Re-examining regional borders and the multinational enterprise

Managing the Embedded Multinational: A Business Network View, Mats Forsgren, Ulf Holm, Jan Johansson, Edward Elgar, Cheltenham, 2005

Purpose This study aims to discuss an argument that the social value creation of multinational enterprises (MNEs), beyond creating economic value for the shareholders, could be the next “big question” for international business (IB) research. The authors also provide examples of promising research topics associated with this research agenda. Design/methodology/approach The paper is conceptual. Findings Although a new paradigmatic question for IB in terms of social value creation would lead IB outside familiar territory in terms of the previous focus on financial performance, IB scholars are well equipped to take on this broader question. IB scholars arguably have their key strengths in understanding the inner workings of firms, as well as in understanding the role of context for business. Moreover, to the extent that this new agenda requires IB scholars to acquire new capabilities and form new partnerships with relevant disciplines, this could contribute to revitalising the IB field. As illustrated by the suggested topics, such an agenda could both increase the relevance of IB research and contribute to theory development. Originality/value The paper is amongst the first to explore the notion that a broader view of the outcome of MNE activities, beyond MNEs’ own financial outcomes, should be a key goal of future IB research.

Corporate governance is concerned with how firm performance may be affected by how the organization is governed. Corporate governance is a multifaceted concept that ranges in scholarly interest from the composition of boards to ownership and relational issues of power dependency, control, and decision-making within an organization. International business (IB) researchers have employed multiple theoretical lenses across institutional, resource dependency, and agency theories to examine corporate governance in the multinational enterprise (MNE). As the organizational form of the MNE shifted from hierarchical to heterarchical, and responsibility for sourcing market and innovation knowledge was increasingly devolved to competent subsidiaries, governance arrangements in the MNE came under increased scrutiny. Much IB research into corporate governance examined the balance of power within the MNE and how decision making is influenced by both headquarters (HQ) and its subsidiaries. A parent-subsidiary governance dilemma became apparent around the degree of freedom and control that HQ should leverage over its foreign subsidiaries to maximize the survival and performance of these economically, culturally, and politically dispersed units. Agency theory and resource dependence theory were to the fore in examining the parent-subsidiary dilemma around how control over decision-making scope and processes shaped subsidiary governance around the strategies and operations with the MNE governance architecture. In essence, subsidiary governance and strategy can be seen to represent two sides of the same coin. Subsidiary governance and strategy become complex issues the minute we step outside the hierarchical domain and allow for subsidiaries to have a greater contributory role in the MNE. As a subsidiary is mandated to pursue certain activities in the environment where it has been located, it also is granted some autonomy to strategize around its assigned activities and responsibilities. Opportunities may surface through the embeddedness of its activities in the local environment and the resources this can provide to the subsidiary and MNE. Acting on these opportunities by taking initiatives can result in increased influence and an elevated role in terms of mandate gain and enlarged responsibilities. The issue of subsidiary governance first emerges in relation to how the subsidiary strategy is aligned or not aligned with HQ strategy. Subsidiary managers can decide to solely perform their assigned mandate, or they can choose to generate a resource endowment that may help them become indispensable for HQ, but crucially to guarantee their own survival. The mechanisms available to subsidiaries to achieve this strategic aim are evidenced via initiative taking, seeking autonomy, increasing their role, appropriating power and influence, and embedding themselves in the local and internal environments. In this chapter we approach corporate governance from the perspective of the subsidiary (subsidiary governance) and examine the relationship between subsidiary governance and what we determine to be the prime elements of subsidiary strategy. We respectively define subsidiary governance as the gamut and interplay of control and operations around which management strategize and subsidiary strategy as a process of continuous, deliberate upgrading of knowledge and capabilities to thrive and survive. IB literature on MNE subsidiary governance and strategy to date is incomplete insofar as there are disparate steams of research that warrant integration into a grand theory of subsidiary governance and strategy.

A contemporary challenge for the international business (IB) field is to maintain a link between the global activity of firms and the local concerns of regions and communities. In this essay, we reflect on how the IB scholarship of the late Stephen Young, which was embedded in (but not confined to) Scotland, offers valuable insight into how this might be done. With an overarching interest in the role of IB in economic development, the common thread in his work on multinational enterprise (MNE) subsidiaries and internationalizing small- and medium-sized enterprises (SMEs) is the significance of locally relevant entrepreneurial behavior in internationalized firms, which we refer to as “the local roots of global entrepreneurship”. We highlight three facets of his work: (1) the scholarly approach, which was sustained, engaged, and broad-based, (2) the conceptual ideas around the purpose, process and people involved in MNEs and SMEs, and (3) the resonance of these ideas with contemporary IB topics. Our analysis indicates that the emergent body of work on cooperation between MNEs and SMEs (especially new ventures) constitutes an extension and integration of Young’s IB scholarship. An overall implication of our essay is that perhaps, counterintuitively, the future interests of IB research may be served well by paying closer attention to one’s own backyard.

