Subsidiary Divestment: The Role of Multinational Flexibility

We take the multinational flexibility perspective and examine the conditions under which multinational corporations’ (MNCs’) foreign manufacturing subsidiaries in labor-intensive industries are not divested from their host country markets under the influence of their host country’s rising labor costs. We examine in this paper the effects of intra-firm product shifts within the same MNC network on foreign subsidiary divestment. We utilize a panel of data of Korean MNCs’ foreign subsidiaries in labor intensive industries and employ a Cox proportional hazard rate model as an event history analysis methodology on STATA 10. We find that intra-firm product shifts within the same MNC network reduce the probability of subsidiaries exposed to rising labor costs in their host countries being divested earlier. We also find that greater cross-country labor cost differentials and more country options in the same MNC network are helpful in facilitating intra-firm product shifts and lowering divestiture rates of the subsidiaries. Contrastingly, we find from control variables that weaker performing, smaller, and stand-alone subsidiaries, in riskier countries, facing currency appreciation, and increasing labor costs are more likely to divest. We conclude from our findings that MNCs are able to enhance multinational flexibility by using intra-firm trade connections among affiliated firms in flexible responses to cross-border cost and value differentials.     

Success Factors of Regional Strategies for Multinational Corporations: Exploring the Appropriate Degree of Regional Management Autonomy and Regional Product/Service Adaptation

This paper examines the factors that drive the success of multinational corporations (MNCs) in their pursuit of regional strategies. Based on contingency theory, we develop a comprehensive regional success factor model to investigate the effects of regional management autonomy and regional product/service adaptation on the regional success of MNCs. Using structural equation modelling, we also analyse the interaction effects of regional orientation and inter-regional distance. We evaluate our model by means of both primary and secondary data for Fortune Global 500 firms. Our findings show that appropriate degrees of regional management autonomy and regional product/service adaptation are highly contingent upon contextual influences on MNCs.     

Ownership Increase in International Joint Ventures: The Within- and Across-Country Flexibility Perspective

We employ the real options perspective to examine how multinational corporations (MNCs) increase ownership levels in their international joint ventures (IJVs) to exploit (or utilize) both within- and across-country flexibility. This paper utilize a rich dataset of South Korean firms’ foreign affiliates to test hypotheses derived from the real options theory. It examines the roles of growth options that require small equity stakes under uncertainty as well as switching options that require controlling equity stakes to coordinate switching implementation. Specifically, we examine how the ownership of jointly-owned foreign subsidiaries changes under the influence of changing labor cost uncertainty. We utilize a two-stage model to address the sample selection bias associated with a subsidiary’s choice of joint venture under the influence of high labor cost uncertainty. In the first stage, we run a probit model with a dummy variable for JVs and wholly-owned subsidiaries (WOSs) (1: JV, 0: WOS) as the dependent variable. In the second stage, we run a panel logistic regression model (STATA command, “xtlogit”). We found that MNCs engaged in greenfield IJVs increase their initial ownership when labor cost uncertainty within their host countries is favorably resolved. We also found that MNCs’ tendency to increase their IJV ownership intensifies when their subsidiary networks are exposed to negatively correlated labor cost growth rates across countries. Taking within and across country flexibility perspective, this study adds new insights on MNC ownership changes, especially in IJVs. Based upon our findings, we conclude that MNCs make flexible ownership adjustments for their foreign subsidiaries in response to different uncertainty conditions within and across countries.     

Multinationality Matters in Innovation: The Case of the UK Financial Services

The paper starts with a brief summary of theoretical perspectives on the relationship between multinationality and innovation and the move from a centralized and hierarchical perspective to a more decentralized network-based one. Four hypotheses are set up to test the relationship between multinationality and innovation, using data from the Community Innovation Survey 12 for the financial services sector. All models control for the size of the enterprise. The results show that multinationality is positively related to innovation activities. The positive impact of being part of a multinational company (MNC) on the propensity to innovate seems largely due to the fact that MNCs operate in different countries rather than, or more than, to the enterprise being part of a group. The relevance of multinationality appears to be higher, the higher the degree of internationalization of the company of which the enterprise is part. The country of origin of the company appears also to be important.     

