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Article
Publication date: 19 June 2017

Ilaria Galavotti, Donatella Depperu and Daniele Cerrato

The purpose of this paper is to analyze corporate scope decisions in acquisitions with a focus on the relationship between target country unfamiliarity and…

Abstract

Purpose

The purpose of this paper is to analyze corporate scope decisions in acquisitions with a focus on the relationship between target country unfamiliarity and acquirer-to-target relatedness and on the moderating effects played by product diversification and international experience.

Design/methodology/approach

Using a dataset of 689 acquisitions completed in the period 2007-2013 by acquirers located in 60 countries, this paper utilizes an ordered logistic regression analysis.

Findings

With greater target country unfamiliarity, acquirers are encouraged to pursue greater acquirer-to-target relatedness. This finding suggests that acquirers tend to seek a balance between product and international diversification to reduce the sources of uncertainty in their acquisition moves. While past international experience strengthens this relationship, diversification experience has a negative moderating effect and hence encourages acquirers to reduce relatedness at increasing market unfamiliarity.

Originality/value

The originality of this paper is twofold. First, the authors extend the traditional internationalization-diversification framework to an unfamiliarity-relatedness relationship in the context of acquisitions. Second, the authors propose a construct of target country unfamiliarity in acquisitions that goes beyond the traditional domestic vs cross-border dichotomy by including previous experience in the target country.

Details

Management Decision, vol. 55 no. 5
Type: Research Article
ISSN: 0025-1747

Keywords

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Book part
Publication date: 9 November 2004

Lorraine Eden and Stewart R Miller

The costs of doing business abroad (CDBA) is a well-known concept in the international business literature, measuring the disadvantages or additional costs borne by…

Abstract

The costs of doing business abroad (CDBA) is a well-known concept in the international business literature, measuring the disadvantages or additional costs borne by multinational enterprises (MNEs) that are not borne by local firms in a host country. Recently, international management scholars have introduced a second concept, liability of foreignness (LOF). There is confusion in the two literatures as to the relationship between CBDA and LOF, as evidenced in a recent special issue on liability of foreignness (Journal of International Management, 2002). We argue that LOF stresses the social costs of doing business abroad, whereas CDBA includes both economic and social costs. The social costs arise from the unfamiliarity, relational, and discriminatory hazards that foreign firms face over and above those faced by local firms in the host country. Because the economic costs are well understood and can be anticipated, LOF becomes the core strategic issue for MNE managers. We argue that the key driver behind LOF is the institutional distance (cognitive, normative, and regulatory) between the home and host countries, and explore the ways in which institutional distance can affect LOF. We operationalize our arguments by showing how institutional distance and liability of foreignness can provide an alternative explanation for the MNE’s ownership strategy when going abroad.

Details

"Theories of the Multinational Enterprise: Diversity, Complexity and Relevance"
Type: Book
ISBN: 978-1-84950-285-6

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Article
Publication date: 22 February 2008

Sadrudin A. Ahmed and Alain d'Astous

The purpose of this paper is to provide an in‐depth examination of country‐of‐origin (COO) perceptions of consumers in a multinational setting. It shows how explanatory…

Abstract

Purpose

The purpose of this paper is to provide an in‐depth examination of country‐of‐origin (COO) perceptions of consumers in a multinational setting. It shows how explanatory factors like demographics, familiarity with a country's products, purchase behaviour and psychological variables jointly work to explain consumers' COO perceptions.

Design/methodology/approach

This is a quantitative study using a drop‐off and pick‐up survey among three samples of consumers in Canada, Morocco and Taiwan. The final sample size was comprised of 506 male consumers. The data were analyzed using factor analysis to group countries of origin and analyses of variance to relate COO perceptions to the explanatory variables.

Findings

The familiarity with products made in a country was the strongest predictor of country perceptions, followed by nationality and the manufacturing process and product complexity dimensions of country evaluation. Canadians had the highest propensity to distinguish between countries of origin on the basis of product technological complexity and manufacturing dimensions and Moroccans the least. Taiwanese appeared to show animosity towards China.

Research limitations/implications

The study used an only‐male sample from a limited number of countries. Future research should seek to develop a multi‐dimensional scale for the familiarity construct. They should also explore the concept of consumer capacity to distinguish between COOs. Cross‐national studies using cognitive style scales should be carried out. A qualitative examination of Taiwanese's COO perceptions is also recommended.

Practical implications

It seems important to increase consumers' familiarity with a COO and its products to improve its overall perception. Products made in Latin American countries have the lowest level of familiarity in general. Thus, increasing familiarity with their products is particularly important to achieve export success.

