scholarly journals Ownership hybridization and FDI propensity: How firms from state-directed emerging economies can overcome institutional challenges in foreign direct investment.

2020 ◽  
Author(s):  
Tega Ogbuigwe ◽  
Hongzhi Gao ◽  
Eldrede Kahiya
Keyword(s):  
Emerging Economies ◽  
Liability Of Foreignness ◽  
Private Ownership ◽  
Political Connection ◽  
Host Countries ◽  
Foreign Investments ◽  
Ownership Structures ◽  
Top Executives ◽  
Government Involvement ◽  
Institutional Challenges

The emergence of hybrid ownership structures and their OFDI activities is a critical but under-investigated phenomenon. We proffer that ‘state-directed emerging economies’ (SDEEs) - a unique typology of emerging economies – are largely driving the emergence of hybrid ownership structures. The direct and continuous government involvement in SDEE markets and the perception this economic system creates across a variety of host countries, present the dual hurdle of liability of “origin” and liability of foreignness in the OFDI of SDEEs firms. Our study proposes ownership hybridization (i.e. mixing state and private ownership) in the home market, as a mechanism through which SDEE firms counteract these unique institutional challenges in foreign investments. We argue that through hybridization, SDEEs firms benefit from the unique resources brought into the mixture by the different ownership logics and synergistically strengthen their ability to overcome institutional challenges in foreign investments. Nevertheless, benefits of hybridization are likely to vary in magnitude in relation to the degree of hybridization, suggesting an optimal blend of state and private ownership in a hybrid firm. In addition, we propose that hybridization effects are also contingent on top executives and their political connection, that engender resource and legitimacy implications. Our approach differs from existing studies that view home and host country institutional challenges in isolation. Rather, we recognize the inter-related effect of these institutional challenges and propose ownership hybridization as a strategy that simultaneously counteracts both.

scholarly journals Ownership hybridization and FDI propensity: How firms from state-directed emerging economies can overcome institutional challenges in foreign direct investment.

2020 ◽  
Author(s):  
Tega Ogbuigwe ◽  
Hongzhi Gao ◽  
Eldrede Kahiya
Keyword(s):  
Emerging Economies ◽  
Liability Of Foreignness ◽  
Private Ownership ◽  
Political Connection ◽  
Host Countries ◽  
Foreign Investments ◽  
Ownership Structures ◽  
Top Executives ◽  
Government Involvement ◽  
Institutional Challenges

The emergence of hybrid ownership structures and their OFDI activities is a critical but under-investigated phenomenon. We proffer that ‘state-directed emerging economies’ (SDEEs) - a unique typology of emerging economies – are largely driving the emergence of hybrid ownership structures. The direct and continuous government involvement in SDEE markets and the perception this economic system creates across a variety of host countries, present the dual hurdle of liability of “origin” and liability of foreignness in the OFDI of SDEEs firms. Our study proposes ownership hybridization (i.e. mixing state and private ownership) in the home market, as a mechanism through which SDEE firms counteract these unique institutional challenges in foreign investments. We argue that through hybridization, SDEEs firms benefit from the unique resources brought into the mixture by the different ownership logics and synergistically strengthen their ability to overcome institutional challenges in foreign investments. Nevertheless, benefits of hybridization are likely to vary in magnitude in relation to the degree of hybridization, suggesting an optimal blend of state and private ownership in a hybrid firm. In addition, we propose that hybridization effects are also contingent on top executives and their political connection, that engender resource and legitimacy implications. Our approach differs from existing studies that view home and host country institutional challenges in isolation. Rather, we recognize the inter-related effect of these institutional challenges and propose ownership hybridization as a strategy that simultaneously counteracts both.

scholarly journals Hybrid ownership structures and cross-border acquisition completion of emerging market firms: An institutional and signalling theory perspective

2021 ◽  
Author(s):  
◽  
Tega Ogbuigwe
Keyword(s):  
Foreign Investment ◽  
Emerging Market ◽  
Government Support ◽  
Hybrid Organizations ◽  
Political Connection ◽  
Ownership Structures ◽  
Top Executives ◽  
Developed Economies ◽  
Regulatory Quality ◽  
Direct Government

