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Book part
Publication date: 27 September 2011

Yuhua Li and Konari Uchida

Purpose – Investigate the causes and consequences of foreign financial institutions' divestments in China's banking sector which is an example of cross-border transactions…

Abstract

Purpose – Investigate the causes and consequences of foreign financial institutions' divestments in China's banking sector which is an example of cross-border transactions by institutional investors.

Methodology – Use a sample of 26 foreign financial institutions' strategic investments in Chinese banks. Ten of those investments are divested after the global financial crisis. We investigate determinants of the divestment, business cooperation after the divestment, and Chinese banks' stock price reactions to the divestment announcement.

Findings – The poor performance of foreign financial institutions, which is attributable to the global financial crisis, and the institutions' regulated low equity ownership are important causes of divestment (or whole divestment). In contrast, Chinese banks' poor performance does not cause foreign divestments. Foreign financial institutions that fully divest their equity stakes usually terminate their cooperative business, which was required by the strategic investment agreement. The Bank of China and the China Construction Bank, which experienced large H-share divestments, experienced large economic declines in A-share values.

Social implications – Foreign financial institutions' strategic investments created substantial shareholder value before the divestment. Banking sector developments that rely on foreign investments are vulnerable to economic downturns in developed countries.

Originality/value of paper – To the best of our knowledge, this is the first trial to analyze the impact of divestments on divested bank performance.

Details

Institutional Investors in Global Capital Markets
Type: Book
ISBN: 978-1-78052-243-2

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Article
Publication date: 9 April 2019

Lili Mi, Yuanfei Kang and Yulong Liu

This paper aims to investigate the relationship between strategic asset-seeking intent and firms’ entry strategies of foreign investment in the context of emerging market firms.

Abstract

Purpose

This paper aims to investigate the relationship between strategic asset-seeking intent and firms’ entry strategies of foreign investment in the context of emerging market firms.

Design/methodology/approach

This study is based on survey data of 392 Chinese foreign direct investment projects. Structural equation modelling is used for data analysis.

Findings

With stronger strategic asset-seeking intent, emerging market multinational enterprises are likely to locate their subsidiaries in developed countries, use a wholly owned subsidiary mode and invest with greater intensity, while they do not have a clear preference in entry timing.

Practical implications

The strategic asset-seeking intent applies not only to emerging market firms but also to small and medium firms in general that have limited resources and a need to catch up with stronger competitors. This study therefore provides guidance to these firms.

Originality/value

This study contributes by investigating how the strategic asset-seeking intent affects firms’ strategies. The findings have practical implications for strategic managerial decisions that lead to sustained competitive advantage and improved firm performance.

Details

Journal of Business Strategy, vol. 41 no. 1
Type: Research Article
ISSN: 0275-6668

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Article
Publication date: 13 June 2008

Fengming Qin and Yang Liu

The purpose of this paper is to analyze whether, and how, foreign strategic investor entry to China conveys management expertise to domestic banks. Some observers are…

Abstract

Purpose

The purpose of this paper is to analyze whether, and how, foreign strategic investor entry to China conveys management expertise to domestic banks. Some observers are concerned that foreign investors will be reluctant to transfer their expertise to local partners, and few skills will be acquired by Chinese banks. At the same time, the trade‐off between China's access to banking skills and foreigners' access to Chinese customers will overwhelmingly favour the foreigners.

Design/methodology/approach

The discussion is based on authentic cases collected from the China Banking Regulatory Commission, various banks annual reports, and the China Financial Development Report. Cross‐border management knowledge transfer from global banks to emerging economies is the theoretical framework for analyzing strategic investment in bank cases.

Findings

The paper finds that there are some successes of management knowledge transfer from such investment, although foreign strategic investment is limited as a minority share in each local bank. Culture shock came at the first stage and syncretism later on.

Originality/value

The cultural shock and rigidity of traditional conception are an impediment in the transfer process. This paper shows that the initial conflict can be avoided.

Details

Chinese Management Studies, vol. 2 no. 2
Type: Research Article
ISSN: 1750-614X

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Article
Publication date: 19 September 2016

Desislava Dikova, Andrei Panibratov, Anna Veselova and Lyubov Ermolaeva

The purpose of this paper is to advance knowledge about factors that influence the location of Russian foreign direct investments. In particular, it focusses on the role…

Abstract

Purpose

The purpose of this paper is to advance knowledge about factors that influence the location of Russian foreign direct investments. In particular, it focusses on the role of institutional distance (represented by corruption perception distance, political distance and cultural distance) as a moderator of the relationships between traditional investment motives and the number of M&A deals made by Russian companies in a specific country.

Design/methodology/approach

The analysis is conducted on panel data of Russian cross-border M&As launched in 46 countries during the period 2007-2013. The final data set includes 322 observations. Due to the nature of dependent variable and the results of pre-tests, negative binomial regression is used in the main analysis.

