Managing non-standard international experience: evidence from a Finnish company

Purpose – This paper extends the increasing debates about the role of international experience through mechanisms other than standard expatriation packages, in particular through the use of short-term assignments. It explores the different forms of short-term assignments (project work, commuter assignments, virtual international working and development assignments) and the different sets of positive and negative implications these can have for the company and the individuals concerned. The integration-differentiation debate is reflected here as elsewhere in IHRM, with the company moving towards greater centralization and control of its use of these assignments. Design/methodology/approach – Since the research is exploratory, we adopted a qualitative approach to get a more in-depth understanding on the realities the corporations and the assignees are facing. The study was implemented through a single case study setting in which the data were collected by interviewing (n=20) line managers, human resource management (HRM) staff and assignees themselves. In addition corporate documentation and other materials were reviewed. Findings – The present case study provides evidence about the characteristics of short-term assignments as well as the on the management of such assignments. The paper identifies various benefits and challenges involved in the use of short-term assignments both from the perspectives of the company and assignees. Furthermore, the findings support the view that a recent increase in the popularity of short-term assignments has not been matched by the development of HRM policies for such assignments. Research limitations/implications – As a single case study, limitations in the generalizability of the findings should be kept in mind. More large-scale research evidence is needed around different forms of international assignments beyond standard expatriation in order to fully capture the realities faced by international HRM specialists Practical implications – The paper identifies many challenges but also benefits of using short-term assignments. The paper reports in-depth findings on HR development needs that organizations face when expanding the use of such assignments. Social implications – The paper identifies many challenges but also benefits of using short-term assignments. The paper reports in-depth findings on HR development needs that organizations face when expanding the use of such assignments. Originality/value – Empirical research on short-term assignments is still very limited. In that way the paper provides much needed in-depth evidence on why such assignments are used, what challenges are involved in the use of such assignments and what kinds of HR-development needs are involved.

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.

Can British multinational enterprises finance economic development in South East Asia?

Purpose – The purpose of this paper is to shed new light on the debate about the role of foreign direct investment (FDI) and public policy in fostering economic development. Specifically, can the capital inflow of multinational enterprises (MNEs) and the ability of the subsidiaries to raise funds locally help promote development? This paper addresses this issue by examining the capital structure and financing sources of foreign subsidiaries of MNEs. Design/methodology/approach – This paper integrates the capital structure theories in finance with internalization theory in international business. It uses an original primary dataset collected by a survey of 101 foreign subsidiaries of British MNEs in six emerging economies in the ASEAN region. Findings – There are three significant findings. First, these subsidiaries rely heavily on internal funds generated within the MNEs and less on external debts raised in the host countries. Second, the foreign subsidiary's capital structure is influenced by the home country of origin of the parent firm and the parent firm's financing sources. Third, these subsidiaries have used the financial resources to develop business networks with local small and medium enterprises (SMEs) which contribute to economic development of the host countries. Originality/value – This paper examines the internal capital market within the MNE. It provides theoretical and empirical support for the capital structure theory of the hierarchy financing approach and also for internalization theory by addressing FDI inflows by MNEs and the raising of funds locally. These findings have important implications for public policy, namely the facilitation of MNE entry to encourage economic development.

Changing HRM systems in two Russian oil companies: Western hegemony or Russian spetsifika?

We contrast attempts to introduce what were seen as sophisticated Western-style human resource management (HRM) systems into two Russian oil companies – a joint venture with a Western multinational corporation (TNK-BP) and a wholly Russian-owned company (Yukos). The drivers for Western hegemony within the joint venture, heavily influenced by expatriates and the established HRM processes introduced by the Western parent, were counteracted to a significant degree by the Russian spetsifika – the peculiarly Russian way of thinking and doing things. In contrast, developments were absorbed faster in the more authoritarian Russian-owned company. The research adds to the theoretical debate about international knowledge transfer and provides detailed empirical data to support our understanding of the effect of both organizational and cultural context on the knowledge-transfer mechanisms of local and multinational companies. As the analysis is based on the perspective of senior local nationals, we also address a relatively under-researched area in the international HRM literature which mostly relies on empirical data collected from expatriates and those based solely in multinational headquarters.

Multinational subsidiary sales and performance in South East Asia

We extend the theory of the multinational enterprise (MNE) by exploring the concept of subsidiary-specific advantages (SSAs) as a driver for subsidiary performance. We investigate the relationship of host country-specific advantages (host CSAs) in the form of market attractiveness, SSAs and subsidiary sales as they affect subsidiary performance. From an original primary dataset of 101 British multinational (MNE) subsidiaries in six South East Asian countries, our analysis reveals three significant findings. First, host market attractiveness has a statistically positive impact on the performance of subsidiaries. Second, the three traditional SSAs of general management, marketing capabilities and invested capital enhance subsidiary performance. Third, we examine geographic direction and types of customers for subsidiary sales by following international accounting standards. We find that these subsidiaries generate on average 95 percent of total sales from the Asia Pacific region and 91 percent of total sales from external customers. Our findings have important research and managerial implications.

