institutional exceptions on global projects a process model this inductive study offers an examination of 23 cases in which informants from firms engaged in large scale global projects reported unforeseen costs after failing to comprehend cognitive cultural normative and or regulative institutions in an unfamiliar host societal context the study builds on the conceptual framework of institutional theory the findings which include propositions and a generic narrative model contribute to theoretical knowledge of how institutional exceptions arise how they are resolved and how they typically involve three general phases ignorance sensemaking and response the findings also articulate the kinds of institutional transaction costs that an entrant incurs in each of the three phases and the conditions that lead to the growth of these costs

research notes characterizing environmental variation a hypothesized relationship between environmental variation and organizational actions is central to organization theory this study shows that conventional summary measures of instability do not c

going the distance the pros and cons of expanding employees global knowledge reach while some scholars have suggested mnes to be superior to markets for managing knowledge across geographically distant boundaries how they actually accomplish this has not been fully considered we address this void by developing and testing a model that highlights the critical role of organizational incentives in enhancing employees internal search and use of knowledge data from 166 knowledge intensive projects support our argument that in contrast to process based incentives that influence more local search outcome based incentives motivate employee teams to reach well beyond their immediate location which in turn enhances performance at the same time we demonstrate that expanded reach also increases the likelihood of accessing more codifiable knowledge which can hurt performance our model examines the contradictory and previously unknown effects of global knowledge reach

inertia and creeping rationality in strategic decision processes in two earlier studies comprehensiveness a characteristic of rational strategic decision making processes exhibited a positive relationship with organizational performance in a stable environmen

eco labelling by a for profit certifier countervailing power and its consequences for profit certifier s eco labelling is common in industries where firms have some countervailing power on sharing gains from labelling we show that the certification standard for an environmental quality is lowered when firms have strong power a certifier with too low bargaining power will prefer to sell to the best offer rather than bargain this switch in the selling mechanism also thwarts his incentives in setting the standard this is consequential for evaluating policies the dimensions and even signs of welfare changes induced by taxes and subsidies depend upon the mechanism used and ultimately upon firms countervailing power

what are the consequences of initiative taking in multinational subsidiaries the phenomenon of subsidiary initiative has received increasing attention in recent years but the consequences of initiatives and the associated dynamics of headquarters subsidiary relationships have received much less research attention building on resource dependence theory and self determination theory we argue that two basic goals subsidiary managers pursue are to achieve autonomy vis a vis corporate headquarters and influence over other units we investigate how a subsidiary s past initiatives contribute to its bargaining power and how headquarters response through granting attention or monitoring affects the realization of the subsidiary s goals using structural equation modeling our hypotheses are tested by drawing on a sample of 257 subsidiaries located in three different countries australia canada and the united kingdom our results show that subsidiaries are not able to increase their influence through initiatives unless they get headquarters attention we also find that subsidiary initiatives have a direct effect on subsidiary autonomy but the caveat is that initiatives also evoke headquarters monitoring which in turn decreases the subsidiary s autonomy in addition to providing insights into how subsidiaries can achieve their goals the paper also sheds light on the critical role headquarters plays in leveraging initiatives and the influence of individual subsidiaries in the multinational enterprise

foreign exchange equivalence and project appraisal procedures this paper investigates the implications of different adjustment mechanisms for shadow pricing traded and nontraded goods in a flexible price model a foreign exchange equivalent rule that can be readily adapted whatever the adjustment mechanism is derived it is shown that traded commodities are always valued at border prices and nontraded commodities can always be shadow priced in terms of changes in production and consumption of traded goods valued at border prices the role of the shadow exchange rate and the implications for measuring the balance of payments effect when no tax adjustment policy is assumed are also discussed copyright 1990 by royal economic society

patterns of control in u s uk and european multinational corporations this paper examines the type and level of control exercised by the parent headquarters of 50 u s uk and european multinational corporations over their foreign subsidiaries patterns of control in the 3 national groups differ in significant ways and these differences seem to have important implications for other characteristics of a company s organization design and managerial style