Findings

The key finding of the study reveals the importance of institutional distance, in particular, the moderating effect of different dimensions of institutional distance on the relationships between internationalization motives and the number of Russian M&As. Corruption, political and cultural differences show different effects in terms of both direction and strength, but all three were found to be significant.

Research limitations/implications

The major concern stems from the type of secondary data used in the paper. This indicates the necessity to improve data collection methods which could allow for better transparency of Russian foreign investments, would facilitate more sophisticated research and probably more accurate business forecasts.

Originality/value

By conducting a systematic examination of Russian cross-border M&As the authors contribute to the literature on emerging markets firms by addressing the important yet under-researched domain of Russian foreign direct investments. Building on the macroeconomic and institutional logic proposed in this study, future research on Russian cross-border activities could add to the understanding by providing more generalizable and critical evidence. The study provides a point of departure from prior studies on Russian outward FDI which the authors hope to inspire future research to further analyze the drivers of Russian M&As and foreign investments in general.

Details

International Journal of Emerging Markets, vol. 11 no. 4
Type: Research Article
ISSN: 1746-8809

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Book part
Publication date: 23 November 2017

Michael J. Mueller, Guus Hendriks and Arjen H.L. Slangen

In this chapter, we aim to shed more light on the role of formal institutional distance in firms’ foreign entry mode choices by accounting for the direction of that…

Abstract

In this chapter, we aim to shed more light on the role of formal institutional distance in firms’ foreign entry mode choices by accounting for the direction of that distance. Specifically, we distinguish between foreign entries where the host country is institutionally less developed than the investing firm’s home country (negative institutional distance) and those where the host country’s institutions are comparatively more developed (positive institutional distance), and explore whether these different types of entries are implemented through different equity-based modes. We take an information economics perspective to develop hypotheses on the effects of positive and negative formal institutional distance on firms’ choices between greenfields and acquisitions, and between full and partial ownership of greenfield and acquired subsidiaries. We test our hypotheses on a sample of 1,070 foreign entries made by 796 emerging market multinationals originating from 14 countries. Controlling for the host country’s formal institutional quality and other factors, we find that negative institutional distance increases the likelihood that a foreign entry takes the form of a greenfield investment rather than an acquisition and that positive institutional distance decreases that likelihood. We also find that negative institutional distance increases the chances that firms choose greenfield joint ventures over wholly owned greenfields and full over partial acquisitions. Finally, we find that positive institutional distance does not affect firms’ ownership stake choices, neither for greenfields nor for acquisitions. Overall, these findings argue for a nuanced, contingency view of the role of formal institutional distance in foreign entry mode choices. To the best of our knowledge, this study is the first to use information economics to construct a holistic picture of firms’ equity-based entry mode choices, taking into account both establishment and ownership modes.

Details

Distance in International Business: Concept, Cost and Value
Type: Book
ISBN: 978-1-78743-718-0

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Book part
Publication date: 24 June 2015

Michael Hilb

This paper introduces a conceptual framework to assess the foreign market entry behavior of emerging market multinationals (EMMs). By introducing strategic cognition as…

Abstract

This paper introduces a conceptual framework to assess the foreign market entry behavior of emerging market multinationals (EMMs). By introducing strategic cognition as the underlying theoretical perspective, this paper postulates that different levels of institutional voids in home markets shape the strategic cognition of EMMs, influencing their market entry behavior due to the prevalence of organizational imprinting in the early stages of internationalization. The paper aims to contribute to the strategic cognition literature by introducing emerging markets as a relevant context in which to apply and extend current thinking. Additionally, it aims to contribute to the institutional voids literature by providing a cognitive framework of behavioral patterns that is rationalized by institutional voids. Finally, the paper contributes to the entry mode literature by proposing strategic cognition as a relevant moderator for foreign entry mode choices, particularly those of EMMs.

Details

Emerging Economies and Multinational Enterprises
Type: Book
ISBN: 978-1-78441-740-6

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Article
Publication date: 8 May 2007

Yi Zhang, Zigang Zhang and Zhixue Liu

This paper seeks to challenge the traditional wisdom that sheds light upon sequential entry modes in developed countries by exploring the dynamic entry mode choice in…

Abstract

Purpose

This paper seeks to challenge the traditional wisdom that sheds light upon sequential entry modes in developed countries by exploring the dynamic entry mode choice in sequential foreign direct investment (FDI) in emerging economies.

Design/methodology/approach

A review of the literature on the entry mode choice is undertaken. Based on analysing two related theories consisting of the knowledge‐based theory of the firm and organizational learning theory, entry mode choices in sequential FDI in emerging economies are investigated using both an internationalisation process model and the capability‐developing perspective, and exclusive propositions are put forward accordingly. Then, these propositions are tested on the context of China with the methodology of paired‐samples t‐tests.

