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Multinational corporations (MNCs) are experiencing a number of major challenges in the international business arena. Can business diplomacy help them to deal with these challenges effectively? In this introductory chapter we conceptualize and identify the relationship between MNCs’ international business diplomatic activities and firm performance.

We conducted a literature review and interviews with five large MNCs that are operating in distinctive industries. Business diplomatic activities have been classified into three particular areas to support the analysis, namely: (1) MNC–Non-Governmental Organization (NGO) relations, (2) MNC–Host Government relations, and (3) MNC–Local Community relations.

The main findings suggest that international business diplomacy has a direct positive effect on firm performance with regard to so-called soft or nonfinancial indicators. These indicators include knowledge sharing, reputation, company image, and marketing possibilities. The effect can in turn lead to a better financial performance and market stance in the long run.

The results of this study are important for the future awareness and execution of business diplomacy in large MNCs.

This study aims to clarify the factors that act as a buffer to rent extraction from multi-national corporations (MNCs) in exchange relationships with the host country’s political actors.

This study proposes a conceptual model of the factors that determine rent extraction by host country political actors from MNCs. The model identifies the sources of power the MNC can use to alleviate the power imbalance relative to the political actor to decrease rent extraction. Additionally, it identifies the factors that constrain the power-advantaged political actor, thus moderating the relationship between power imbalance and rent extraction.

This conceptual paper’s propositions remain for future empirical validation.

This study integrates insights from the international business literature and resource dependence theory (RDT) to identify the determinants of firm-specific rent extraction risk for MNCs. First, the model sheds light on the heterogeneity among MNCs in their susceptibility to rent extraction and their ability to manage their liability of foreignness in the host country. Second, by integrating the horizontal and vertical distribution of power in the political environment to analyze the power-dependence relationship between the MNC and host country political actors, the framework addresses a shortcoming of RDT and accounts for the dynamics of the external environment for MNCs managing their dependencies. This study also provides a basis for discussing the rent extraction MNCs face worldwide and lays the foundation for future empirical works.

Using an institutional theory perspective this paper aims to examine the influence of multinational corporations (MNCs) on host country institutional environments.

This is a conceptual piece that introduces the concept of the country institutional profile (CIP) as a useful theoretical framework for analyzing the host country institutional environment.

The existing model that describes the MNC as a social change agent within host country institutions is extended. This is accomplished by utilizing the CIP as a more formal conception of the host country institutional environment. The model is then used to examine a specific case of the MNC impact on the host country level of environmentalism.

The value of the contribution lies in the application of the CIP for analyzing the host country institutional environment. Furthermore, this framework is applied to the case of the MNC's impact on host country environmentalism.

How should a multinational corporation (MNC) from a mature democracy deal with the human rights issues in a country with a poor human rights standard? The paper aims to discuss these issues.

The authors develop a mathematical model to depict MNC's behavior in response to human rights violations in the host country.

The authors show that, first, in a country with a high level of human rights abuses, a firm will have to lower its human rights standards to survive; but, second, a collective effort by all firms is essential to improve the human rights conditions in the host environment; and third, a firm's human rights practices may have a multiplicative effect that can significantly affect the momentum of human rights development in a host country.

This study is one of the first attempts to provide a theoretical framework on the issue of MNCs and human rights in host countries.

This study examines the effect of host government interference with foreign investors’ assets on foreign direct investment (FDI) inflow. The author hypothesizes that the relationship between host government interference and FDI inflow takes the form of an inverted U shape. The author tests this hypothesis using data from the International Centre for Settlement of Investment Disputes between 1996 and 2017. The results support the above hypothesis. While host government interference with the assets of a few foreign investors may not deter FDI inflow, frequent interferences, which result in an increasing number of host state–foreign investor disputes, reduces FDI inflow in a host country. The analysis also shows that when faced with an increasing host country uncertainty, investors adopt a wait and see strategy. However, how long investors wait depends on the economic situation of the host country. For high-income countries, investors wait until approximately 10 disputes before reducing investments level in a host country, while for low-income countries, this waiting period is a mere two disputes. The findings of this study suggest that countries seeking to attract more FDI should not interfere with the activities of foreign investors, however, if they do, disputes should be settled at home, not in international arbitration courts, because doing so frequently may poison the host environment and deter other foreign investors from investing in the host country.

In response to the tilted emphasis on the corporate political activities and to the recent call for including the institutional perspective in the research of the MNE’s governmental relations (MGRs), this study aims to, departing from resource dependence theory, introduce the legitimacy formation as a bridging mechanism to MGRs to holistically examine the behavioral types of antecedents of MGRs in contingency with three critical contextual influences.

This study purposely chose a Taiwanese globalized logistic corporation that we have been acquainted with as the entry for collecting data. The study started the survey with the seven foreign subsidiaries of this logistic corporation and invited their customers through their personal referrals to join this survey. Following the snowball sampling, remarks were added in the questionnaire to request respondents’ assistance in inviting TMT members of different MNE subsidiaries in their personal networks to join the survey.

