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Article
Publication date: 1 February 1990

Alan M. Rugman and Alain Verbeke

The capital budgeting decision for a multinational enterprise needs to take into account concepts of business policy and competitive strategy. From the modern theory of the…

Abstract

The capital budgeting decision for a multinational enterprise needs to take into account concepts of business policy and competitive strategy. From the modern theory of the multinational enterprise, i.e., the theory of internalisation, it is recognised that proprietary firm specific advantages yield economic rents when exploited on a world‐wide basis. Yet the multinational enterprise finds these potential rents dissipated by internal governance costs of its organisational structure and the difficulty of timing and sustaining its foreign direct investment activities. This paper examines these issues by a focus upon parent‐subsidiary relationships and the strategic nature of the capital budgeting decision for a multinational enterprise.

Details

Managerial Finance, vol. 16 no. 2
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 1 March 2002

Isabelle Martinez

Outlines the three theories which link multinationality to share value (internalization, imperfect capital markets and managerial objectives), reviews the relevant research and…

814

Abstract

Outlines the three theories which link multinationality to share value (internalization, imperfect capital markets and managerial objectives), reviews the relevant research and hypothesizes that a multinational’s degree of internalization is positively related to its accounting value (q‐value). Tests this using 1994‐1998 data on French listed companies and presents the results which support the hypothesis, the existence of a size effect (smaller firms have higher q‐values) and leverage effect (higher debts are linked with lower q‐values), but sow no significance in the proportion of intangible assets; i.e. they support the imperfect capital markets theory but not the internalization theory. Considers consistency with other research and opportunities for further research.

Details

Managerial Finance, vol. 28 no. 3
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 11 January 2021

Byung Il Park and Jeoung Yul Lee

The purpose of this perspective paper is to answer the question of why some multinational corporations (MNCs) do not evolve and fail to avoid retrogression by natural selection in…

1003

Abstract

Purpose

The purpose of this perspective paper is to answer the question of why some multinational corporations (MNCs) do not evolve and fail to avoid retrogression by natural selection in international business (IB) and to introduce eight papers selected for this special issue.

Design/methodology/approach

The authors conceptually discuss the reasons for MNC failure by illustrating key motivations behind foreign direct investment (FDI) undertaken by MNCs based on internalization theory, the OLI paradigm and the OILL (i.e. OLI plus the learning motivation) paradigm. Then, the authors develop an evolutionary perspective to explore the survival of the fittest in the global markets and the natural selection of MNCs.

Findings

The eight papers selected for this special issue expand the authors’ understanding of globalized organizations' challenges, evolution and decline as well as offering a distinct opportunity to reconsider diverse extant theories about MNCs by suggesting an extension that accounts for the rise of various globalized organizations particularly in and from emerging markets.

Originality/value

Despite increased numbers of MNCs, which struggle to survive and are faced with great risk of failure, the authors’ understanding of them still remains in infancy. While scholars have investigated diverse topics related to MNCs, existing studies have developed theories predominantly emphasizing MNC success. Thus, conventional theories in IB such as internalization theory and the OLI paradigm may not be sufficiently applicable to explain the phenomenon of MNC failure (i.e. MNC decline). Based on authors’ discussions, the authors believe this is an appropriate time to refine mainstream IB theories by concurrently considering both evolution and retrogression.

Details

Management Decision, vol. 59 no. 1
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 10 December 2018

Byung Il Park and Taewoo Roh

The purpose of this paper is to complement the conventional international business (IB) theory, the OLI perspective, which is good at explaining the foreign direct investments…

1463

Abstract

Purpose

The purpose of this paper is to complement the conventional international business (IB) theory, the OLI perspective, which is good at explaining the foreign direct investments (FDIs) undertaken by developed market multinational corporations (DMNCs). This study also suggests a new theoretical framework, namely, the OILL paradigm, that is able to encompass FDIs from emerging market multinational corporations (EMNCs) toward developed economies.

