Antecedents and Innovation Performance Implications of MNC Political Ties in the Chinese Automotive Supply Chain

The development of political ties represents a non-market strategy, which may substitute for formal contracts in safeguarding against transaction risks of innovation processes in emerging markets with weak institutions, such as China. Previous work has largely ignored the role political ties play in product innovation, and especially with respect to subsidiaries of foreign multinational corporations (MNCs). This study investigates the antecedents and role of political ties in relation to the innovation performance of foreign subsidiaries supplying automotive parts in China. Our analysis is based on survey data from 170 foreign MNC supplier firms in China. A partial least squares structural equation modelling (PLS-SEM) approach is employed to examine relationships through a ‘soft-modelling’ analysis, using SmartPLS 3. The results empirically confirm the positive impact of political ties, in terms of enhancing foreign MNCs’ product innovation performance in China. Furthermore, it is found that the extent to which foreign suppliers invest in and maintain political ties is driven by a mix of organizational and environmental factors, namely protection orientation, relationship-specific investment, technological dynamism and competitor opportunism. The paper contributes to the understanding of the antecedents and the implications of political ties with respect to the innovation performance of foreign MNC subsidiaries in emerging economies.     

Foreign Subsidiaries and Technology Sourcing in Spain

Firms acquire external technological knowledge via different channels. In this paper, we compare the technology sourcing of foreign subsidiaries and domestic firms looking at domestic R&D outsourcing, international R&D outsourcing, domestic cooperation for innovation and international cooperation for innovation. We use data from the Spanish Technological Innovation Panel for the years 2005–2009 for 10,206 innovative firms operating in Spain. We apply a multivariate probit specification which allows for systematic correlations among the different choices. The results show that the different technology sourcing choices are interdependent and that foreign subsidiaries show a different pattern of external technology sourcing. Compared to affiliated domestic companies, foreign subsidiaries show a smaller propensity for external technology sourcing via R&D outsourcing from independent firms in the host country, for international R&D outsourcing and for international cooperation for innovation. In contrast, foreign subsidiaries show a greater propensity for domestic cooperation for innovation. However, foreign subsidiaries are not a homogenous group in this respect.     

Simultaneous Impact of the Presence of Foreign MNEs on Indigenous Firms’ Exports and Domestic Sales

Incorporating the global production network approach and competitor analysis, this paper establishes an analytical framework with two hypotheses for the role of foreign multinational enterprises (FMNEs) in indigenous firms’ exports and domestic sales. First, the presence of FMNEs as a whole is likely to have a negative impact on indigenous firms’ domestic sales but a simultaneous positive impact on their exports in an emerging economy like China. Second, the presence of MNEs from Hong Kong, Macau and Taiwan (HMT MNEs) is more likely to generate this pattern of impact than MNEs from other countries (Other FMNEs). The foreign direct investment-led export strategy contributed to the dominance of the scenario described by the first hypothesis in China, while a higher degree of market commonality and resource similarity of HMT MNEs with that of indigenous Chinese firms than Other FMNEs leads to the second hypothesis. These novel hypotheses are tested and supported by a very large and recent firm-level panel dataset from Chinese manufacturing.     

Profitability and Speed of Foreign Market Entry

This research explores the relationship between firm profitability and actual speed of foreign market entry. Results suggest that profitability has an inverted U-shaped relationship with actual speed of foreign market entry, in the context of large US corporate law firms entering China. This result supports the idea that firms with both the need and resources to expand into foreign markets rapidly will do so, while laggards will lack either the resources or need to enter markets. Results also suggest that previously established offices in culturally similar markets, larger firm size, firm infancy, and prior international experience hasten market entry. Alternatively, limited organizational slack and concentrated practices delay market entry. Unexpectedly, prior entry of competitors appears to represent a deterrent to rapid entry. Additionally, while regulatory reforms on foreign law firms in China allowed for wider geographic access, they also increased operating restrictions, slowing entry speeds. Finally, results suggest that intense home-market competitive intensity may divert or decrease resource commitments to rapid foreign expansion.     

Institutional Distance and Foreign Subsidiary Performance in Emerging Markets: Moderating Effects of Ownership Strategy and Host-Country Experience

Institutional distance has been known to be an important driver of Multinational Enterprises’ strategies and performance in host countries. Based on a large panel dataset of 10,562 firms operating in 17 emerging markets and spanning 80 home countries, we re-examine the relationship described by Gaur and Lu (J Manage 33(1):84–110, 2007) between regulatory institutional distance and subsidiary performance. We extend this research by (1) examining this relationship in the context of emerging markets, (2) examining the moderating effects of ownership strategy and host-country experience within the context of emerging markets and (3) accounting for a greater variety of institutions by including a large number of home and host countries. We find that institutional distance negatively affects subsidiary performance in emerging markets. Our findings also show that the negative effects of institutional distance on subsidiary performance are lesser for subsidiaries with partial ownership (than for subsidiaries with full ownership) and for subsidiaries with greater host-country experience. We discuss our findings with respect to Gaur and Lu’s model, which explores the relationships between these variables in a general context.     

