The Social Influence of Executive Hubris

• Executive hubris—an important psychological bias—affects the strategic decisions of a firm as well as their implementation. Yet executive hubris brought about by social influence in different cultural environments is not well understood.
• Anchored in the upper echelons theory and the cross-cultural management literature, this study investigated the social influence of executive hubris among peer executives in two different cultural contexts: China and the US.
• Using a large set of survey data on Chinese firms and a large archive of US firm data, we found that the social influence of executive hubris is stronger in the Chinese context than in the US. The social influence among Chinese executives tends to be moderated by their similarity in categorical factors indigenous to the Chinese context: executives who are managing state-owned firms or were politically appointed are more strongly influenced by each other than by those managing non-state-owned firms or were not politically appointed.
• We illustrate that cultural contexts give rise to differences in the social influence of executive hubris.

     

Diverse Institutional Environments and Product Innovation of Emerging Market Firms

• This study unbundled institutional environment into two distinct aspects: institutional distance (the degree of dissimilarity between the institutional environment of a firm’s home country and an economy into which it expands) and institutional diversity (the variety of all the institutional environments to which a firm is exposed), and related them to product innovation performance of emerging market firms.
• Data on 917 Chinese manufacturing firms in multiple industries over 3 years was analyzed.
• The results show a positive relationship between institutional distance and product innovation success. An inverted U-shaped relationship was found between the institutional diversity of a firm’s foreign markets and its product innovation success.

     

How Firm Performance Affects Internationalization

• Only a few studies have investigated whether a firm’s performance has an effect on its internationalization. These studies, focusing on actual firm performance, have suggested a resource-based argument and generally found non-significant results.
• In this paper, we argue that relative firm performance is critical in determining a firm’s internationalization because it influences a firm’s attitude toward risk-taking. We apply prospect theory to predict this relationship.
• Using time-series, cross-sectional analysis of 701 Japanese firms from 1993 to 1998, we uncovered an inverted-U shaped relationship between a firm’s relative performance and its degree of internationalization using its historical performance target. As compared to the industry target, relative performance showed a positive impact on a firm’s internationalization.

     

Political Institutional Change, Obsolescing Legitimacy, and Multinational Corporations

• This paper studies the practice of integration of influential host country actors to a multinational corporation as a strategy to decrease problems of legitimacy to the foreign firm before the host country??s society.
• By developing the concept of obsolescing legitimacy, we argue that this strategy provides legitimacy to the foreign firm only in the absence of institutional changes at the macro-political level in the host country. Once these changes take place, an alliance by the multinational to an elite or a political system no longer ruling the host country will become a liability and will generate problems of legitimacy for the multinational.
• We illustrate our argument with the case of the US multinational United Fruit Company in Central America.

     

Family Management and Internationalization: The Impact on Firm Performance and Innovation

• Researchers in international business have long been interested in understanding the impact of internationalization on firm performance and innovation. However, because international diversification offers both advantages and agency problems, prior studies of this research stream offer mixed results.
• Based on a sample of Taiwan’s publicly listed firms during the period of 2000–2009, this study contributes to this research stream by examining the impact of family management on firm performance and innovation implications of internationalization.
• This study finds that family management positively moderates the relation between internationalization and performance/innovation. These findings suggest that family management helps mitigate the agency problems associated with internationalization so that family firms experience positive benefits from internationalization in terms of innovation and performance.

     

Does National Context Affect Target Firm Employees’ Trust in Acquisitions?

• In this study, we test the assumption that the way target firm employees respond to a takeover is contingent on their national origin.
• The antecedents of target firm member trust in the acquiring firm management were examined in a cross-national sample of German and Singaporean employees using a policy-capturing design.
• Five factors hypothesized to affect target firm member trust after a takeover were found to be significant influences on employees?? trust judgments in a decision-making simulation: (i) combining firms?? collaboration history, (ii) mode of takeover, (iii) whether it was a domestic or cross-border acquisition, (iv) degree of autonomy removal, and (v) attractiveness of the acquiring firm??s human resource policies and reward system. Further analyses suggest that the relative importance of these factors in predicting target firm employees?? reactions to a takeover varies depending on their national origin.
• We conclude that companies engaged in cross-border acquisitions need to consider contingencies in the cultural and institutional contexts in which the acquired firms are embedded and adapt their approaches for integrating them accordingly.

     

In at the Deep End of Firm Internationalization

• The purpose of this research is to examine the consequences of top management team (TMT) internationalization: why and under what conditions can TMT nationality diversity be beneficial?
• On the basis of the upper echelons theory from the strategic leadership literature, the relationship between the TMT nationality diversity and firm performance in the strategic context of firm internationalization is investigated in moderated multiple regressions models (MMR) for a sample of Dutch, Swiss, and UK companies.
• The study findings suggest that the TMT nationality diversity becomes advantageous only in firms with high degree of internationalization. Companies have to be strongly committed to foreign markets so that the benefits of the TMT nationality diversity can materialize.
• The arising managerial implication is that the TMT nationality diversity can be a powerful tool in building a firm’s competitive advantage, provided that companies are strongly exposed to the international environment. The study also provides corroborative evidence that the search for moderating and mediating variables in the TMT demography research represents a step in the right direction.