Design/methodology/approach

The data comprising 206 Chinese MNCs, which completed international mergers and acquisitions (IMAs), were obtained from Zephyr. By using these data, logical regressions are conducted to statistically confirm that we should not omit the learning motivation if we want to adequately understand the FDI phenomenon by encompassing investment flow from developing (or emerging) to developed countries.

Findings

The results based on this data set indicate that EMNCs often try to enter developed economies with the motivation to seek sophisticated foreign host knowledge that is not available internally. In particular, they tend to use IMA strategies when they want to learn from heterogeneity (i.e. inter-industry mergers and acquisitions) and absorb advanced technologies from DMNCs.

Research limitations/implications

By shedding light on the recent new trend in FDI (i.e. FDI from emerging countries to developed economies), the study provides useful theoretical implications, as well as suggesting scholarly contributions. However, we should acknowledge that there are some limitations to this study. First, the study explores only Chinese MNCs. Second, learning motivations need to be minutely and precisely measured by other studies. Third, this study argues that FDI from EMNCs to DMNCs is triggered by the former’s motivation concerning knowledge acquisition. However, the type of knowledge should be considered, and this is perhaps another avenue for future research.

Practical implications

Conventional IB theories, such as the OLI paradigm and internalization theory, have long sought to answer the question of why DMNCs go for foreign markets, in spite of the presence of the liabilities of foreignness, and focused on their main investment motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations). For this reason, these theories do not adequately capture the primary FDI motivations of EMNCs, and consequently, they are unable to see the big picture when it comes to the FDI phenomenon. Based on this idea, the authors complement the well-known triad motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations) by adding the knowledge-seeking motive and contribute to the evolution of IB theories by suggesting a new theory, which is the OILL paradigm.

Originality/value

The study contributes to the extant literature in the field of IB in two key ways. First, it examines EMNCs’ central motivations in conducting FDI where empirical research is sparse. By doing this, this paper attempts to solve the query indicated above (i.e. why MNCs choose FDI in spite of the presence of the liabilities of foreignness), and it offers a new theory (i.e. the OILL paradigm).

Details

International Journal of Emerging Markets, vol. 14 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

Book part
Publication date: 24 February 2023

Romina Gómez-Prado, Aldo Alvarez-Risco, Jorge Sánchez-Palomino, Berdy Briggitte Cuya-Velásquez, Sharon Esquerre-Botton, Luigi Leclercq-Machado, Sarahit Castillo-Benancio, Marián Arias-Meza, Micaela Jaramillo-Arévalo, Myreya De-La-Cruz-Diaz, Maria de las Mercedes Anderson-Seminario and Shyla Del-Aguila-Arcentales

In the academic field of business management, several potential theories were established during the last decades to explain companies' decisions, organizational behavior…

Abstract

In the academic field of business management, several potential theories were established during the last decades to explain companies' decisions, organizational behavior, consumer patterns, and internationalization, among others. As a result, businesses and scholars were able to analyze and decide based on theoretical approaches to explain the current conditions of the market. Secondary research was conducted to collect more than 36 management theories. This chapter aims to develop the most famous theories related to business applied in the international field. The novelty of this chapter relies on the compilation of recognized previous research studies from the academic literature and evidence in international business.

Article
Publication date: 3 October 2016

Keith J. Kelley

The purpose of this paper is to explore the largely marginalized role of distance or “space” in multinationality and performance (MP) research. It argues that scholars should…

Abstract

Purpose

The purpose of this paper is to explore the largely marginalized role of distance or “space” in multinationality and performance (MP) research. It argues that scholars should adopt a more fine-grained, or relativistic approach when studying the link between MP and that conceptualizing multinationality as space may facilitate this.

Design/methodology/approach

By treating space as though it is liability forming, the paper examines frequently contentious research issues in domain of MP research such as: how is multinationality measured; what are the moderating variables; and what is the performance metric appropriate, as a framework to help illustrate the relativistic nature of MP studies.

Findings

The paper illustrates that the choice of distance dimensions, along which the “space” is formed, alters the relationship between MP. Furthermore, this relationship is relative to moderating variables that include among others: when the space is measured (time), point of reference and perspective, the firm’s resources (e.g. human and technological capabilities), and the performance measure considered.

