Investment attributes and learning from failure in foreign direct investments

This study examines the learning effect of multinational enterprises' (MNEs) failure experience in foreign direct investment (FDI). We also examine the contingent effects of two key investment attributes: cultural distance between the host countries and the MNE's home country and entry mode. Using a longitudinal dataset of Korean foreign direct investments during 1990–2011, we find that an MNE's prior FDI failure experience is negatively related to the failure likelihood of a focal subsequent FD, indicating a learning effect of FDI failure experience. Our results show that this learning effect weakens, as the cultural distance between the host countries of prior failed FDIs and South Korea, or the joint venture percentage among prior failed investments increases; however, those interaction effects become insignificant when a focal subsequent FDI is in a culturally different country, or a JV. This study enriches the literature on learning from failure and research on experiential learning in FDI by demonstrating the boundary conditions of the learning effect of the FDI failure experience of MNEs.     

The product cycle model of foreign direct investment and developing country welfare

Raymond Vernon's product-cycle model predicts two distinctive kinds of foreign direct investment in developing countries: fist, subsidiaries whose operations are tightly integrated into the parent's strategy to advance its competitive position in international markets; second, subsidiaries toward the host market whose profits help fund the needs of the parent but whose output is not an integral part of the parent's global sourcing network. In practice, the latter are frequently subject to domestic content, joint venture, and technology-sharing requirements; the former almost never are. How do the two kinds of foreign direct investment differ in their impact on host country development? Somewhat surprisingly, to those who may be wary of what Vernon himself reffered to as “captive” plants, foreign investor operations intimately linked into the parent's global sourcing network make a systematically larger and more dynamic contribution to the host economy via the activities of the affiliates themselves, via backward linkages to local suppliers, and via spillovers and externalities. Foreign investor operations impeded from close integration via domestic content, joint venture, and technology-sharing requirement provide a much less positive and sometimes genuinely negative impact, especially if they are protected by trade barriers or other forms of market exclusivity.     

The micro-foundations of industrial diversification through foreign acquisitions: The multifaceted role of CEO experience

This paper examines the micro-foundations of cross-border industrial diversification strategies. We study the impact of observable CEO experience attributes on the propensity to acquire foreign target firms in unrelated (versus related) industries. Our findings, based on a sample of UK-based firms that engaged in cross-border acquisitions between 2010 and 2016, support an inverted U-shaped relationship between life experience of the CEO and the likelihood of engaging in unrelated foreign acquisitions. Further, we find that CEOs' broad-based work experience, across countries or industries, is associated with a higher propensity to engage in unrelated foreign acquisitions. Finally, CEOs’ education experience in MBA-type qualifications is associated with a preference for related foreign acquisitions. We discuss the theoretical implications of these findings and outline directions for future research in the context of micro-foundations in international business, strategic leadership, and upper echelons theory.     

Location choice of Chinese outward FDI – An ethnicity-based population ecology perspective

Drawing on population ecology theory (PET) which conceptualizes an individual organization's survival as a result of organizational changes at the population level, we explain why multinational enterprises (MNEs) from emerging markets prefer to enter countries with an existing population of co-national peers. Our study of a sample of Chinese MNEs shows that the size of co-national MNEs population in the host country has a positive effect on new FDI entries by firms from the same home country. Interestingly, the co-province and co-industry-formed organizational population in the host country has an inverted U-shaped effect on the new FDI entries, and that provincial dialect and co-national immigrants flatten this curvilinear effect. We also analyze how the focal relationships vary between host countries with different levels of economic development and between different industries. Our study contributes to the research of FDI location choices by providing a population ecology-based explanation that differs fundamentally from those based on agglomeration economics and institutional theory. The study also advances PET by theorizing how legitimizing and competing forces interact to jointly influence the way the extant population of certain types of organizations influences the entries of the same type of organizations into the population.     

Diaspora Concentration and the Venture Investment Impact of Remittances

International business (“IB”) research has developed theory and preliminary evidence suggesting that remittances from overseas immigrant diasporas enhance home-country venture funding access, particularly in developing countries where a dearth of formal institutional protections deter other foreign investors. I extend this research with theory and evidence linking the geographic concentration of immigrant diasporas abroad to the magnified venture investment impact of their remittances back home. Analyses of remittances to 50 developing counties from 2002 to 2007 show that the venture investment impact of remittances may be completely nullified when coming from geographically-dispersed immigrant diasporas. Diaspora concentration abroad facilitates more effective discovery of venture opportunities back home.     