Using Systems of Innovation Approach (SI) and International Business (IB) literature, this paper analyzes the level of embeddedness of Multi?national Enterprises (MNEs) in Central and Eastern Europe (CEE). MNEs are discussed as they link the host country economy with the global economy by their regional and global networks. The expansion and successful embeddedness of West European multinational firms is crucial for the industrial integration of CEECs into the EU. The focus of the study is on the largest food processing com?panies, which invested in the region - namely Nestl? Unilever and InBev. The paper discusses the motives of investment and the entry strategies of food MNEs, outlines their contribution to the local development and stresses on the national actors as forces to embedded foreign direct investment (FDI). The paper discovered that EU membership facilitated the processes of global reorganizations of Nestl?, Unilever and InBev in CEE. All the three MNEs object of this research closed partially or completely plants all over CEE (and Western Europe). Hence, in a liberal trade regime it is very difficult to talk about long-term embeddedness of MNEs. It seems that the global strategies of the companies and the size of the market are the factor, which pre-determines the level of embeddedness of food MNEs in a certain economy and not so much the national actors and institutions. .

Introduction During the latter part of the twentieth century the global business environment changed significantly, owing to drastic economic reforms in China in the late 1970s, the neoliberal wave that swept Latin America in the 1980s, and the decade of reform that followed the opening up of Central and Eastern European countries, along with India, in the 1990s. This trend of economic liberalization in the emerging economies gathered further momentum in the 2000s as more countries have opened up their markets to the majority of the world’s multinational enterprises (MNEs). For example, in 2006, emerging economies received approximately $448.40 billion in foreign direct investment (FDI) inflows, registering a growth rate of 26.13 percent over the 2005 figure (UNCTAD, 2007). This change was brought about by the government policies of these countries favoring pro-market reforms ranging from international policy (international trade, exchange regime and foreign investment) to the macroeconomic environment (price liberalization, labor markets and fiscal policy), and finally to privatization in specific sectors. For conceptual clarity an emerging economy is defined as a low-income country that satisfies two criteria: a rapid pace of economic development, and government policies favoring economic liberalization and the adoption of a free-market system (Arnold and Quelch, 1998). A list of sixty-four such emerging economies was identified by Hoskisson et al. (2000).1 Moreover, Dunning has defined an MNE as a firm that “engages in foreign direct investment and owns or controls value-adding activities in more than one country” (1992: 1). The growing importance of FDI inflows in these emerging economies is reflected in an upsurge of international business (IB) research on this topic. However, most of the published scholarship addresses the interdependencies between the MNEs and the economic environment of the emerging economies and pays relatively less attention to theories that can explain interdependencies between MNEs and the political environment of emerging economies. Nevertheless, a well-managed MNE must deal effectively with the political and legal dynamics of its environment as well as the more traditional product-and marketfocused variables (Baron, 1995). Vernon (1971) suggests that MNEs have strongincentives to influence host-country government policies on an ongoing basis to safeguard their often substantial investments, particularly given the threat of repatriation of earnings, immigration laws, trade laws and investment laws. Similarly, Dunning asserts that “any theory of MNE activity which does not explicitly seek to understand and explain the role of governments, not just another variable, but, like the market, as an organizational entity is, in its own right, bound to be deficient” (1993: 49). Failure to understand this political angle might lead to over-simplistic models of MNEs. Therefore, there is a need to conduct research on the factors that determine the choice of political strategies by MNEs operating in an emerging economy context. Note that these political strategies are not an end in themselves, but rather a means for an MNE to achieve public policy outcomes that are favorable for its economic success. This theoretical study aims to fill this gap in the literature by first discussing the existing work on the political strategies of MNEs and then presenting a theoretical framework with specific propositions that predict the effect of different variables on the choice of these political strategies. Institutional theory is the focused theoretical framework in constructing the propositions because it emphasizes the relationship between the MNE and its “institutional environment,” including government actions and the way through which this relationship shapes the MNE’s internal structures and processes (Westney, 1993). Institutional theory is also appropriate for the emerging economies’ contexts since it emphasizes contextual factors influencing both market and non-market forces (Peng et al., 2008; Oliver, 1991). Since the environment faced by an MNE is characterized by high uncertainty and multiple demands, institutional theory provides a suitable theoretical framework with which to study MNEs’ strategies, especially when one seeks to understand how MNEs attempt to reshape institutional environments (Xu and Shenkar, 2002). Given that the government is a major source of uncertainty for MNEs (Brewer, 1992), and political strategies by definition (Baysinger, 1984) are attempts to reshape a firm’s opportunity set, or that of its rivals, institutional theory is particularly considered as relevant to the study of MNEs’ political strategies. Moreover, in line with calls for research using multiple levels of theoretical explanation (Klein et al., 1994), factors at firm, industry and institutional level are considered in the theoretical framework. This has enabled us to develop a holistic model for political strategy formulation. Some of the practical implications of this model, along with suggestions for future research, are explored in the concluding remarks.