Originality/value

This study contributes to the marketing and international business literatures and provides insights to international marketers by bringing valuable information that can help make decisions as to where to manufacture and how to promote global products. It provides guidance as to what types of nations are likely to require multi‐dimensional information about countries of origin.

Details

International Marketing Review, vol. 25 no. 1
Type: Research Article
ISSN: 0265-1335

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Article
Publication date: 12 February 2018

Deborah Drummond Smith, Kimberly C. Gleason, Joan Wiggenhorn and Yezen H. Kannan

This paper aims to apply the Capital Market Liability of Foreignness (CMLOF) framework to the audit fees of a sample of foreign firms listed on US exchanges to examine…

Abstract

Purpose

This paper aims to apply the Capital Market Liability of Foreignness (CMLOF) framework to the audit fees of a sample of foreign firms listed on US exchanges to examine whether American auditors price foreignness.

Design/methodology/approach

The four components of the CMLOF are institutional distance (civil versus common law system and enforcement), information asymmetry (disclosures and mandatory IFRS adoption), unfamiliarity (exports, English language and geographical distance) and cultural difference [Hofstede (1980) dimensions of culture]. These variables are examined in a regression model that explains audit fees to determine the auditor perception of risk associated with the CMLOF.

Findings

Examining the factors that mitigate perceived agency costs, this investigation determines that auditors price risk according to each component of the liability of foreignness. Audit fees are higher for shareholders of firms headquartered in countries exhibiting greater institutional distance, unfamiliarity and cultural distance. Audit fees are higher for firms when their home country requires additional disclosures or the adoption of IFRS to reduce information asymmetry.

Practical implications

CMLOF is costly for capital market participants and has implications for auditors, shareholders of foreign firms and managers considering listing in the US Auditors, and investors should carefully assess this risk for pricing and valuation, and managers should take action, to the extent possible, to reduce the firm-specific level of unfamiliarity and increase transparency.

Originality/value

This paper is the first to apply the CMLOF to examine whether auditors price aspects of foreignness of their non-US-headquartered clients.

Details

Review of Accounting and Finance, vol. 17 no. 1
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 7 August 2017

Rushiun Liou, Kevin Lee and Scott Miller

Emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions (M&As) to acquire strategic assets that compensate for their resource…

Abstract

Purpose

Emerging-market multinational companies (EMNCs) utilize cross-border merger and acquisitions (M&As) to acquire strategic assets that compensate for their resource deficiencies. Therefore, developed markets have become important destinations for EMNCs. Institutional distance constitutes a major source of competitive disadvantage for foreign firms competing with indigenous firms. The purpose of this paper is to examine the ownership pattern of cross-border M&As in the USA, and determine if EMNCs respond to institutional distance differently than advanced-market multinational companies (AMNCs).

Design/methodology/approach

Based on the extant literature in institutional theory as well as internationalization strategy, a quantitative study was carried out. Hypotheses were proposed and tested using fixed effects panel regressions.

Findings

This paper finds that both AMNCs and EMNCs take smaller ownership positions when there is greater cognitive and normative distance. The negative association is stronger for AMNCs than for EMNCs. Further, the larger the regulative distance in the positive direction, meaning a higher level of development in the host market than in the home market, the more AMNCs and EMNCs are led to opt for a higher ownership position, with EMNCs being less influenced by regulative distance.

Research limitations/implications

Though findings are robust and stable, this study is limited to observations that only have US target firms.

Originality/value

By integrating the literature from institutional theory and strategy, this paper offers a clearer understanding and distinction of the acquisition decisions made by EMNCs and AMNCs.

Details

Cross Cultural & Strategic Management, vol. 24 no. 3
Type: Research Article
ISSN: 2059-5794

Keywords

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Book part
Publication date: 25 October 2014

Katrin Held and Nicola Berg

In developed markets, emerging market multinational enterprises (EMNEs) seem to be more discriminated by host country nationals than foreign developed market multinational…

Abstract

Purpose

In developed markets, emerging market multinational enterprises (EMNEs) seem to be more discriminated by host country nationals than foreign developed market multinational enterprises (DMNEs). They are challenged with host country nationals’ prejudices and face a stigma of being from emerging markets. While literature agrees that EMNEs suffer from additional disadvantages due to their country-of-origin, research fails to identify those factors that may lead to a higher discrimination against EMNEs than against foreign DMNEs.

Design/methodology/approach

Based on institutional theory, we look at institutional-related and resource-related antecedents that have an impact on various forms of direct and indirect discrimination by host country nationals.

Originality/value

Our framework analyzes the crucial differences between host country nationals’ perception of EMNEs and foreign DMNEs and the resulting challenges for EMNEs in the developed world. It enhances our understanding of the importance of institutional environments in explaining differences in host country nationals’ discrimination against foreign MNEs.