Twice as Smart? The Importance of Managers’ Formative‐Years’ International Experience for their International Orientation and Foreign Acquisition Decisions

This study examined how top management team's (TMT) international orientation influences perceptions of environmental uncertainty and how these perceptions impact international strategic decisions, in particular regarding ownership stakes taken in foreign acquisitions. We highlighted the need for the concept of TMT international orientation to encompass executives’ formative‐years’ international experiences along with their international career experiences and nationalities. Empirical tests based on a sample of 2122 international acquisitions completed by 561 UK firms over the period 1999–2008 showed that TMT international orientation positively moderated the negative impact of cultural differences and host country risk on acquisition ownership stakes. The results underscored the importance of considering decision‐makers’ attributes due to their experiences at a young age, beyond their demographic characteristics or professional experience, in the context of international strategic choices. We also discussed some implications of one of the possible consequences of executives’ formative international experience, namely biculturalism, for international business.     

国际性无形技术外溢与中国全要素生产率——基于分位数回归的实证研究

考虑国际性技术外溢中技术外溢方和吸收方互动因素的基础上,本文测算了我国各省吸收同化的无形国际性外溢R&D存量,将其代入Coe和Helpman推导的内生增长模型中,利用我国各省的面板数据估计了自主R&D存量和无形国际性外溢R&D存量对全要素生产率的弹性系数,同时,应用了分位数回归分析了无形国际性技术外溢对TFP的贡献随着各省市TFP的分位点的变化而变化的趋势。研究结果表明,自主R&D投资显著促进全要素生产率的增长,是我国各省技术进步的主要推动力;无形的国际性技术外溢同样促进了各省的全要素生产率的提高,但其作用要小于自主R&D投资对各省全要素生产率的推动作用。分位数回归结果进一步表明,随着各省市全要素生产率的提高,无形的国际性技术外溢对各省全要素生产率的促进作用逐步降低。     

Heterogenous internationalization processes of emerging economy MNEs: A review and research agenda

The internationalization of emerging economy MNEs (EEMNEs) is a major topic in international business (IB) research. IB scholars testing the applicability of existing internationalization theories to EEMNEs, or developing new EEMNE theories, have failed to explain that the heterogeneity in EEMNE internationalization is due to their being based in different countries, being active in different industries, and having different resource endowments. With these differences investigated mostly in isolation, the research to date has been fragmented. We take a more holistic view. Our paper synthesizes the literature to show that heterogeneity in EEMNE internationalization processes are due to the interaction between country, industry, and firm and this allows us to explain the “where,” “how,” “when,” and “how much” of it. We use a top-down approach, that is, how macro-level and industry factors impact firm-level ones. We disentangle studies on home-country, industry, and firm-level antecedents to internationalization, which yields rich insights. We develop an integrative framework that identifies the antecedents of EEMNE internationalization and their interrelationships. We then use the framework to review and summarize past research, outlining gaps and contradictions, and most importantly, we present crucial findings. Finally, we propose research questions that we believe will advance the EEMNE internationalization field.     

CEO Narcissism and Global Performance Variance in Multinational Enterprises: The Roles of Foreign Direct Investment Risk-Taking and Business Group Affiliation

This study examines key mechanisms through which CEO narcissism influences global performance variance in the context of Asian emerging market multinational enterprises. Building on the contextual reinforcement model of narcissism and the cushion hypothesis, we focus on the role of foreign direct investment (FDI) risk-taking and business group affiliation (BGA). We test our moderated mediation model on data from 149 South Korean multinational enterprises from 2006 to 2016. The results show that CEO narcissism is positively associated with FDI risk-taking. The effect of CEO narcissism on global performance variance is mediated by FDI risk-taking. Furthermore, BGA moderates the above-mentioned relationships. Our findings offer important contributions to the international business and CEO narcissism literatures.     