The empirical literature on multinational enterprises, subsidiaries and performance

Purpose – This paper aims to provide a synthetic review of the empirical literature on the multinational enterprise (MNE), subsidiaries and performance. Design/methodology/approach – The paper examines the following: the theoretical and conceptual foundation of multinationality (M) and performance (P) measures; the impact of MNE strategic investment motives on performance; the influence of contextual external and internal environment factors on performance; the strategy to optimize value chain activities of the MNE by cooperating with external partners in an asymmetric network, the key drivers of enhanced shareholder value and the implications of performance; and the need to access primary data provided by firms and managers themselves when analyzing the internal functioning of the MNE and its subsidiaries. Findings – The overall message from this literature review is that empirical research should be designed on the basis of relevant theoretical and conceptual foundations of the performance construct. Originality/value – The paper provides a systematic and synthetic review of theoretical and empirical literature.

Transcending borders with international top management teams: a study of European financial multinational corporations

This paper investigates how changes in firm degree of internationalization are associated with the configuration of top management teams (TMT) based on a dataset of 41 large European firms in the banking and insurance industry, including detailed career profiles of the 264 executives that were serving on the TMTs of these firms at year-end 2002. Our findings suggest firms tend to match top executive profiles to their strategies. Entry into new foreign markets and new cultural zones was found to be associated with higher levels of international capacity at TMT level, whereas changes in international posture per se are not related to TMT international capacity. We discuss the interplay between firm strategies and internal structures in the context of firm internationalization and suggest directions for future research on TMTs

Regional business networks in the multinational retail sector

This article examines the network relationships of a set of large retail multinational enterprises (MNEs). We analyze under what conditions a flagship-network strategy (characterized by a network of five partners – the MNE, key suppliers, key partners, selected competitors and key organisations in the non-business infrastructure) explains the internationalisation of three retailers whose geographic scope, sectoral conditions and competitive strategies differ substantially. We explore why and when retailers will adopt a flagship strategy. The three firms are two U.K.-based multinational retailers (Tesco and The Body Shop) and a French-based global retailer (Moët Hennessy Louis Vuitton). We find evidence of strong network relationships for all three retailers, although each embraces network strategies for different reasons. Their flagship relationships depend on each retailer's strategic use of firm-specific-advantages (FSAs) and country-specific advantages (CSAs). We find that a flagship strategy can succeed in overcoming internal and/or environmental constraints to cross-border resource transfers, which are barriers to foreign direct investment (FDI). We provide recommendations on why and when to use a flagship-based strategy and which type of network partners to prioritize in order to succeed internationally.

Revisiting the 'modern' multinational enterprise theory: an emerging-market multinational perspective

Using Triad-based multinational enterprises as their empirical setting, influential scholars in international management uncovered key organizational characteristics needed to create globally integrated and locally responsive multinationals. They proposed a “modern” theory of multinationals' organization (Hedlund, 1994). But recently, a new generation of multinationals from emerging markets has appeared. Little is known about their organizational choices and some scholars even doubt that they leverage organizational capabilities altogether. Does the “modern” theory still hold in their case? This exploratory study of three emerging-market multinationals (EMNEs) discloses that for reasons related to their origin in emerging economies and to the competitive specificities of these economies, EMNEs approach the global and local conundrum in ways which are both similar – and vastly different – from recommendations of the “modern” theory. We inductively develop a new theory that accounts for the evolution of organizational capabilities in EMNEs to reconcile global integration and local responsiveness. We discuss its implications for the executives of both emerging and Triad-based multinationals.

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.

The Mystery of Privity: Grand Trunk Railway Company of Canada v Robinson (1915)

This article examines a little known decision of the Judicial Committee of the Privy Council: Grand Trunk Railway Company of Canada v Robinson (1915). The examination is historical and it provides a different insight into the understanding of privity of contract, a doctrine central to contract law. The examination reveals a process of trans-Atlantic legal migration in which English law was applied to resolve an Ontario case. The nature of the resolution is surprising because it appears to conflict with the better known decision of the House of Lords, Dunlop Pneumatic Tyre Company, Limited v Selfridge and Company, Limited, which a similarly constituted panel delivered in the same week. This article argues that there was a greater malleability in the resolution of cases concerned with privity than was thought to have existed. It is also argued that the power of Canadian railway capitalism is a significant factor in understanding the legal resolution of the case. Finally, it the article considers the use of English and American precedents relevant to the case. The application of English precedents to the case led to a resolution not entirely befitting Canadian conditions.

Internationalization motives: sell more, buy better, upgrade and escape

Purpose – The purpose of this the paper is to review the motives for internationalization to clarify previous arguments and provide a theory-driven classification. Design/methodology/approach – The authors build on behavioral economics and propose a classification of internationalization motives as the result of the interaction among two dimensions, an economics-driven exploitation of existing resources or exploration of new resources, and a psychology-driven search for better host country conditions or avoidance of poor home country conditions. Findings – These two dimensions result in four internationalization motives: sell more, in which the company exploits existing resources at home and obtains better host country conditions; buy better, in which the company exploits existing resources abroad and avoids poor home country conditions; upgrade, in which the company explores for new resources, and it obtains better host country conditions; and escape, in which the company explores for new resources and avoids poor home country conditions. Originality/value – This theory-driven classification provides predictive power for future analyses of internationalization motives.