     

Management Compensation Systems in MNCs and Domestic Firms

• This is a study of the relationship between institutional settings and managerial compensation systems, based on extensive cross-national survey evidence.
• We compare differences in practices between Multinational Corporations (MNCs) and domestic firms across a range of capitalist archetypes.
• We find that MNCs are more likely to promote compensation systems that incentivise managers in line with organisational performance compared to domestic firms. Our findings also reveal persistent diversity reflecting firm type and institutional setting. We find that the gap between MNCs and domestic firms in terms of the usage of incentive-related compensation is less pronounced in Liberal Market Economies than in other settings. This suggests that it is a combination of being an MNC and the specific home locale that moulds approaches to managerial compensation. This reflects considerable hybridisation of practices within and between settings.

     

Isomorphic Pressures, Peripheral Product Attributes and Emerging Market Firm Export Performance

• Drawing upon the neo-institutional theory of mimetic isomorphism and the concept of the extended product, we identify and empirically evaluate two potential product strategies that emerging market firms (EMFs) may use to improve their export performance while also addressing the financial, managerial expertise, and international experience limitations that they frequently face.
• Hierarchical regression is used to test our proposed peripheral product adaptation strategies on a unique dataset of 106 Chinese and Romanian exporters.
• We find that EMFs that change either of two visible peripheral product attributes (the brand name or the packaging) to conform to local market norms, on average, are more satisfied with their export performance than those that pursue other strategies. Our results also suggest that changing the brand name to conform to local market norms has more than twice the impact on EMF performance than does changing the packaging.
• Consistent with the tenets of neo-institutional theory, EMFs managers may be able to improve their firms’ export performance by changing the peripheral attributes of their products to conform to local market norms.

     

Emotions and foreign direct investment: A theoretical and empirical exploration

Abstract

Emotions are largely absent in economic models. Possibly for this reason, many theories fail to explain the actual decisions made by managers.

Therefore, we integrate emotions with regular microeconomic theory. We focus on FDI decisions, and include both economic and emotional variables in our analysis of the firm’s decision-making process.

In our theoretical analysis, emotions are included in a utility maximization model that considers not only the utility of the firm but also the utility of the individual decision-maker.

In our empirical analysis, the presence of emotions in FDI decision-making is tested using a sample of Dutch enterprises that considered an investment in Central or Eastern Europe between 1990 and 2000.

     

The Impact of Psychic Distance on Chinese Outward Foreign Direct Investments

• The aim of this paper is to investigate the value of the well-known construct of psychic distance, developed to explain the internationalization path of firms from developed countries, for the internationalization of Chinese firms.
• Our research question is: Does psychic distance and its individual stimuli (differences in language, religion, culture, economic development, political systems, education, and geographic distance) explain Chinese investments abroad?
• We test hypotheses on the relation between psychic distance and its stimuli and Chinese outward direct investments with OLS regression analyses.
• We find that Chinese OFDI indeed is influenced by an aggregate construct of psychic distance and by certain psychic distance stimuli, but not by all; in particular, similarities or differences with regard to language and culture, the level of industrialization and the level of democracy relate to Chinese firms’ internationalization.
• Our findings suggest that psychic distance and its stimuli cannot be ignored as explanatory factors for Chinese outward FDI but that the explanatory value of these constructs depends on the context of the phenomenon under study.
• We conclude that it is important to understand how the home country context influences managerial perceptions and thereby patterns of international expansion from different regions.

     

The Industry-focused International Strategy

• Many firms facing low-cost international competition can reposition into niches. This study examines one such niche: industry-focused international firms, defined as companies that produce, sell, and expand internationally within one industry. Analysis of the global pharmaceutical industry finds a group comprising of about 20 % of the firms that pursue this strategy. This strategy is distributed internationally, but not uniformly.
• It is relatively more prevalent among firms based in emerging countries compared to industrialized nations. These firms invest in R&D in order to create deep specialized expertise that they exploit internationally.

     

Born-Globals and Culturally Proximate Markets

• In this paper we focus on the differences between born-globals and older firms. We compare whether cultural proximity is important for born-globals and older firms and whether international or technological knowledge drives their internationalisation. In addition, we compare whether born-globals and older firms are proactive or reactive in their choice of culturally proximate markets.
• Our research suggests that born-globals tend to internationalise rapidly into markets ready to adopt their technology. This is driven by the need to establish a revenue stream (cash flow) as quickly as possible. These born-globals usually seek larger advanced economies, which are often culturally similar (proximate) and offer economies of scale; reducing risk for inexperienced firms. Indeed, born-global firms are more willing than older firms to move from culturally proximate to culturally non-proximate markets very quickly.
• Utilising an abductive approach based on case studies, our findings show that born-globals use their technological knowledge and networks and are proactive when they enter culturally non-proximate markets. Born-globals must assess a new market for its ability to provide a revenue stream very soon after entry. If the culturally proximate market does not offer this, then they will leverage technological knowledge and networks to move rapidly into nearby non-proximate markets where they perceive better opportunities for building a customer base or new funding alternatives to sustain the firm in their early foreign market forays.
• Our research significantly extends theory in highlighting that born-globals rely more on technological experience and display proactive behaviour more than older firms which can draw on previous international experience.