Spatial Dependence of the FDI Entry Mode Decision: Empirical Evidence From Emerging Market Enterprises

The entry mode and location choices are two fundamental decisions made by firms after they decide to proceed with foreign direct investment (FDI). In previous studies, these two strategic concerns have usually been studied separately as independent decisions. Following recent claims, we extend beyond the macro-environment of the host country or geographical space to study the interdependence between these two decisions by comparing the effects of two different colocation strategies on the establishment mode and ownership structure of investors in FDI. We tested our hypotheses based on a sample of 162 Chinese-owned subsidiaries in Germany and found spatial dependence in the entry mode strategies, where the existing theories regarding ownership structure prediction for the sampled firms had limited explanatory power. We also observed that the experience of investors had a negative moderating effect on these interactions. Our results suggest the following: (1) the FDI strategies of foreign investors consider conditions that vary among countries as well as within the host economy and place; (2) the entry mode and location choices can be alternative strategies for overcoming barriers to entry in FDIs where a trade-off between both is required; and (3) more efforts are still needed to interpret the FDI behaviors of investors from emerging economies.     

Collaboration in Innovation Between Foreign Subsidiaries and Local Universities: Evidence from Spain

Collaboration between foreign subsidiaries and universities is relevant for multinational companies (MNCs) that aim at absorbing knowledge from abroad, as well as for universities and policy-makers attempting to maximize the spillovers associated with foreign direct investment (FDI). In this paper, we explore how MNCs collaborate with universities in the foreign countries where they locate and provide new empirical evidence for Spain as a host country. Using a probit model with panel data comprising 9,614 firms for the period 2005–2011, we explore differences between the propensity to collaborate with universities of foreign subsidiaries and Spanish firms. Subsequently, building on a new survey to 89 foreign subsidiaries and on a more detailed analysis of five case studies, we discuss the variety of motivations that drive collaboration with universities and relate the scale and scope of such collaborations with the dynamic mandates of foreign subsidiaries in global innovation networks.     

Implicit Industrial Policy: The Triumph of Britain and the Failure of France in Global Pharmaceuticals

This study illustrates a new view of industrial policy, basedon the emerging organizational economics theory of the firm.Organizational economics regards the firm as a collection ofskills/ capabilities embedded in a network of relations withexternal transactors. Industrial policy shapes the local network,thereby defining domestic firms and delimiting their skill accumulation.In the pharmaceutical industry, British regulations of safety,pricing, basic research and foreign direct investment createda demanding local competitive environment for British firms,training British firms in skills that would facilitate globalcompetitiveness. In France, very different regulations enticedFrench ethical drug firms to focus on a protected local marketincreasingly desynchronized from the worldwide industry. Thus,industrial policy laid the ground work for the spectacular riseto global success of UK pharmaceutical firms and the correspondingfailure of French firms.     

中国空分设备市场现状与近期发展

概述了中国空分市场的现状 ,指出了中国空分制造业与国外各大公司相比存在的差距。简要分析了国内空分制造业经多年的发展已具有的实力 ,在材料和人工成本上具有的竞争优势 ;与国外空分行业的差距在逐步缩小。对差距与不足及近期发展的对策谈了一些看法。     

Market Orientation, Embeddedness and the Autonomy and Performance of Multinational Subsidiaries in an Emerging Economy

• This paper develops a conceptual framework for market orientation, embeddedness, autonomy and performance of multinational subsidiaries in an emerging economy.
• We argue that internal and external embeddedness has different performance implications for export- and local market-oriented multinational subsidiaries.
• Our results, based on a sample of 233 multinational subsidiaries from China, indicate that while external embeddedness has a positive impact on specialized resources of both types of subsidiary, such resources only positively affect the performance of local market-oriented subsidiaries. By contrast, internal embeddedness has a negative impact on specialized resources of both types of subsidiary.
• Managerial and policy implications are discussed.

     

Patents,Competition, and Firms’ Innovation Incentives

This paper presents fresh evidence on the interaction between industrial property rights (patents) and competition, and their joint effect on firms’ innovation. We use panel data of Spanish manufacturing firms for 1990–2006, as well as external information on European Patent Office and US Patent Office patent counts. We construct a new synthetic measure of competition and estimate the impact of patents on this measure at the industry level. Then, the effect of industry-wide competition and patenting on firms’ innovation is estimated at the firm level. Our results suggest that patents reduce the level of competition in the industry, whereas the effect of competition on innovation varies with the type of innovation indicator. Thus, by lowering competition, patents in an industry exert an indirect effect on innovation besides their direct effect. In addition, interaction effects between patents and competition indicate that patents soften the impact of competition changes on firms’ innovation.     

