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.

The underpricing of IPOs on the stock exchange of Mauritius

This paper investigates the underpricing of IPOs on the Stock Exchange of Mauritius (SEM). Taking into account the whole population of firms which went public since the inception of the SEM until 2010, the results show an average degree of underpricing within the range 10 to 20%. Using a regression approach, we demonstrate that the aftermarket risk level and auditor's reputation both have a significant positive impact on initial returns. We propose the use of the Z-score as a composite measure of a firm's ex ante financial strength, and find that it has a significant negative effect on the degree of short-run underpricing.

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.

The end of the opportunism vs trust debate: bounded reliability as a new envelope concept in research on MNE governance

Modern transaction cost economics (TCE) thinking has developed into a key intellectual foundation of international business (IB) research, but the Williamsonian version has faced substantial criticism for adopting the behavioral assumption of opportunism. In this paper we assess both the opportunism concept and existing alternatives such as trust within the context of IB research, especially work on multinational enterprise (MNE) governance. Case analyses of nine global MNEs illustrate an alternative to the opportunism assumption that captures more fully the mechanisms underlying failed commitments inside the MNE. As a substitute for the often-criticized assumption of opportunism, we propose the envelope concept of bounded reliability (BRel), an assumption that represents more accurately and more completely the reasons for failed commitments, without invalidating the other critical assumption in conventional TCE (and internalization theory) thinking, namely the widely accepted envelope concept of bounded rationality (BRat). Bounded reliability as an envelope concept includes two main components, within the context of global MNE management: opportunism as intentional deceit, and benevolent preference reversal. The implications for IB research of adopting the bounded reliability concept are far reaching, as this concept may increase the legitimacy of comparative institutional analysis in the social sciences.

The effect of the national setting on employment practice: the case of downsizing

Although there is now a sizeable body of academic literature that tries to explain cross-country differences in terms of corporate control, capital market development, investor protection and politics, there is as yet very little literature on the degrees of protection accorded to other corporate stakeholders such as employees, based on a systematic comparison of firm level evidence. We find that both theories of legal origin and the varieties of capitalism approach are poor predictors of the relative propensity of firms to make redundancies in different settings. However, the political orientation of the government in place and even more so the nature of the electoral system are relatively good explanators of this propensity. In other words, political structures and outcomes matter more than more rigid institutional features such as legal origin. We explore the reasons for this, drawing out the implications for both theory and practice.

Qualified immigrants' success: exploring the motivation to migrate and to integrate

High-quality employees with international experience bring valuable advantages to internationally operating organizations. The growing number and importance of immigrants, and particularly qualified, university-educated immigrants, deserves more attention from international business practitioners and scholars. The market for highly qualified people within MNCs is increasingly becoming international, and ever more of them have migrated to a new country to advance their career. Such employees can be a source of competitive advantage for international firms. We use qualitative research with qualified immigrants (QIs) in France to argue that the success of QIs depends in large part on their motivation to integrate into their host country, which is largely explained by their motivation to migrate. From the qualitative data we derive four different types of qualified migrant, and suggest that the type will determine the success of the immigrant within, and outside, the organization. The relationship between the motivation to migrate and the motivation to integrate is moderated by “met expectations” and “organizational integration policies”, such that the effects of these, in turn, vary with type. Recognition of the types of QI and the moderating factors will be valuable for practitioners, as well as opening up research avenues for scholars.

Globalization, new ecologies, new zoologies and the purported death of the eclectic paradigm

This paper provides a commentary to John Mathews' article in issue 23(1) of the Asia Pacific Journal of Management. I discuss how globalisation is fundamentally altering the milieu within which international business is conducted, and this new ‘ecology’ may indeed require scholars to consider a new ‘zoology’ of firms in the future. However, his specific suggestions are based on sparse evidence, and his alternative to the eclectic paradigm is founded on a misunderstanding of some fundamental concepts.

