and 2019 on CE with the keywords “corporate entrepreneurship,” “emerging economies” and “emerging countries” published in the Australian Business Deans Council list journals. The authors review the existing literature about CE in emerging markets, summarize current achievements and present an agenda for future research.
Findings
Based on the review, the authors categorized the macro and micro contexts of CE and summarized the current articles on CE in emerging markets within each macro and micro context. The authors conclude that despite the abundance of research on CE that investigates the three prongs of CE in terms of innovation, strategic renewal and new venturing in developed market contexts, there is a scarcity of literature that focuses on CE in emerging markets from a holistic perspective.
Originality/value
While there is an abundance of literature review on CE in general in terms of the drivers of the construct, the contexts contributing to it and the outcomes, the reviews are lacking about CE specifically within the context of emerging markets. Emerging markets vary from developed markets institutionally, economically, culturally, socially and technologically. However, the questions of how these differences impact the CE activities, as it relates to innovation, venturing and strategic renewal in EMFs, and how these differences provide incentives or hinder the activities that contribute to CE remain mostly unanswered. This paper reviewed the research on CE and emerging market contexts from 2000 to present. It targets to provide a better understanding of the current achievement on this topic and what to be done in the future.
... The belief that FDI brings in advanced technology and generates positive spillovers to local firms has led governments in many emerging markets to devote resources and offer policy incentives to attract FDI. But the regulatory institutions in some emerging economies may favor the interests of local firms over those of foreign firms (Boddewyn 1988). That creates an environment discouraging foreign investment. ...
The legal and economic institutions in emerging economies normally undergo major changes during the transition to a market economy. The development of legal and economic institutions in such economies is discussed, and two different development paths are analyzed. One relates to economies with relatively better-developed economic institutions, and the other to those with relatively better-developed legal institutions. A series of propositions are developed to explain how different imbalances in institutional development might influence market competition, firms’ strategic choices, and firm performance. A three-stage model of economic development is proposed which attempts to account for the two different situations.
The Oxford Handbook of International Business contain articles by distinguished scholars in the field of international business. The authors are all authorities on their chosen topics and have been active as leaders in the Academy of International Business. Their articles survey and synthesize relevant literature of recent years. The book is split into five major sections, providing comprehensive coverage of the following areas: the history and theory of the multinational enterprise; the political and policy environment of international business; strategies of multinational enterprises; the financial areas of the multinational enterprise (marketing, finance and accounting, Human Resource Management [HRM], and innovation); and business systems in Asia, South America, and the transitional economies.
Global challenges, from the climate crisis to digitalisation, are faced by businesses as well as governments and international organisations such as the WTO and the OECD. Responding to these challenges requires large-scale co-operation and shared development goals. Co-operation on global trade and trade governance are no exception. Thus, there is a need for an in-depth understanding of the international trade and investment landscape and, in light of this, how recent shifts in the patterns of globalisation present a major challenge to traditional trade policy systems. It is necessary to develop new knowledge that helps to identify the implications of these trends on the links between trade, international business and development. This chapter gives an overview of the development of research on trade policy, with a particular focus on the international business studies perspective. It will highlight the main contributions and identify key themes. The chapter reflects on the development of trade policy as a phenomenon and the academic research related to it. Thus, the chapter contributes to the increasing interest in policy-related studies within international business research, with an emphasis on the role that international business scholarship can play in the development of new knowledge that is relevant to global trade-related policymaking.
This chapter aims to give an overview of emerging themes of research currently not on the international business (IB) community radar. As the founder of the Middle East North Africa Chapter for the Academy of International Business, it is observed that since 2009 the research and publishing situation, while improving, still has a long way to go. Not only have I been spearheading the teaching and research agenda in IB in the region, but my experience is multi-sectoral, working with academia, industry, and government. This experience gives me the advantage of a bird’s eye view of an emerging topic that may become more relevant with time. The historical discourse often opined by western scholars may not be applicable in a region like ours or other emerging markets. This overview analyzes decades of experience in the field and observations of publications in leading IB journals. By addressing some of the knowledge gaps, I hope that we can create a more inclusive research agenda.The MENA region is strategic from an IB perspective since it
1.
is a significant trade and logistics route
2.
has a significant population
3.
is the heart of international affairs.
I will briefly deconstruct the perception of the Middle East North Africa (MENA) region. Then I will present new areas of research relevant to international business in the region but not captured in current IB publications. Finally, I will offer recommendations to remedy the situation by adding more promising topics to the IB research agenda.
