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.     

Headquarters’ Managerial Intentionality and Reverse Transfer of Practices

This paper addresses the reverse transfer (RT) of practices in multinational corporations (MNCs), a phenomenon which occurs when practices originating in their cross-border affiliates are transferred back to the parent MNCs. Based on an empirical investigation of the experience of 503 Hong Kong MNCs with subsidiaries in Mainland China, this study has successfully and more systematically tested and discussed the managerial intentionality (MI) related factors on RT than has been done before in the literature. The results suggest high headquarters intentional arrangements involving choosing wholly-ownership, International Human Resource Management control, active trust building, and frequent personal contact can improve explanatory power of achieving the objectives of reverse transfer of practices significantly.     

Knowledge sources of innovation in a small open economy: The case of Singapore

By tracing the flows of patent citation to prior patents and scientific journal articles, we investigate the sources of knowledge for innovation output in Singapore, a small, highly open economy that has traditionally been significantly dependent on foreign multinational corporations (MNCs). We found that the local production of new knowledge by indigenous Singaporean firms depends disproportionately on technological knowledge produced by MNCs with operational presence in Singapore and scientific knowledge generated by foreign universities. Locally produced new knowledge by indigenous firms and local universities/ public research institutes constitutes an as yet insignificant, albeit growing, source for innovation in Singapore.     

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.     

Is green manufacturing expensive? Empirical evidence from China

With increasingly serious environmental problems, a circular economy production system is in urgent needs. This study explores whether green manufacturing (GM) is expensive and how external institutional environmental pressures influence the cost of GM among industrial enterprises in emerging economies. Through an analysis of 10,380 observations of 1470 listed manufacturing firms in the Chinese share market from 2008 to 2015, this paper finds that GM increases operating cost (OC). In addition, the positive relationship between GM and OC is strengthened with reduced pollution level in the local city. Furthermore, synergistic effects of the local pollution level and the local government’s pollution information transparency are found. Firms’ OC increases more as firms carry out GM when both the local pollution level and pollution information transparency of local government are high, or when the local pollution level and the local government’s pollution information transparency are low.     

Clusters and Regional Management Structures by Western MNCs in Asia: Overcoming the Distance Challenge

Recent literature suggests that multinational companies pursue regional rather than global strategies. Therefore, this study investigates regional management structures, using French multinational companies (MNCs) in the Asia–Pacific region as an empirical context, to address two research questions: first, do MNCs split Asia into subregions and, if so, what are the resulting clusters of countries and clustering criteria? Second, what kind of regional management structures do MNCs establish in Asia, and what are their roles and functions? Factors, such as MNC size, the size of host markets, or the nature of their activities, might explain some differences. The authors conducted 77 face-to-face interviews with expatriated managers in charge of the subsidiaries or regional management structures of 47 French MNCs located in 11 countries in Asia, then crossed these data with secondary sources of information. Nearly half the MNCs subdivide the Asia–Pacific region into clusters of countries, where they locate regional management centres (regional headquarters, regional offices, distribution centres, local offices) with substantial functions and roles. The main drivers of a regional Asian strategy and organisation are the overall size of the MNC and its sales in Asia; the presence of manufacturing activities does not exert any influence. This research identifies ten clusters of countries in Asia, determined by the French MNCs in our sample, on the basis of four main criteria: market orientation/economic logic, geographical and institutional proximity, cultural differences, and the MNC’s own characteristics. Smaller MNCs do not slice Asia into clusters but rather centralise regional decisions and control procedures, implementing few regional management centres in Asia and giving them limited roles and functions.     

Large firms and the science-technology interface Patents,patent citations,and scientific output of multinational corporations in thin films

Firms operating in science-based technological fields reflect some of the complexities of the science-technology interaction. The present study attempts to investigate these interactions by analyzing patent citations, publication and patent outputs of multinational corporations (MNCs) in 'thin film' technology. In particular we explore different characteristics of knowledge production and knowledge utilization of these firms. The results indicate no correlation between intensity of research activity and patents produced by the MNCs. The relationship between scientific and technological knowledge generation as well as the linkage between science and technology appear to be firm-specific rather than dependent on a technological or industrial sector. The dispersion of journal sources for the majority of patent citations of scientific literature as well as for the majority of scientific outputs is narrow. Basic journals play an important role in patent citation as well as in addressing research of MNCs in thin-film technology.     