<p><b>Over the last decade, cross-border acquisitions (CBAs) have emerged as one of the most significant engines through which emerging market firms (EMFs) carry out foreign investments. Yet, emerging market acquirers (EMAs) terminate a significant percentage of initiated CBAs before completion. Compared to the 18 percent termination rate of CBAs involving acquirers from developed economies (DEs), CBAs by EMAs have a 33 percent termination rate. Scholars attribute the higher CBA termination by EMAs to the dual hurdle of 'liability of origin' and 'liability of foreignness' arising from direct government involvement and institutional voids in emerging economies. Although extant research provides in-depth insights into why EMAs have higher CBA termination rates than developed economies acquirers, they fall short in exploring how EMAs can navigate these challenges. Hence, in this study, I aim to investigate ownership based solutions to the institutional challenges affecting the CBA completion of EMAs.</b></p> <p>A striking phenomenon in the foreign investment of EMFs is that a firm's ownership matters. Pioneering ownership-based studies reveal that state-owned enterprises (SOEs) and private-owned enterprises (POEs) experience distinct interactions with home and host countries leading to diverse foreign investment challenges and strategies. Government regulatory discretion combined with capital market imperfection in emerging markets means that SOEs are privileged in accessing government support. In contrast, POEs lack direct government support and seek to establish and leverage political ties to survive. This need for sustained firm government relationships and the gradual pro-market reforms in many emerging economies catalyse hybrid ownership structures among EMFs where state and private owners coexist in one organization. However, this emergence of hybrid ownership structures and their implications for EMFs' foreign investment activities are under-investigated in the international business domain.</p> <p>Building on the new institutional theory and the signalling theory, I argue that hybrid ownership structures can act as signals through which external stakeholders evaluate and confer legitimacy on EMAs during the CBA process. My conceptualization emphasizes the mixture of unique resources brought into hybrid organizations by both SOEs and POEs. Accordingly, I assert that as hybrid organizations incorporate elements prescribed by both SOEs and POEs, they are likely to project at least partial appropriateness to a broader set of institutional referents. As a result, hybrid ownership structures confer legitimacy-enhancing benefits, resource-enhancing benefits, and operational autonomy benefits that position EMAs to simultaneously navigate the home and host institutional challenges in CBAs ultimately increasing the completion likelihood. In addition to proposing a direct effect of hybrid ownership on CBA completion, I develop novel varieties of hybrid ownership structures that categorize variations in the internal configurations of hybrid organizations as typology, degree, and nature of hybridization. I carry out further investigation on how the hybrid ownership effect might vary with these varieties of hybrid ownership structures. Subsequently, I identify top executives' political connection, target industry political sensitivity, and host country regulatory quality as contingences to the effect of hybrid ownership on CBA completion of EMAs.</p> <p>Analysing a dataset of 838 CBAs by Chinese firms between the years 2008 to 2017, the results from this study demonstrate that acquirers with hybrid ownership structures are more likely to complete CBAs than nonhybrid acquirers. Moreover, while the hybridization effect varied with the degree of hybridization, the results did not provide conclusive evidence for the nature of hybridization. The result also reveals that top executives' political connection and the host country regulatory quality present differing interactions with the hybrid ownership effect relative to the hybrid organization's typology. With these findings, I contribute to the literature on EMFs' CBA completion by demonstrating that hybrid ownership structures benefit from their different owners' resources to overcome challenges in CBAs. I also contribute to the conceptualization and implication of hybrid ownership for EMFs strategic outcomes. I find that the benefits of hybrid ownership differed with the controlling shareholder's identity and the degree of hybridization in a hybrid organization. Furthermore, by examining the boundary conditions of top executives' political connection, target industry political sensitivity, and host regulatory quality, I provide insights into how intra-organizational attributes and external factors shape the significance of ownershipstructures in EMFs foreign investment.</p>

scholarly journals Hybrid ownership structures and cross-border acquisition completion of emerging market firms: An institutional and signalling theory perspective

2021 ◽  
Author(s):  
◽  
Tega Ogbuigwe
Keyword(s):  
Foreign Investment ◽  
Emerging Market ◽  
Government Support ◽  
Hybrid Organizations ◽  
Political Connection ◽  
Ownership Structures ◽  
Top Executives ◽  
Developed Economies ◽  
Regulatory Quality ◽  
Direct Government