the global value chain and internalization theory in a research note in this issue strange and humphrey discuss how a global value chain gvc approach serves to usefully move internalization theory towards a better understanding of the increasingly important middle ground between markets and hierarchies in the contemporary highly globalized international business scene after a brief recount of their main arguments we argue that their discussion needs to the extended as it does not adequately recognize important differences between internalization theory and the gvc approach specifically the approaches differ on the notions of efficiency opportunism and level of analysis we then argue that internalization theory can benefit from the systemic view implied in the gvc approach and discuss the role of trust as a coordinating mechanism in international business this leads to a more general discussion of internalization theory and the difficulty of encompassing dynamic considerations such as learning and foreign operation mode combinations and flexibility within value chain interdependencies we conclude with a research agenda that flows from our discussion

stickiness and the adaptation of organizational practices in cross border knowledge transfers the reuse of organizational practices in multiple locations is a fundamental way in which mncs leverage knowledge to seek competitive advantage scholars approaching the issue of adaptation from both a market and an institutional perspective argue that in order to achieve fit with the local environment some degree of adaptation is advisable and the need for adaptation increases as the institutional distance between source and recipient locations increases however arguments to date have examined the effect of adaptation primarily on a subsidiary s long term performance a necessary precursor is to understand the effect of adaptation on the transfer process itself as transfer difficulty or stickiness may preclude the reuse of an organizational practice in the first place in this paper we explore how the adaptation of organizational practices affects the stickiness of cross border transfers we use structural equation modeling to analyze data from 122 internal transfers of best practice contrary to expectation we find that adaptation significantly increases rather than decreases the stickiness of cross border knowledge transfer

utilizing the broader agency perspective for studying headquarters subsidiary relations in multinational companies the nature of global business today increases the complexity of multinational companies and highlights the challenges of managing headquarters subsidiary hq sub relationships we identify key unresolved issues in hq sub relations including closing the gap between headquarters expectations and subsidiary performance managing the nested hierarchical relationships across multiple organizational layers and aligning these relationships across diverse subunits embedded in different social contexts we propose that agency theory particularly its more recent progressions can advance our understanding of these issues and we offer a perspective to guide such research we discuss several research implications of the static bilateral static multilateral dynamic and social and contextual streams of agency theory

price advertising and the deterioration of product quality arguments in favour of self enforced bans on advertising by professionals often rely on the stylized fact that advertising can communicate information about price but not about quality this being the case it is argued that allowing professionals to advertise runs the risk that firms will compete vigorously over price at the expense of the quality of their product this paper shows that even if price can communicate no information directly about quality it can do so indirectly because price will be a signal of quality because of this allowing advertising is shown to improve consumer welfare

explaining stakeholder evaluations of hrm capabilities in mnc subsidiaries this paper examines how functional and line management stakeholders evaluate operational human resource management capabilities in multinational corporation mnc subsidiaries we suggest that such evaluations are a function of two key structural factors 1 that focal subsidiary human resource hr departments respond differentially to the expectations of differently located stakeholders and 2 that the structural position of the stakeholder determines what cues he or she relies upon to construct the evaluation our findings show that the focal hr subsidiary department is likely to exert more effort towards meeting the expectations of line management stakeholders and we suggest that this is a function of line management s co location with the focal hr department second we find that co located line management stakeholders are more likely to rely on experience based cues when constructing evaluations whereas headquarters located functional stakeholders tend to rely on cognition based evaluation driven by their ability to compare across different subsidiary hr departments we contribute to the literature by going beyond existing research that has tended to focus on evaluation from the perspective of organizational behavior by providing a structural perspective on capability evaluation in mncs that combines the insights of role theory and cognitive choice heuristics

prices and qualities in markets with costly information this paper extends the seminal work of akerlof and salop and stiglitz in two directions i the sellers can select both the selling prices and quality levels of their good and ii the buyers can acquire price quality information about individual sellers at a cost we observe multiple price quality combinations in equilibrium which depend upon the distribution of information costs of consumers and upon whether quality or price or both are costly observable welfare comparisons of equilibrium are considered we show that welfare will be greater when price advertising is permitted

certification under oligopolistic competition in a symmetric duopolistic market where each firm s choice regarding certain quality attributes such as the environmental friendliness of its product is its own private information the extent of horizontal differentiation between firms plays a crucial role in a certifier s optimal certification policy under a non profit certifier it is always the case that both firms produce the highest quality and opt for certification this is also the case under a for profit certifier but only when the degree of horizontal differentiation is sufficiently high when horizontal differentiation is low the for profit certifier by charging a very high certification fee creates maximum vertical differentiation between firms as a result only one firm produces the highest quality and opts for certification whereas the other firm produces the lowest quality and does not opt for certification this asymmetry under a for profit certifier makes the market inefficient which provides one possible explanation for the existence of mostly non profit certifiers in such markets

