Innovation-Intensive FDI and Host Country Institutions

2018 ◽  
Author(s):  
Patrick J. W. Egan
Keyword(s):  
Developing Countries ◽  
Human Capital ◽  
Host Country ◽  
Institutional Quality ◽  
Entry Modes ◽  
Host Countries ◽  
Firm Level ◽  
Investment Models ◽  
The Impact ◽  
Innovation Outcomes

This chapter moves beyond firm level attributes and economic motivations to consider the impact of host country institutions on investment models of multinationals in developing countries. It adopts a comparative institutionalist perspective, and utilizes country and firm level variables to measure governance. These measures are then employed to predict innovation outcomes. This chapter demonstrates that host country institutions affect the likelihood of local innovation taking place, and its intensity. A variety of measures of institutional coherence are developed, and address such diverse concepts as intellectual property protection, corruption, democracy, and bureaucratic quality. In addition, firm surveys are used to convey firm perceptions of institutional quality in host countries. The chapter includes a discussion of the literature on firm entry modes, and considers how other host country attributes, such as education and human capital, may influence innovation outcomes alongside institutions.

R&D in the periphery? Foreign direct investment, innovation, and institutional quality in developing countries

2013 ◽  
Vol 15 (1) ◽  
pp. 1-32 ◽  
Author(s):  
Patrick J.W. Egan
Keyword(s):  
Developing Countries ◽  
Multinational Corporations ◽  
Political Institutions ◽  
Multinational Firms ◽  
Institutional Quality ◽  
Socioeconomic Indicators ◽  
Host Countries ◽  
Firm Level ◽  
Education Levels ◽  
The Impact

This paper considers the relationship between assessments of institutional quality in developing countries and the innovative activities of multinational corporations. Firm entry mode literature has established links between domestic institutions and ownership equity patterns among multinationals, but institutionalist analyses have not adequately addressed the types of activities pursued by multinational firms. I argue that in addition to various socioeconomic indicators, the quality of domestic political institutions in developing countries is an important determinant of local innovative activity. I argue that institutional quality in host countries reinforces consistent patterns of interaction between states and firms, leading to reduced risk of technological expropriation and other undesirable outcomes for firms. I test this argument by examining the impact of institutional assessments, carried out by firms themselves and by outside observers, on R&D effort among multinationals, using firm-level surveys conducted in developing countries between 2002 and 2005. The multilevel empirical analysis suggests that multinational firms are likely to both locate R&D activities and pursue them intensively in developing countries with well-regarded institutions, and that the impact of institutional variables is more significant than other likely predictors, such as education levels in host countries.

Impact of corruption on Chinese investment in African countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Shilin Yuan ◽  
Haiyang Chen ◽  
Wei Zhang
Keyword(s):  
Developing Countries ◽  
Developing Country ◽  
Host Country ◽  
Practical Implication ◽  
Host Countries ◽  
African Countries ◽  
Control Variables ◽  
Content Type ◽  
The Impact ◽  
New Evidence

Purpose This paper aims to examine the impact of host country corruption on foreign direct investment (FDI) from China to developing countries in Africa. With the opposing arguments that corruption is detrimental to or instrumental in FDI and mixed empirical evidence, this paper contributes to the literature by providing new evidence on the issue. Additionally, little research has been done on the impact of corruption on FDI made by developing country multinationals to developing countries. This paper fills a void in this area. Design/methodology/approach Based on the published literature, as well as China and Africa contexts, the authors develop hypotheses that host countries with low corruption receive more FDI and resource-seeking investments weaken the relationship. The annual stock of Chinese FDI in 35 African countries, host country corruption data and other control variables from 2007 to 2015 are collected. Feasible generalized least squares models are used to test the hypotheses. Additional robustness tests are also conducted. Findings The findings support the hypotheses. Specifically, Chinese investors make more investments in host countries with low corruption except for resource-seeking investments in resource-rich host counties. The results are statistically significant accounting for various control variables. The results of the robustness tests show that the main findings are robust. Originality/value First, this study provides new evidence on the impact of corruption on FDI. Second, this study also fills a void by examining FDI from a developing country, China to other developing countries in Africa. Finally, this study also has a practical implication for Chinese multinationals investing in Africa.

