Outward FDI Type and Ownership Mode: The Effect on Home Country Exports

2016 ◽  
Vol 3 (2) ◽  
Author(s):  
Neelam Singh
Keyword(s):  
Multinational Enterprises ◽  
Joint Venture ◽  
Home Country ◽  
Outward Fdi ◽  
Differential Impact ◽  
Firm Level ◽  
Capability Building ◽  
Wholly Owned Subsidiary ◽  
The Empirical Analysis ◽  
Auto Component

The influence of outward foreign direct investment (OFDI) by emerging economy multinational enterprises (EMNEs) on the parent company and home economy are relatively under-researched areas. The OFDI-heterogeneity dimensions such as the ownership mode as wholly-owned subsidiary (WOS) or international joint venture (JV) - have received little attention in the empirical analysis. This study examines the firm-level determinants of exports by auto component companies in India. Considering the prior recent OFDI flows by the firm, we distinguish among the effects of having manufacturing-JV, manufacturing-WOS and non-manufacturing OFDI. Thus exploring the differential impact of JV versus WOS ownership mode of manufacturing abroad, adds to the limited literature on the effects of OFDI by OFDI-type. Consistent with the expectation of greater capability building, the JV mode of overseas production is found to lead to relatively more exports by the investing firm. We also estimate the separate effects of magnitude of manufacturing and non-manufacturing OFDI flows.

Revisit the CD Paradox in Entry Model Choice: Toward the Perspective of Strategic Fit

2018 ◽  
Vol 18 (3) ◽  
pp. 86-103
Keyword(s):  
Joint Venture ◽  
Cultural Distance ◽  
Model Choice ◽  
Outward Fdi ◽  
Strategic Fit ◽  
Market Expansion ◽  
Technological Competence ◽  
Entry Model ◽  
Wholly Owned Subsidiary ◽  
Strategic Motives

The effect of cultural distance (CD) on the entry mode choice (EMC) has been intensively studied but the empirical results are mixed. This study adopts the strategic fit perspective to examine how firms’ strategic motives and technological ownerships may influence the EMC in face of different cultural distances. Analyzing Taiwanese outward FDI cases from 2004 to 2007, this study found that firms entering the culture-distant countries would choose the wholly-owned subsidiary (WOS) mode when emphasizing more about the protection of technological competence than market expansion, or else would choose the joint-venture (JV) mode when the market expansion is prioritized.

Internationalization strategy and the home-regionalization hypothesis: The case of Australian multinational enterprises

2017 ◽  
Vol 42 (4) ◽  
pp. 673-691 ◽  
Author(s):  
Youngok Kim ◽  
Sidney J Gray
Keyword(s):  
Multinational Enterprises ◽  
Home Country ◽  
Multinational Enterprise ◽  
International Experience ◽  
Differential Impact ◽  
Country Effects ◽  
Australian Context ◽  
Internationalization Strategy

In this study, we set out to, first, replicate the classification of multinational enterprise (MNE) types proposed by Rugman and Verbeke in the Australian context. Second, we explore how a firm’s international experience influences the degree of its home regionalization and how industry affects the international experience–home regionalization relationship. We find that while home regionalization is still a dominant regionalization strategy for Australian MNEs, the proportions are different from those of Rugman and Verbeke. In particular, the share of home-regional firms is less pronounced and the share of host-regional firms is higher than Rugman and Verbeke’s findings. We also find that a firm’s international experience is negatively related to home regionalization, and that this relationship is further moderated by the firm’s industry. Our findings suggest that more attention be devoted to uncovering both home-country effects and the differential impact of international experience on home regionalization across industries.

How does liability of origin influence cross-border acquisition completion? Evidence from Chinese firms

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Tingting Jiang ◽  
Buyun Yang ◽  
Bo Yang ◽  
Bo Wu ◽  
Guoguang Wan
Keyword(s):  
Multinational Enterprises ◽  
Home Country ◽  
Emerging Market ◽  
Organizational Legitimacy ◽  
Binary Logistic Regression Model ◽  
Firm Level ◽  
Content Type ◽  
Low Level ◽  
Cross Border ◽  
Chinese Mnes

