Effects of founder CEO duality and board size on foreign IPOs’ survival in US markets

Purpose This study aims to investigate how three critical governance decisions by foreign firms impacted their survivability post-initial public offerings (IPO): the choice of CEO (founder vs non-founder); the power the founder CEO wields relative to the board in terms of CEO duality; and board size. Design/methodology/approach This study uses data from 86 foreign firms that completed IPOs in the US market between 2000 and 2008 and adopts a Cox proportional hazards model to examine how the founder, founder CEO duality and board size influence foreign firm delisting post-IPO. Findings A founder CEO or a founder CEO with duality (i.e. when a founder CEO is also chair of the board of directors) does not support a foreign firm’s survival post-IPO. Expectedly, board size has a negative impact on post-IPO firm survivability; however, founder CEO duality positively moderates this negative relationship. Therefore, founder CEO duality plays a positive indirect role in the context of post-IPO firms with large boards. Originality/value First, while the benefits of CEO duality have been empirically ambiguous, this study clarifies how founder CEO duality manifests its positive impacts in foreign listings. Second, by focusing on board cognition, this study confirms the negative impact of large boards, but highlights that this can be mitigated by governance leadership structure. Finally, despite organizational life-cycle theorists’ advocacy of the replacement of founder CEOs with professional CEOs in sizable ventures, this study shows the benefits of their retention when the board is large.

The Rise of China, Inc.

Leveraging its absolute power, low human rights advantage, and tolerance by other countries, the Chinese Communist Party has transformed China into a giant corporation. Living and working is not a right, but a privilege granted by the party. State-owned firms are business units or subsidiaries, private firms are joint ventures, and foreign firms are franchisees of the party. 'China, Inc.' enjoys the agility of a firm and the vast resources of a state. Meanwhile, foreign firms competing with Chinese firms can find themselves matched against the mighty Chinese state. The Rise of China, Inc. will interest many readers: it will compel business scholars to rethink state-firm relationships; assist multinational business practitioners in formulating effective strategies; aid policy-makers in countering China's expansion; and inform the public of the massive corporate organisation China has become, and how democracies can effectively deal with it.

Relational contracts and value chain governance: exporter approaches to overcoming transaction costs in Rwanda's coffee sector

Purpose In developing countries, local buyers often rely on relational contracting based on reciprocity and trust. This paper analyzes relational contracting and global value chain (GVC) governance by focusing on how domestic and foreign coffee exporters in Rwanda confront challenges.Design/methodology/approach Semi-structured interviews were conducted with 25 representatives of Rwandan private, Rwandan cooperative-owned and foreign exporters, and four coffee sector stakeholders.Findings Foreign firms export most Rwandan coffee, and local exporters express concerns about their ability to compete. Rwandan exporters face challenges accessing capital, competing with foreign firms and managing high transaction costs. They use relational contracts to reduce transaction costs, and they benefit from a monopsony zoning regulation that reduces competition. Foreign exporters face regulatory challenges: a government-set coffee price and the zoning regulation. They vertically integrate to reduce costs and lock in suppliers through prefinancing.Research limitations/implications Future research should analyze differences between local and foreign exporters in other contexts to advance understanding of the different challenges faced and contracting approaches used.Originality/value Few GVC governance studies address the role of relational contracts in contexts where enforcement is costly. Considering relational contracts within GVCs can improve value chain analysis, specifically in the developing countries where many GVCs start.

Social Efficiency of Entry in an Open Economy

We show that cost asymmetry between the domestic and foreign firms is not necessary for the occurrence of insufficient entry in the domestic country. This result provides a rationale for pro-competitive domestic policies even in the absence of cost asymmetries among the domestic and foreign firms. However, if significant demand comes from foreign countries, and the market structures are determined endogenously in the domestic and foreign countries, domestic-entry in an open economy might not be insufficient, implying that foreign competition might not reduce the importance of anti-competitive domestic policies.