<p><b>Over the last decade, cross-border acquisitions (CBAs) have emerged as one of the most significant engines through which emerging market firms (EMFs) carry out foreign investments. Yet, emerging market acquirers (EMAs) terminate a significant percentage of initiated CBAs before completion. Compared to the 18 percent termination rate of CBAs involving acquirers from developed economies (DEs), CBAs by EMAs have a 33 percent termination rate. Scholars attribute the higher CBA termination by EMAs to the dual hurdle of 'liability of origin' and 'liability of foreignness' arising from direct government involvement and institutional voids in emerging economies. Although extant research provides in-depth insights into why EMAs have higher CBA termination rates than developed economies acquirers, they fall short in exploring how EMAs can navigate these challenges. Hence, in this study, I aim to investigate ownership based solutions to the institutional challenges affecting the CBA completion of EMAs.</b></p> <p>A striking phenomenon in the foreign investment of EMFs is that a firm's ownership matters. Pioneering ownership-based studies reveal that state-owned enterprises (SOEs) and private-owned enterprises (POEs) experience distinct interactions with home and host countries leading to diverse foreign investment challenges and strategies. Government regulatory discretion combined with capital market imperfection in emerging markets means that SOEs are privileged in accessing government support. In contrast, POEs lack direct government support and seek to establish and leverage political ties to survive. This need for sustained firm government relationships and the gradual pro-market reforms in many emerging economies catalyse hybrid ownership structures among EMFs where state and private owners coexist in one organization. However, this emergence of hybrid ownership structures and their implications for EMFs' foreign investment activities are under-investigated in the international business domain.</p> <p>Building on the new institutional theory and the signalling theory, I argue that hybrid ownership structures can act as signals through which external stakeholders evaluate and confer legitimacy on EMAs during the CBA process. My conceptualization emphasizes the mixture of unique resources brought into hybrid organizations by both SOEs and POEs. Accordingly, I assert that as hybrid organizations incorporate elements prescribed by both SOEs and POEs, they are likely to project at least partial appropriateness to a broader set of institutional referents. As a result, hybrid ownership structures confer legitimacy-enhancing benefits, resource-enhancing benefits, and operational autonomy benefits that position EMAs to simultaneously navigate the home and host institutional challenges in CBAs ultimately increasing the completion likelihood. In addition to proposing a direct effect of hybrid ownership on CBA completion, I develop novel varieties of hybrid ownership structures that categorize variations in the internal configurations of hybrid organizations as typology, degree, and nature of hybridization. I carry out further investigation on how the hybrid ownership effect might vary with these varieties of hybrid ownership structures. Subsequently, I identify top executives' political connection, target industry political sensitivity, and host country regulatory quality as contingences to the effect of hybrid ownership on CBA completion of EMAs.</p> <p>Analysing a dataset of 838 CBAs by Chinese firms between the years 2008 to 2017, the results from this study demonstrate that acquirers with hybrid ownership structures are more likely to complete CBAs than nonhybrid acquirers. Moreover, while the hybridization effect varied with the degree of hybridization, the results did not provide conclusive evidence for the nature of hybridization. The result also reveals that top executives' political connection and the host country regulatory quality present differing interactions with the hybrid ownership effect relative to the hybrid organization's typology. With these findings, I contribute to the literature on EMFs' CBA completion by demonstrating that hybrid ownership structures benefit from their different owners' resources to overcome challenges in CBAs. I also contribute to the conceptualization and implication of hybrid ownership for EMFs strategic outcomes. I find that the benefits of hybrid ownership differed with the controlling shareholder's identity and the degree of hybridization in a hybrid organization. Furthermore, by examining the boundary conditions of top executives' political connection, target industry political sensitivity, and host regulatory quality, I provide insights into how intra-organizational attributes and external factors shape the significance of ownershipstructures in EMFs foreign investment.</p>

scholarly journals Developing in Investment Environment in Jordan from the Perspective of Jordan Investments Commission

2019 ◽  
Vol 14 (10) ◽  
pp. 116 ◽  
Author(s):  
Mohammad Anhier Al-Froukh
Keyword(s):  
Developed Countries ◽  
Added Value ◽  
Host Countries ◽  
Senior Managers ◽  
Foreign Investments ◽  
Investment Environment ◽  
Domestic Markets ◽  
Transfer Of Technology ◽  
Import And Export ◽  
Means Of Production

Globalization; along with its developed technology and wide opened window has facilitated interaction between countries that surpassed import and export. Attracting foreign investments to a country is an added value which helps in developing the workforce within the country and get use from different experiences that other countries employ. From that point, current study seeks to examine the influence of a group of CSF on the investment environment in Jordan from the perspective of Jordan Investment Commission. In order to achieve the aim of study, (412) questionnaire were distributed on senior managers, managers and tram leaders within JIC. Results of study indicated that foreign direct investment is a real means to achieve a number of objectives, including: decrease unemployment, exploitation of natural resources, contribution to the increase of GDP, the abundance of goods for domestic markets, increased exports, and technology transfer. What is important to us in all this is the transfer of technology from developed countries with direct investments to the host countries of this investment, where the transfer of the most efficient and developed means of production, since the foreign investor is always looking for the greatest return through investments in other countries, Create appropriate conditions for this.