Purpose The environment of international business (IB) and the capabilities of emerging market multinational enterprises (EMNEs) as well as their home countries have changed significantly, leading to some new features of liability of origin (LOR). This paper aims to extend the LOR literature by particularly focusing on the LOR of Chinese multinational enterprises (MNEs) and by taking into account the heterogeneity among industries and across individual MNEs. Design/methodology/approach Based on the stereotype content model and organizational legitimacy perspective, this study explores how LOR influences Chinese MNEs’ cross-border acquisition completions. Several hypotheses were tested by using a binary logistic regression model with panel data techniques based on data of 780 Chinese MNEs’ acquisition deals between 2008 and 2018. Findings The results of this study show that when the competence dimension of China’s LOR is perceived as high in the host country, Chinese MNEs are less likely to complete cross-border acquisitions. Moreover, deals are less likely to be completed when the warmth dimension of China’s LOR is perceived to be low. Global experience and the foreign-listed status of individual Chinese MNEs can alter the relationship between the LOR and deal completions. Originality/value This study advances and enriches the LOR research. It shows that a high level of competence in the home country has led to LOR for Chinese MNEs rather than the low level of competence proposed by existing LOR studies; and the LOR for Chinese MNEs is also determined by the perceived low level of warmth in the home country resulting from the geopolitical conflicts between two countries. In addition, the LOR suffered by EMNEs could vary based on certain industry- and firm-level characteristics. The findings of this study provide important practical implications for emerging economy governments and for firms intending to go abroad.

Outward FDI from small developing economies

2016 ◽  
Vol 11 (4) ◽  
pp. 693-714 ◽  
Author(s):  
Ramon Padilla-Perez ◽  
Caroline Gomes Nogueira
Keyword(s):  
Empirical Evidence ◽  
Economies Of Scale ◽  
Home Country ◽  
Developing Economies ◽  
Investment Strategy ◽  
Business Environment ◽  
Costa Rican ◽  
Outward Fdi ◽  
Firm Level ◽  
Content Type

Purpose Foreign direct investment (FDI) from developing economies has increased sharply since the beginning of the 2000s. While most investment flows correspond to firms from large economies, small developing economies have also witnessed the increase of outward investment flows from their domestic companies. The literature on outward FDI (OFDI) from developing economies has focused mainly on large emerging countries, such as China and India. In the case of small developing economies, for which there is scant empirical evidence, firms willing to invest abroad face a different business environment with several barriers such as a small domestic market to achieve economies of scale and a limited supply of specialised resources. In this setting, the purpose of this paper is to examine firm-level strategies and the home-country effects in a small developing economy. Design/methodology/approach A research case study is conducted through a representative sample of Costa-Rican firms investing abroad. Costa Rica makes a strong case since it stands out among small developing economies investing abroad in terms of both the number of operations and the amount of OFDI. Findings The main findings are: outward investment is not only for large and mature firms, as medium and small-sized firms are actively investing abroad; most firms pursue a market-seeking strategy; the benefits for the firm and the home country are stronger when companies follow a clear outward investment strategy; and there is a positive relationship between international trade and OFDI. Originality/value This paper provides novel empirical evidence to better understand an emerging trend in OFDI: in an increasingly integrated world economy, even SMEs from small developing economies are compelled to internationalise their operations in order to compete successfully.

Exports and outward FDI: are they complements or substitutes? Evidence from Asia

2016 ◽  
Vol 24 (1) ◽  
pp. 62-78 ◽  
Author(s):  
Niti Bhasin ◽  
Justin Paul
Keyword(s):  
Multinational Enterprises ◽  
Home Country ◽  
Panel Cointegration ◽  
Emerging Countries ◽  
Outward Fdi ◽  
Content Type ◽  
Long Run ◽  
Causality Tests ◽  
Relationship Of ◽  
The Relationship

Purpose Outward foreign direct investment (OFDI) and its relationship with exports of home country is an important aspect of internationalization having implications for both policymakers and multinational enterprises (MNEs). This paper aims to examine this relationship by using panel data for ten major emerging countries from Asia over the period 1991-2012. Design/methodology/approach The authors use panel vector auto regression, panel cointegration and causality tests in this study. Findings The authors find evidence of long-run causality from exports to OFDI. Further, exports and OFDI are found to be substitutes. There is no long-run causality from OFDI to exports, implying that MNEs are not “connecting” with home country firms through backward and forward linkages in the production process. Originality/value To the best of the authors’ knowledge, this is the first paper to deal with the relationship of OFDI with exports of the home country, for a group of developing/emerging countries.