An investigation of Confucius Institute’s effects on China’s OFDI via cultural difference and institutional quality

2020 ◽  
Vol 14 (3) ◽  
pp. 241-263
Author(s):  
Chensheng Xu ◽  
Feng Yao ◽  
Fan Zhang ◽  
Yonghong Wang
Keyword(s):  
Host Country ◽  
Cultural Difference ◽  
Institutional Quality ◽  
Cultural Exchange ◽  
Ordinary Least Squares ◽  
Study Strategies ◽  
Potential Interaction ◽  
Host Countries ◽  
Content Type ◽  
The Impact

Purpose This study aims to investigate the influence of the Confucius Institute (CI) on outward foreign direct investment (OFDI) by China and its potential interaction with cultural difference and institutional quality in host countries. Design/methodology/approach In the empirical study, the gravity model is adopted as the benchmark to investigate the effects of CI on China's OFDI using the ordinary least squares or Poisson Pseudo Maximum Likelihood estimators. Panel data on China's OFDI from 2004 to 2015 are used. Cultural difference and institutional quality are included explicitly as control variables to examine the effects of CI on China's OFDI. Findings CI has a significant positive effect on China’s OFDI, and this effect depends on the cultural difference and institutional quality of the host country. The impact of CI on China’s OFDI is more prominent in host countries with a smaller cultural difference or lower institutional quality. Originality/value CI is a comprehensive platform for foreign cultural exchange and signifies the rebirth of Confucianism in China. The present study shows that CI can stimulate the growth of China’s OFDI, with implications for other Asian countries influenced by Confucianism. Based on the results of the study, strategies for “Going Global” and encouraging economic growth based on cultural exchange and the recognition of host country heterogeneities are proposed.

Impact of host country institutional context on subsidiary performance

2015 ◽  
Vol 53 (1) ◽  
pp. 198-220 ◽  
Author(s):  
Chinmay Pattnaik ◽  
SoonKyoo Choe ◽  
Deeksha Singh
Keyword(s):  
Labor Market ◽  
Host Country ◽  
Institutional Quality ◽  
New Institutional Economics ◽  
Institutional Distance ◽  
Host Countries ◽  
Subsidiary Performance ◽  
Content Type ◽  
The Impact

Purpose – The purpose of this paper is to examine the impact of quality of market supporting institutions (institutional quality) in host country and the similarities and differences of institutional quality between the home and host country (institutional distance) on subsidiary performance. Design/methodology/approach – Based on the conceptualization of new institutional economics, the authors divide quality of host country institutions into factor markets; product, capital, labor market and sociopolitical dimensions. The authors examine the impact of the quality these institutional dimensions in host countries and their difference between home and host country on the performance of 318 subsidiaries of 146 Korean listed manufacturing firms operating in 28 host countries from 2001 to 2006. Findings – The empirical results based on 1,129 observations show that institutional distance explains a significant variance in the subsidiary performance. In particular, the difference in quality of institutions in product, capital and labor market has negative impact on subsidiary performance. However, except for quality of regulation in labor market, host country institutional qualities do not significantly explain the variation in subsidiary performance. Originality/value – The evidence suggests that host country institutions matter substantially when considered with their relative similarity and difference with home country institutions. The impact of individual dimensions of institutions varies on subsidiary performance.

Could CSR improve the financial performance of developing countries’ firms? Analyses of mediating effect of intangible resources

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Mohamed Hamdoun ◽  
Mohamed Akli Achabou ◽  
Sihem Dekhili
Keyword(s):  
Developing Countries ◽  
Human Capital ◽  
Financial Performance ◽  
Competitive Advantage ◽  
Mediating Effect ◽  
Social Dimension ◽  
Content Type ◽  
Intangible Resources ◽  
The Impact

Purpose This paper aims to examine the link between corporate social responsibility (CSR) and financial performance in the context of developing countries. More specifically, the mediating role of a firm’s competitive advantage and intangible resources, namely, human capital and reputation are studied. Design/methodology/approach The study considered a sample of 100 Tunisian firms. The analysis makes use of the structural equation modelling method to explore the relationship between CSR and financial performance, by including mediator variables. Findings The results confirm that CSR has no significant direct effect on financial performance. In particular, they indicate that the social dimension of CSR has a negative impact on performance. However, CSR does have a positive impact on competitive advantage via the two intangible resources considered, human capital and company reputation. Research limitations/implications The research fills a gap that occurred in the previous literature. In effect, previous studies focussed only on the direct link between CSR and financial performance. In addition, it enriches the limited literature on CSR strategies in the context of developing countries. However, further studies should explore the opposite relationship, i.e. the impact of financial performance on CSR strategy. In addition, the authors believe that amongst other potential research avenues, it would be interesting to study the moderating role of the activity sector. Practical implications From a practical point of view, this study suggests new applications with respect to the link between CSR and financial performance. To enhance their company’s financial performance, managers need to ensure that intangible resources are managed efficiently. Originality/value The paper contributes to the literature by examining how a firm’s intangible resources mediate between CSR and competitive advantage and how competitive advantage mediates between intangible resources and financial performance. Second originality is related to the study of the link between CSR and the financial performance of business organisations in the context of a developing country.

