Offshoring Production while Offshoring Pollution

This paper introduces a firm-strategy perspective to the global combat against environmental pollution. We find that U.S. plants release less toxic emissions when their parent firm imports more from low-wage countries (LWCs). Consistent with the Pollution Haven Hypothesis, goods imported by U.S. firms from LWCs are in more pollution-intensive industries; U.S. plants also shift production to less pollution-intensive industries and spend less on pollution abatement when their parent firm imports more from LWCs. The negative impact of LWC imports on toxic emissions is stronger for U.S. plants located in counties with more powerful institutions, but weaker for more-capable U.S. plants and firms. These results highlight the role of local institutions and firm capabilities in explaining firms’ choice of offshoring and environmental strategy.http://deepblue.lib.umich.edu/bitstream/2027.42/109195/1/1253_Zhou.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/109195/4/1253_Zhou_Feb2015.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/109195/6/1253_Zhou_Nov16.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/109195/8/1253_Zhou_Nov.pdfDescription of 1253_Zhou_Nov16.pdf : November 2016 revisionDescription of 1253_Zhou_Feb2015.pdf : February 2015 revisionDescription of 1253_Zhou_Nov.pdf : Nov 2016 fixed titl

Supervising Across Borders: The Case of Multinational Hierarchies

This paper examines how multinational corporations (MNCs) selectively assign supervisory responsibilities to units in countries with varying levels of institutional quality. Arbitraging across institutional contexts is an important function of MNCs, but it also creates coordination challenges. The choice of organization structure, such as the differential assignment of supervisory responsibilities, is an important tool for managing these coordination challenges. Using data on the business activities and supervision relationships within U.S. multinational manufacturers in 1996-2008, I find that frontline subsidiaries in countries with weaker institutions are more likely to be supervised by foreign rather than domestic supervisory units. Foreign supervision is even more likely when subsidiaries in weak-institution countries conduct activities that are more central to or interdependent with their parents’ global operations. These findings confirm that MNCs use differential supervision to enhance global coordination. The paper highlights one of the most unique features of MNCs: a multinational hierarchy that resides within firm’s boundary but across national borders. It also connects MNCs’ hierarchical structure with institutional imperfections that give rise to the emergence of the firm in the first place.http://deepblue.lib.umich.edu/bitstream/2027.42/108496/1/1249_Zhou.pd

Product Variety and Vertical Integration

In vertical relationships the potential for scale economy in manufacturing often calls for specialization and outsourcing. Specialization, however, depends critically on the stability of the task and contractual environment. In a highly uncertain environment the need for frequent mutual adjustments favors integration instead of outsourcing. To evaluate vertical relationships in value chains where one stage competes on product variety under great uncertainty and the other stage competes on scale, we compare operations data at about 300 distribution centers within a major soft-drink bottler before and after it was integrated into an upstream firm. We find that vertical integration improved coordination for the integrated firm by aligning incentives and reducing strategic information asymmetry, but it worsened coordination for upstream rivals who shared the same downstream facilities.http://deepblue.lib.umich.edu/bitstream/2027.42/118066/1/1315_Zhou.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/118066/4/1315_Zhou_Apr16update.pdfDescription of 1315_Zhou_Apr16update.pdf : April 2016 updat

Origin Matters: The Differential Impact of Import Competition on Innovation?

We examine the impact of import competition on firms’ innovation input and output. We conjecture that U.S. firms view import competition from high-wage countries (HWCs) as “neck-and-neck” competition and will respond by intensifying innovation. In contrast, U.S. firms will reduce innovation in response to import competition from low-wage countries (LWCs), because such competition does not always increase the potential benefits from innovation. Our empirical results are supportive. We find that, when confronting HWC import competition, U.S. firms increase R&D spending while intensifying and improving innovation output (file more patents, receive more citations to their patents, and produce more breakthrough patents). Moreover, U.S. firms closest to the technological frontier — largest firms, firms with the largest stocks of knowledge, and most profitable firms — increase and improve their innovation the most in response to HWC competition. These results shed light on the relationship between product market competition and innovation, and point to the origin of import competition as a determent of innovation decisions made by U.S. companies.http://deepblue.lib.umich.edu/bitstream/2027.42/116614/1/1299_Zhou.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/116614/4/1299_Zhou_.pdfDescription of 1299_Zhou_.pdf : New Title/Abstrac