Details

Multinational Enterprises, Markets and Institutional Diversity
Type: Book
ISBN: 978-1-78441-421-4

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Book part
Publication date: 8 June 2012

Wei Shi and Robert E. Hoskisson

The liability of foreignness has long been acknowledged as a key concept in international business research. Departing from the cost side of foreignness, this chapter…

Abstract

The liability of foreignness has long been acknowledged as a key concept in international business research. Departing from the cost side of foreignness, this chapter explores intangible benefits of foreignness exclusive to multinational enterprises in a host country in addition to tangible benefits such as preferential tax policies. Intangible benefits of foreignness are defined as advantages of foreignness so as to distinguish from assets of foreignness – tangible benefits of foreignness. Drawing on institutional theory and social comparison theory, we propose that advantages of foreignness can lead to important firm-specific performance-related outcomes, which have been generally underestimated in the international business literature.

Details

Institutional Theory in International Business and Management
Type: Book
ISBN: 978-1-78052-909-7

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Article
Publication date: 1 January 2001

Sadrudin A. Ahmed and Alain d'Astous

This article presents the results of a survey of 250 Canadian male consumers. In this study consumer judgements of products made in both highly and newly industrializing…

Abstract

This article presents the results of a survey of 250 Canadian male consumers. In this study consumer judgements of products made in both highly and newly industrializing countries were obtained in a multi‐attribute and multidimensional context. The results show that younger and less affluent respondents react more favorably towards products made in newly industrializing East Asian countries. The country‐of‐origin image of East Asian countries is less negative for products that generate a medium level of involvement (e.g., a VCR). This negative image of East Asian countries is attenuated by providing other product‐related information to consumers such as brand name and warranty. East Asian countries are perceived more negatively as countries of design than as countries of parts and assembly. In comparison with products made in highly developed countries, products made in East Asia are perceived to be poorer in terms of performance, quality and originality but more economical.

Details

International Journal of Commerce and Management, vol. 11 no. 1
Type: Research Article
ISSN: 1056-9219

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Article
Publication date: 1 August 2002

Sadrudin A. Ahmed, Alain d’Astous and Jelloul Eljabri

This article reports the results of a survey of 151 Canadian male consumers. In this study, consumer judgements of products varying in their level of technological…

Abstract

This article reports the results of a survey of 151 Canadian male consumers. In this study, consumer judgements of products varying in their level of technological complexity made in both highly and newly industrialised countries (NICs) were obtained in a multi‐attribute and multi‐dimensional context. The results show that the country‐of‐origin image of NICs is less negative for technologically simpler products (i.e. television) than for technologically complex products (i.e. computers). In addition, NICs are perceived more negatively as countries of design than as countries of assembly, especially for technologically complex products, but their negative image may be attenuated by making consumers more familiar with products made in these countries and/or by providing them with other product‐related information such as brand name and warranty. Three personal variables namely, computer involvement, technological sophistication and technological innovativeness were found to moderate the perceptions of countries of origin. The more technologically sophisticated a consumer was, the more favourable he/she was towards products made in more technologically advanced NICs.

Details

International Marketing Review, vol. 19 no. 4
Type: Research Article
ISSN: 0265-1335

Keywords

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Article
Publication date: 9 February 2015

Chinmay Pattnaik, SoonKyoo Choe and Deeksha Singh

The purpose of this paper is to examine the impact of quality of market supporting institutions (institutional quality) in host country and the similarities and…

Abstract

Purpose

The purpose of this paper is to examine the impact of quality of market supporting institutions (institutional quality) in host country and the similarities and differences of institutional quality between the home and host country (institutional distance) on subsidiary performance.

Design/methodology/approach

Based on the conceptualization of new institutional economics, the authors divide quality of host country institutions into factor markets; product, capital, labor market and sociopolitical dimensions. The authors examine the impact of the quality these institutional dimensions in host countries and their difference between home and host country on the performance of 318 subsidiaries of 146 Korean listed manufacturing firms operating in 28 host countries from 2001 to 2006.

Findings

The empirical results based on 1,129 observations show that institutional distance explains a significant variance in the subsidiary performance. In particular, the difference in quality of institutions in product, capital and labor market has negative impact on subsidiary performance. However, except for quality of regulation in labor market, host country institutional qualities do not significantly explain the variation in subsidiary performance.

Originality/value

The evidence suggests that host country institutions matter substantially when considered with their relative similarity and difference with home country institutions. The impact of individual dimensions of institutions varies on subsidiary performance.

Details

Management Decision, vol. 53 no. 1
Type: Research Article
ISSN: 0025-1747

Keywords

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