scholarly journals Multinational enterprises, entry mode strategies, and emerging economies

2015 ◽  
Author(s):  
Ξανθίππη Αδάμογλου
Keyword(s):  
Emerging Economies ◽  
Multinational Enterprises ◽  
Joint Venture ◽  
Entry Mode ◽  
Multinomial Logit ◽  
Logit Regression ◽  
Multinomial Logit Regression ◽  
Wholly Owned Subsidiary

Ο στόχος της παρούσας διατριβής είναι να μελετήσει πως η μορφή εισόδου μιας Πολυεθνικής Επιχείρησης (ΠΕ) σε μια ξένη αγορά επηρεάζεται από την πολιτισμική, θεσμική, γεωγραφική, και οικονομική απόσταση δυο χωρών. Πιο συγκεκριμένα, η παρούσα διατριβή στοχεύει να μετατρέψει το “CAGE” θεωρητικό πλαίσιο σε “CIGE”, εφαρμόζοντας κάποιες τροποποιήσεις. Πρώτον, τη διάκριση ανάμεσα σε πολιτισμική και θεσμική απόσταση, δεύτερον, την κατασκευή ενός οικονομετρικού μοντέλου με συγκεκριμένα χαρακτηριστικά, και τρίτον την εμπειρική εφαρμογή του μοντέλου αναλύοντας την μορφή εισόδου των ΠΕ στις ακόλουθες μορφές. Δημιουργία μιας νέα θυγατρικής (Wholly Owned Subsidiary) (WOS) και διάφορες μορφές Κοινοπραξίας (Joint Venture) όπως πλειοψηφική κοινοπραξία (majority JV), 50-50% κοινοπραξία (co-ownership JV), και μειονοτική κοινοπραξία (minority JV)Όλα τα παραπάνω θα επιτεθούν αναλύοντας και συγκρίνοντας πως κάθε είδους απόσταση (πολιτισμική, θεσμική, γεωγραφική , και οικονομική) θα επηρεάσει τη μορφή εισόδου των ΠΕ σε μια ξένη αγορά. Ο στόχος αυτός βασίζεται στο γεγονός ότι το «CAGE» θεωρητικό πλαίσιο είναι ένα πλήρες και ολοκληρωμένο θεωρητικό πλαίσιο, ικανό να αναδείξει μια νέα θεώρηση της απόστασης των χωρών μεταξύ τους.Όλα τα παραπάνω λαμβάνουν χώρα σε ένα δείγμα αποτελούμενο από 245 επενδύσεις που προέρχονται από 17 χώρες της Ευρωπαϊκής Ένωσης (ΕΕ) και 21 μη Ευρωπαϊκές χώρες. Η πηγή αυτών των επενδύσεων είναι η Investment Support and Promotion Agency (ISPAT) και η χρησιμοποιούμενη οικονομετρική μέθοδο Multinomial Logit Regression Model.Τα εμπειρικά αποτελέσματα της παρούσας διατριβής δείχνουν ότι στην περίπτωση της Τουρκίας τόσο τα συναλλακτικά όσο και τα θεσμικά κόστη επηρεάζουν την απόφαση των ΠΕ να επενδύσουν στην Τουρκία. Η πιο συχνά χρησιμοποιούμενη μορφή εισόδου στην οικονομία της Τουρκίας από τις ΠΕ είναι η δημιουργία μιας εξολοκλήρου νέας θυγατρικής επιχείρησης. Ειδικότερα, η πολιτισμική απόσταση, όπως μετρήθηκε από το μοντέλο του Hofstede βρέθηκε μη στατιστικά σημαντική σε όλα τα μοντέλα και σε όλες τις μορφές εισόδου παρέχοντας καμία υποστήριξη στην Υπόθεση 1α. Από την άλλη πλευρά, η πολιτισμική απόσταση, όπως μετρήθηκε από το μοντέλο του GLOBΕ είναι στατιστικά σημαντική στα μοντέλα 2,3,4 αλλά μόνο στην περίπτωση που το WOS συγκρίνεται με co-ownership JV, παρέχοντας αδύναμη υποστήριξη στην Υπόθεση 1α. Στην περίπτωση της θεσμικής απόστασης υπάρχουν τέσσερα βασικά συμπεράσματα. Πρώτον, όταν η θεσμική απόσταση αναλύεται ως το άθροισμα της ρυθμιστικής και κανονιστικής απόστασης ταυτόχρονα, τότε είναι στατιστικά σημαντική μόνο στο μοντέλο 1 στην περίπτωση που το majority JV συγκρίνεται με το WOS, παρέχοντας αδύναμη υποστήριξη στην Υπόθεση 2α.. Δεύτερον, όταν η θεσμική απόσταση αναλύεται στις ρυθμιστικές και κανονιστικές της διαστάσεις τότε είναι στατιστικά ασήμαντη στο μοντέλο 2 σε όλες τις περιπτώσεις που συγκρίνονται με το WOS, παρέχοντας καμία υποστήριξη στην Υπόθεση 2α. Τρίτον, όταν η θεσμική απόσταση αναλύεται μόνο στη ρυθμιστική της διάσταση, τότε είναι στατιστικά σημαντική στο μοντέλο 3 στην περίπτωση που το co-ownership JV συγκρίνεται με το WOS παρέχοντας αδύναμη υποστήριξη στην Υπόθεση 2β.. Τέταρτον, όταν η θεσμική απόσταση αναλύεται μόνο στην κανονιστική της διάσταση, τότε είναι στατιστικά σημαντική μόνο στην περίπτωση που το co-ownership αναλύεται σε σχέση με το WOS, παρέχοντας αδύναμη υποστήριξη στην Υπόθεση 2γ. H γεωγραφική απόσταση εμφανίζει δυο αποτελέσματα: πρώτον, στο βασικό μοντέλο και μοντέλο 1 είναι στατιστικά σημαντική σε όλες τις περιπτώσεις που συγκρίνονται με το WOS, παρέχοντας ισχυρή υποστήριξη στην Υπόθεση 3. Ενώ στα μοντέλα 2, 3, και 4 η γεωγραφική απόσταση είναι στατιστικά σημαντική μόνο στις περιπτώσεις που το majority και minority JVs συγκρίνονται με το WOS, παρέχοντας μέτρια υποστήριξη στην Υπόθεση 3.. Tέλος, η οικονομική απόσταση είναι στατιστικά σημαντική σε όλα τα μοντέλα αλλά μόνο στην περίπτωση που co-ownership συγκρίνεται με το WOS, παρέχοντας μέτρια υποστήριξη στην Υπόθεση 4.

