Network centrality and organizational aspirations: A behavioral interaction in the context of international strategic alliances

Whereas social network analysis has been associated with organizational aspirations, little is known on how firm's structural positioning, and particularly network centrality, affects organizational aspirations to engage in international strategic alliances (ISA). This study examines the impact of network centrality on firm's internationalization behavior within the ISA domain in response to the performance-aspiration gap. We build on social and behavioral perspectives to predict that network centrality and performance-based aspirations will be associated with the number of ISA the firm engages in. Using a sample of 7760 alliance collaborations from the top 81 global pharmaceutical firms for the period of 1991-2012, we find supporting evidence for most of our arguments

Risk propensity in the foreign direct investment location decision of emerging multinationals

A distinguishing feature of emerging economy multinationals is their apparent tolerance for host country institutional risk. Employing behavioral decision theory and quasi-experimental data, we find that managers’ domestic experience satisfaction increases their relative risk propensity regarding controllable risk (legally protectable loss), but decreases their tendency to accept non-controllable risk (e.g., political instability). In contrast, firms’ potential slack reduces relative risk propensity regarding controllable risk, yet amplifies the tendency to take non-controllable risk. We suggest that these counterbalancing effects might help explain observation that risk-taking in FDI location decisions is influenced by firm experience and context. The study provides a new understanding of why firms exhibit heterogeneous responses to host country risks, and the varying effects of institutions

Problematizing fit and survival: transforming the law of requisite variety through complexity misalignment

The law of requisite variety is widely employed in management theorizing and is linked with core strategy themes such as contingency and fit. We reflect upon requisite variety as an archetypal borrowed concept. We contrast its premises with insights from the institutional literature and commitment literature, draw propositions that set boundaries to its applicability, and review the ramifications of what we call “complexity misalignment.” In this way we contradict foundational assumptions of the law, problematize adaptation- and survival-centric views of strategizing, and theorize the role of human agency in variously complex regimes

Cultural Distance and Firm Internationalization:A Meta-Analytical Review and Theoretical Implications

This paper presents the most comprehensive review and meta-analysis of the literature on cultural distance and firm internationalization to date. We analyze the effects of cultural distance on key strategic decisions throughout the entire process of internationalization. For the preinvestment stage, we examine the decisions on where to invest (location choice), how much to invest (degree of ownership), and how to organize the foreign expansion (entry and establishment mode). For the postinvestment stage, we examine the decisions of how to integrate the foreign subsidiary into the organization (transfer of practices) as well as the performance effects of cultural distance at both the subsidiary and the firm level. We find that firms are less likely to expand to culturally distant locations but if they do, they prefer greenfield investments and integrate subsidiaries more through transfer of management practices. Cultural distance does not seem to affect how much capital firms invest and whether they enter through a joint venture or full ownership. Interestingly, cultural distance has a strong negative effect on subsidiary performance but no effect on the performance of the whole multinational company. In addition, we find that the effects of cultural distance are not sensitive to time, but they are sensitive to the cultural framework used (e.g., Hofstede vs. Global Leadership and Organizational Behavior Effectiveness) and the home country of the company (developed vs. emerging market). Based on our study, we feel confident to offer some theoretical insights, recommendations for improving the validity and reliability of cultural-distance research, and ideas for future research

Is foreign investment for outperformers or underperformers? Evidence from Japanese machinery firms

Drawing on performance feedback theory, this study examines the relationship between corporate performance and subsequent foreign investment decisions. It is argued that a firm's performance relative to its aspiration levels influences its propensity to engage in foreign investment as well as its choice of investment location. We propose that an improvement in performance relative to aspiration levels of performance reduces the propensity for international investment and that the deterrent impact of country distance on foreign entry is contingent on relative performance. Consistent with the theory, an analysis of investments in foreign manufacturing facilities made by 206 Japanese machinery firms between 1986 and 2002 shows that foreign investment propensity is overall negatively related to prior firm performance relative to aspiration levels. The likelihood of foreign investment decreases when firm performance exceeds historical and social aspirations. The probability of foreign entry does not significantly increase as performance falls below aspirations, however is still greater than when performance exceeds aspirations. In addition, outperforming and underperforming firms were more likely to enter host countries with larger geographic and institutional distances from Japan, implying extended search efforts and/or greater risk-taking behavior