The localised accounting environment in the implementation of fair value accounting in Indonesia

2022 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Bernadia Linggar Yekti Nugraheni ◽  
Lorne Stewart Cummings ◽  
Alan Kilgore
Keyword(s):  
Emerging Economies ◽  
Accounting Standards ◽  
Fair Value ◽  
Successful Implementation ◽  
Fair Value Accounting ◽  
Structured Interviews ◽  
Content Type ◽  
Emerging Country ◽  
Government Involvement

Purpose This case study aims to investigate the role of actors in the implementation of fair value standards in an emerging country, Indonesia. Design/methodology/approach This study uses semi-structured interviews with important actors within the local accounting profession, standard setting and regulatory environment, to analyse fair value accounting implementation. This study also incorporates information from press releases and newspapers, to provide a more comprehensive picture of fair value implementation. Findings First, professionals undertake routine actions, cultivate interests and strategically navigate their environment during the process of fair value standard implementation. Second, the role of appraisers becomes more prominent during this process. Third, government involvement is significant in ensuring the successful implementation of global accounting standards. Research limitations/implications First, differing localised contexts, including communities and actors, may shape how an emerging country undertakes the diffusion and implementation of global standards, which in turn can also lead to institutional change. Second, government involvement is crucial in supporting the implementation of global accounting standards within emerging economies. Third, implementing market-based measurements within emerging economies characterised by a lack of an active and liquid market may present challenges. Practical implications Third, implementing market-based measurements within emerging economies characterised by a lack of an active and liquid market may present challenges. Originality/value This study applies the concept of Institutional Work within Institutional Theory to explain how fair value standards are implemented within a localised emerging economy characterised by unique actor roles and goal-directed action.

Conditional factors for training activities in Chinese, Indian and Mexican subsidiaries of German companies

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Beke Vogelsang ◽  
Matthias Pilz
Keyword(s):  
Influencing Factors ◽  
External Factors ◽  
Further Training ◽  
Host Countries ◽  
Foreign Investments ◽  
Content Type ◽  
Training Strategies ◽  
The Impact ◽  
And Training ◽  
National Borders

Purpose The purpose of this paper is to analyse the qualification measures of 12 German multi-national companies (MNCs), all of which are present in China, India and Mexico. In particular, the transfer of dual initial training practices and further training measures are investigated. It examines the impact consistent training strategies across national borders have emerged in German companies or local arrangements have developed despite identical internal influencing factors. Design/methodology/approach Because of its design, the focus is on the external factors that influence the companies’ training measures. However, an exploratory approach was followed. To pursue the research question face-to-face expert interviews were conducted with 46 training managers in 12 active companies in all 3 countries. The interviews were completely transcribed and evaluated using qualitative methods. Findings The analysis shows that it is not internal company factors but country-specific contextual factors that influence training measures and that companies cannot act in the same way worldwide. Research limitations/implications The study is based on 12 MNC and only analyses the blue-collar area. Therefore, it would have to be evaluated whether a similar analysis would result from a survey of other companies in different sectors or whether the differences in terms of training and further training measures would then be even greater. Practical implications The study supports the internationalization strategies of MNC by providing first-hand empirical results concerning recruitment and training of blue colour workers on an intermediate skill level. It gives evidence on the need of national adaptation in the process of transferring training cultures from countries of origin into the host countries. More attention must, therefore, be paid to external factors when developing and implementing training measures. Social implications The economic development in many countries includes an expansion of foreign investments. MNC provides employment and income for workers and their families. However, successful foreign investments also include sustainable recruitment and training strategies of the local workforce. The results of the study support policymakers to guide and support foreign companies to develop successful Human Resource Management strategies in the host countries. Originality/value This paper is original because due to the research design the internal factors are kept largely constant and the external influencing factors are singularly focused in detail. Therefore, this procedure makes it possible to investigate whether consistency training strategies across national borders have emerged in German companies or local arrangements have developed despite identical internal influencing factors.

scholarly journals Determinants of outward FDI from emerging economies

Equilibrium ◽  
2019 ◽  
Vol 14 (2) ◽  
pp. 209-231 ◽  
Author(s):  
Andrzej Cieślik ◽  
Giang Hien Tran
Keyword(s):  
Emerging Economies ◽  
Multinational Enterprise ◽  
Value Added ◽  
Likelihood Estimation ◽  
Main Stream ◽  
Outward Fdi ◽  
Host Countries ◽  
Asian Tigers ◽  
1960S And 1970S ◽  
The 1960S