scholarly journals An Analysis of Host Country Characteristics that Determine FDI in Developing Countries: Recent Panel Data Evidence

2009 ◽  
Vol 14 (2) ◽  
pp. 71-96 ◽  
Author(s):  
Muhammad Tariq Majeed ◽  
Eatzaz Ahmad
Keyword(s):  
Developing Countries ◽  
Panel Data ◽  
Multinational Corporations ◽  
Host Country ◽  
Negative Impact ◽  
Positive Impact ◽  
Negative Effects ◽  
Host Countries ◽  
Country Characteristics ◽  
General Method Of Moments

This paper analyzes a range of host country characteristics that determine foreign direct investment (FDI) flows to developing countries, using panel data on 72 countries for the period 1970-2008. Keeping in view the endogeneity problem of the chosen host country’s characteristics, the model is estimated using the General Method of Moments (GMM) technique. The analysis shows that gross domestic product (GDP), economic growth, and per capita income positively affect FDI—a result consistent with the market-seeking behavior of multinational corporations (MNCs). Furthermore, we find that remittances have a significant and positive impact on FDI. On the other hand, inflation and the balance of payments deficit have negative effects on FDI. MNCs are attracted to host countries that are outward looking and follow trade-promoting policies. This is confirmed by the positive effect of openness on FDI flows to developing countries. The study also finds that the effect of military expenditures on FDI is negative and significant. Finally, our analysis finds that the real exchange rate has a significantly negative impact on FDI.

M&A vs. Greenfield

2018 ◽  
pp. 169-185
Author(s):  
Sana Moid
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Mergers And Acquisitions ◽  
Empirical Evidence ◽  
International Market ◽  
Time Effect ◽  
Entry Modes ◽  
Host Countries ◽  
Bidirectional Relationship ◽  
The Right

The chapter has raised two critically important questions. First, is the M&A boom a one-time effect of privatization, or is it likely to be followed by a rise in Greenfield investment? Second, do these two types of FDI mode have different macroeconomic consequences in terms of aggregate investment and growth? The main purpose of this chapter is to analyze the two entry modes, mergers and acquisitions and Greenfield investment, specifically, and to present a comparative view of the same and how it leads to the economic growth of a nation. It is concluded that one should choose the right mode according to the different situation about the firms in the international market. The present chapter also concludes that Greenfields and M&As do have a positive homogenous effect on growth. Additionally, the enhancement of human capital is an important condition for the host countries to derive the maximum benefits from Greenfields and M&As. Also, there is empirical evidence of a two-way linkage between FDI and growth. However, the bidirectional relationship exists only for the M&A's growth nexus.

Foreign Business Environments and Entry Mode Choice

2012 ◽  
pp. 165-181
Author(s):  
Maud Oortwijn
Keyword(s):  
Host Country ◽  
Joint Venture ◽  
Mode Choice ◽  
External Environment ◽  
Entry Mode ◽  
Entry Modes ◽  
Host Countries ◽  
Entry Mode Choice ◽  
Business Studies ◽  
Business Environments

The entry mode choice is at the core of International Business studies (Oortwijn, 2011a). IB research concerns the organization of firm activities across country borders and thus across different cultures and business contexts. These host country differences impact the firm’s way of working internally within the organization and in interaction with the external environment in the host country. Companies can consider a broad range of entry modes to organize across country borders, including partnership, trade, joint venture (JV), and wholly owned enterprise (WOE). The entry mode defines what activities are internalized within the firm and how the firm interacts with the external environment in different host countries.

scholarly journals You Can't Count on Me: The Impact of Electricity Unreliability on Productivity

2017 ◽  
Vol 46 (3) ◽  
pp. 579-602
Author(s):  
Sharon Poczter
Keyword(s):  
Developing Countries ◽  
Industrial Production ◽  
Solar Irradiance ◽  
Electricity Demand ◽  
District Level ◽  
Firm Level ◽  
The Impact ◽  
Electricity Provision ◽  
Over Time

While access to reliable electricity can significantly constrain industrial production, little is known as to how unreliability impacts firm level productivity. This is a particularly salient issue for firms in developing countries, where electricity provision is still unreliable and self-generation is costly. This paper analyzes the impact of electricity provision on productivity, instrumenting for electricity demand with district level solar irradiance. Results indicate that firms exhibit decreasing productivity in the initial stages of electricity adoption that decreases over time. Furthermore, I find that unreliability negatively impacts productivity initially and over time, and this effect is larger for smaller firms.

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