Innovation Practice Transfer and Capability Development within the Multinational Enterprise

For many firms, there is no long term effective strategy except to continue to grow and evolve through innovation. Hence, investment in developing these capabilities is a significant managerial priority. The original view within international business research holds that these capabilities are developed in the headquarters of the multinational enterprise (MNE) and are subsequently exploited globally through foreign affiliates. However, as MNEs become established in a multitude of foreign markets, affiliates are now often involved in innovation activities themselves. Establishing innovation mandates within foreign affiliates often requires the transfer of practices from elsewhere within the MNE network. If, in accordance with the knowledge based theory of the firm, the MNE is superior to markets in the exploitation and diffusion of knowledge and capabilities, it must identify and diffuse superior practices throughout the innovation network. Case study methodology is used to examine the transfer, adaptation and diffusion of innovation practices and the resulting development and enhancement of associated capabilities within four MNEs. Contributions from this study include a) the role of headquarters in creating mutual interdependencies amongst subsidiaries in order to hasten innovation capability development and enhance knowledge flow, b) an identification of different modes of innovation practice transfer consisting of central administration, brokering, and organic diffusion, the structural configurations which favour them, and the role of headquarters in creating signals to indirectly control the flow of practices. Furthermore, the relative influences on innovation practice adoption and adaptation at the national, organizational, subsidiary and practice levels of analysis were identified

U.S. FDI and Shareholder Rights Protection in Developed and Developing Economies

We examine the impact of shareholder rights protection on U.S multinational firms’ Foreign Direct Investments (FDI). We hypothesize that the expropriation of wealth is less likely to occur in countries with strong shareholder rights and hence, these countries will attract more FDI relative to countries with weaker shareholder rights protection. We also hypothesize that this relationship will be more important for developing countries compared to developed countries. Based on an analysis of US FDI data over the period 1997-2016, we find support for our predictions. These findings emphasize the importance of institutional development for economic development, via the attraction of FDI

Organizational structure and knowledge-practice diffusion in the MNC

Purpose This study aims to examine the interaction of formal and informal cross-border knowledge-sharing practices of four large multinational corporations (MNCs) in aerospace, software, IT services and telecommunications industries. The goal was to determine the manner in which coordination and control mechanisms facilitated knowledge transfer. Design/methodology/approach Case studies comprised secondary data and semi-structured interviews with corporate headquarters and subsidiary managers in large MNCs conducted in the USA, Canada, Mexico, China, India and Eastern Europe. Findings The primary finding of this study is that knowledge transfer mechanisms arise as a result of both formal and informal structures of the MNC. Formal structures which create either mutual dependencies or occasions for knowledge exchange facilitate transfer. Formal structure which inhibits knowledge transfer can be overcome by knowledge brokers and evaluation metrics. Research limitations/implications These findings suggest that knowledge transfer is more informal than formal, but that MNC headquarters does play a role, intended or not, through shaping the interdependencies among geographically distributed units. Managers should be mindful of both the manner in which tasks and the organization are structured, as these have an indirect impact on the development of knowledge channels. Originality/value This paper investigates the role of organizational structure and its effect, both intended and unintended, on the transfer of knowledge-based practices. While knowledge transfer has been heavily researched, this study examines the phenomenon at a finer-grained level of analysis

Terrorism hazard and infrastructure projects: The moderating role of home experience and institutions

This paper analyzes the impact of terrorism hazard on the performance of private participation infrastructure projects. Applying transaction cost theory, we hypothesize that terrorism hazard has a negative relationship with infrastructure project completion, and that host government accountability and investor experience with terrorism hazard have opposing impacts on this relationship. Host government accountability, we argue, produces higher indirect costs of managing terrorism hazard, which reduces investor confidence, and reinforces the negative relationship between terrorism hazard and the probability of satisfactory project completion. Conversely, investor’s experience with terrorism hazard increases investor confidence and hence partially mitigates the negative consequences of terrorism hazard which hamper project completion. Hence, the impact of terrorism is weakened for projects led by firms from higher terrorism hazard countries. We find support for our hypotheses using a sample of 5,083 projects in 135 countries from 2002 to 2017

Cooperative strategies in international business and management: Reflections on the past 50 years and future directions

Over the past 50 years, cooperative forms of governance such as equity joint ventures and other strategic alliances have received tremendous attention in international business and management research. This article traces the history of this research over these past five decades with particular emphasis on the critical role that (Columbia) Journal of World Business has played in disseminating scholarly and managerial expertise on the successful management of cross-border, inter-firm collaboration. We highlight the evolution of interest in different contexts, phenomena, theories, and methodologies, along with the factors that have driven interest in these topics. Several suggestions for future research are also provided

