Mining Junior, Major Political Risks

Recent geopolitical tensions and conflicts have escalated, introducing a heightened level of complexity and uncertainty for multinational enterprises (MNEs) operating in the global context. This study probes how MNEs can strategically deploy their host country subsidiaries to counterbalance the repercussions of geopolitical risk emanating from their home country. Drawing from the social geography literature, the study perceives the home and host countries as distinct “places”, each possessing unique attributes that can either aid or hinder the operations of MNEs. When the geopolitical risk in the home country influences MNEs’ place bonding with the home country, host country subsidiaries can serve as both functional and emotional sanctuaries to mitigate the impacts of home-country geopolitical risk. The study uncovers that the geopolitical risk in the home country is negatively related to the foreign divestment of MNEs in the host country. However, not all subsidiaries confer the same benefits to MNEs. The role of geographical “space”, defined by the interconnections and relationships between MNEs and the host country, also bears significance. The study proposes that MNEs’ geo-strategies to alleviate the geopolitical risk from their home country should incorporate both geo-ideological and geo-political alignment with the host country for stronger place bonding. Geo-ideological alignment, characterized by the low psychic distance between the home and host countries, and geo-political alignment, achieved through the participation of the local state equity in the host country subsidiary, can augment the subsidiary’s functional and emotional bonding, thereby serving as a bulwark against home-country geopolitical uncertainties.

Research Summary: We propose that the liability of foreignness (LOF) applies to individuals and not only to firms. To identify such a liability, we study entrepreneurial firms created by natives and immigrants. Firms created by immigrants have a lower rate of survival than those founded by natives. Work experience in the host country and size of the immigrant's national community improves the chances of survival of firms founded by immigrants, in particular, for firms founded by immigrants from institutionally distant countries. In contrast, the impact of firm age on survival is not significantly different for firms created by natives and immigrants. This indicates that learning by individuals before the creation of firms is more important than learning that occurs at the firm level after firms have been created. Managerial Summary: We explore how the characteristics of individuals running firms affect firm performance. We focus on foreignness and study the chances of survival of firms created by immigrants. Firms created by individuals who have longer work experience in the host country and who are integrated in larger national communities are more likely to survive than those created by their counterparts with less experience and smaller communities. The effect is stronger for immigrants from countries with different institutions to those of the host country. This indicates that, when choosing new countries to operate in, it is important to carefully choose the management team and the location within the host country, in particular, if the countries being considered are relatively dissimilar to the firm's home country.

By focusing on the tacit and explicit characteristics of informal and formal institutional distances, this study investigates the competitive advantage of foreign subsidiary firms from developed countries and emerging markets operating in Latin America. Following recent research on distances in international management, this study measured the size and direction of distances and computed formal institutional distances based on the world governance indicators from the World Bank, whereas informal institutional distances are calculated using the four original dimensions of Hofstede. Considering that culture is tacit, whereas formal institutions are explicit, it is argued that these differences affect the ability to convert experience dealing with cultural and formal institutional conditions in the home country into firm specific advantages (FSAs) in a foreign host country. These assumptions are tested quantitatively using data from the Orbis database, a sample that includes over 4200 firm-year observations covering 10 of the largest economies in Latin America. In a departure from previous studies investigating the implications of FID direction, it is shown that the effects in specific directions are different for foreign subsidiaries from developed countries and from emerging markets. The results reveal that emerging market firms are at an advantage when operating in less developed host countries, whereas foreign subsidiaries from developed countries can adjust more positively when operating in host countries with strong formal institutions. On the other hand, the effects of the different CD dimensions depend on the direction towards host countries with specific cultural profiles. These findings indicate that foreign subsidiaries from emerging markets have a clear advantage in dealing with institutional voids in Latin America (i.e., FID towards less developed host countries), whereas the effects of CD are the same for all firms. This suggests that the cultural profile of the host country is what really matters.