We explore the firm internationalization's impact on firm credit ratings in emerging economies. Adopting Chinese data from 2009 to 2018, we document that firm internationalization varies negatively with its credit ratings, indicating that emerging debt market participants are risk averse and prioritize the risks involved in firm internationalization endeavors. This association is amplified for firms operating in host countries with lower institutional quality, decreased cultural distance from home countries, and when firms do not hold tax haven subsidiaries. We observe that the main association is consistent when alternative dataset (India, Russia, and Brazil) or proxy (cost of debt) is applied.
This commentary on the article by Gao, Wang and Che (Journal of International Business Studies, 49, 1060–1080, 2018) titled “Impact of historical conflict on FDI location and performance: Japanese investment in China”, discusses the manner in which political conflict and its associated risks have been studied in the current literature. It is argued that the political risk literature mostly examines political risk in isolation and tends to ignore the interdependencies with other types of risk such as economic/financial, technological, ecological, and sociocultural risks. This is deemed as important since the boundary between political and other risk types may be very thin. The author explains the high degree of interconnectedness and interdependence among the various dimensions of risk due to the phenomena of globalization that exists at the sub-national, national, international, and even supranational levels. While each category of risk may have relevance in specific contexts, a comprehensive assessment of the overall risks faced by the modern MNE is needed.
This study examines how ideological polarization and corruption jointly impact MNEs’ lobbying decision-making. Building on resource dependence theory, we argue that the ideological polarization of the host country’s politics encourages MNEs to engage in lobbying. Furthermore, we suggest that this effect is strengthened by increased corruption distance between the home and host countries. Testing our hypotheses on a sample of 353 firms from 41 countries, we reveal that the host country’s political environment affects corporate lobbying activity, moderated by the corruption distance from the home country.
We revisit the new perspectives that explain the internationalization and growth of multinational enterprises (MNEs) in emerging markets (EMs). Do we need a new theory for EM MNEs? Are the new theorizing efforts seeking the “just right” approach as in the Goldilocks story justified? We beg to disagree. We draw attention to the foundations of current international business (IB) and organization theories, rooted in culture, history, institutions, economics, strategy, and market dynamics to meet the challenges of theorizing the new EM MNE views. We offer complementary explanations on how to develop a more comprehensive approach, elaborate on the underlying assumptions and theoretical underpinnings of extant theories, elucidate their boundary conditions, and suggest how to alleviate the lack of systematic contextualization and directionality in causal relationships. We assert that while some EM MNEs display competitive advantages vis-à-vis their counterparts, not all possess superior capabilities compared to their advanced market rivals; as we exemplify, cases should not be generalized to the population but rather to theory.
The quest for the relevant skills necessary for socio-economic transformation in Africa partly explains the drive by African countries to attract investments by multinational corporations (MNCs) – the custodians of modern skills and technology. While the literature is replete with analyses of liberal policies and incentives offered to encourage investments by multinational corporations, little scholarly attention appears to have been paid to the need to incorporate MNC skills policies and programmes into the national skills agenda. In Nigeria, like many developing countries, several years of MNC operations have not resulted in any meaningful alignment of multinational skills development programmes with national aspirations for human capital formation. It is against this backdrop that this article examines the skills development challenge in Nigeria vis-à-vis the efforts of multinational corporations in the area of skills development. The article is anchored in the Human Capital Theory of Gary S. Becker and Protectionist Narrative of Joel Bakan. The article engaged with key-informant interviews (5) and in-depth interviews (19) conducted in selected multinational companies, government agencies concerned with skills development and Organised Labour Federations in Nigeria. The paper has found that there is somewhat incongruence in MNCs’ skills development practice and national aspirations.
Drawing on the sociological literature of state bureaucracy, we develop a political incentive perspective on FDI inflows. We argue that political term, as a core feature of career advancement in state bureaucracy, influences the incentives of newly appointed government officials and in turn their efforts toward achieving the state’s goal of attracting FDI. Due to the mandatory retirement age which limits the career advancement, officials in their first terms perceive that they have better chances of promotion and hence have stronger incentives to work toward advancement than those continuing to serve in the current position for the following term. We test this argument by examining Chinese city government leaders and FDI inflows in their cities from 2003 to 2010, using a difference-in-differences design. The results show that first-term leaders, who are newly appointed after political turnover, attract more FDI inflows than continuing leaders. The difference is smaller when the new leaders are close to retirement, but greater if they are appointed to cities with low prior GDP performance. This study offers a new perspective on intra-country FDI variations, and extends the literature on the role of political institutions by investigating the political incentives of government officials.
