The outsourcing strategy of local and multinational firms: A supply base perspective

Firms outsource through connecting to local and global supply bases and making such connections produces costs of search and evaluation, which are a function of transaction characteristics and firm capabilities. We argue that firms outsource more when those costs are low. Hence, domestic subsidiaries of multinational firms, with low cost access to both local and global supply bases, outsource more than either domestic firms or foreign subsidiaries, as confirmed by evidence from a large data panel. We also propose that among foreign subsidiaries, distance from the home country co-determines search and evaluation costs such that subsidiaries from more distant countries outsource less. This is confirmed for geographic distance, but a positive effect is found for political distance and a mixed effect for cultural distance.

The dilemma of scope and scale for construction professional service firms

Construction professional service (CPS) firms sell expertise and provide innovative solutions for projects founded on their knowledge, experience, and technical competences. Large CPS firms seeking to grow will often seek new opportunities in their domestic market and overseas by organic or inorganic growth through mergers, alliances, and acquisitions. Growth can also come from increasing market penetration through vertical, horizontal, and lateral diversification. Such growth, hopefully, leads to economies of scope and scale in the long term, but it can also lead to diseconomies, when the added cost of integration and the increased complexity of diversification no longer create tangible and intangible benefits. The aim of this research is to investigate the key influences impacting on the growth in scope and scale for large CPS firms. Qualitative data from the interviews were underpinned by secondary data from CPS firms’ annual reports and analysts’ findings. The findings showed five key influences on the scope and scale of a CPS firm: the importance of growth as a driver; the influence of the ownership of the firm on the decision for growth in scope and scale; the optimization of resources and capabilities; the need to serve changing clients’ needs; and the importance of localization. The research provides valuable insights into the growth strategies of international CPS firms. A major finding of the research is the influence of ownership on CPS firms’ growth strategies which has not been highlighted in previous research.

How culture and government shape entrepreneurial innovation: the case of Korean and UK online gaming firms

This paper examines institutional sources of product innovation with reference to the online gaming sector of Korea and the UK. It examines the combined impact of formal and informal institutions and their interaction with multiple case studies. Despite the growing importance of innovative products in contemporary entertainment (including interactive games), the ‘informal’ source of innovation has attracted limited attention. By closely looking at the idea exploration, generation and selection process (where creativity plays a major role), we intend to find out how values and public policy affect product innovation. This study shows that the value of Korean and UK online gaming firms (regardless of their different socio-economic contexts) plays an important role in generating product innovation. An additional point is that Korean firms are likely to take advantage of government policy support to overcome inadequate institutional settings in conjunction with the initial conditions of online game development.

Institutional pressures on financial services firms: the role of information systems in regulatory compliance

The financial crisis of 2008 led to new international regulatory controls for the governance, risk and compliance of financial services firms. Information systems play a critical role here as political, functional and social pressures may lead to the deinstitutionalization of existing structures, processes and practices. This research examines how an investment management system is introduced by a leading IT vendor across eight client sites in the post-crisis era. Using institutional theory, it examines changes in working practices occurring at the environmental and organizational levels and the ways in which technological interventions are used to apply disciplinary effects in order to prevent inappropriate behaviors. The results extend the constructs of deinstitutionalization and identify empirical predictors for the deinstitutionalization of compliance and trading practices within financial organizations.

Growth of entrepreneurial software firms in cities

Despite the prediction of the demise of cities with the advance of new information and communication technologies in the New Economy, the software industry has emerged from cities in the USA, Europe and Asia in the past two decades. This article explores the reasons why cities are centers of software clusters, with reference to Boston, London and Dublin. It is suggested that cities' roles as centres of knowledge flows and creativity are the key determinants of their competitiveness in the knowledge-intensive software industry.

Identifying, mapping, and monitoring the impact of hybrid firms

There is growing recognition that hybrid organizations can play a critical role in tackling intractable global sustainable development challenges. At the same time, acute social, environmental, and economic challenges are opening up “opportunity” spaces for hybrids. Different institutional contexts are also leading to variable hybrid forms linked to the focus of their mission and their profit-oriented status. This article presents a process for identifying, mapping, and building impact indicators based on a study of 20 hybrid organizations in Sub-Saharan Africa.