Assessing Participation and Position of Vietnam in Global Value Chains

Vietnam’s policy of openness to trade and investment has made it integrated very quickly with the global production networks, also known as global value chains, which has brought many visible fortunes to it in terms of socio-economic achievements. To have a deeper insight into the prospects and constraints of its integration into global value chains, and also to assess its degree of integration, this paper has employed Koopman et al. (2010) approach to measure the participation index, and position index. The analysis shows that the participation of Vietnam in global value chains has increased significantly in the last two decades based on strengthening FDI-led exports of Vietnam. It also shows that most of the exporting industries are located in the middle-stream in the value curve and are net buyers of intermediate products for exports, which infers the presence of predominant I2E practices in Vietnam. The paper also identifies and assesses the risk I2E practices are prone to. Scenario analysis suggests that Vietnam shall focus on upskilling of its labour force and developing indigenous industrial base. In the meantime, domestic firms shall be encouraged to collaborate with foreign firms and densify into global value chains.

The Impact of Heterogeneous Environmental Regulations on Location Choices of Pollution-Intensive Firms in China

The spatial transfer pattern and dynamic mechanisms of pollution-intensive industries are key issues for national and regional sustainable development. Although previous studies have emphasized the impact of environmental regulations on the transfer of pollution industries, there is a lack of firm-level analysis of the combined effects of different types of environmental regulations and other factors on them, which has led to the pollution haven hypothesis remaining contested. In order to provide micro evidence to test the pollution haven hypothesis, this paper reveals the temporal and spatial evolution of pollution-intensive foreign firms’ distribution in China, and explores the impact of heterogeneous environmental regulations on the location choices by using spatial analysis and zero-inflated negative binomial regression. The empirical results were as follows: Firstly, pollution-intensive foreign firms were highly concentrated in the eastern developed region and have a strong path dependency in China. Secondly, environmental regulations, especially the market-based environmental regulation, had a significant negative impact on the location choices of pollution-intensive foreign firms. Thirdly, the spatial distribution of pollution-intensive foreign firms was strongly influenced by new economic and geographic factors. Fourthly, pollution-intensive foreign firms have a significant pollution border effects in developed regions but not in economically less-developed regions due to transportation costs. The governments are expected to adopt heterogeneous environmental regulations based on the level of regional economic development to avoid the pollution haven phenomenon, thus achieving a sustainable development.

The effect of institutions and failure-based learning on entry mode choice

<p>This study investigates the role of learning from failures and how learning from failure of others shapes the entry mode choice of subsequent entrants – a choice between joint venture (JV) and wholly owned subsidiary (WOS). A review of the entry modes and institutional perspective literature has revealed that research to date has focused on the effect of successes rather than failures. While it recognises the effect of other firms’ entry mode on the entry mode decisions of subsequent entrants, it has overlooked the influence of failures’ on entry mode. It is important to investigate the effect of failure of other firms since it has been recognised by organisational learning scholars as a valuable source of information for firms to improve their performance, decrease their uncertainty and consequently influences their actions. Therefore, the present research applies institutional and organisational learning perspectives as the underpinning theories to examine how the failure of others determines the entry mode choice of a firm. Further investigation was carried out on how a firm’s entry mode decision in response to regulative and normative institutions might be asymmetric. Additionally, firms’ responses to institutional dimensions were analysed further by investigating how they would change with experience in the host country and in other foreign countries. This study applied a quantitative approach to answer these questions in the context of China. The data for this study consists of 1021 observations invested by 622 foreign firms from 2003 to 2012. Through a logistic regression analysis, this study found that the failure of prior entrants with JV structure increases a new entrant’s tendency to choose JV over WOS. Moreover, regulative distance negatively influences the choice of JV whereas the effect of normative distance was found to be positive. Regarding the effect of experience, host country experience was found to be an influential factor that mitigates the effect of regulative and normative distance on the entry mode choice. The findings of the present research contribute to both institutional and entry mode literature by demonstrating that firms make their entry mode decisions based on information inferred from prior entrants’ failures. This research also contributes to organisational learning literature by showing that responses to failures are not merely avoidance-based, but rather based on the firm’s evaluation of the cause of failure.</p>

