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Country risk is an important determinant for foreign direct investment (FDI) decisions. Over the lifetime of an FDI project, country risk can change due to political…
Country risk is an important determinant for foreign direct investment (FDI) decisions. Over the lifetime of an FDI project, country risk can change due to political, social, or economic events in a country. However, how changing country risk influences FDI decisions has not been fully investigated. Therefore, the goal of this study is to provide a theoretical conceptualization of how dynamic risk developments affect FDI. We follow a financial theoretical perspective and base our propositions on discounted cash-flow models. We propose that a positive trend in country risk, where country risk is expected to decrease over time, increases FDI probability. What is more, we propose that predictability of this trend positively moderates this effect, but that high amplitude and high frequency in risk changes reduce the positive effect of a positive trend on FDI. Finally, our theoretical model proposes that firms of different size can manage dynamic risk developments differently: large firms can better deal with high-amplitude changes, whereas small firms can better deal with high frequency changes in country risk. With this study, we want to contribute to a better understanding of how dynamic environments influence investment decisions and introduce a long-term perspective of country risk.
Crises are often studied in international business (IB) research as the external “context” for business strategies, but firms can also be active participants in the…
Crises are often studied in international business (IB) research as the external “context” for business strategies, but firms can also be active participants in the unfolding of crises. The study of crises in IB could benefit greatly from studying the role of multinational enterprises (MNEs) as active participants, rather than as mere passive actors, responding to exogenous events. History shows that IB crises typically unfold partially as exogenous processes, and partly as the result of MNE strategies. A multilevel and longitudinal approach to studying crises in IB is clearly necessary. This chapter considers the extent to which smaller events that preceded the present crisis – since 1989 – point to systemic problems in global governance. It also defines five overlapping lenses through which future IB studies can further create relevant insights on how to deal with crises: historic, macro, meso, micro and exogenous. The chapter finally serves as an introduction to the whole Progress in International Business Research volume by indicating the relevance of all parts and chapters that follow.
We build on the resource-based view and extend entry mode research by focusing on firms’ intention to transfer different resources from the parent firm to its overseas…
We build on the resource-based view and extend entry mode research by focusing on firms’ intention to transfer different resources from the parent firm to its overseas subsidiary. In line with our hypotheses, we find that parent firms that plan to transfer high levels of intangible resources to their foreign subsidiaries tend to choose wholly owned subsidiaries, while firms that intend to transfer high levels of tangible resources tend to choose international joint ventures. Moreover, we find that these relationships are moderated by institutional distance. We test our hypotheses using unique primary data from a sample of 128 foreign subsidiaries in the People’s Republic of China. Our results have important theoretical implications for international business strategy research as they develop further existing entry-mode theories.
Prior research on political strategies has predominantly analyzed singular political activities or drivers for firms to become politically active and, overall, only…
Prior research on political strategies has predominantly analyzed singular political activities or drivers for firms to become politically active and, overall, only scarcely obtained insights on performance consequences of political strategizing. To further develop the realm of political strategy, this study analyzes the effects of two “generic” political strategies on firms’ (1) stakeholder network development and (2) performance. Specifically, we provide theoretical and empirical evidence whether the two political strategies add to or substitute each other in their effect on the corresponding outcome variable. We find that an information strategy significantly affects the stakeholder network development, whereas no influence of a financial incentive strategy could be detected. Moreover, we find that the stakeholder network drives firm performance and, more importantly, that the two political strategies substitute each other in their effect on firm performance. Thus, we provide initial insights on the efficiency of political strategies when firms opt to execute an information strategy and financial incentive strategy simultaneously. The results of our study have important implications for research as they put a new light on the efficiency of political strategies.
Building on transaction cost economics (TCE) and recent critique on international business (IB) research, we intend to sharpen our knowledge on the application of TCE in…
Building on transaction cost economics (TCE) and recent critique on international business (IB) research, we intend to sharpen our knowledge on the application of TCE in entry mode studies.
We develop a two-sided model of transaction costs by considering the multinational corporation (MNC) and the local partner.
Overall, we illustrate that the decisions firms undertake are not always in line with traditional MNC-centric TCE reasoning. Specifically, we identify three situations when “traditional” TCE predicts transaction costs lower than they actually are. Based on our findings we derive implications for future TCE studies.
Our study is among the first to highlight the relevance of potential partners’ transaction costs during market entry. Our model of dually impinged transaction costs is supposed to guide future research and can be of direct use to firms assessing costs of entry.
Prior research has tended to view cross-country distance as an obstacle. Yet, differences across countries are a key reason for firms to internationalize. To address this…
Prior research has tended to view cross-country distance as an obstacle. Yet, differences across countries are a key reason for firms to internationalize. To address this discrepancy, this paper puts forward a unifying framework which (1) synthesizes and delineates the different types of cross-country distance, (2) provides a logic for analyzing cross-level influences of distance on internationalization decisions, and (3) highlights the opportunities brought about by distance. The paper argues that firms are more likely to be able to realize these opportunities when they have internationally experienced managers and diverse, well-functioning top management teams at the helm. The paper also highlights the complex influences of distance, calling for the use of cognitive and behavioral research methodologies to further our understanding of the role of distance in internationalization. An illustrative example of Vodafone Group PLC is included.
The Covid-19 pandemic has quickly transformed the notions of crises and of living in a VUCA (volatile, uncertain, complex, and ambiguous) world into a lived experience…
The Covid-19 pandemic has quickly transformed the notions of crises and of living in a VUCA (volatile, uncertain, complex, and ambiguous) world into a lived experience. This chapter offers a perspective on how New Zealand businesses experienced and reacted to Covid-19 related management from a distance and with a mindset that was informed by the government’s focus on health and well-being and “being kind.” This exploratory findings from a sample of New Zealand exporters show that technology-supported management of digital distance and trust, infused with a partner-specific exhibition of empathy, fostered successful business relationships during these challenging times.