Unlike the conventional understanding of China’s outward foreign direct investment, we found that the pattern of compressed development better reflects China’s outward foreign direct investment in the 21st century. The compressed development of Chinese outward foreign direct investment is characterized by a much higher growth rate than that of earlier industrializers and greater structural changes in types of investment, investors and destination countries. These changes result in new challenges to the Chinese government in dealing with domestic and foreign actors. Nevertheless, these challenges also create incentives for the Chinese government to improve how it interacts with Chinese investors and regulates their investment behavior.
Purpose
The purpose of this paper is to evaluate multinational enterprises’ (MNEs) performance and impact in contexts beyond their own internal objectives.
Design/methodology/approach
Based on an “eclectic” paradigm and the range of motivations, the framework is designed around three layers of evaluation: “efficiency” as static optimisation, “growth and development” as the dynamics of change on a purely economic view; political/economic sphere in terms of the outcomes of “distribution”, and “sovereignty” on the more purely political concern of how MNEs may undermine countries’ policy independence.
Findings
MNE and national economies have to use current sources of competitiveness efficiently while addressing the necessity to reinforce and refocus them through time. Within these broad agendas, significant interactions and outcomes reflect a range of contingencies conditioned by both MNE objectives and hosts’ competitive status.
Originality/value
The paper concerns economics and MNE role in globalisation. The paper defines a framework of four generic evaluative issues of MNE performance, which subsume a wider range of important but more niche concerns.
Whether investment in political ties enhances or inhibits firm innovation has not been well understood in the literature. Theoretically, proactive use of political ties could help firms gain favourable political resources, thereby enhancing the effectiveness and efficiency of firm innovation activities. However, investment in political ties might conflict with innovation in internal resource orchestration processes. Based on a sample of 9693 firms across 27 transition economies, I find that the effect of investment in political ties on the link between innovation and productivity is based on type of innovation and type of political investments. Although bribery does not show any significant influence on the link between either product or organizational innovation and firm productivity, managerial time invested in political ties weakens the positive relationship between organizational innovation and productivity.
Purpose
This is one of the first studies to investigate the influences of institutions in an authoritarian regime on the strategies of firms that operate in a potentially sensitive industry. The purpose of this paper is to examine how institutional pressures affect the strategies of multi-platform mass media companies (print, broadcast and internet) in the United Arab Emirates (UAE).
Design/methodology/approach
This qualitative study used a purposive sampling strategy to conduct interviews with 28 senior managers who have responsibility for strategic level decision making in a UAE media company. All of the interviews were audio recorded and transcribed. A mainly deductive process of thematic analysis was undertaken to identify key ideas, patterns and relationships in the data.
Findings
The survey participants reported that increased multi-platform delivery in the media industry brings rewards, challenges and new risks. Although the normative and cultural-cognitive pressures are both strong in the UAE, it is the regulative pressures that seem to have the largest constraining influence on firm decision making and business strategies. The strong institutional pressures existing in the UAE encourage tight coupling, where firm structures and processes are linked and designed in response to the institutional constraints. Evidence was found only of some minor decoupling.
Originality/value
In response to the authors’ findings, the authors hypothesise that in nations under authoritarian rule, political pressures will likely override all other institutional pressures and that it will be most sensible for firms to adopt tight coupling strategies. However, the success of many UAE firms both at home and internationally suggests that strong institutional constraints do not necessarily act as a barrier to superior firm performance.