Immigration,Growth, and Unemployment: Panel VAR Evidence from OECD Countries

This paper examines empirically the interaction between immigration and host country economic conditions. We employ panel vector autoregression (VAR) techniques for a large annual data set on 22 OECD countries over the period 1987–2009. The VAR approach addresses the endogeneity problem by allowing for endogenous interactions between the variables in the system. Our results provide evidence of migration contribution to host economic prosperity (positive impact on GDP per capita and negative impact on aggregate unemployment, native‐ and foreign‐born unemployment rates). We also find that migration is influenced by host economic conditions (migration responds positively to host GDP per capita and negatively to host total unemployment rate).     

Country-of-origin determinants of foreign direct investment in an emerging market: the case of Mexico

Foreign direct investment (FDI) research has generally focused on inward FDI to large, developed nations. Very limited research has examined the country-of-origin factors that are related to FDI into the developing nations (emerging markets) that are becoming increasingly important in the global economy. In this paper, we provide the first empirical test of a multidimensional, country-of-origin model of factors related to FDI in an emerging market — Mexico. Economic, socio-political, and geographic factors are hypothesized to be important country-of-origin determinants of FDI into Mexico. The results indicate that some factors, such as the level of bilateral trade, home-country GDP, political risk, geographic distance, and exchange rates, are related to FDI into Mexico. At the same time, relationships between FDI and country-of-origin factors, such as market size (GDP) and cultural distance, that have previously held in research on FDI to large, developed nations do not hold in the same way in the emerging market context. Separate consideration of efficiency-seeking (maquila) FDI indicates that bilateral trade, wage rate, GDP, and the exchange rate contribute significantly to the explanation of inward FDI in Mexico.     

The Impact of Vicarious Experience on Foreign Location Strategy

MNEs can learn from the foreign investment experiences of other firms when evaluating their own foreign entry strategies. We argue that other firms' experiences reduce investment barriers arising from formal and informal institutional environments in host countries that are dissimilar from an MNE's home country, thereby encouraging new entry. Our empirical analysis of foreign entries by Japanese public manufacturing firms over more than a thirty-year period indicates that the prior experiences of other firms in a host country mitigate the negative effect of formal and informal institutional distance on entry decisions: as other firms' experiences in a host country increase, a firm is less deterred by greater institutional distance from entering the country. We also find that the distance-mitigating effect of other firms' experiences in different industries is less significant when a larger body of same-industry firm experience exists in a country, implying a substitution effect between different types of vicarious experience.     

Multinational Enterprises and the Provision of Collective Goods in Developing Countries under Formal and Informal Institutional Voids. The Case of Electricity in Sub-Saharan Africa

Despite their unprecedented growth, developing countries still face severe problems in the provision of collective goods. Electricity, whose provision is scarce or unreliable in most developing regions, especially in Sub-Saharan Africa, is an emblematic case. The reason for this shortage is not only imputable to the lack of effective formal institutions, but also to the inefficacy of informal institutions in enabling alternative solutions for the production, transmission and distribution of electricity. We claim that in this context of “double institutional void”, foreign direct investment (FDI) and multinational enterprises (MNEs) can play a decisive role. However, their effectiveness depends on both the formal and informal institutional proximity between the home and the host countries. Our empirical analysis relies on panel data models run on a sample of pairs of home-host countries, the latter of which are all from Sub-Saharan Africa (SSA), observed from 2005 to 2011.     

Home country institutions and exports of firms in transition economies: Does innovation matter?

We draw on institutional theory and the resource-based view to analyze the relation between home-country governance imperfections and the export intensity of firms in transition economies, including an examination of the moderating role of innovation. We propose that greater governance imperfections result in lower export intensity and that innovation mitigates the constraints of operating with weak home-country institutions. Analyses of panel data from the Business Environment and Enterprise Performance Survey (BEEPS) on firms from transition economies provide support for our arguments. Our findings allow us to conclude that although firms from transition economies face difficulties to export due to the regulatory constraints of their home countries, a strategy based on innovation represents a viable way of overcoming these limitations.     

Regulation as Country‐Specific (Dis‐)Advantage: Smoking Bans and the Location of Foreign Direct Investment in the Tobacco Industry

This paper seeks to examine the relationship between smoking bans and the propensity of tobacco firms to engage in foreign direct investment (FDI). Using international business theory based on the firm‐specific advantage/country‐specific advantage (FSA/CSA) matrix, the authors show that, contrary to what one may expect, smoking bans at home are an important institutional intervention, reducing the propensity for firms to engage in FDI, even to countries without a ban themselves.     