oligopolistic competition in price and quality abstract we consider an oligopolistic market where firms compete in price and quality and where consumers have heterogeneous information some consumers know both the prices and quality of the products offered some know only the prices and some know neither we show that if there are sufficiently many uninformed consumers then there exists a unique equilibrium where price is a perfect indicator of quality this equilibrium is characterized by dispersion and pareto inefficiency of the price quality offers where better price quality combinations are associated with lower prices

credence attributes voluntary organizations and social pressure abstract credence attributes of products are unobservable through search or experience some consumers are willing to pay a premium for their provision and in addition citizens can apply social pressure on firms to supply credence attributes firms have formed voluntary organizations to assure the provision of credence attributes and the credible provision provides product differentiation this paper provides a theory of the voluntary provision of credence attributes in the presence of demand pull from consumers and social pressure from ngos where an organization chooses a credence standard and firms compete given the standard the credence standard is lower the larger the organization and social pressure results in a higher standard

managing the mne subsidiary advancing a multi level and dynamic research agenda abstract multinational enterprise mne subsidiaries abroad are important organizations in their own rights they typically hold some of the mne s most critical resources and operate at the forefront of complex international environments in this review we identify and organize theoretical and empirical research on subsidiary management based on over 600 articles in leading academic journals we develop a conceptual framework that integrates complementary streams of theoretical and empirical research with the subsidiary as its focal unit of analysis in particular we review six lines of research on subsidiary scope practices knowledge management engagement with local market and nonmarket actors performance and individuals within subsidiaries we highlight theoretical perspectives that have contributed to and been advanced by research on mne subsidiaries based on the review we explore future research agendas linking the contemporary research themes with two main thrusts first subsidiary management is a multi level phenomenon that would benefit from more microfoundational research second subsidiary management operates at key interfaces of technology paradigm shifts and of disruptions in the political and institutional environment research into the dynamics of subsidiary management would thus enhance our understanding of international business in a volatile global economy

characterizing environmental variation a hypothesized relationship between environmental variation and organizational actions is central to organization theory this study shows that conventional summary measures of instability do not capture all dimensions of environmental variation this problem is addressed with frequency amplitude and predictability measures that characterize the pattern of environmental variation the hypothesis that there is a relationship between longitudinal environmental variation and organizational structures actions and outcomes is common to most of the major perspectives of organization theory child 1972 hannan freeman 1977 pfeffer salancik 1978 thompson 1967 although there has been little agreement across theories about the causal mechanisms linking environmental variation with organizational characteristics organizational theorists have generally agreed that there is some relationship between longitudinal environmental change and organizing problems as a result environmental variability is a central independent construct in models of processes as disparate as strategic choice firm failure and executive turnover organizations experience longitudinal environmental variation as variation in the availability of the resources required for organizational survival dess beard 1984 52 these resources include sales and knowledge about product design and manufacturing processes in private enterprises budget allocations in the public sector personnel and other production factors researchers have typically characterized variation in the availability of such resources over time with measures of volatility dynamism or instability that attempt to capture total environmental variation with a single dimension we propose a characterization of the pattern of longitudinal environ

an empirical analysis and extension of the bartlett and ghoshal typology of multinational companies this study offers an empirical test and extension of the bartlett and ghoshal typology of multinational companies mncs a three fold typology of multinational companies global multidomestic and transnational is developed from the literature this typology is tested using data from 166 subsidiaries of 37 mncs headquartered in 9 different countries subsidiaries in the three types of mncs are shown to differ significantly in aspects of interdependence and local responsiveness

rating the raters are reputation concerns powerful enough to discipline rating agencies abstract credit rating agencies cras are accused of bearing a strong responsibility for contributing to the subprime crisis by having been deliberately too lax in the ratings of some structured products in response to this accusation cras argue that such an attitude would be too dangerous for them since their reputation is at stake the objective of this article is to examine the validity of this argument within a formal model are reputation concerns sufficient to discipline rating agencies we show that the reputation argument only works when a sufficiency large fraction of the cra income comes from other sources than rating complex products by contrast when rating complex products becomes a major source of income for the cra we show that it is always too lax with a positive probability and inflates ratings with probability one when its reputation is good enough we provide some empirical support for this prediction by showing that ceteris paribus the proportion of subprime residential mortgage backed securities rmbs that were rated aaa by the three main cras indeed increased over the last eight years we analyze the policy implications of our findings and advocate for a new business model of cras that we call the platform pays model