The findings from analyzing a survey data set of 155 MNE subsidiaries during 2016 show that the MNE’s economically-good behaviors are not so influential as Milton Friedman stated in 1962, and can only outperform socially-good and politically-good behaviors in shaping better MGRs under some specific contextual influences.

This study contributes to the international business literature by shedding new light on the sensitivity of behavioral antecedents of MGRs in contingency with contextual influences and provides managerial implications to MNE particularly when they expect to reduce external uncertainties or capturing opportunities by MGRs.

This chapter examines the role of formal and informal institutions in foreign direct investment (FDI) dynamics.

We examine the effects of the quality of legal, political, and economic formal institution as well as the effect of institutional distance (based on new dataset) on bilateral inward FDI stocks in 34 Organization for Economic Cooperation and Development countries for the period 1990–2010 using a gravity specification. Additionally, we also examine FDI for the effects of a specific informal institution – attitude of the public toward economic liberal issues. Reactions of FDI to liberal and nonliberal public opinion (part of informal institutions) are examined with and without controlling for formal institutions.

Findings show that the quality of legal and political institutions are important determinants of FDI, that legal and political institutional distance are both significant obstacles to FDI, and that public opinion also matters. We find that it is important to control for formal institutions when looking at the effect of informal institutions, and that both past liberal and nonliberal public opinion correlate with FDI, but only nonliberal public opinion significantly reduces inward FDI directly.

Results are relevant for enterprises’ investment strategies, marketing strategies influencing public opinion as well as for policy makers, and governmental agencies involved in investment promotion programs.

Exploring the interplay between formal and informal institutions, institutional quality, institutional distance, and their effect on FDI in a bilateral panel.

International business theory leans heavily on neoclassical economics, ignoring its unrealistic assumptions and the many changes in the environment. The chapter calls for a revision of the theory to a contingency theory. The major contingent elements analysed are the political system, business–government and NGOs relations, industries, regimes, ownership patterns, the degree of reliance on ethical behaviour, the institutional environment and social norms.

The purpose of this article is to analyze the impact of the rise of emerging economies and emerging economy firms on multinational corporations (MNCs) with respect to four important strategic decisions for MNCs' foreign investment – control and coordination strategies, geographic and product markets of entry, timing of entry, and organizational design for foreign subsidiaries.

The author utilizes an integration of institutional perspective with the existing explanations of MNC activities, to support their arguments about the impact of the rise of emerging economies on MNCs' strategy and structure decisions. The author presents propositions linking the type of external governance structure in the emerging economy's institutional environment (rule based or relationship based) with the strategy and structure decisions for MNCs.

The paper proposes that MNCs will follow different control and coordination strategies, geographic and product market strategies, entry timing strategies and organizational design strategies depending on whether the target emerging economy's institutional environment is characterized by a rule based or a relationship based governance structure.

Increasing globalization and rapid rise of emerging economies and emerging economy firms has not only opened up many opportunities for MNCs, but also raised many challenges. Extant literature has, however, not paid enough attention to how MNCs can best make use of the opportunities available in emerging markets, while taking care of the associated challenges. This paper is unique in providing a holistic framework pertaining to important strategic decisions that MNCs have to make, with specific reference to emerging markets.

This chapter analyses the multiple embeddedness of MNEs, and their participation in solving contemporary societal issues. We aim to increase understanding on the relational processes and network dynamics present in MNEs’ participation in cross-sector partnerships.

Our study addresses the issue of the poor ecological state of the Baltic Sea and illustrates the early developments in cross-sector collaboration. We build on a single exploratory case study of the cooperation of one MNE (IBM) with an environmental NGO (BSAG) in Finland. We analyse how participation in the cross-sector collaboration manifests itself in the external and internal networks of the MNE.

We show that an initiative by the NGO to participate in environmental work was actively adopted within the MNE and led to network changes. These changes concerned both the activation of existing links and the establishment of new links with such actors as authorities and research institutes. The NGO acted as a catalyser and cultural mediator to create a bridge between the MNE and governmental actors.

There is a need to investigate cross-sector collaboration in other contexts – particularly from the perspective of MNEs and (international) business networks. Questions such as how do enduring (business and socio-political) relationships emerge from MNE’s participation in issue networks and how technology that has been developed to solve a specific societal issue may be translated into commercial solutions are especially promising. We also urge scholars to investigate the ties, texture and dynamics (including tensions) of business relationships with those of public actors and civil society.

Participation in cross-sector initiatives may grant an MNE a forerunner position in the creation of new sustainable markets and technologies. It may also create an opportunity to influence policymakers and build new socio-political networks. From the perspective of a subsidiary of an MNE, engagement with cross-sector partnerships may strengthen its voice within the MNE network.

Our study contributes to the understanding of the relationship dynamics between actors in cross-sector collaboration around a societal (environmental) issue. Our analysis illustrates the embeddedness of MNE networks, where actions in the regional and global networks (the representatives of the headquarters) overlap with and strengthen the local actions of the subsidiary.