The influence of industry structure on the entry mode choice of overseas entrants in manufacturing industries

This study examines the impact of industry structure on the foreign direct investment (FDI) entry mode decisions by multinational enterprises (MNEs) in manufacturing industries. We explore the notion that firms would seek to balance the risks due to industry structural barriers and liabilities of foreignness while seeking entry in international markets. A multinomial logistic regression model is used to test 336 entry decisions from 18 countries entering the United States over the period 1989–1994. Empirical evidence shows that underlying industries' structural characteristics influence a firm's preference for entry mode alternatives such as greenfield investments, acquisitions, and joint ventures. In concentrated and high-growth industries, foreign firms prefer entry by setting up greenfield operations rather than pursuing acquisitions or joint ventures. However, in industries characterized by high gross profits or higher plant scale, the preference is for joint ventures or acquisitions as an entry mode over greenfield operations.     

The Impact of Social Media and Digital Platforms Experience on SME International Orientation: The Moderating Role of COVID-19 Pandemic

Drawing on network learning theory, it investigates the effect of small and medium-sized enterprises' (SMEs) experience of using foreign and domestic social network services (SNS) and foreign and domestic platforms (such as B2B digital platforms) on their international orientation. We further examine the moderating effects of the COVID-19 pandemic on the relationship between digital experience and international orientation. Empirical results from a sample of 373 observations from 250 Chinese SMEs show that their use of foreign SNS and B2B digital platforms has a stronger positive impact on their international orientation than their use of domestic SNS and B2B digital platforms. Even with the COVID-19 pandemic, SMEs' use of foreign SNS still has a stronger positive impact on their international orientation than their use of domestic SNS. Moreover, the COVID-19 pandemic mitigates the positive impact of their use of both foreign and domestic platforms on their international orientation. This study presents some interesting theoretical and practical implications for SMEs' digitalization and internationalization.     

Multinational firms' pace of expansion within host countries: How high rates of pro-market reform hamper the local exploitation of foreign expansion knowledge

Although increases in corporate ownership positions in foreign markets occur frequently, the factors that determine how quickly such increases occur are underexplored. Combining international business research on experiential learning, knowledge recombination, and pro-market reform, we hypothesize that a firm's international experience with ownership increases has a positive effect on the pace at which the firm implements an ownership increase in a host country, but that this effect is weaker during periods of quicker pro-market reform in the country. We find support for our hypotheses in an analysis of Austrian firms expanding in Central and Eastern Europe, suggesting that, rather than merely being beneficial to foreign investors, pro-market reform also poses a challenge to them.     

Racing to the bottom or seeking legitimacy? National environmental performance and the location strategies of Chinese MNEs

This paper studies the extent to which the international location patterns of Chinese MNEs privilege economies with environmentally sustainable practices. We develop a theoretical framework confronting the traditional race-to-the-bottom arguments with the Chinese MNEs' need to gain legitimacy abroad and signal their global citizenship. We also examine a set of conditioning factors pertaining to the heterogeneity of both host countries and firms, to explore potential sources of ethical pluralism in Chinese MNEs' location strategies. Empirically, we study 948 greenfield investments in manufacturing undertaken by Chinese companies in 82 countries over the 2013–2019 period. Our results suggest that Chinese MNEs may feed a downward spiral by favouring locations with fragile ecosystem vitality, that is, a weak sustainable use of natural resources with the consequent erosion of environmental quality. This result is driven by Chinese FDI in developing countries and locations with fragile institutional setting. Furthermore, the attracting force of a degraded environmental situation holds especially for Chinese MNEs operating in most polluting sectors and with private ownership.     

Die Wirkung ausländischer Direktinvestitionen auf die Beschäftigung im Heimatmarkt: Eine empirische Analyse des deutschen Mittelstands

Outbound FDI of German SMEs is often assumed to have a negative impact on domestic employment due to job replacement into low wage countries. In this context research often disregards, that FDI can be of horizontal or vertical nature and therefore has different effects on domestic employment. We analyze domestic employment effects using a sample of 1.106 German SMEs. The results show, that a differentiated view is appropriate and necessary to generate a more complete picture of the effects of FDI on job development in the domestic market. Whereas horizontal FDI has complementary effects on domestic employment, vertical FDI is linked to substitutional employment effects.