This paper addresses how corporate social responsibility of multinationals in China influences their Chinese subsidiaries’ performance. Using panel data regression, (1) we investigate the effects of corporate social moderating effects of institutional and geographic distances between their home countries and China. Our findings show, first, that subsidiaries’ corporate social performance is associated positively with their profit in China. Second, we find that the greater the cultural, economic, and geographic distances between the home country and China, the less likely it is that a subsidiary will benefit from corporate social responsibility. We enrich the theoretical understanding of the institutional conditions under which corporate social responsibility leads to specific outcomes by adding new institutional elements—the differences of culture and the economies between multinationals’ host and home countries. Our findings suggest that although corporate social responsibility is still new to China, being socially responsibility provides financial benefits to multinationals. Their global and local corporate social responsibility strategies have to adjust based on local cultures and economic levels, especially with respect to fundamental beliefs about spirituality and values. The paper fulfilled the research gap between multinationals’ social practices and their performance in host countries at the subsidiary level by providing empirical evidence concerning the responses to corporate social responsibility initiatives in emerging markets and clarifying the conditions under which foreign affiliates’ corporate social responsibility engagement in the host country can gain better returns in local markets.

<p>This Master‘s thesis seeks to consider the impacts of institutional distance regarding IPR protection on Foreign direct investment’s (FDI) internationalization strategies. Estimated at approximately US$ 1.8 trillion in 2015 and sitting at its highest level since the global economic and financial crisis in 2008 (UNCTAD, 2016), FDI flows are fast becoming a focal issue of global business. Developing Asia, for example, has emerged as the world’s largest FDI recipient region in the world, which has attracted a wide and public attention. China, in particular, is the largest recipient of FDI among the emerging economies. In 2014, it overtook the US as the most popular destination for multinational enterprises (MNEs). To date, most academic interest has focused on how the institutional environment of the host country affects both the overall volumes of FDI (e.g., Lee & Mansfield, 1996; Smarzynska Javorcik, 2004), and the modes of entry strategy (e.g., McCalman, 2004; Dikova & Witteloostuijn, 2007). However, other areas of research also consider institutional distance, and the magnitudes and asymmetric effects of institutional distance (e.g., Cuervo-Cazurra & Genc, 2011; Phillips, Tracey, & Karra, 2009; Zaheer et al., 2012). In this context, this thesis, uses China as a sample of FDI recipient to seek to understand how the directions of institutional distance affect FDI’s flows and MNEs’ choice of entry mode into the host country. In particular, the research questions being addressed in this study are: (1) How does the bidirectional distance between home and host country regarding IPR protection affect FDI’s inflows to China? and (2) How does this bidirectional distance regarding IPR protection influence MNEs’ choice of entry mode? Using a quantitative research design, two dependent variables are examined in this study: FDI inflows and entry mode (wholly-owned subsidiaries (WOS) versus joint ventures (JVs)). Using the institutional theory as its theoretical underpinning, this study hypothesizes that IPR distance between home and host countries negatively affects FDI inflows to the host market. It also hypothesizes that IPR distance is positively related to MNEs’ choice of WOS as an entry mode as opposed to JVs. Both hypotheses build on the new notion regarding the directions of institutional distance that MNEs’ strategies and behaviours are divided into positive and negative directions. This consideration of directions of institutional distance differs to that of the general institutional approach, which typically clusters all regulative, normative and cognitive pillars within the institutional distance. However, this research focuses on the single regulative distance of IPR protection. Using the 691 collected observations of FDI flows to China from 2006 to 2012, hypothesis 1 was tested by employing the estimation techniques of panel linear regression. To further assess hypothesis 2, 801 instances of foreign market entry of FDI in China between 2008 and 2012 were analysed by logistic regression. From the panel linear regression model, the empirical results show that the larger the distance of IPR protection between home and host countries, the fewer the flows of FDI that entered into China. Such results are consistent with previous mainstream literature suggesting that greater institutional distance significantly diminishes the MNEs’ intentions to invest (e.g., Du, 2009; Berry et al., 2010). Moreover, logistic regression for hypothesis 2 reveals that IPR distance appears to be significantly and positively associated with the choice of WOS. This means that the tendency of MNEs from countries with a higher distance of IPR protection to enter China’s market by means of WOS (as opposed to JVs) will decrease. This result is in line with previous studies that note that larger institutional distance is associated with a lower level of equity ownership mode, such as JVs over WOS (e.g., Xu et al., 2004; Xu & Shenkar, 2002; Estrin et al., 2009). The greatest takeaway from this study is that it advances knowledge about the impact of the directions of IPR distance and provides new opinions on the debate around the asymmetric effect of institutional distance on internationalization decisions. This study also offers practical implications for both firm managers and public policy makers.</p>

