Structural Reform and Firm Profitability in Developing Countries

We extend agency theory to propose that structural reform positively impacts firm profitability in developing countries because the improvements in external monitoring that accompany structural reform decrease the agency costs faced by firms. However, we also argue that not all firms benefit equally from structural reform because their agency problems are impacted differently. Hence, we propose that structural reform results in higher improvements in profitability for domestic state-owned and domestic private firms than it does for subsidiaries of foreign firms. Results of the analyses of the largest 500 firms in Latin America support the arguments, suggesting that, contrary to the views of many critics of globalization, domestic firms are the main beneficiaries of structural reform in developing countries.http://deepblue.lib.umich.edu/bitstream/2027.42/64370/1/wp940.pd

Host country concerns and policies toward state-owned MNEs

Different concerns about FDI by state-owned enterprises require separate policies: national security concerns can be dealt by exclusion of all foreign investors; worries about the opacity of foreign SOEs can be solved via monitoring; and unease about adversarial governments’ SOEs can be reduced using controls

STRUCTURAL REFORM AND FIRM PROFITABILITY IN DEVELOPING COUNTRIES

We extend agency theory to propose that structural reform positively impacts firm profitability in developing countries because the improvements in external monitoring that accompany structural reform decrease the agency costs faced by firms. However, we also argue that not all firms benefit equally from structural reform because their agency problems are impacted differently. Hence, we propose that structural reform results in higher improvements in profitability for domestic state-owned and domestic private firms than it does for subsidiaries of foreign firms. Results of the analyses of the largest 500 firms in Latin America support the arguments, suggesting that, contrary to the views of many critics of globalization, domestic firms are the main beneficiaries of structural reform in developing countries.agency theory, structural reform, firm profitability, state-owned firms, private firms,subsidiaries of foreign firms, developing countries, globalization

A set of motives to unite them all?

Purpose – The purpose of this paper is to introduce the debate forum on internationalization motives of this special issue of Multinational Business Review. Design/methodology/approach – The authors reflect on the background and evolution of the internationalization motives over the past few decades, and then provide suggestions for how to use the motives for future analyses. The authors also reflect on the contributions to the debate of the accompanying articles of the forum. Findings – There continue to be new developments in the way in which firms organize themselves as multinational enterprises (MNEs), and this implies that the “classic” motives originally introduced by Dunning in 1993 need to be revisited. Dunning’s motives and arguments were deductive and atheoretical, and these were intended to be used as a toolkit, used in conjunction with other theories and frameworks. They are not an alternative to a classification of possible MNE strategies. Originality/value – This paper and the ones that accompany it, provide a deeper and nuanced understanding on internationalization motives for future research to build on

Africa business research as a laboratory for theory-building: extreme conditions, new phenomena and alternative paradigms of social relationships

Africa is an increasingly important business context, yet we still know very little about it. We review the challenges and opportunities that firms in Africa face and propose that these can serve as the basis for extending current theories and models of the firm. We do so by challenging some of the implicit assumptions and stereotypes on firms in Africa and proposing three avenues for extending theories. One is taking the extreme conditions of some Africa countries and using them as a laboratory for modifying current theories and models of the firm, as we illustrate in the case of institutional theory and the resource-based view. A second one is identifying new themes that arise from analyzing firms in Africa and their contexts of operation, and we discuss four themes: migrating multinationals and the meaning of home country, diaspora networks within and across countries, a recasting of cultural and institutional distance, and new hybrid organizational forms. A third one is developing new theories based on alternative paradigms of social relationships that have emerged in Africa that differ from those underpinning existing theories of the firm, such as kgotla and its view of community-based relationships or ubuntu and its humanizing view of relationships

The impact of R&D sources on new product development: Sources of funds and the diversity versus control of knowledge debate

We build on the knowledge-based view to study the relative impact of alternative R&D sources on innovation performance. We contrast two arguments that have created a debate in the literature: One is that diversity of knowledge is better for innovation, because the integration of a larger variety of knowledge helps create new products that can fulfill unmet customer needs; another is that control of knowledge is better, because the incentives and contextual system of the firm facilitate employees' experimentation, which supports the creation of new products. We provide one solution to this debate by arguing that the relative importance of diversity and control of knowledge on innovation depends on the sources of finance. Hence, we find that, in general, control of knowledge has a higher impact than diversity of knowledge on the sale of new products. We also find that alternative sources of finance moderate the relationships: internal funds strengthen the impact of R&D sources with more diversity of knowledge on the sale of new products, while external funds strengthen the impact of R&D sources with more control of knowledge on the sale of new products.Authors appear in alphabetical order. We thank Tina Ambos, anonymous reviewers, and participants at the European International Business Academy annual meeting for useful suggestions for improvement. We thank the National Statistics Institute, the Science and Technology Foundation, and the Foundation for Technical Innovation of Spain for access to the database. This project was funded by the Ministry of Economy and Competitiveness (ECO2015-67296-R, MINECO/FEDER, UE) and the Community of Madrid and the European Social Fund (S2015/HUM-3417, INNCOMCON-CM). Cuervo-Cazurra thanks the Walsh Research Professorship, the Robert Morrison Fellowship and the Lloyd Mullin Fellowship for financial support. Rodriguez thanks Ramon Areces Foundation for financial support

The United Nations' Sustainable Development Goals: Pros and Cons for Managers of Multinationals

The UN Sustainable Development Goals (SDGs) are becoming a crucial mechanism for coordinating governments' efforts to address global challenges. However, their implementation by managers is challenging. In this article, we offer an overview of the pros and cons of the SDGs as mechanisms for managers of multinationals to help contribute to sustainable development. On the pro side, the SDGs are comprehensive and actionable. On the con side, they are vague, complex and may lend themselves to "rainbow-washing." We provide suggestions for managers to help them respond to these challenges by avoiding cherry-picking SDGs, using the SDGs to assess sustainability, and pursuing SDG projects via partnerships

Institutional complementarity and substitution as an internationalization strategy: the emergence of an African multinational giant

Research Summary: We examine the internationalization decisions made by one of Africa's most successful companies, South African Breweries, as it underwent a period of aggressive expansion. We see processes of both institutional complementarity and substitution at different phases and with different motives. At first it sought countries that played to its strength, namely the knowledge of doing business in environments of institutional uncertainty, but later it pursued an institutional diversification strategy whereby it attempted to minimize its institutional risk exposure. As it became larger, its aspirations increased too, and its over-exposure to emerging market institutional risk saw it engage in institutional substitution into advanced countries. Through this phased international process, it was able to develop its internal assets, and this enabled the moves into developed markets. Managerial summary: We demonstrate that firms can exploit their knowledge of ‘weak’ institutional settings and turn it into a source of advantage as they internationalize into locations with similar institutional ‘weaknesses.’ Using the case of one of Africa's most successful multinational enterprises, we illustrate the value gained from initially capitalizing upon institutional complementarity (utilizing the comparative advantage linked to institutional know-how) by exploiting the experience of the home country's environment into similar settings. Over time and through learning-by-doing, pressure arose to diversify the risk linked with over-exposure to institutional uncertainty and country risk, and this was associated with the process of institutional substitution into more advanced countries. We see emerging multinational learning and building its capabilities by leveraging its understanding of its home country institutional environment