Regional and Global Technological Knowledge Search Strategies and the Innovative Performance of Large Multinational Corporations

This study focuses on the innovative performance implications of large MNCs' regional and global technological knowledge search strategies. In networked MNCs, the parent can still offer valuable knowledge to subsidiaries. The parent's and a subsidiary's knowledge becomes complementary if an MNC appropriately adopts a global strategy at the parent level and a regional strategy at the subsidiary level. An analysis of the world's largest firms in the Electrical Equipment industry shows that, in general, a global strategy improves the innovative performance of the MNC. Meanwhile, only the combination of a global strategy at the parent level and a regional strategy at the subsidiary level is positively associated with the innovative performance of the MNC. This study contributes to the literature on networked MNCs and the debate of globalization and regionalization. Managerial implications are discussed as well.     

EU Regions and Multinational Corporations: Change, Stability and Strengthening of Technological Comparative Advantages

In a rapidly globalizing economy, and particularly in the faceof a process of economic integration such as that occurringin the EU, regions forge an increasing number of linkages withother locations within and across national boundaries throughthe local technological development efforts of multinationalcorporations (MNCs). By using a database of patents grantedto the largest firms by the US Patent and Trademark Office (USPTO),we have shown in previous research that the pattern of MNC networksfor innovation conforms to an internal (within national boundaries)hierarchy of regional centres. In this paper the hypothesisof the combined significance of cumulativeness and incrementalchange in innovation is examined by testing the extent of continuityin the sectoral composition of technological profiles of differentEU regional centres between the 1970s and the 1990s. The resultsprovide support for our hypothesis that a geographical hierarchyof regional locations can be established also across nationalboundaries within the EU. It is shown that the core Europeanregions can be divided into two kinds—those in which MNCshave consolidated areas of traditional specialisation for theregions in question, and those in which there has been a shifttowards (and a relative growth of) the development of fieldsof high technological opportunities.     

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.     

Stopford and Wells were Right! MNC Matrix Structuresdo fit a “High-High” Strategy

• This paper seeks to address a primary question about matrix structures: under which strategic condition should multinational companies (MNCs) use matrix structures instead of other structures? To answer this question, the seminal Stopford and Wells Model (1972) is re-examined.
• Stopford and Wells (1972) predicted in their model that MNCs tend to use matrix structure to implement high levels of dual strategies??foreign product diversification and area diversification. Their prediction, however, has remained theoretically unclear and empirically unproven.
• To address this gap in the strategy-structure literature, we re-examine and revise the Stopford and Wells Model to explain the strategic condition in which MNCs tend to use matrix. The key of the revision is to use ??corporate integration?? instead of ??foreign product diversification??.
• The revised model is preliminarily supported by the data from a study of German MNCs. This suggests that corporate integration, together with area diversification, are the two over-riding strategies that lead to MNCs?? use of matrix.

     

“外派”模式下的跨国公司人力资源风险研究

在全球化发展的新趋势下,跨国公司人力资源管理面临新的挑战。分析了"外派"模式下人力资源管理的特点和内容,对相关学者关于"外派"的研究进行了总结,重新界定了"外派失败"的概念,明确指出"外派"模式下跨国公司人力资源风险产生的结果包括外派失败和人才流失。结合跨国公司人力资源管理的流程,从产生过程、管理性质和结果等方面对人力资源风险进行了分类。从跨文化管理和人力资源管理的角度分析了跨国公司人力资源风险的成因。     

Practice Standardization in Cross-Border Activities of Multinational Corporations: A Resource Dependence Perspective

This study examines the relationship between power dependence and practice standardization in the context of cross-border alliances. Existing studies have typically assumed that standardization or adaptation is a unilateral decision made by multinational corporations (MNCs) but ignored the influence of the relative power of multinational and local partners under conditions of government influence. Drawing on resource dependence theory (RDT), we argue that the power imbalance between multinational and local firms may shape the standardization of practices in their established alliances. The results, based on a sample of 243 Fortune 500 US companies, indicate that when the level of government influence is high, the positive effect of MNCs’ resource importance on practice standardization diminishes and the negative effect of local firms’ alternative resources becomes stronger. These findings suggest that RDT has important implications for understanding standardization versus adaptation in cross-border alliances.     