The increasing globalization of firms has given rise to an increase in the number of international assignments of human resources. The effect of cultural factors on the relationships of expatriate managers with the cultures of their home and host countries will be explored in this paper. The subjects of this study are the relationships of South Korean expatriate managers with their home and host countries who are assigned to work in Turkey and the USA. The analysis uses the matrix, which was proposed by Black and Gregersen in 1992 and modified by Richardson and McKenna in 2006. The research participants were reached by the trace method and data analyses were done by QSR Nvivo software with thematic analyses. The results indicate that the relationship of participants with their home country depends strongly on the cultural similarities and differences between their home and host countries. The profiles of the participating expatriate managers were located in “hearts at home” and “dual citizens” and no participants were found in the “go native” and “free agents” typologies. As a result, the South Korean managers who live in Turkey and the USA have a very strong relationship with their home country and their relationship with host countries change on the basis of cultural similarities and differences. Key words: Expatriate managers, Black and Gregersen’ matrix, cultural differences and similarities.

This study examines how multinational enterprises (MNEs) strategically respond to dual legitimacy challenges arising from geopolitical conflicts between their home and host countries. MNEs might encounter legitimacy issues in both host countries, where they may be seen as adversarial economic entities, and home countries, where their operations in hostile nations might be perceived as conflicting with national interests. Using a resource dependence perspective, we develop a two-by-two matrix typology of MNEs' strategic responses based on the level of economic stakes—high and low—in both the host and home countries. Additionally, we consider how MNE salience and the intensity of geopolitical conflict influence their strategic choices. Our study advances international business studies by offering a theoretical framework for understanding how MNEs navigate complex geopolitical tensions.

The current increasing volatility in international politics makes it more important to understand how multinational enterprises respond to political tension between host and home countries. This paper explains the impact of macro-level bilateral political tension on micro-level strategy of multinationals in the host country. We developed the idea that patenting may be used to signal a firm’s commitment and contribution to the host country’s economy and development. Data on 437 large multinationals and interviews with senior managers of 20 foreign subsidiaries in China show that patenting local innovation does indeed help an investing firm signal its usefulness to the host country government. It can thus serve as a response to bilateral political tension. The relationship between political tension and local patenting also depends on the relative trade dependence of the home and host countries and on the investing firm’s technology level and its stake in China. The greater the dependence of an MNE and its home country government on the host country, the more likely patenting of local innovations would increase in times of bilateral political tension.

Given the dramatic increase in the number of expatriates living and working abroad, there is a need to advance the research into how to make sure these employees achieve success on their assignments. Often, these expatriates assume managerial roles and are intended to be the gatekeepers of information. Typically, this information is necessary for the success of their colleagues, in both their home country and their host country. The expatriate’s role is to facilitate the integration of organizational knowledge from both their home and host countries, as well as key sources in their host country’s local environment. However, historically, there has been an exceptionally high failure rate in expatriate engagements. There are various factors discussed in the literature related to this failure rate including the stress of cultural integration and isolation from family. This often interferes with the expatriate being able to perform of their key responsibilities, which is to innovate. This research will launch pilot studies to investigate the use of social media, and computer mediated communications, to develop virtual proximity, its effects on cultural integration, the maintenance of professional relationships on a global scale, and its effect on the reduction of stress and the innovation process.

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.

The costs of doing business abroad (CDBA) is a well-known concept in the international business literature, measuring the disadvantages or additional costs borne by multinational enterprises (MNEs) that are not borne by local firms in a host country. Recently, international management scholars have introduced a second concept, liability of foreignness (LOF). There is confusion in the two literatures as to the relationship between CBDA and LOF, as evidenced in a recent special issue on liability of foreignness (Journal of International Management, 2002). We argue that LOF stresses the social costs of doing business abroad, whereas CDBA includes both economic and social costs. The social costs arise from the unfamiliarity, relational, and discriminatory hazards that foreign firms face over and above those faced by local firms in the host country. Because the economic costs are well understood and can be anticipated, LOF becomes the core strategic issue for MNE managers. We argue that the key driver behind LOF is the institutional distance (cognitive, normative, and regulatory) between the home and host countries, and explore the ways in which institutional distance can affect LOF. We operationalize our arguments by showing how institutional distance and liability of foreignness can provide an alternative explanation for the MNE’s ownership strategy when going abroad.

