Procedural justice, not absorptive capacity, matters in multinational enterprise ICT transfers

This paper empirically tests the effectiveness of information and communications technology (ICT) knowledge transfer and adoption in the multinational enterprise (MNE) as an issue of critical importance to contemporary MNE functioning. In contrast to mainstream thinking on absorptive capacity, but in line with prevailing international business theory, our research supports the proposition that perceptions of procedural justice, rather than absorptive capacity, determine effectiveness, especially in cases of high tacit knowledge transfers. Data was collected from senior ICT representatives in 86 Canadian subsidiaries of foreign owned MNEs. Each of these subsidiaries recently experienced a significant ICT transfer imposed by the parent organization. Support was found for the main propositions: Procedural justice significantly predicted successful ICT transfer and adoption, while absorptive capacity was not significant. These findings are consistent even when knowledge tacitness was high. The perceived success of the ICT transfer as well as its adoption varied widely across these firms. The potential reasons for this divergence in effectiveness are manifold, but our findings suggest that in situations of substantial knowledge tacitness, a higher level of procedural justice, rather than a higher level of absorptive capacity, is critical to effective transfer and adoption.

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.

Multinational companies and productivity spillovers: is there a specification error?

Recent empirical works on the within-sector impact of inward investments on domestic firms’ productivity have found rather robust evidence of no (or even negative) effects. We suggest that, among other reasons, a specification error might explain some of these results. A more general specification, which includes the usual one as a special case, is proposed. Using data on Italian manufacturing firms in 1992–2000, we find positive externalities only once we allow for the more flexible specification.

Choosing international linkage strategies in the electronics industry: the role of multinational experience

This paper examines how different aspects of multinational experience affect the choice of international linkage strategy. Integrating transaction cost and dynamic efficiency considerations, we empirically test the determinants of the choice between acquisitions, joint ventures (JV), and strategic alliances (SA) for the world’s largest electronics corporations in 1993–1997. We show that “country specific experience” increases the probability of commitment intensive linkage modes (such as acquisitions and joint ventures), while a positive effect on strategic alliances is caused by “variety experience”, deriving from the heterogeneity of international contexts, and by “internationalisation experience” reflecting overall involvement in international markets.

Rethinking the literature on the performance of Chinese multinational enterprises

We synthesize the literature on Chinese multinational enterprises (MNEs) and find that much of the prior research is based on as few as a dozen case studies of Chinese firms. They are so case-specific that it has led to a misplaced call for new theories to explain Chinese firms’ internationalization. In an attempt to better relate theory with empirical evidence, we examine the largest 500 Chinese manufacturing firms. We aim to find out the number of Chinese manufacturing firms to be true MNEs by definition, and to examine their financial performance relative to global peers using the financial benchmarking method. We develop our theoretical perspectives from new internalization theory. We find that there are only 49 Chinese manufacturing firms to be true MNEs, whereas the rest is purely domestic firms. Their performance is poor relative to global peers. Chinese MNEs have home country bound firm-specific advantages (FSAs), which are built upon home country-specific advantages (home CSAs). They have not yet developed advanced management capabilities through recombination with host CSAs. Essentially, they acquire foreign firms to increase their sales in domestic market, but they fail to be competitive internationally and to achieve superior performance in overseas operations. Our findings have important strategic implications for managers, public policy makers, and academic research.