     

National Culture and International Differences in the Cost of Equity Capital

• Prior literature suggests that national culture influences many facets of business operations including corporate governance, capital structure, managerial compensation, foreign direct investment behavior and accounting systems.
• Extending this line of literature, we examine whether key aspects of national culture are also related to international differences in the cost of equity capital.
• In a cross-country sample of 32 countries during 1992–2006, we find that the cost of equity capital tends to be higher in more individualistic and less uncertainty avoiding societies consistent with their greater risk-taking orientation.
• This finding contributes to the international business and financial literature by identifying national culture as an important institutional variable influencing firms’ cost of equity capital around the world.

     

Global Transfer and Indian Management

• The goal of this paper is to contribute to a better understanding of Indian management and to challenge more generally ahistorical and essentialist notions of indigenous management perspectives.
• Drawing selectively on postcolonial theory, we suggest that a historical hybridity perspective serves as a crucial heuristic device to understand the nature of Indian management and its globalization related transition.
• Discussing the example of the local mismatch and transfer outcome related to a global transfer initiative in a German subsidiary in India, we illustrate the analytical value of a historical hybridity perspective.
• Our paper concludes that the postcolonial notions of ‘hybridity’ or ‘inbetweenness’, are crucial to understand the nature of management in India and in emerging markets more generally as they move us beyond reductionist Eastern vs. Western or indigenous vs. global dichotomies.

     

Technological Knowledge Intensity and Entry Mode Diversity

• This paper expands the entry mode literature by referring to multiple modes exerted simultaneously in different value chain activities within and across host markets, rather than to a single entry mode at the host market level. We apply competing theoretical perspectives—internalization theory and knowledge transfer efficiency considerations on the one hand, and organizational learning theory on the other—to argue that firms’ technological knowledge intensity affect their entry mode diversity across value chain activities, across host markets, and at the overall corporate level.
• Analyzing a unique dataset we show that high technological knowledge intensity is strongly associated with high entry mode diversity across value chain activities and at the corporate level, but only weakly associated with greater entry mode diversity across geographic host markets.

     

The Quality of Domestic Legal Institutions and Export Performance

• Does the quality of domestic legal institutions matter for export performance? How does differential access to protections and privileges offered by informal institutions moderate the relationship between the quality of formal legal institutions and export performance? To answer these questions, we develop a theoretical framework drawing on insights from trade theory and institutional theory.
• We propose that higher-quality legal systems in an exporter’s location are associated with higher export performance, particularly when trade partners face higher levels of external and internal uncertainty. We further propose that firms that have less access to local informal institutions to reduce transaction costs and opportunism benefit more from better-developed legal institutions.
• Using information for more than 198,000 firms and legal quality information for 120 cities in China, we find strong support for our predictions. We discuss our contributions to the literature on institutions and export.

     

What Do HR Managers Really Do?

• The contribution of the HR function in supporting international business operations has received limited attention to date, with even less attention paid to HR roles.
• This article seeks to address this by studying the role of HR managers on international projects.
• We identify five IHR roles: service provider, policy police, strategic partner, change agent; and welfare officer.
• We also identifyhow these roles are enacted, questioning the prevailing divide between strategic and operational roles; and adding another dimension??emotional.
• We also argue that role enactment is context-specific; and show how context constrains as well as enables IHR role enactment.

     

International Diversification

• International diversification can have both benefits and costs. In this paper, we argue that a firm??s level of international diversification depends not only upon firm-specific characteristics such as its size and the industry to which it belongs, but also upon its ownership structure and the ability of its management to carry out an international strategy.
• We test our hypotheses using a panel of Italian firms. Our findings show that a high level of family ownership has a negative effect on international diversification, but that an inactive market for corporate control negates this. We found too that when the board of a family-owned firm has a higher proportion of independent directors, international diversification is greater. We also found that similar to the family-ownership effect, a high level of state ownership results in less international diversification. Overall our results confirm that corporate governance variables affect international diversification.

     

International Marketing Standardization

• Throughout the past four decades, researchers have examined several antecedents and consequences of international marketing program standardization. However, the findings reported in the literature are too fragmented to yield clear insights. To address this issue, the authors conduct a meta-analysis to quantitatively synthesize and analyze the empirical findings on antecedents and consequences of international marketing program standardization.
• The empirical results reported in this study have been integrated from 110 independent samples published in 108 articles. Multivariate analysis is used to examine the antecedents of international marketing program standardization strategy as well as the interdependence between the four elements of the marketing-mix. In addition, meta-regression analyses and subgroup analyses are performed to test potential moderating effects of performance measurement characteristics on marketing standardization-performance relationship.
• On the basis of the results, the authors discuss the implications of their findings and provide directions for further research.