Over the last ten years or so, an important new approach to the study of organizations has emerged within economics. It is perhaps best characterized by three elements: a contractual perspective on organizational relationships, a theoretical focus on hierarchical control, and formal analysis via principal-agent models. This paper provides political scientists with an overview of the "new economics of organization" and explores its implications for the study of public bureaucracy. So far, positive political theory has not contributed much to our understanding of public bureaucracy. In part this is due to the unsympathetic treatment that rational modeling and most other modes of quantitative analysis have long received from students of public administration. The other side of the coin, however, is that positive theorists have not made much of an effort to develop theories of bureaucracy. Their concerns have centered around two basic mechanisms of social choice, voting and markets, and they have devoted little systematic attention to a third mechanism that is clearly important for understanding how societies and other aggregates make collective decisions. This third and relatively unexplored mechanism is hierarchy. Movement toward a positive theory of hierarchies would fill a serious gap in the social choice literature, while at the same time making a theoretical contribution that strikes to the essence of public bureaucracy, indeed of all organizations. In fact, significant steps toward a positive theory of hierarchies have very recently been taken-but by economists, not political scientists. In small numbers, of course, economists made contributions to the study of public bureaucracy some time ago with the pioneering works of Downs (1967), Tullock (1965), and Niskanen (1971). But this new wave of theoretical work is different. It is already a large, complex body of literature that is the focus of innovation and excitement among a growing number of economists, and it reflects an unusual degree of theoretical coherence and cumulative effort. Work in this tradition tends to receive orientation from a distinctive economic approach to the analysis of organizations, an approach perhaps best characterized by three elements: a contractual perspective on organizational relationships, a focus on hierarchical control, and formal analysis via principal-agent models. This approach has emerged from recent attempts to move beyond the neoclassical theory of the firm, which assumes away all organizational considerations, to a theory of economic organizations that can explain why firms, corporations, and other enterprises behave as they do. Propo
The evolution of multinational companies (MNCs) over the last decade has been characterized by a growing conflict between the requirements for economic survival and success (the economic imperative) and the adjustments made necessary by the demands of host governments (the political imperative). Faced with the conflict between the economic and political imperatives within a business, MNCs can respond in several ways. This article, based on intensive field research of the management processes in about a dozen MNCs, analyzes strategies and administrative processes used by MNCs to reconcile the conflicting economic and political imperatives. 32 references.
The scope given to cultural phenomena in organizational analysis has been growing but little conceptual integration has taken place. In this paper, a cultural analysis of organizational phenomena is developed using a conceptual framework that throws new light on the Markets and Hierarchies debate. In particular, it is shown that a choice between markets and hierarchies does not reduce to a choice between external and internal transactions. The framework is introduced and developed in sections one and two for the general case and is applied to the modern corporation in section three. The implications of the analysis are discussed in section four.
This article reviews recent developments in macroeconomic theory and considers their relevance for developing countries. Particular
emphasis is given to the rational expectations revolution. The article asks whether government policies are systematic and
suggests the need to study the expectations on which governments base their decisions. Also discussed are the neo-Ricardian
theorem, the implications of real wage rigidity and of supply side models with sectoral income effects, and recent models
involving large group interaction.
“Private Vices by the dextrous Management of a skillful Politician may be turned into Publick Benefits.”
—Bernard Mandeville, 1714
Corruption, some say, is endemic in all governments. Yet it has received remarkably little attention from students of government. Not only is the study of corruption prone to moralism, but it involves one of those aspects of government in which the interests of the politician and the political scientist are likely to conflict. It would probably be rather difficult to obtain (by honest means) a visa to a developing country which is to be the subject of a corruption study.
One of the first charges levelled at the previous regime by the leaders of the coup in the less developed country is “corruption.” And generally the charge is accurate. One type of reaction to this among observers is highly moralistic and tends to see corruption as evil. “Throughout the fabric of public life in newly independent States,” we are told in a recent work on the subject, “runs the scarlet thread of bribery and corruption …” which is like a weed suffocating better plants. Another description of new states informs us that “corruption and nepotism rot good intentions and retard progressive policies.”
Others have reacted against this moralistic approach and warn us that we must beware of basing our beliefs about the cause of coups on post-coup rationalizations, and also of judging the social consequences of an act from the motives of the individuals performing it. Under some circumstances Mandeville is right that private vice can cause public benefit.
This paper applies transactions cost principles to the multinational enterprise in order to ascertain its distinctive properties as a mode of economic organization. The analysis helps identify just when and where contractual alternatives to the multinational firm are likely to be viable. This turns out to depend upon the nature of the technology, the regime of appropriability within which the firm operates, and the characteristics of the markets in question. Transactions cost analysis is also extended to the multinational enterprise-host country relationship. Implications for management and public policy are derived.
Douglass C. North, premio Nóbel de Economía en 1993. En esta obra analiza las estructuras y transformaciones económicas más significativas dentro de la historia económica occidental, con el auxilio de la teoría económica. Dicho análisis abarca desde las primitivas organizaciones agrícolas, hasta los albores del siglo XX, pasando por la Revolución Industrial.
This is an exploratory paper, the purposes of which are to identify the principal variables having to do with corruption in governmental organizations in the United States and to point out some significant relationships among them. The paper begins by setting forth a conceptual scheme for the description and analysis of corruption in all sorts of organizational settings. This is applied first to the “typical” business and then to the “typical” governmental organization. (The reason for introducing the business organization into the discussion is to create a contrast that will highlight the characteristic features of governmental organization.) In the concluding section some dynamic factors are noted.