Scholars of international business (IB) know that ‘institutions matter’, but how they matter remains a hotly contested question. Multinational enterprises (MNEs) operate in different business environments and face challenges in strategically locating themselves and adapting to the diversity of institutions across countries and regions. MNEs bring different home country endowments in the way of routines, standard practices and capabilities, but operate in diverse host country environments where very different sets of institutional constraints and opportunities may exist. MNEs’ experience in emerging markets, including Central and Eastern Europe, has highlighted the importance of institutions for understanding business strategy and performance across national borders.

Regional Sales of Multinationals in the World Cosmetics Industry

For more than 60 years, scholars in the international business field have studied the distribution of value-adding activity across national borders, and attempted to explain where, how and by whom international production is organized. It is their deep knowledge of the different kinds of multinational enterprises (MNEs) and of the myriad ways in which these firms interact with the local environment that allows international business scholars to make a unique contribution to public policy debates. In launching the Journal of International Business Policy (JIBP), we intend to build a leading outlet for research that demonstrates how a greater understanding of MNE strategies, organizational structures and systems can yield better public policy.

MNEs and the practice of international business diplomacy

Purpose The study aims to catalyze research on lesbian, gay, bisexual, transgender, queer, intersex, asexual and other non-heteronormative sexual identity (LGBTQIA+) issues within the international business (IB) field in a structured manner beyond human resource management (HRM) or marketing topics. In addition to the growing number of diversity, equity and inclusion (DEI) researchers, the authors also want to speak to a broader audience of IB scholars focused on multinational enterprise (MNE) non-market strategy, IB policy and strategic management scholars. Design/methodology/approach The study first looks at the evolving LGBTQIA+ terminology. It then synthesizes the extant LGBTQIA+ literature, as it relates to the IB field, starting with the marketing literature from the 1990s. Findings Within the IB literature, HRM issues, particularly around expatriation and the diffusion of LGBTQIA+ policies and practices, dominate. The study also finds that the majority of LGBTQIA+ research is etic rather than in nature and is heavily dominated by Anglo-American terminology and western, educated, industrialized, rich and democratic (WEIRD) ontologies. Originality/value The IB field has only recently started systematically addressing diversity, such as gender, ethnicity and race. The interest in sexual orientation and the LGBTQIA+ community is even more novel. The authors make a case for more emic-type of LGBTQIA+ research and stronger cultural theorizing to provide nuanced and pluralistic approaches beyond so-called WEIRDperspectives. The study also provides guidance on how the IB field should engage with LGBTQIA+ topics across multiple levels of theorizing and analysis and provides some supporting research questions.

The rise of populism worldwide provides an excellent setting to explore the dynamic relationships among international business (IB), institutional context, and IB policymaking. It also has important implications for multinational enterprises (MNEs). To understand populism’s recursiveness, such relationships need to be examined more broadly from a social psychology lens; also, within IB and IB policy research. While populism has been attracting widespread attention among many different IB stakeholders, our understanding of populism at the nexus of politics, the economy and social psychology remains undertheorized and, sometimes, misunderstood. We employ socio-cognitive theory (SCT) to answer how populism arises (RQ1) and establishes itself as an institution (RQ2). By shedding light on the origin and mechanics of populism’s recursive nature, the logic of “proto-institutions”, which we employ to understand institutional change in the context of populism, helps advance institutional theory within an IB context. Exploring the implications of populism for MNEs helps advance theory on MNE non-market strategies (NMSs) and shed light on MNEs’ corporate political activities. The re-framing of populism as a wicked problem further provides a theoretical toolkit for IB policy research. We present several future research directions for IB and IB policy research, as well as MNE research.

Power and plenty: Trade, war, and the world economy in the second millennium2008Princeton University PressPrinceton, New Jersey$39.50, 624 pages

ABSTRACTThe international expansion of emerging-market multinational enterprises (MNEs) is becoming a research topic of increasing interest among international business scholars. One of the specific research questions arising is whether conventional theoretical arguments originated in studies on developed-country MNEs are still valid for explaining the international behavior of emerging-market MNEs. Drawing on the institutional theory, this paper argues that the influence of host country institutional factors on location decisions differs between Chinese and Indian MNEs. We hypothesize that the negative impact of both cultural distance and political risk on location decisions is lower for Chinese MNEs as compared to Indian MNEs. From a sample of 832 outward foreign direct investments (OFDIs) we obtain empirical support for these hypotheses.

This study brings unique ideas from internalization theory in the international business (IB) literature to the study of internal capital markets, financing, and tax planning strategies of multinational enterprises (MNEs). Insights about the role of MNEs in overcoming external capital market imperfections through the use of internal capital markets are proving instrumental in understanding corporate international finance in MNEs. The ability to access capital in multiple locations to take advantage of differences in cost of financing, and to create a pool of internal financing sources through internal capital markets, which are used to fund international business activities, is an important firm- specific advantage (FSA) of MNEs. However, the use of internal capital markets may raise tax concerns because it gives MNEs opportunities to arbitrage tax differentials across countries to reduce the overall corporate taxes. This article synthesizes, critically analyzes, and assesses these lines of research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.