Clanism

• The objectives of this paper are: (1) to present and develop clanism as an indigenous management concept in Central Asia, and (2) to analyze the effect of clanism on a specific management function—human resource management (HRM)—in the concrete context of Kazakhstan.
• This exploratory study employs a qualitative research. The data indicate that the degree to which clanism affects HRM practices depends, to a great extent, on the type of company. Clanism’s effect is strong in state-owned companies and moderate in privately held companies, while it is weak in the subsidiaries of multinational companies. Furthermore, the influx of western MNCs has influenced Kazakhstani HRM in general and lessened the influence of clanism on HRM. However, some characteristics of the local labor market may strengthen the effect of clanism on HRM practices.
• The paper proposes a definition of clanism; discusses the reasons for clanism’s existence; investigates how clanism differs from other indigenous concepts, such as blat and guanxi; and analyzes how clanism affects HRM practices in Kazakhstan, a country that is strategically important for international management.

     

The Performance of Independent Active SMEs in French Competitiveness Clusters

This article analyses the evolution of independent members of French independent competitiveness clusters. It compares small and medium-sized enterprises (SMEs) that participated in collaborative research projects, funded by French competitiveness clusters, against similar control companies that were not part of such projects and not funded by the policy, over the period 2005–2013. French competitiveness clusters seek to enhance SMEs’ size, performance, innovation and employment; the current study therefore assesses their outcomes in terms of capital invested and equity returns. The findings from a difference-in-differences analysis reveal that sales, employment, R&D investments, and value added all increase in relative terms, but financial returns exhibit significant relative decreases for the smallest companies, whereas larger firms record strong increases. The inability of the smallest SMEs to reap gains from their cluster membership should be a matter of great concern to both companies and policy-makers.     

Learning from Political Change and the Development of MNCs’ Political Capabilities: Evidence from the Global Mining Industry

Previous studies have suggested that (1) a type of organizational capabilities—namely, political capabilities—are required for multinational corporations (MNCs) to grow in global markets, (2) political capabilities are important for building productive relations with governments in politically risky host countries, and (3) MNCs can develop political capabilities by accumulating foreign experiences. However, empirical studies have found both positive and negative effects of such experiences on global market expansions. This study attributes such mixed findings to our lack of understanding about MNCs’ procurement processes of political capabilities and proposes types of experiences critical for such procurements by focusing on their reactions to political changes in host countries. Using data on the global mining industry and political changes in host countries, we find that MNCs develop political capabilities and thus make entries into politically risky host countries when they accumulate the experience of partially divesting some of their assets after political changes in host countries. We also find that MNCs are less likely to enter such countries if they have more experiences of exiting from host countries following political change.     

A study of quality management practices and performance in Asia and the South Pacific

This paper discusses the findings from a survey of 599 managers in five countries in the Asia/South Pacific region. We sought to discover how similar the practices were, based on opinions, and the resulting performance, based on 14 measures, in the region. We also sought to derive a profile of practices which was associated with performance. Results indicate that practices may show more variety than performance relative to the regional scores. Regression analysis found only one measure of performance was significantly related to practice factors.     

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.     

赢利能力不同的跨国公司技术转让策略的演化博弈分析

为研究跨国公司能否将其先进的技术转让给我国企业,尤其是赢利能力强与赢利能力相对弱的两种跨国公司,究竟哪一种更愿意转让技术的问题,运用演化博弈论分析了两种跨国公司转让技术策略选择的动态演化过程。结果表明,对于都只是准备进入而尚未进入我国的跨国公司而言,技术转让成本低的跨国公司更愿意转让技术;对于已经进入我国设厂的跨国公司来说,则是赢利能力相对弱的跨国公司更愿意转让技术给我国企业。     

The Effect of Corporate Political Activity on MNC Subsidiary Legitimacy: An Institutional Perspective

MNC subsidiaries engage in a variety of corporate political activities to gain legitimacy in the host country. Based on institutional theory, our study examines five types of strategies that MNC subsidiaries pursue to gain legitimacy in foreign markets. Using data from Australian subsidiaries of MNCs operating in different industries, and whose parents originate from 28 different countries, we find that mimetic isomorphism strategy has the strongest effect whereas information strategy has no effect on subsidiary legitimacy. The other three strategies, namely, financial, constituency building and relational have strong to moderate effects on subsidiary legitimacy. In addition, we show that multiple CPA strategies are essential and work together synergistically to contribute to the legitimacy of MNC subsidiaries. Our paper provides empirical support to the widely recognized need for MNC subsidiaries to engage in different types of CPA to legitimize their operations in diverse institutional contexts across the globe.