How do MNEs invent? An invention-based perspective of MNE profitability

Copyright © 2022 The Author(s). Although MNEs create inventions both internally and collaboratively with partners as well as within and across countries, we know very little about the effects that combining such inventive activities have on their profitability. This study develops an invention-based perspective that considers how MNEs' profitability is influenced by the ways they organize the development of inventions across organizational boundaries (internally or collaboratively) and geographic boundaries (within or across countries). This perspective postulates that profitability is not merely driven by advantageous technological endowments but also by how such technological assets have been created. Accordingly, it explains why specific combinations of inventive activities across the two boundaries affect the likelihood of creating breakthrough inventions differently, provide different revenue and cost advantages, and have different effects on MNEs’ profitability. It further explains why cross-country inventions contribute more to profitability when they are internalized, while within-country inventions are more profitable when they are created collaboratively. - Résumé: Bien que les entreprises multinationales (Multinational Enterprises – MNEs) créent, aux échelles transfrontalière et nationale, des inventions à la fois en interne et en collaboration avec des partenaires, nous en savons très peu sur les impacts de la combinaison de telles activités inventives sur leur rentabilité. Cette recherche développe une perspective fondée sur les inventions laquelle examine comment la rentabilité des MNEs est influencée par les manières dont elles organisent le développement des inventions à travers les frontières organisationnelles (internes ou collaboratives) et géographiques (à l'intérieur ou entre des pays). Cette perspective postule que la rentabilité n'est pas seulement façonnée par des facultés technologiques avantageuses, mais aussi par la manière dont ces actifs technologiques ont été créés. Par conséquent, cela explique pourquoi les combinaisons spécifiques des activités inventives à travers les deux frontières influencent différemment la probabilité de créer des inventions disruptives, apportent différents avantages en matière de revenus et de coûts, et exercent divers impacts sur la rentabilité des MNEs. Cela explique en outre pourquoi les inventions transfrontières contribuent davantage à la rentabilité lorsqu'elles sont internalisées, tandis que les inventions au sein d’un pays sont plus rentables lorsqu'elles sont créées en collaboration. - Resumen: A pesar las empresas multinacionales crean invenciones tanto interna como en colaboración con socios, así como dentro y entre los países, sabemos muy poco sobre los efectos que la combinación de tales actividades inventivas tiene en su rentabilidad. Este estudio desarrolla una perspectiva basada en la invención que considera cómo la rentabilidad de las empresas multinacionales está influenciada por las formas en que organizan el desarrollo de las invenciones a través de los limites organizacionales (interna o colaborativamente) y los limites geográficos (dentro o entre países). Esta perspectiva postula que la rentabilidad no está impulsada simplemente por legados tecnológicos ventajosos, sino también por la forma en que se han creado dichos activos tecnológicos. Por ende, explica por qué las combinaciones específicas de actividades inventivas a través de los dos límites afectan de manera diferente la probabilidad de crear invenciones novedosas, proporcionan diferentes ventajas de ingresos y costos, y tienen diferentes efectos en la rentabilidad de las empresas multinacionales. Explica además por qué las invenciones entre países contribuyen más a la rentabilidad cuando son internalizadas, mientras que las invenciones dentro del país son más rentables cuando se crean en colaboración. - Resumo: Embora MNEs criem invenções tanto interna quanto colaborativamente com parceiros, bem como dentro e entre países, sabemos muito pouco sobre os efeitos que a combinação de tais atividades inventivas tem em sua lucratividade. Este estudo desenvolve uma perspectiva baseada em invenções que considera como a lucratividade de MNEs é influenciada pelas formas como organizam o desenvolvimento de invenções além de fronteiras organizacionais (internamente ou colaborativamente) e geográficas (dentro ou entre países). Essa perspectiva postula que lucratividade não é apenas impulsionada por dotações tecnológicas vantajosas, mas também por como esses ativos tecnológicos foram criados. Consequentemente, isso explica por que específicas combinações de atividades inventivas através das duas fronteiras afetam de forma distinta a probabilidade de criar invenções revolucionárias, fornecem receitas e vantagens de custo diferentes e têm efeitos diferentes na lucratividade de MNEs. Ela também explica por que invenções entre países contribuem mais para a lucratividade quando são internalizadas, enquanto invenções dentro do país são mais lucrativas quando são criadas de forma colaborativa. - 摘要 虽然跨国公司(MNE)同时在内部和通过与伙伴合作在国内和跨国创造发明, 但我们对此类发明活动的结合对其盈利率的影响知之甚少。本研究提出了一个基于发明的视角, 该视角考虑了MNE的盈利率如何受到它们跨越组织边界 ( (内部或协作) 和地理边界 ( 国内或跨国 ) 织发明开发的方式的影响。这一视角假定盈利率不仅受有利的技术禀赋的驱动, 而且还受这些技术资产的创造方式的驱动。因此, 它解释了为什么跨越两个边界的发明活动的特定组合对创造突破性发明的可能性产生不同的影响, 提供不同的收入和成本优势, 并对MNE的盈利率产生不同的影响。它还进一步解释了为什么跨国发明在内部化时对盈利率的贡献更大, 而国内发明在合作创造时更有利

Externalizing, internalizing and fostering commitment: the case of born-global firms in emerging economies

This paper examines the HR practices of mature born-global firms from twenty-nine emerging economies. Through an examination of large scale survey data the paper questions the extent to which firm size impacts the employment of temporary workers, the employment of skilled workers and the extent of employee training. Findings suggest that as firm size increases the use of temporary workers decreases, the number of skilled workers increases and the number of employees receiving training also increases. The paper highlights how born-global firms are able to shift away from externalized, market-based approaches towards more internalized, commitment-based approaches in order to survive, adapt and grow