The relocation of corruption fugitives raises an important question: how does their presence in host countries affect the brand credibility of multinational enterprises (MNEs) from those destinations? Drawing on the reputation spillover perspective, this study theorizes and tests a ripple effect of reputational damage. Consumers in fugitives’ home countries attribute corruption-related reputational damage to the host country’s image and extend it to MNE brands originating there. This spillover effect is moderated by perceived corruption in consumers’ home country and by national animosity between the home and host countries. By uncovering how corruption fugitives indirectly shape foreign brand evaluations, this study broadens the understanding of nonmarket actors as carriers of reputational contagion across borders. It also highlights the paradox that anti-corruption efforts, while normatively desirable, can generate unintended reputational externalities that complicate the balance between global policy enforcement and international business legitimacy.

PurposeThe purpose of this paper is to reveal how the host and the home countries’ formal institutions may affect mergers and acquisitions (M&A) abandonment by Russian multinational enterprises (MNEs), and how MNE industry can influence the results. The second objective of the study is to have a separate look at the negative experience, and to uncover its influence on M&A deal completion.Design/methodology/approachIn the study, a sample of 446 international M&A deals initiated by Russian MNEs in the period of 2000–2014 is empirically tested by means of logistic regression analysis.FindingsThe empirical analysis indicates that better business environment in the host country is crucially important whereas development of business freedom at home may make the international M&A less attractive and increases the likelihood of M&A deal abandonment. Thus, the larger the institutional distance by this indicator the more likelihood the deal is completed. Contrary results are implied for property rights: the larger the distance between Russia and host country, the lower likelihood of M&A deal completion. Failure experience decreases the likelihood of acquisition completion whereas international experience increases.Research limitations/implicationsThe study has number of limitations: individual-level variables were not included in the model; and a limited number of factors were tested due to availability of data and moderate sample size.Practical implicationsThe study indicates that better development of business freedom and moderate property rights protection in the host country are the most favorable factors for an M&A deal completion. Russian policymakers should realize that development of property rights protection in Russia ensures success of MNEs abroad, and development of business freedom reduces the outflow of capital from the economy.Originality/valueThe paper makes several theoretical and practical contributions: it contributes to institutional international business literature, indicating in which particular cases institutional distance has positive or negative effect on M&A completion. It also contributes to organizational learning literature, confirming that failures inhibit learning, and firms tend to repeat previous mistakes. Finally, the paper widens the scarce research on Russian MNEs, and on the role of the home country institutions for MNE’s behavior abroad.

Although the diversity of cultural expectations for different corporate governance practices has been acknowledged, our understanding of how companies use cultural differences to legitimize their governance practice choice and facilitate their resource acquisition remains limited. Building on the literature on cultural entrepreneurship, we theorize how foreign-listed firms engage in global framing in tailoring the description of their new governance practice to the host country investors. Our empirical study examines the relative emphasis of monitoring over resource-providing roles by the U.S.-listed Chinese companies’ independent directors when their roles are understood differently in the home and host countries. Our study finds that exposure to the alternative cultural repertoire of a host country via overseas education of board members and foreign institutional ownership enhance a firm’s organizational resources available to engage in global framing. The likelihood of global framing, however, is constrained by the home country’s institutional environment, which is characterized by local business history and connections to strong local resource providers such as the state. We also find that the effectiveness of global framing to obtain investor recognition in the host country is restricted when the company lacks the capacity to implement the declared role of independent director-as-monitor in its home country.

The purpose of this paper is to analyze how China’s outward foreign direct investment (OFDI), driven by different motivations, affects the bilateral global value chain (GVC) relationship between the home country (China) and host countries, evaluating both bilateral GVC trade value and relative GVC positions. Employing the OECD Trade in Value Added (TiVA) database combined with Chinese listed firm data, we found the following results: (1) Strategic asset-seeking OFDI strengthens the GVC relationship between China and host countries while enhancing China’s GVC position relative to host countries. (2) Efficiency-seeking OFDI increases the domestic value-added exported from host countries to China but does not improve China’s relative GVC position. (3) Natural resource-seeking OFDI enhances bilateral GVC trade volumes but has no significant impact on the relative GVC positions of China and host countries. (4) China’s OFDI, not driven by these motivations, generates a trade substitution effect between home and host countries. We also examined the heterogeneity of these effects. Our findings suggest that China’s OFDI fosters equitable and sustainable international cooperation, supports mutually beneficial GVC trade and host-country economic growth, and therefore, progresses toward Sustainable Development Goal (SDG) 8.