The impact of diversifying and de novo firms on regional innovation performance in an emerging industry: a longitudinal study of the U.S. ethanol industry

There is growing interest among strategy scholars and policy makers regarding the influence of diversifying and de novo firms on regional innovation activities in emerging industries. This paper examines how the population, entry, and exit of diversifying and de novo firms in regions influence regional innovation output in an emerging industry. Using longitudinal data from the U.S. ethanol industry, we find that the local population and exit of diversifying and de novo firms have differing impacts on regional innovation output. Our findings contribute to the literature on firm heterogeneity, agglomeration, and regional innovation systems.     

Bridging Knowledge Gaps: Returnees and Reverse Knowledge Spillovers from Chinese Local Firms to Foreign Firms

Adopting a knowledge-based perspective and embeddedness theory, this study examines the impact of reverse knowledge spillovers from local Chinese firms to foreign firms using a sample of high-tech firms in Zhongguancun Science Park in China. It also investigates whether returnees in foreign firms help bridge knowledge gaps between local firms and foreign firms. The results show that the presence of returnee CEOs and returnee employees enhances the impact of reverse technological and marketing spillovers on the innovation and financial performance of foreign firms. The findings call for more studies on the social dimensions of knowledge spillovers across international boundaries and have important theoretical and practical implications.     

An empirical study of impacts of production mix,product route efficiencies on operations performance and profitability: a reverse logistics approach

This research studies the impact of two reverse logistics business strategies on profitability of the firm through operations management (OM). The study is employed on scrap steel industry. The first strategy is production mix efficiency (PME), which is involved in the process of producing goods. The second strategy is product route efficiency (PRE), which engages in the transportation of goods. Our finding indicates that OM alone does not have a positive impact on profitability. However, the two strategies have a positive effect on profitability, which provides a potential answer to firms trying to improve profitability.     

Transnational Strategies and Regional Development: The Case of GM and Delphi in Mexico

The Mexican automotive industry has been undergoing continuous and rapid change over the past two decades. Much of this change has been understood in the context of related processes of firm restructuring and globalization. The paper examines GM's global strategies and describes the profound transformation of Mexican affiliates in re-orientating away from production for the domestic market towards global operations. It also analyses the successful experience of Delphi (GM's former components division) in Ciudad Juarez as an example of how the agglomeration can add value under specific social and institutional conditions by forming a sectoral cluster in which a network of companies accelerate learning, especially among engineers and technicians. Delphi is one of the most conspicuous examples of the process of productive integration within the North American Free Trade Agreement (NAFTA), as well as a model of technological learning and upgrading in an emerging economy. Finally the paper examines the limited influence of public policy initiatives aimed at building on the upgrading strategies of transnational firms in Mexico to stimulate endogenous regional development by local suppliers.     

Transnational Strategies and Regional Development: The Case of GM and Delphi in Mexico

The Mexican automotive industry has been undergoing continuous and rapid change over the past two decades. Much of this change has been understood in the context of related processes of firm restructuring and globalization. The paper examines GM's global strategies and describes the profound transformation of Mexican affiliates in re-orientating away from production for the domestic market towards global operations. It also analyses the successful experience of Delphi (GM's former components division) in Ciudad Juarez as an example of how the agglomeration can add value under specific social and institutional conditions by forming a sectoral cluster in which a network of companies accelerate learning, especially among engineers and technicians. Delphi is one of the most conspicuous examples of the process of productive integration within the North American Free Trade Agreement (NAFTA), as well as a model of technological learning and upgrading in an emerging economy. Finally the paper examines the limited influence of public policy initiatives aimed at building on the upgrading strategies of transnational firms in Mexico to stimulate endogenous regional development by local suppliers.     

How Do the Normativity of Headquarters and the Knowledge Autonomy of Subsidiaries Co-Evolve? Capability-Upgrading Processes of Chinese Subsidiaries in Belgium

To successfully compete with advanced market multinationals (AMNEs), emerging market multinationals (EMNEs) have to access higher innovation capabilities from their autonomously operating advanced economy subsidiaries. There are two competing schools of thought on how EMNE subsidiaries obtain capability-upgrading autonomy from their headquarters. The first school of thought embraces a knowledge-based, boundedly rational perspective on headquarters’ delegation of capability-upgrading autonomy. The second argues that normative stakeholder priorities pervade headquarters’ capability-upgrading logic, with a “headquarters knows best logic” standing in the way of knowledge-based subsidiary autonomy. This paper adopts a process perspective to understand how EMNE headquarters’ logics and subsidiaries’ mandate for capability-upgrading co-evolve over time. Drawing on the case of Chinese multinational subsidiaries (CMNEs) in Belgium we find that subsidiary managers’ ability to challenge normative expectations is a condition to headquarters acting in a knowledge-based manner. We contribute to the literature on EMNE capability-upgrading by developing several propositions on how autonomy negotiation processes between headquarters and subsidiary evolve over time; depending on the historical imprinting of home success values, the socialisation in how to respond to failure and the emergence of constructive conflict.