Product Variety, Sourcing Complexity, and the Bottleneck of Coordination

This paper studies the coordination burden for firms that pursue variety as their main product strategy. We propose that product variety magnifies the tension between scale economies in production and scope economies in distribution, giving rise to complex sourcing relationships. Sourcing complexity worsens performance and poses a dilemma for organization design: A hierarchical structure with intermediate coordinating units such as sourcing hubs reduces sourcing complexity for downstream distribution but creates bottlenecks at the hubs, hurting performance for both the hubs and downstream distribution. We empirically examine operations data for about 300 distribution centers within a major soft drink bottling company in 2010-2011. Results support our hypotheses, illuminating the source of complexity in multi-product firms and the challenge for organization design in managing complexity.http://deepblue.lib.umich.edu/bitstream/2027.42/133522/1/1329_Zhou.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/133522/4/1329_Zhou_Oct2016.pdfDescription of 1329_Zhou_Oct2016.pdf : October 2016 revisio

Product variety and vertical integration

Peer Reviewedhttps://deepblue.lib.umich.edu/bitstream/2027.42/136548/1/smj2540.pdfhttps://deepblue.lib.umich.edu/bitstream/2027.42/136548/2/smj2540_am.pd

Subsidiary divestiture and acquisition in a financial crisis: Operational focus, financial constraints, and ownership

We exploit parent- and subsidiary-level data for publicly listed firms in Thailand before, during, and after the 1997 Asian Financial Crisis to investigate the extent to which firms with different types of ownership restructure their business portfolios, in terms of divestitures and acquisitions. We compare restructuring choices made by firms mostly owned by (a) domestic individuals with block shares (family firms), (b) domestic firms and/or institutions (DI firms), and (c) foreign investors (foreign firms). We show that following the crisis (1) foreign firms' restructuring behavior is the least affected; (2) domestic firms owned by families and domestic institutions (DI) behave similarly to one another; (3) domestic firms do not increase divestiture in their peripheral segments to improve operational focus or to obtain cash in a credit crunch; they actually reduce divestiture in core segments; and (4) domestic firms also significantly reduce the acquisition of new subsidiaries. Our results challenge traditional explanations for divestiture such as corporate governance, operational refocus, and financial constraints. They indicate that in the great uncertainty of a crisis, domestic firms are able to hold onto their core assets to avoid fire-sale. In essence, they act more conservatively in churning their business portfolios

Are Importance Ratings Stable? A Study of Perceptions of Information Quality

Information consumption in China occurs in a rapidly shifting social and political environment. Understanding this group of information consumers is likely to play an important role in business and political decision making globally for the foreseeable future. Ratings of the importance of the dimensions of information quality and the way in which these ratings have shifted over time shed light on the beliefs of this group of information consumers. This study reports the results of a nonpanel longitudinal study involving two surveys conducted in China over a five year period examining information consumer ratings of the importance of the dimensions of information quality. Results show that Chinese information consumers rate the information quality dimensions of believability, reputation, and value-added as less important at the end of the five year period than at the beginning and rate representational consistency and concise representation as more important at the end of the five year period than at the beginning

Coordination Costs, Organization Structure and Firm Growth.

This dissertation views firms as systems of interdependent activities and investigates the role of coordination costs in setting limits to firms’ growth strategies and organization structure. It contains three interrelated studies. Study I examines the impact of coordination costs on firms’ diversification strategies. A synergistic view of diversification suggests that firms are more likely to diversify into a new business that shares significant resources with their existing businesses: There is more potential for synergies. Study I argues that, to realize the potential synergies, firms need to actively manage the interdependencies caused by resource sharing, which adds to coordination demand from firms’ existing businesses, and may cause marginal coordination costs to outweigh marginal synergistic benefits. The impact of coordination costs is particularly significant if the existing businesses are already complex. The argument takes into account the joint effects of synergies and coordination costs, and offers a unique explanation for the limit to related diversification. Study II examines the impact of the activity system on the partitioning and recombination of organization units inside the firm. It investigates how the complexity and decomposability of the activity system affect the firm’s choice of a more modular, integrated, or hierarchical structure. It argues that the degree of organization integration is constrained when the activity system is highly complex, whereas for a given level of complexity the degree of organization modularity is constrained by the decomposability of the activity system. Under both constraints, a hierarchical structure plays the important role of coordinating inter-unit interdependencies. Study III extends the inspection of organization structure from firm to unit level and examines the differential delegation of coordination responsibilities within a hierarchical structure. It exploits institutional differences across host countries where multinational corporations operate. It proposes that institutional differences affect the local units’ ability to coordinate via the differential availability of information and clarity of property rights; differential delegation is an important vehicle to countervail such coordination constraints. I find support for my hypotheses using data of U.S. equipment manufacturers from 1993 to 2003.Ph.D.Business AdministrationUniversity of Michigan, Horace H. Rackham School of Graduate Studieshttp://deepblue.lib.umich.edu/bitstream/2027.42/61704/1/ymz_1.pd