institutional theory and mnc subsidiary hrm practices evidence from a three country study this study sets out to explore human resource management hrm practices in multinational corporation mnc subsidiaries within an institutional theory framework based on a sample of 158 subsidiaries of mncs operating in the united states russia and finland the paper examines factors hypothesised to influence the hrm practices adapted in us japanese and european mnc subsidiaries located in russia finland and the us the results indicate significant differences in hrm practices used across host countries both the status of the subsidiary human resource department and the degree to which the subsidiary was involved in knowledge transfer with other parts of the mnc had a significant impact on the selection of hrm practices

the coordination of manufacturing interdependence in multinational companies many companies have recently adopted global manufacturing rationalization programs in order to realize the full benefit of these internationally integrated manufacturing strategies however companies need to overcome the problem of coordinating operations where interdependence exists among subsidiaries this article which is based on a field study of 25 multinational companies provides insights on how manufacturing interdependence among country subsidiaries is coordinated specifically the study examined the relationships between increasing manufacturing interdependence with the use of 4 coordination modes impersonal methods use of organization members who have a system sensitive outlook executive compensation systems based on a subsidiary s performance and personal communication and with the use of 3 communication patterns communication between managers of different country subsidiaries communication with top management and communication with a central manufacturing staff group findings suggest that although there is an extensive use of impersonal methods of coordination with increasing interdependence there is a change in coordination mix towards greater use of system sensitive members and personal communication increasing interdependence is also significantly associated with greater communication among country subsidiary managers and greater communication with a central manufacturing staff group although the relationships between increasing interdependence and communication with top management through the formal hierarchy was not found to be statistically significant interviews with managers suggested the importance of this channel when communication among country subsidiary managers and communication with the central manufacturing staff group are inadequate for managing the manufacturing interdependence implications are drawn for companies planning to increase the international integration of their manufacturing operations

foreign market entry strategies and post entry growth acquisitions vs greenfield investments we examine the relationship between the foreign market entry strategy and the subsequent growth of a subsidiary we build upon the penrose theory of firm growth and on the organizational economics international management and foreign market entry strategy literatures we hypothesize that the post entry growth of acquisitions is positively associated with weak and codifiable interdependence within the multinational enterprise network whereas the post entry growth of greenfield investments is positively related to strong and complex interdependence empirical findings from a sample of japanese subsidiaries in the us lend support to our argument

a knowledge based theory of the firm the problem solving perspective in this paper we develop a knowledge based theory of the firm while existing knowledge based theory focuses on the efficiency of hierarchy in economizing on knowledge exchange we develop a theory of the firm that focuses on the efficiency of alternative organizational forms ingenerating knowledge or capability our theory begins with the problem as the basic unit of analysis arguing that a problem s complexity influences the optimal method of solution search and the optimal means of organizing that search the distinguishing feature that differentiates among organizational alternatives is the different way each resolves conflict over the selection of solution trials that is the way it chooses the path of search our theory predicts that efficiency demands that these governance alternatives be matched in a discriminating way to problems based on their associated benefits and costs in governing solution search thus our theory is among the first to simultaneously treat both the boundary choice i e internal versus external and the choice among alternative internal approaches to organizing

project appraisal procedures and the evaluation of foreign exchange different procedures for evaluating foreign exchange have been suggested in the project appraisal manuals of unido and little and mirrlees while it is widely agreed that the manuals differ in their practical procedures there has been disagreement as to whether they are equivalent in principle using a model due to boadway we show that the manuals differ in principle the little mirrlees procedure can be given an interpretation which correctly values traded and non traded goods in project appraisal while the unido formula for the shadow exchange rate is not required when the balance of payments constraint is binding

strategic certification and provision of quality we study the effect of the presence of a certification intermediary in an environment where information asymmetries are particularly severe the intermediary improves the information that buyers have about quality this in turn increases the incentives that the seller has to provide high quality goods efficiency is increased by the presence of the intermediary but quality is underprovided in equilibrium relative to full information the intermediary can implement the optimal policy in many ways the amount of information revealed ranges from full disclosure to partial noisy disclosure