scholarly journals Chinese Service Multinationals: The Degree of Internationalization and Performance

2021 ◽  
Author(s):  
Ziyi Wei ◽  
Quyen T. K. Nguyen
Keyword(s):  
Financial Performance ◽  
Multinational Enterprises ◽  
Home Country ◽  
Academic Research ◽  
Brand Names ◽  
Theoretical Development ◽  
Superior Performance ◽  
Foreign Firms ◽  
Service Firms ◽  
Degree Of Internationalization

AbstractWe investigate the degree of internationalization of Chinese service multinational enterprises (MNEs) and their performance relative to global peers operating in the same industries, using the benchmarking method with the industry financial data. Our theoretical development is based upon Verbeke and Forootan (2012)’s framework, grounded in “new” internalization theory, arguing that an MNE’s financial performance is fundamentally determined by its firm-specific advantages (FSAs). Here FSAs include not only conventional strengths in R&D and brand names, but also the recombination capabilities, which is a higher-order FSA. We theorize that Chinese service MNEs develop FSAs, which are built upon home country-specific advantages (CSAs) and thus their FSAs are home country-bound in nature. They have not yet been able to develop advanced management capabilities through recombination with host CSAs. We empirically examine the largest 500 Chinese service firms. We find that only 23 Chinese service firms are true MNEs, whereas the majority of them are purely domestic firms. The financial performance of Chinese service MNEs is poor relative to global peers. They internationalize mainly through acquisitions of foreign firms, which help them increase their foreign sales, but they are not able to achieve superior performance in overseas operations. We discuss the strategic implications of our findings for managers, public policy makers, and academic research.

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