Images of the multinational firm

A compilation of perspectives from leading authors from international business studies and organisation studies, including John Dunning, Eleanor Westney, John Cantwell, Richard Whitely and Alan Rugman.

Race-to-the-bottom or -top at home or abroad: Health and safety standards and the multinational firm

We develop a model to illustrate potential complexities in the relationship between corporate geographical diversification and the health and safety (H&S) standards set in national jurisdictions. A firm, that initially has a plant in its home country, may choose to also have one or two foreign plants in order to improve its bargaining position versus local governments, and so ensure reduced H&S standards, i.e. a race-to-the-bottom. However, contrary to the main focus of the popular debate on this topic, we note the potential for the race-to-the-bottom tendency to be exerted on H&S standards in the multinational company’s home rather than host country, and also for an upward push on H&S to instead result.

Firm size and competition: a comparison of the housebuilding industries in Australia, the UK and the USA

Housebuilding is frequently viewed as an industry full of small firms. However, large firms exist in many countries. Here, a comparative analysis is made of the housebuilding industries in Australia, Britain and the USA. Housebuilding output is found to be much higher in Australia and the USA than in Britain when measured on a per capita basis. At the same time, the degree of market concentration in Australia and the USA is relatively low but in Britain it is far greater, with a few firms having quite substantial market shares. Investigation of the size distribution of the top 100 or so firms ranked by output also shows that the decline in firm size from the largest downwards is more rapid in Britain than elsewhere. The exceptionalism of the British case is put down to two principal reasons. First, the close proximity of Britain’s regions enables housebuilders to diversify successfully across different markets. The gains from such diversification are best achieved by large firms, because they can gain scale benefits in any particular market segment. Second, land shortages induced by a restrictive planning system encourage firms to takeover each other as a quick and beneficial means of acquiring land. The institutional rules of planning also make it difficult for new entrants to come in at the bottom end of the size hierarchy. In this way, concentration grows and a handful of large producers emerge. These conditions do not hold in the other two countries, so their industries are less concentrated. Given the degree of rivalry between firms over land purchases and takeovers, it is difficult to envisage them behaving in a long-term collusive manner, so that competition in British housebuilding is probably not unduly compromised by the exceptional degree of firm concentration. Reforms to lower the restrictions, improve the slow responsiveness and reduce the uncertainties associated with British planning systems’ role in housing supply are likely to greatly improve the ability of new firms to enter housebuilding and all firms’ abilities to increase output in response to rising housing demand. Such reforms would also probably lower overall housebuilding firm concentration over time.

Dynamic capabilities in a sixth generation family firm: entrepreneurship and the Bibby Line

In this paper we draw on the theory of dynamic capabilities to examine development of the only surviving family-owned Liverpool shipping company. The Bibby Line was founded in 1807 to take advantage of the growing sea-trade based in Liverpool. The company remained in shipping until the mid-1960s, when a series of external crises led the owner, Derek Bibby, to begin a process of diversification. In the last 50 years, the Bibby Line has grown into a £1bn business with interests in retail, distribution and financial services as well as a continuing commitment to shipping. Our intention is to demonstrate how multigenerational ownership contributes to the creation of dynamic capabilities in family firms. The distinctive nature of Bibby as a long-standing family business is related to unique assets such as patient capital, flexible governance structures as well as the ability to mobilise social and human capital.

Liability of country foreignness and liability of regional foreignness: their effects on geographic diversification and firm performance

The costs of inter- and intra-regional diversification have been widely discussed in the existing international business literature, but the findings are mixed. Explanations for the mixed findings have important managerial implications, because business managers have to estimate accurately the costs of doing business within and across regions before they make their internationalization decisions. To explain the existing mixed findings, this study differentiates between liabilities of foreignness at the country and regional levels, and explores the joint effects of liability of country foreignness (LCF) and liability of regional foreignness (LRF) on the performance of internationalizing firms. Using data from 167 Canadian firms, we find that LCF may not necessarily be negatively correlated with intra-regional diversification, but LRF is positively correlated with inter-regional diversification. LCF moderates the relationship between LRF and inter-regional diversification, and also mediates the relationship between intra-regional diversification and firm performance. LRF mediates the relationship between inter-regional diversification and firm performance. Missing one or more of these variables may result in different cost estimates. Identification of the relationships between these variables helps to improve the accuracy of estimating the costs of doing business aboard.

Proactive R&D management and firm growth: a punctuated equilibrium model

The external environment is characterized by periods of relative stability interspersed with periods of extreme change, implying that high performing firms must practice exploration and exploitation in order to survive and thrive. In this paper, we posit that R&D expenditure volatility indicates the presence of proactive R&D management, and is evidence of a firm moving from exploitation to exploration over time. This is consistent with a punctuated equilibrium model of R&D investment where shocks are induced by reactions to external turbulence. Using an unbalanced panel of almost 11,000 firm-years from 1997 to 2006, we show that greater fluctuations in the firm's R&D expenditure over time are associated with higher firm growth. Developing a contextual view of the relationship between R&D expenditure volatility and firm growth, we find that this relationship is weaker among firms with higher levels of corporate diversification and negative among smaller firms and those in slow clockspeed industries.

Greasing the wheels? The impact of regulations and corruption on firm entry

This paper investigates the question of whether corruption might ‘grease the wheels’ of an economy. We investigate whether and to what extent the impact of regulations on entrepreneurship is dependent on corruption. We first test whether regulations robustly deter firm entry into markets. Our results show that the existence of a larger number of procedures required to start a business, as well as larger minimum capital requirements are detrimental to entrepreneurship. Second, we test whether corruption reduces the negative impact of regulations on entrepreneurship in highly regulated economies. Our empirical analysis, covering a maximum of 43 countries over the 2003–2005 period, shows that corruption facilitates firm entry in highly regulated economies. For example, the ‘greasing’ effect of corruption kicks in at around 50 days required to start a new business. Our results thus provide support for the ‘grease the wheels’ hypothesis.