Operating models for a multi-polar world: balancing global integration and local responsiveness

Purpose – Multinationals have always needed an operating model that works – an effective plan for executing their most important activities at the right levels of their organization, whether globally, regionally or locally. The choices involved in these decisions have never been obvious, since international firms have consistently faced trade‐offs between tailoring approaches for diverse local markets and leveraging their global scale. This paper seeks a more in‐depth understanding of how successful firms manage the global‐local trade‐off in a multipolar world. Design methodology/approach – This paper utilizes a case study approach based on in‐depth senior executive interviews at several telecommunications companies including Tata Communications. The interviews probed the operating models of the companies we studied, focusing on their approaches to organization structure, management processes, management technologies (including information technology (IT)) and people/talent. Findings – Successful companies balance global‐local trade‐offs by taking a flexible and tailored approach toward their operating‐model decisions. The paper finds that successful companies, including Tata Communications, which is profiled in‐depth, are breaking up the global‐local conundrum into a set of more manageable strategic problems – what the authors call “pressure points” – which they identify by assessing their most important activities and capabilities and determining the global and local challenges associated with them. They then design a different operating model solution for each pressure point, and repeat this process as new strategic developments emerge. By doing so they not only enhance their agility, but they also continually calibrate that crucial balance between global efficiency and local responsiveness. Originality/value – This paper takes a unique approach to operating model design, finding that an operating model is better viewed as several distinct solutions to specific “pressure points” rather than a single and inflexible model that addresses all challenges equally. Now more than ever, developing the right operating model is at the top of multinational executives' priorities, and an area of increasing concern; the international business arena has changed drastically, requiring thoughtfulness and flexibility instead of standard formulas for operating internationally. Old adages like “think global and act local” no longer provide the universal guidance they once seemed to.

Internal equity financing and the performance of multinational subsidiaries in emerging economies

We examine the internal equity financing of the multinational subsidiary which retains and reinvests its own earnings. Internal equity financing is a type of firm-specific advantage (FSA) along with other traditional FSAs in innovation, research and development, brands and management skills. It also reflects subsidiary-level financial management decision-making. Here we test the contributions of internal equity financing and subsidiary-level financial management decision-making to subsidiary performance, using original survey data from British multinational subsidiaries in six emerging countries in the South East Asia region. Our first finding is that internal equity financing acts as an FSA to improve subsidiary performance. Our second finding is that over 90% of financing sources (including capital investment by the parent firms) in the British subsidiaries come from internal funding. Our third finding is that subsidiary-level financial management decision-making has a statistically significant positive impact on subsidiary performance. Our findings advance the theoretical, empirical and managerial analysis of subsidiary performance in emerging economies.

Challenges in conducting and publishing research on the Middle East and Africa in leading journals

Purpose – The purpose of this paper is to examine the reasons for the lack of research attention paid to the Middle East (ME) and Africa regions. In particular, this study seeks to identify the reasons for and implications of the paucity of ME- and Africa-based studies in high-quality international journals in the marketing field with a specific focus on the challenges in conducting and publishing research on these regions. Design/methodology/approach – The authors conducted a systematic review of the literature on the ME and Africa regions to identify papers published in 23 high-quality marketing, international business, and advertising journals. This search resulted in 301 articles, among which 125 articles were based on primary or secondary data collected from a local source in those regions. The authors of these 125 articles constitute the Delphi study sample. These academics provided input in an effort to reach a consensus regarding the two proposed models of academic research in both regions. Findings – This paper differs from previous studies, where academic freedom emerged as the most important inhibitor to conducting and publishing research. The most frequently mentioned challenges in conducting research in Africa were access to data, data collection issues, diversity of the region, and lack of research support infrastructure. For the ME, the most often described challenges included validity and reliability of data, language barriers, data collection issues, and availability of a network of researchers. Editors’ and reviewers’ low interest and limited knowledge were ranked high in both regions. South Africa, Israel, and Turkey emerged as outliers, in which research barriers were less challenging than in the rest of the two regions. The authors attribute this difference to the high incidence of US-trained or US-based scholars originating from these countries. Originality/value – To the best of the knowledge, no marketing studies have discussed the problems of publishing in high-quality international journals of marketing, international business, and advertising for either region. Thus, most of the issues the authors discuss in this paper offer new insightful results while supplementing previous research on the challenges of conducting and publishing research on specific world regions.

The impact of career capital on expatriates’ perceived marketability

We examine how the development of three types of career capital (knowing how, knowing whom, and knowing why) during an international assignment affects the perceived marketability of organizational expatriates. Using the perceived marketability perspective and long-term follow-up data, we show that knowing how is seen as the most transferable type of career capital, while the development of other aspects of career capital has little impact on perceived marketability. We also show that career capital development is more recognized in the external market than by current employers. Our findings expand our understanding of long-term career marketability among people who have completed international assignments.