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.

     

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.     

Offshore versus domestic: Can EM MNCs reach higher R&D quality abroad?

In the current discourse about the technological development of emerging market multinational companies (EM MNCs), the internationalization of research and development (R&D) activities is increasingly discussed as a strategy for catching-up to established MNCs. EM MNCs attempt to use international R&D to tap into technologically superior resources abroad which are not available to them in their home market. This study compares the performance of domestic and offshore R&D activities to look into EM MNCs’ ability to conduct high-quality R&D abroad. We use the Chinese telecommunication equipment manufacturer Huawei as a best practice case study. To map their worldwide patent quality pattern, we propose a multiple-patent-office-approach to ensure a balanced view on their activities with data from SIPO, USPTO and EPO. We also employ three different measures to capture different dimensions of patent quality. The results of the empirical model support the assumption of higher quality for patents with knowledge from advanced offshore locations.     

重视跨国公司在中国标准化中的作用

跨国公司参与中国标准化促进了国内标准发展的速度,增加了中国标准化过程的透明度和国际化程度,同时也可能抑制本土技术创新、形成市场垄断和政策挟持效应。需要正确地引导和管理标准化的国际合作,将我国的国情、优势和跨国公司的优势进行有机的结合,跨国公司参与中国标准化的界限,构建开放条件下政府标准化管理模式,提升国际标准合作与竞争能力。     

Subsidiary Interdependencies and International Human Resource Management Practices in German MNCs

• Using the resource-based view, this paper links the degree of interdependence that exists between subsidiaries of multinational corporations (MNCs) to the use of various International Human Resource Management (IHRM) practices.
• We assume that in many MNCs this interdependence has increased the need for cross-border coordination.
• We analyze to what extent MNCs use IHRM practices in order to enhance their coordination capability across national borders.
• We present a framework that addresses these effects and empirically test it using data from a questionnaire survey among 142 majority-owned overseas subsidiaries of German MNCs.
• The findings show that the degree of interdependence is related to the level of international experience of staff employed in subsidiaries, the use of third-country nationals, the provision of training, the use of cross-cultural management teams, and the choice of employee evaluation and reward methods.
• We conclude by discussing the implications of our findings for IHRM practitioners and scholars as well as the limitations of our study.

     

Managing dependence in logistics outsourcing relationships: evidence from China

As third-party logistics (3PL) plays an increasingly important role in businesses, managing dependences between 3PL providers and users has become critical for business success. Drawing on the resource dependency theory (RDT), we propose that logistics integration and interorganisational relationships are two effective approaches for 3PL users to cope with their dependence on 3PL providers and to achieve better financial performance. The model was empirically tested using data collected from 134 3PL users in China. The results show that both inter-organisational relationships and integration and their interplay effectively carry the positive influence of dependence on financial performance. We also find that while both interorganisational relationships and integration are effective for Chinese-controlled 3PL users to leverage their dependence on 3PL providers for financial performance improvement, foreign-controlled 3PL users rely solely on interorganisational relationships to manage their dependence.     

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.     

The Impact of Internationalization on Home Country Charitable Donation: Evidence from Chinese Firms

Does internationalization promote or inhibit home country charitable donation for firms from developing countries? This is an important question that remains poorly studied. This paper aims to address this question by focusing on Chinese internationalizing firms. We maintain that while broadening overseas markets brings financial returns to Chinese firms, their domestic charitable donation may decrease with the level of internationalization. Drawing on the resource dependence theory, we argue that the more Chinese firms depend on overseas sales, the less important domestic stakeholders are for their survival, and therefore they are less likely to make charitable donations within China. Further, we maintain that this negative relationship between internationalization and home country charitable donation is attenuated by Chinese firms’ state-ownership. This is because state-ownership provides the firms with alternative sources of critical resources that alleviate their dependence on the international markets. We tested and supported our theory using data collected from all public firms in China between 2008 and 2012. Theoretical and policy implications are provided.