global strategy implementation at the business unit level operational capabilities and administrative mechanisms the study examines the impact of internationally strategy on organizational design and the influence of the organizational design on effectiveness at the business unit level the empirical findings are based on survey responses from eighty two business units competing in global industries the findings are supportive of the contingency notion which suggests that business unit effectiveness is a function of the fit between the international strategy and the organizational design

staying home or moving away restructuring efforts within multinational enterprises this paper analyses the impact of geographic dispersion on employment changes within multinationals building on earlier work of landier et al 2009 review of financial studies 22 3 1119 we investigate whether corporate decision making within a multinational is affected by the distance between an affiliate and its headquarter our findings suggest a detrimental impact of distance on employees by either an increased likelihood of observing a downsizing event or by witnessing a larger decrease in the number of employees at distant locations during downsizing events in addition our results seem to relate the higher likelihood of observing a downsizing event to the role of social factors on decision making the more visible a manager is in his community the less likely he is to downsize proximate divisions

learning to compete in a transition economy experience environment and performance does organizational learning as measured by experience in a host country affect international expansion performance if so does such a relationship between experience and performance hold over time how do the environmental forces in the host country affect such a relationship focusing on organizational learning by multinational enterprises mnes operating in a transition economy this study answers these three critical questions by exploring the relationships among experience environment and performance at the subsidiary level based on a recent survey of 108 mne subunits operating in china we find that the intensity and diversity of host country experience is an important predictor of subunit performance while the positive effect of the intensity of experience on performance diminishes over time the impact of the diversity of experience on performance remains unchanged moreover for mnes experiencing greater environmental dynamism complexity and hostility there is a stronger positive relationship between experience and performance

managing foreign subsidiaries agents of headquarters or an interdependent network in this study two different theoretical perspectives are used to develop sets of hypotheses regarding the mechanisms used to manage foreign subsidiaries of multinational corporations first agency theory serves as the basis for a model that predicts the use of monitoring mechanisms and incentive compensation then it is argued that these mechanisms are insufficient for managing subsidiaries characterized by high levels of intra firm international interdependence the management of which is critical to many of today s complex global firms a second set of hypotheses is argued linking international interdependence to several social control mechanisms primary and secondary data from u s based multinational corporations were used to test both sets of hypotheses the results indicate that agency theory although a useful foundation for studies of control within mncs is limited in its ability to explain fully the phenomenon of foreign subsidiary control however the model based on intra firm interdependence had much greater predictive ability copyright 2000 john wiley sons ltd

national culture and expatriate deployment we hypothesize that expatriate deployment is a control function predicted by home country culture dimensions with transaction cost and agency repercussions rather than culture in the aggregate this departure from the traditional conceptualization and measurement of cultural impact also yields a hypothesized asymmetrical effect which is tested for a multi country sample of 236 multinational subsidiaries using multiple measures of national culture hypotheses are supported with assertiveness and power distance confirmed as prime predictors of expatriate deployment

project appraisal and foreign exchange constraints a comment a paper in this journal by blitzer dasgupta and stiglitz i98i hereinafter bds entitled project appraisal and foreign exchange constraints examines the implications of various non optimal macroeconomic adjustment policies for project evaluation the discussion is presented in terms of a simple two good one consumer economy with price distortions which lead the ratio of the domestic price of the exported good e to the domestic price of the imported good i to be greater than the internati onal price ratio it is argued that the resulting trade gap will force the government to pursue an adjustment policy which may take the form of taxation of income or commodities rationing or foreign borrowing and it is shown that the choice of policy will determine the appropriate shadow price formulae to be used in project appraisal the view that world prices provide shadow prices for traded goods is argued to be correct for some but not all of the macroeconomic policies considered this comment argues that the bds analysis fails to specify how tax revenue is to be incorporated in the model as a result the various policy options open to the government are not clearly brought out we set out below in section i an amplified version of the bds general equilibrium model which includes tax revenue and use it to show how the different adjustment mechanisms have to be related to the public sector budget constraint in section ii we reconsider their analysis and show that if either an income or a commodity tax on the importable is used to ensure public sector balance then world prices remain shadow prices for traded goods in section iii we make the point that the presence of import tariffs does not imply in the context of a real general equilibrium model that the balance of payments constraint will be violated the conclusion is drawn that endogenous foreign borrowing cannot be analysed without respecifying the basic bds model our comment is confined to the problem of shadow pricing traded goods in the bds model we do not consider rationing as a means of macroeconomic adjustment policy nor do we comment on their section iii where they analyse the additional problems which follow from introducing a non traded commodity into the model