Originality/value

This paper suggests new avenues and approaches toward exploring the effects of multinationality to improve methodological rigor. It identifies several important methodological shortcomings of current and previous research and suggests areas in which current research gaps must be filled to advance this body of knowledge. It introduces the notion of spatial relativism as a concept that will facilitate more fine-grained and contextualized studies.

Article
Publication date: 1 February 2004

Ikechi Ekeledo and K. Sivakumar

This research has two major purposes: developing and testing a resource‐based framework for entry mode choice and ascertaining the extent to which the determinants of foreign…

35332

Abstract

This research has two major purposes: developing and testing a resource‐based framework for entry mode choice and ascertaining the extent to which the determinants of foreign market entry mode choice in the manufacturing sector apply to foreign market entry mode choice in the non‐separable service sector. Using mail survey data collected from top‐level managers of US firms that had been engaged in international business, the article tests a number of research hypotheses concerning foreign market entry mode choice in the manufacturing and service sectors. The managerial and research implications of the findings are delineated and directions for future research are offered.

Details

International Marketing Review, vol. 21 no. 1
Type: Research Article
ISSN: 0265-1335

Keywords

Book part
Publication date: 2 September 2010

Bo Bernhard Nielsen and Sabina Nielsen

This paper offers a discussion of the key multilevel issues pertaining to the multinationality–performance (M–P) relationship. Arguably, one of the most important areas of…

Abstract

This paper offers a discussion of the key multilevel issues pertaining to the multinationality–performance (M–P) relationship. Arguably, one of the most important areas of research in international business, firm internationalization and its consequences are multilevel phenomena, influenced by forces at different managerial and structural levels: from the executive, subsidiary and firm, to the country and industry. We suggest that accounting for important factors at each level and for their cross-level interactions may help reconcile inconsistent findings and advance our understanding of the M–P relationship. Based on a critical review of the literature, we offer recommendations regarding the appropriate levels of theory, measurement, and analysis to guide future research.

Details

The Past, Present and Future of International Business & Management
Type: Book
ISBN: 978-0-85724-085-9

Article
Publication date: 6 June 2008

Peter J. Buckley

The purpose of this paper is to examine the extent to which we require a special theory of foreign direct investment (FDI) for extractive industries.

1066

Abstract

Purpose

The purpose of this paper is to examine the extent to which we require a special theory of foreign direct investment (FDI) for extractive industries.

Design/methodology/approach

The paper examines the general theory of FDI using internalising theory and location theory and augments this by using special features that apply to the extractive industries including the obsolescing bargaining argument.

Findings

The paper shows that a special theory is clearly required to explain the particular circumstances of extractive industries. However, the received theory relying on internalisation and location elements performs well.

Practical implications

Despite the current issues around extractive industries and its peculiarities, analysis of the reasons for FDI (including Chinese FDI) remains explicable by standard theory.

Originality/value

FDI in the extractive industry provides a good test of the general theory of FDI and a special theory nested within this gives a great deal of insight into current issues of FDI in extractive industries.

Details

Journal of Chinese Economic and Foreign Trade Studies, vol. 1 no. 2
Type: Research Article
ISSN: 1754-4408

Keywords

Article
Publication date: 17 June 2010

Sarianna M. Lundan

In this paper we examine three distinct types of ownership advantages, and argue that these are associated with three different kinds of limits to the growth of the firm. For…

6171

Abstract

In this paper we examine three distinct types of ownership advantages, and argue that these are associated with three different kinds of limits to the growth of the firm. For some firms, the inability to regenerate its asset‐based advantages is critical, while for others, the inability to effectively coordinate its assets (inside or outside the firm), or the inability to negotiate the nonmarket environment are more salient. We think that the identification of different analytical categories of ownership advantages enables the construction of better proxies in empirical research, and helps to explain the limited geographical reach of MNEs observed in the literature.

Details

Multinational Business Review, vol. 18 no. 2
Type: Research Article
ISSN: 1525-383X

Keywords

11 – 20 of over 7000