Findings

Based on macro‐level longitudinal data in China from 1979 to 2005, the choice of entry mode in sequential FDI in emerging economies is inconsistent with the capability‐developing theory of the firm, but is consistent with the international process model.

Practical implications

This study provides four practical implications. First, managers intending to invest abroad need to consider the cost and return of a specific entry mode. Second, knowledge about host markets has a more important effect on entry mode choice in emerging markets than MNCs' internal organizational capabilities. Third, MNCs adopt sequential investment in emerging economies, in which they adopt joint ventures in earlier entries and then shift to green‐field investment in later entries. Fourth, experiential learning, which consists of learning about host markets and local partners' skills, is emphasized in sequentially entering emerging markets.

Originality/value

This paper expands the research scope of previous studies that either explore a static choice of entry mode in foreign markets or only examine the entry mode choice in sequential FDI in developed countries. Taking into consideration the dynamic choice of entry modes, the paper studies sequential FDI in emerging economies, which throws light upon theoretical analysis of sequential FDI in China, and which has practical implications for foreign firms that are interested in China and planning to enter China's markets.

Details

Management Decision, vol. 45 no. 4
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 11 December 2017

Yigang Pan

The study conceptualizes how firms’ strategic motives interact with the heterogeneity of host country institutional environments in determining the subsidiary ownership…

Abstract

Purpose

The study conceptualizes how firms’ strategic motives interact with the heterogeneity of host country institutional environments in determining the subsidiary ownership. The author hypothesizes and tests two interaction effects. The study found that firms with market-seeking motives are more affected by the heterogeneity of host country institutional environments, while firms with resource-seeking motives are less affected by the heterogeneity. The empirical findings are based on a sample of overseas subsidiaries reported in the annual reports of listed firms in China.

Design/methodology/approach

In this study, an empirical investigation was conducted using a sample of subsidiaries of listed firms in China. The data were compiled from 2012 annual reports of listed firms in China. The sample consists of 2,270 subsidiaries of these firms.

Findings

The study conceptualizes that firms with market-seeking motives and resource-seeking motives are influenced differently by the heterogeneity of host country institutional environments in determining their subsidiary ownership. We hypothesize two interaction effects. Firms with market-seeking motives are more subject to the heterogeneity of host country institutional environments in determining their FDI ownership level. In contrast, firms with resource-seeking motives are less subject to this heterogeneity. The findings largely supported the study’s hypotheses.

Originality/value

This study fills an important gap in the literature by incorporating the interaction between strategic motives and host country environments in the analysis of subsidiary ownership. The findings of the study suggest that firms with a market-seeking motive are more particular about the host country institutional environments. They will acquire a high level of ownership in host countries with attractive institutional environments. In contrast, firms with resource-seeking motive are less concerned with the host country institutional environments. Their decision on subsidiary ownership is less affected by the variance in host country institutional environments. This study adds to the stream of studies that have examined outward investments of firms from emerging economies, particularly the outward expansion of Chinese firms with different strategic motives.

Details

Multinational Business Review, vol. 25 no. 4
Type: Research Article
ISSN: 1525-383X

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Article
Publication date: 1 February 2002

Ming‐Tien Tsai and Yung‐Ming Cheng

The purpose of this paper is to study the ownership entry mode decision in the United States made by firms in Taiwan. A total of 398 companies were sampled and included in…

Abstract

The purpose of this paper is to study the ownership entry mode decision in the United States made by firms in Taiwan. A total of 398 companies were sampled and included in the mail survey, with usable responses received from 105. We find the asset specificity and the strategic investment motivations are the most important decision criteria for the ownership control entry mode choice for Taiwanese manufacturing firms in the United States. When the stronger the U.S. strategic investment motivations and the higher the asset specificity, the higher the likelihood of Taiwanese manufacturing firm's entry through full‐ownership control mode. Finally, in our conclusion, we propose relevant implications for practice and research.

Details

International Journal of Commerce and Management, vol. 12 no. 2
Type: Research Article
ISSN: 1056-9219

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Book part
Publication date: 27 November 2006

Esther Sánchez Peinado and José Pla Barber

Despite the importance of the service sector in developed economies and the growth of foreign investments in this sector during the last decade, few studies have…

Abstract

Despite the importance of the service sector in developed economies and the growth of foreign investments in this sector during the last decade, few studies have undertaken to empirically analyze the factors influencing entry mode choice. The special characteristics of the service sector increase the complexity of the analysis and, thus, traditional explanations of entry mode choice in manufacturing sectors may need to be complemented by other moderating influences. Based on 174 entry decisions of service firms, our results suggest the importance of including strategic variables and the specific nature of services to understand a complex phenomenon, which is not always associated just with efficiency and value-based considerations but also with strategic issues and industry characteristics.

Details

International Marketing Research
Type: Book
ISBN: 978-0-76231-369-3

1 – 10 of over 25000