The effect of institutions and failure-based learning on entry mode choice

<p>This study investigates the role of learning from failures and how learning from failure of others shapes the entry mode choice of subsequent entrants – a choice between joint venture (JV) and wholly owned subsidiary (WOS). A review of the entry modes and institutional perspective literature has revealed that research to date has focused on the effect of successes rather than failures. While it recognises the effect of other firms’ entry mode on the entry mode decisions of subsequent entrants, it has overlooked the influence of failures’ on entry mode. It is important to investigate the effect of failure of other firms since it has been recognised by organisational learning scholars as a valuable source of information for firms to improve their performance, decrease their uncertainty and consequently influences their actions. Therefore, the present research applies institutional and organisational learning perspectives as the underpinning theories to examine how the failure of others determines the entry mode choice of a firm. Further investigation was carried out on how a firm’s entry mode decision in response to regulative and normative institutions might be asymmetric. Additionally, firms’ responses to institutional dimensions were analysed further by investigating how they would change with experience in the host country and in other foreign countries. This study applied a quantitative approach to answer these questions in the context of China. The data for this study consists of 1021 observations invested by 622 foreign firms from 2003 to 2012. Through a logistic regression analysis, this study found that the failure of prior entrants with JV structure increases a new entrant’s tendency to choose JV over WOS. Moreover, regulative distance negatively influences the choice of JV whereas the effect of normative distance was found to be positive. Regarding the effect of experience, host country experience was found to be an influential factor that mitigates the effect of regulative and normative distance on the entry mode choice. The findings of the present research contribute to both institutional and entry mode literature by demonstrating that firms make their entry mode decisions based on information inferred from prior entrants’ failures. This research also contributes to organisational learning literature by showing that responses to failures are not merely avoidance-based, but rather based on the firm’s evaluation of the cause of failure.</p>

The Impact of Protectionism on the Completion and Duration of Cross-Border Acquisitions

<p>This study investigates the impact of protectionism in a host country on the completion likelihood of an announced cross-border acquisition and the time required to complete the acquisition. Adopting a legitimacy perspective, I identify and test boundary conditions at the firm and national levels to study the relationship between protectionism and cross-border acquisition completion and duration. I hypothesise that in host countries with a high level of protectionism, as reflected by the level of non-tariff barriers, cross-border acquisitions are less likely to be completed and the time taken to close the acquisition deal increases. I also propose that the relationships between protectionism and acquisition outcomes are moderated by critical target firm characteristics and the host country's economic condition. Specifically, these moderators include target firm size, target firm performance, the degree to which the target industry is sensitive to national security concerns, and the host country's GDP growth. I test these hypotheses using a sample of 675 cross-border acquisition attempts by firms in the manufacturing and services industries (excluding financial services) into the U.S. and Canada between 1995 and 2015. The results of the statistical analysis support the prediction that the higher the degree of protectionism, the lower likelihood of acquisition completion and the longer the duration is between acquisition announcement and completion. Findings also support the predicted moderating effects of the target firm size, performance and national security concern. However, the hypothesised moderating effect of the host country's GDP growth was not supported by the results. This finding suggests that host country protectionism impacts cross-border acquisition attempts, irrespective of the host country's economic development. These findings have significant implications for legitimacy-based explanations of cross-border acquisitions. In particular, the results of this study indicate that when protectionism is high, the host country is more likely to raise concerns around the legitimacy of foreign firms. In turn, these firms face adverse host country scrutiny which can result in a failed acquisition attempt, or an extended and therefore, costlier acquisition deal. The framework and findings of this study contribute to an institution-based view and, in particular, to a legitimacy-based perspective in the research on the internationalisation of firms.</p>