A retrospective and agenda for future research on Chinese outward foreign direct investment

Our original paper “The determinants of Chinese Outward Foreign Direct Investment” was the first theoretically based empirical analysis of the phenomenon. It utilised internalisation theory to show that Chinese state-owned firms reacted to home country market imperfections to surmount barriers to foreign entry arising from naivety and the lack of obvious ownership advantages, leveraging institutional factors including favourable policy stimuli. This special theory explained outward foreign direct investment (OFDI) but provided surprises. These included the apparent appetite for risk evinced by these early investors, causing us to conjecture that domestic market imperfections, particularly in the domestic capital market, might be responsible. The article stimulated a massive subsequent, largely successful, research effort on emerging country multinationals. In this Retrospective article we review some of the main strands of research that ensued, for the insight they offer for the theme of our commentary. Our theme is that theoretical development can only come through embracing yet more challenging, different, and new contexts, and we make suggestions for future research directions

Redirecting research efforts on the diversification-performance linkage: The search for synergy

We review the literature on the diversification-performance (D-P) relationship to a) propose that the time is ripe for a renewed attack on understanding the relationship between diversification and firm performance, and b) outline a new approach to attacking the question. Our paper makes four main contributions. First, through a review of the literature we establish the inherent complexities in the D-P relationship and the methodological challenges confronted by the literature in reaching its current conclusion of a non-linear relationship between diversification and performance. Second, we argue that to better guide managers the literature needs to develop along a complementary path – whereas past research has often focused on answering the big question of does diversification affect firm performance, this second path would focus more on identifying the precise micro-mechanisms through which diversification adds or subtracts value. Third, we outline a new approach to the investigation of this topic, based on (a) identifying the precise underlying mechanisms through which diversification affects performance; (b) identifying performance outcomes that are “proximate” to the mechanism that the researcher is studying, and (c) identifying an appropriate research design that can enable a causal claim. Finally, we outline a set of directions for future research

Strategic Belief Management

While (managerial) beliefs are central to many aspects of strategic organization, interactive beliefs are almost entirely neglected, save for some game theory treatments. In an increasingly connected and networked economy, firms confront coordination problems that arise because of network effects. The capability to manage beliefs will increasingly be a strategic one, a key source of wealth creation, and a key research area for strategic organization scholars. KEYWORDS: Interactive beliefs, coordination, network economy, common knowledge. JEL CODE: D84, M3

The effect of within-country inequality on international trade and investment agreements

There is anecdotal evidence suggesting that those losing from globalization influence policy makers to decrease the openness of their countries to globalization, as evidenced by signing international trade and investment agreements. Surprisingly, this influence has never been examined empirically. This study provides novel empirical evidence demonstrating that greater within-country inequality, our proxy for 'perceived losses' from globalization, decreases countries' propensity to sign regional trade and investment agreements. Our findings support the argument that the existence of 'losers' from globalization can be detrimental for continued globalization. To the best of our knowledge, this is the first extensive econometric empirical evidence of the influence of within-country inequality on countries' willingness to sign international trade and investment agreements, as means to increase their global economic integration

Balancing growth across geographic diversification and product diversification: A contingency approach

10.1016/j.ibusrev.2011.11.009International Business Review2161052-106

Scepticism Towards Globalization, Technological Knowledge Flows And The Emergence Of A New Global System

Research Summary This paper examines the potential effect of anti‐globalization on a key attribute of multinational enterprises (MNEs) – the ability to transfer efficiently complex firm specific technological knowledge internationally. Anti‐globalization policies can supress the transfer of complex technological knowledge by limiting the international transfer of intellectual property, restricting the free movement of scientists and engineers or by dis‐harmonizing regulations across nations. Such suppression is shown to significantly change the global system in terms of the location of value adding activities, their organizational firm boundaries and the origin of MNEs. The model predicts that after a “shock” of anti‐globalization policies, which significantly increases international technological knowledge flow costs, a smaller number of firm‐ and MNE‐ location and control configurations emerges, and domestic firms become more dominant. Managerial Summary Anti‐globalization policies threaten a key feature of multinational enterprises (MNEs) – the ability to transfer efficiently complex technological knowledge across political borders. They do so through limitations on the international transfer of intellectual property, restrictions on the free movement of scientists and engineers as well as through dis‐harmonization of regulations across nations. We present a model that shows that such limitations are likely to change the global system making it much more similar to the one that existed pre‐ WW1 and WW2. The emerging global system is predicted to include a large proportion of domestic firms engaging in international trade and MNEs that locate only a small number of value chain activities abroad

The Performance Implications of Speed, Regularity, and Duration in Alliance Portfolio Expansion

Extant research on the management of time shows that the speed of undertaking new strategic moves has negative consequences for firm profitability. However, the literature has not distinguished whether this outcome results from the effects of speed on firms’ revenues or from the effects of speed on firms’ costs, or examined how firms can become more profitable by reducing the negative consequences of speed. We address these gaps for a specific strategic move: alliance portfolio expansion. We show that the speed at which firms expand their alliance portfolios increases managerial costs disproportionately relative to revenues, leading to an overall negative effect on firm profitability. However, a more regular rhythm of expansion and a longer duration of existing alliances reduce the negative profitability consequences of expansion speed by moderating the increase in managerial costs. These findings suggest that firms that make strategic moves, such as alliances, may reduce the negative profitability consequences of speed when they maintain a regular expansion rhythm and when their existing strategic engagements require modest managerial resources

The impact of distance sensitivity and economies of scale on the output and exports of Israel and its Arab neighbors An empirical analysis

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