Citation
Rugman, A.M. (2013), "Firm and country level empirical research in international business", Multinational Business Review, Vol. 21 No. 3. https://doi.org/10.1108/MBR-06-2013-0033
Publisher
:Emerald Group Publishing Limited
Firm and country level empirical research in international business
Article Type:
Letter from the Editor
From:
Multinational Business Review, Volume 21, Issue 3
In this issue of Multinational Business Review, we are pleased to publish four empirical papers. The first two papers use firm-level data and analysis, whereas the latter two papers are fashioned at country level. Although our focus at MBR is upon the multinational enterprise, and therefore essentially prioritizes a firm-level approach, on occasions there are country-level studies which are relevant to the strategies and performance of MNEs. In this issue, I shall comment on these interactions between and firm- and country-level analysis.
The first paper by Ian Lee is a follow up to his path-breaking empirical paper in MBR Vol. 18 No. 4, which is the first published paper finding an M curve relationship between multinationality and performance while controlling for the underlying firm-specific advantages (FSAs), which also determine performance. In this paper, Professor Lee again uses data on Korean international new ventures, but for a more detailed sub-sample of firms in the high technology manufacturing sector. Therefore, in this paper the role of control variables for FSAs, such as R&D intensity and marketing intensity, are even more important. Interestingly, only the latter variable is significant, along with firm-size. The most important finding in this paper is that Korean INVs perform in a more stable manner in their home region of Asia than in other regions of the Triad. This is apparent as a parameter shift when performance is related to home-region orientation (a moderating effect). This paper complements a recent paper by Paloma Almodovar in MBR Vol. 20 No. 4, which also found M-shaped relationships between multinationality and performance, also controlling for FSAs. At MBR, we are proud to be the leading journal in international business advancing empirical research at firm-level with the introduction of the M curve relationship.
The second paper at firm level in this issue examines value creation in subsidiaries of Chinese multinational enterprises. This paper uses classic IB theory to investigate value creation of traditional and asset seeking FDI into advanced and emerging markets by Chinese firms. The paper uses an event study approach (calculating the cumulative average returns) based on public announcements of the FDI. The authors find that traditional FDI (efficiency-seeking, resource-seeking and market-seeking) into developing countries creates more value than asset seeking FDI by Chinese MNEs into advanced economies. This is consistent with findings in prior literature that Chinese MNEs generally lack FSAs and instead build upon the home country advantages of China.
The third contribution, a research note, makes an interesting point by exploring some weaknesses in the classic Kogut and Singh metric for cultural and psychic distance. The authors demonstrate that the classic metric may result in inconsistent results and recommend some minor technical improvements. From my perspective, this is equivalent to bolting the door after the horse has left the stable. Given the overwhelming empirical evidence that MNEs operate regionally, it is clearly about time that scholars examining cultural distance now move away from the moribund country-level studies to a focus upon regional cultural distance. To date I have seen no such studies. At MBR we shall be pleased to consider a region-based metric of cultural and psychic distance.
The fourth paper is a country-level analysis of the tax performance of US multinational enterprises. The authors examine the nature and extent of repatriated earnings around the US governments tax holiday of 2004. They find that repatriated earnings of US subsidiaries are determined more by geographic location factors than by such changes in government policy. In particular, the strongest repatriations of earnings occur in the Canadian and Latin American subsidiaries of US multinationals. This may well be related to the institutional fabric of NAFTA and the increased economic interdependence of Latin American countries with the US economy. In essence, the tax strategies of US multinationals are obviously affected by changes in US government policy, but more importantly is their long-run economic involvement and value-creating activities, which can best be assessed through complimentary studies at firm level.
Readers of MBR will be aware that both firm-level and country-level analysis is relevant in advancing the conversation of international business. This particular issue illustrates that the existing “culture by scholars publishing at country level needs to move quickly to improve linkages with firm-level analysis. It is the interaction between firm- and country-level analysis that leads to improvements in our understanding of international business theory and its policy relevance.
Alan M. Rugman
Editor-in-Chief