Research background: The last four decades have witnessed an upsurge of multi-nationals from emerging markets alongside a narrowed gap in growth prospects between developed and emerging economies. UNCTAD statistics show that FDI flows from emerging economies have gone steady since 1980 and occupied more than one fifth of global FDI stock in 2015. Japan led the reverse FDI trend when it started to invest abroad in the 1960s and 1970s. Two decades later, in the 1980s-1990s, the reverse FDI trend was continued by so-called Asian tigers, then recently by those rapidly-industrializing economies in Southeast Asia as well as China and India in East and South Asia. Purpose of the article: The main goal of this paper is to contribute empirically to the study of the determinants of FDI outflows from emerging economies. Methods: In order to derive empirically testable hypotheses this paper refers to theoretical Knowledge-Capital model developed by Markusen (2002). The model is estimated using the Poisson-Pseudo Maximum Likelihood estimation technique. The specific research hypotheses derived from the theory are verified using a panel dataset of 38 home emerging countries and 134 host countries over the period 2001–2012. Findings & Value added: In this paper, we distinguish between horizontal and vertical reasons for FDI. Our estimation results support the hypothesis that main-stream theory of multinational enterprise can explain FDI flows from emerging economies, implying the significant roles of total market size, skilled-labor abundance, investment cost, trade cost as well as geographical distance between two countries.

The largest financial groups from emerging economies

2018 ◽  
Vol 13 (5) ◽  
pp. 1050-1069 ◽  
Author(s):  
J. Francois Outreville
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Economies ◽  
Direct Investment ◽  
Multinational Firms ◽  
Emerging Countries ◽  
Strong Impact ◽  
Internationalization Process ◽  
Host Countries ◽  
Content Type ◽  
Financial Groups

Purpose Numerous articles contain recommendations as to how emerging countries can attract foreign direct investment on terms that are beneficial to both the investing firm and the host society but very few explore the conditions for firms from emerging countries to invest abroad. The purpose of this paper is twofold: the first is the documentation of the preferred locations of foreign affiliates for the largest financial groups headquartered in emerging countries; and, second, is to identify some of the determinants associated with the location-specific advantages of these host countries. Design/methodology/approach The analysis of the internationalization process of these groups is based on a list of top financial groups ranked by total assets. In the empirical section, the factors that explain the choice of these locations by multinational firms are categorized as resources seeking, market seeking, efficiency-seeking variables and cultural variables. Findings There is empirical evidence that institutions prefer to invest in foreign locations that minimize some dimensions of the culture. Other factors like the role of efficiency variables, i.e. trade efficiency, political risk and government effectiveness, in host countries also have a strong impact on the determinants of the internationalization process. Originality/value The paper puts forward a framework for analyzing determinants of foreign direct investment of multinational financial groups from emerging economies.

Political costs and earnings management: evidence from Tunisia

2016 ◽  
Vol 6 (4) ◽  
pp. 388-407 ◽  
Author(s):  
Mouna Ben Rejeb Attia ◽  
Naima Lassoued ◽  
Anis Attia
Keyword(s):  
Earnings Management ◽  
Emerging Economies ◽  
Management Practices ◽  
Political Influence ◽  
The Political ◽  
Political Connection ◽  
State Control ◽  
Content Type ◽  
Political Costs ◽  
Political Cost

Purpose The purpose of this paper is to test the political costs hypothesis in emerging economies characterized by interventionist governments and weak protection of property rights. The paper uses executives’ political connection and state control to measure firms’ political costs. Design/methodology/approach Based on a sample of Tunisian firms, univariate and multivariate analyses are used to test whether firms’ political costs have any impact on earnings management. Findings The empirical analysis indicates that the executives’ political connection is not directly related to earnings management. However, the interaction between executives’ political connection and the state control affects the firm’s sensitivity to political pressure and its earnings management practices. More specifically, this study provides evidence that non-connected firms and state-controlled firms attempt to use accounting policies to decrease their earnings especially during periods of the former government when they had to face high political costs. This finding is robust to comparing means of political cost indicators between different groups. Indeed, private firms with political connection enjoy a significantly lower insurance right, tax and donations and grants compared to other firms. Research limitations/implications This study provides empirical evidence for the specific application of accounting theory in emerging economies. Practical implications Political influence may be an important criterion that will be used by auditors and investors to appreciate and detect specific manipulations of accounting earnings. Similarly, regulators should be aware of the political factors effect on discretionary behavior of managers to provide appropriate rules and standards. Originality/value The study is a pioneer in proving that a firm’s size is not always a suitable measure of its political cost. It extends the accounting literature on the role of political economy in the application of the political costs hypothesis. This hypothesis is confirmed in emerging economies by providing new and significantly measure of firms’ political costs

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