Managing Joint Ventures

Joint ventures aid firms in accessing new markets, knowledge, capabilities, and other resources. Yet they can be challenging to manage, largely because they are owned by two or more parent companies. These companies may have competing or incongruent goals, differences in management style, and in the case of international business, additional complexities associated with differing government policies and business practices. We examine research on joint venture (JV) performance in order to identify prominent academic discussions established over the last 25 years. From this research, we draw implications from past research and areas for future research on successfully managing JVs, taking into account the decisions JV partners must make throughout the partnering process, from initial motivations through partner selection and negotiation of terms to implementation and ongoing management. Key implications include the necessity of honesty, trust, and commitment for the success of the JV, settling disputes by focusing on what is best for the JV rather than individual partner objectives, and division of managerial responsibilities according to the functional expertise of each partner

Innovation outcomes of knowledge-seeking Chinese foreign direct investment

Purpose The purpose of this paper is to investigates how organizational learning, absorptive capacity, cultural integration, specialization of the acquired firm and characteristics of transferred knowledge impact innovation performance subsequent to overseas acquisitions. Design/methodology/approach Survey responses from 222 Chinese multinational enterprises engaged in overseas acquisitions. Findings Differences between acquiring and acquired firms’ capabilities, while having a positive direct influence, suppress the positive impact of organizational learning and absorptive capacity, suggesting that multinationals require some basic level of capabilities to appropriate value from overseas acquisitions. Research limitations/implications This paper investigates the impact of knowledge-seeking overseas acquisition of Chinese multinationals on innovation performance, as this appears to be the primary motive for making such acquisitions. Practical implications Knowledge-seeking overseas acquisition should be based upon the absorptive capacity of the acquiring firm and complementarity between both firms. In knowledge-seeking overseas acquisitions, establishing an effective organizational learning mechanism is necessary for improving innovation performance. Originality/value This paper reports on the behaviour and innovation performance of Chinese multinationals through analysis of primary data

Subsidiary staffing, location choice, and shareholder rights effectiveness

Institutional differences between countries influence strategic choices and performance of international businesses, but the unintended effects of legal institutions on firm legitimacy have received less attention. We argue that, while minority shareholder rights protection in an investment location does not directly protect shareholder interests abroad, the normative and mimetic effects it has on host country managers can mitigate agency problems. Using Japanese FDI established between 1986 and 2013 we find that (a) subsidiaries established in host countries with higher shareholder rights protection employ a smaller proportion of Japanese expatriates, (b) shareholder rights protection enhances a country’s FDI attractiveness, and (c) that the impacts of shareholder rights protection on expatriate ratio and location attractiveness are stronger when firm ownership is concentrated among exchange-listed firms. This research contributes to the literature on institutional difference in international business, in particular by highlighting the value of studying the imprinting effects of regulations

Taking advantage of institutional weakness? Political stability and foreign subsidiary survival in primary industries

Purpose This paper aims to investigate the extent to which locating primary industry subsidiaries in politically unstable countries impacts their survival. The authors argue that foreign multinational enterprises in less stable political environments can shape policies that are impactful on the costs of operating in primary industries and avoid compliance with more stringent policies at home. Design/methodology/approach Using a sample of 753 primary sector investments of Japanese multinational enterprises during the period 1986 to 2013, the authors conduct a parametric survival analysis of the relationship between political stability and subsidiary survival. Findings Political instability has a slight, curvilinear relationship with subsidiary survival, such that both high and low stability are associated with lower exit hazard, while moderate levels of stability increased exit hazard. This nonlinear relationship is stronger for efficiency-seeking subsidiaries, and weaker for market-seeking subsidiaries. Originality/value This research contributes to the debate around the pros and cons of globalization by examining the extent to which firms benefit by offshoring primary sector investments to avoid more costly legal requirements at home. The results suggest that this non-market strategy should be mitigated through appropriate policy measures and provides evidence that those policies already implemented are effective

A Cultural Value Congruence Approach to Organizational Embeddedness

Drawing on the person–organization fit theory, we investigate how the value congruence between employees’ collectivist values and their perception of organizational collectivism influences organizational embeddedness. Based on a survey of 515 working adults, the polynomial regression and response surface analysis results support that embeddedness is highest in the presence of both high individual and organizational collectivism. Additionally, the smaller the discrepancy between the two perceptions, the more embedded the employees. Our study contributes to the cultural perspectives in the organizational embeddedness research by theorizing and measuring the impact of collectivism at the individual level. The findings also contribute to the person–organization fit theory by identifying a value congruence approach to organizational embeddedness