Innovation diffusion across firms

This chapter seeks to add to the study of innovation diffusion as enacted within the UK construction sector. Whereas using relevant theoretical frames as touch points, the chapter maps out challenges associated with understanding innovation diffusion within the UK construction sector. Central to the argument developed here is just how diverse the UK construction sector is, resulting in the need to focus upon a specific constituent perspective within the sector. It is argued that constituents of the UK construction sector experience the reality of innovation diffusion differently. The chosen focus here is medium-size and typically regionally based construction firms rather than the big guns, because statistics continually demonstrate that this group of smaller firms undertake more than 80% of the sector’s output. As is pointed out in other chapters in the present volume, and as argued theoretically in the industrial network perspective of chapter 7, firms do not innovate in a vacuum. Innovation and diffusion occur within networks of firms typically around a project. A framework drawing upon empirical data is provided to additional insight on the process and the interconnections. It is argued here that the unit of analysis or level of understanding termed the firm can actually be fairly unhelpful for understanding innovation and its manifestation and diffusion within the broader UK construction sector, because this occurs across networks of firms.

Sustainable construction: exploring the capabilities of Nigerian construction firms

As the built environment accounts for much of the world's emissions, resource consumption and waste, concerns remain as to how sustainable the sector is. Understanding how such concerns can be better managed is complex, with a range of competing agendas and institutional forces at play. This is especially the case in Nigeria where there are often differing priorities, weak regulations and institutions to deal with this challenge. Construction firms are in competition with each other in a market that is growing in size and sophistication yearly. The business case for sustainability has been argued severally in literature. However, the capability of construction firms with respect to sustainability in Nigeria has not been studied. This paper presents the preliminary findings of an exploratory multi-case study carried out to understand the firm's views on sustainability as a source of competitive advantage. A international firm and a lower medium-sized indigenous firm were selected for this purpose. Qualitative interviews were conducted with top-level management of both firms, with key themes from the sustainable construction and dynamic capabilities literature informing the case study protocol. The interviews were transcribed and analysed with the use of NVivo software. The findings suggest that the multinational firm is better grounded in sustainability knowledge. Although the level of awareness and demand for sustainable construction is generally very poor, few international clients are beginning to stimulate interest in sustainable buildings. This has triggered both firms to build their capabilities in that regard, albeit in an unhurried manner. Both firms agree on the potentials of market-driven sustainability in the long term. Nonetheless, more drastic actions are required to accelerate the sustainable construction agenda in Nigeria.

Firms’ exporting and importing activities: is there a two-way relationship?

The literature on firm heterogeneity and trade has highlighted that most trading firms tend to engage in both importing and exporting activities. This paper provides some evidence that helps understanding to what extent this is the result of a two-way relationship. Using firm-level data for a group of 27 Eastern European and Central Asian countries from the World Bank Business Environment and Enterprise Performance Survey (BEEPS) over the period 2002–2008, we estimate a bivariate probit model of exporting and importing. After controlling for size (and other firm-level characteristics) we find that firms’ exporting activity does not increase the probability of importing, while the latter has a positive effect on foreign sales. This effect is mainly channeled through an increase in firm productivity and product innovation.

Firms in international trade: importers’ and exporters’ heterogeneity in Italian manufacturing industry

Combining data on structural characteristics and economic performance for a large sample of Italian firms with data on exporting and importing activity, we uncover evidence supporting recent theories on firm heterogeneity and international trade, together with some new facts. In particular, we find that importing is associated with substantial firm heterogeneity. First, we document that trade is more concentrated than employment and sales, and show that importing is even more concentrated than exporting both within sectors and along the sector- and country-extensive margins. Second, while supporting the fact that firms involved in both are the best performers, we also find that firms involved only in importing activities perform better than those involved only in exporting. Our evidence suggests there is a strong self-selection effect in the case of importers and the performance premia of internationalised firms correlate relatively more with the degree of geographical and sectoral diversification of imports.

National boundaries and the location of multinational firms in Europe

Using data on 5,102 subsidiaries established in the period 1991–1999, we examine the location choice of multinational firms of different nationalities in 47 regions of five EU countries. In particular we estimate a nested logit model and find that European multinationals consider regions across different countries as relatively closer substitutes than regions within national borders. This is consistent with the hypothesis that European regions compete to attract foreign direct investments relatively more across than within countries. However, in line with previous studies, we also find that national boundaries still play some role in choices made by non-European multinationals.

Location choices of multinational firms in Europe: the role of EU cohesion policy

Using data on 5509 foreign subsidiaries established in 50 regions of 8 EU countries over the period 1991–1999, we estimate a mixed logit model of the location choice of multinational firms in Europe. In particular, we focus on the role of EU Cohesion Policy in attracting foreign investors from both within and outside Europe. We find that, after controlling for the role of agglomeration economies as well as a number of other regional and country characteristics and allowing for a very flexible correlation pattern among choices, Structural and Cohesion funds allocated by the EU to laggard regions have indeed contributed to attracting multinationals. These policies as well as other determinants play a different role in the case of European investors as opposed to non-European ones.