This article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade, and restates its main tenets. The second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains “a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to MNE activity as well.”© 1988 JIBS. Journal of International Business Studies (1988) 19, 1–31
This paper first sets out the main features of the eclectic theory of international production and then seeks to evaluate its significance of ownership- and location- specific variables in explaining the industrial pattern and geographical distribution of the sales of U.S. affiliates in fourteen manufacturing industries in seven countries in 1970.© 1980 JIBS. Journal of International Business Studies (1980) 11, 9–31
Elaborates some conceptual ideas alluded to by Robert Wade (World Development, April 1985). Corruption in developing countries consists of systematic exploitation of illegal income earning opportunities within different administrative and delivery systems. The enduring nature of these opportunities implies the creation of intangible property rights within these systems. 'Purchases' of postings by officials are methods of acquiring access to these property rights, although their role is not as central to an analysis of corruption systems as Wade suggests. These informal contracting processes outline the contours of recipient systems that often vitiate universal access to the benefits of development programmes. -G.P.Hollier
This study is concerned with Foreign Direct Investment (FDI) and economic growth across the world for the period 1991?2001. This article produces fresh empirical evidence on the relation between FDI and economic growth obtained from single-equation and simultaneous-equation estimates for 140 countries using macroeconomic variables. The results indicate that a positive and statistically significant estimate of coefficient of FDI is obtained from single-equation ordinary least squares method for real per capita GDP regressions in all but one case. There exists a positive and statistically significant relation between the real per capita GDP and FDI in the case of many countries but correlation coefficient between exports-GDP ratio and percentage FDI is found to be insignificant. Country risk rating and the telecommunications variables are significant in all the relevant regressions and correlation estimates.
A critique of transaction cost economics as a theory of organizational behavior Wharton School, University of Pennsylvania, Working Paper 85-05. . 1985b. Designing global strategies: Comparative and competitive value-added chains
- Kogut
- Bruce
Kogut, Bruce. 1985a. A critique of transaction cost economics as a theory of organizational behavior. Wharton School, University of Pennsylvania, Working Paper 85-05. . 1985b. Designing global strategies: Comparative and competitive value-added chains. Sloan Management Review, 26(4): 15-28
International public affairs Handbook of international business, section 42 Wiley (a new edition is coming out in 1988 Theories of foreign direct investment and divestment: A classificatory note Service multinationals: Joumnal of International Business Studies
- J J Boddewyn
Boddewyn, J.J. 1982. International public affairs. In Ingo Walter & Tracy Murray, eds., Handbook of international business, section 42. New York: Wiley (a new edition is coming out in 1988). . 1985. Theories of foreign direct investment and divestment: A classificatory note. Management International Review, 25(1): 57-65. M. Halbrich, & A.C. Perry. Service multinationals: Joumnal of International Business Studies, 17(3): 41-57
A behavioral theoty of the firm Forecasting political risks for international
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New forns of international investment in developing countrties. Paris: Organization for Economic Cooperation and Development
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Oman, Charles. 1984. New forns of international investment in developing countrties. Paris: Organization
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A critique of transaction cost economics as a theory of organizational behavior
- Bruce Kogut
Kogut, Bruce. 1985a. A critique of transaction cost economics as a theory of organizational behavior.
Wharton School, University of Pennsylvania, Working Paper 85-05.
Nonstate actors in international politics
- Philip Taylor
Taylor, Philip. 1984. Nonstate actors in international politics. Boulder, CO: Westview Press.
American business abroad Power and money
- Ch P Kindleberger
Kindleberger, Ch. P. 1969. American business abroad. New Haven, CT: Yale University Press.
. 1970. Power and money. New York: Basic Books.
International business-government communications
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, J.J. Boddewyn, & Ashok Kapoor. 1975. International business-government communications. Lexington,
MA: Lexington Books.
The firm and the market General theories of the multinational enterprise: Their relevance to business history
- Mark Casson
Casson, Mark, 1987. The firm and the market. Cambridge, MA: MIT Press.
. 1986. General theories of the multinational enterprise: Their relevance to business history. In Peter
MNC negotiations: Characteristics and planning implications
- Ashok Kapoor
Kapoor, Ashok. 1974. MNC negotiations: Characteristics and planning implications. Columbia Journal of
World Business, Winter: 121-30.
Corporate external affairs: Blueprint for survival
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(J.J. Boddewyn was the main author of this, report.)