the role of international assignees social capital in creating inter unit intellectual capital a cross level model we conceptualize international assignees as informational boundary spanners between multinational enterprise units and develop a cross level model that explores how assignees social capital translates into inter unit intellectual capital first as knowledge brokers assignees create inter unit intellectual capital by linking their home and host unit social capital thereby enabling cross unit access to previously unconnected knowledge resources second as knowledge transmitters assignees host unit social capital facilitates their creation of individual intellectual capital which in turn translates into inter unit intellectual capital we conclude that individual social capital needs to be explicitly transferred to the organizational level to have a sustained effect on inter unit intellectual capital

managing knowledge transfer in mncs the impact of headquarters control mechanisms in this paper we explore the impact of organisational mechanisms on inter unit knowledge flows in multinational corporations mncs a comprehensive model based on agency theory and socialisation theory is tested on a sample of 134 finnish and chinese mnc subsidiaries our findings indicate that mncs can influence inter unit knowledge transfer by specifying the objectives of the subsidiary and by utilising corporate socialisation mechanisms however we found no support for the hypothesised impact of management compensation systems and the use of expatriate managers on the extent of knowledge transfers from foreign subsidiaries to other parts of the mnc

how multinational subsidiary mandates are gained and lost a subsidiary mandate is a business or element of a business in which the subsidiary participates and for which it has responsibilities beyond its national market this research studied thirty one mandates in six canadian subsidiaries of u s owned multinational corporations a life cycle framework was proposed and used to explore the factors associated with the gain development and loss of mandates by subsidiaries two key findings emerged first it was shown that there is a risk in having a full scope world product mandate because it is possible to become marginal to the corporate strategy second it was observed that the engine of subsidiary growth is its distinctive capabilities and that for a mandate to be effective it must be built on those capabilities implications for mandate sustainability are proposed on the basis of these two insights

prices as signals of product quality this paper is concerned with the provision of quality in markets in which consumers have only imperfect information the analysis focuses on a market for a product that can be produced at different quality levels all consumers prefer higher to lower quality but they may differ in their willingness to pay for quality producers can produce any quality they like but higher qualities are more costly to produce the information in this market is imperfect in the sense that the exact quality chosen by a firm is known only to the firm itself some information about the quality of a firm s product will however reach its potential customers even if they do not make any special effort to acquire it within the framework suggested here two conclusions are drawn first prices may serve as signals which exactly differentiate the available quality levels that is there exists a fulfilledexpectations equilibrium at which each price signals a unique quality level second the pricesignals are not arbitrary each price signal exceeds the marginal cost of producing the quality it signals such a mark up depends on the nature of the product specific information received by consumers the poorer the information the higher the mark up

implementing global strategy characteristics of global subsidiary mandates implementing a global strategy requires coordinating subsidiary activities across country locations the assumption often made is that such coordination must be managed at headquarters however an alternate approach is decentralized centralized responsibilities in which different subsidiaries within the multinational are given worldwide mandates to manage specific products or products lines this study identifies subsidiary characteristics that are associated with receiving a global mandate by examining foreign subsidiaries located in france germany japan u k u s and canada

an empirical analysis of the integration responsiveness framework in global industries in this study businesses competing in global industries were categorized into three groups according to the integration responsiveness framework for conceptualizing industry pressures confronting business competing internationally using this framework contextual conditions associated with each group were examined competitive attributes distinguishing each group were then identified to clarify alternate business level strategies for competing within a global industry context beyond providing additional insight into the nature of competition in global industries several broad extensions to the integration responsiveness framework are suggested

building a process model of local adaptation of practices a study of six sigma implementation in korean and us firms the strategic transformation of asian firms into global players has involved the adoption and adaptation of many organizational practices developed in the west we build a process model of adaptation by observing how an organizational practice is adapted to a local setting different from its locus of origin through inductive methods and case studies of six sigma implementation in korean and us firms based on these cases we propose a cascading sequential pattern to the local adaptation of the conceptual social and technical dimensions of organizational practices reconciling conflicting views in the literature on whether or not to adapt our theoretical model highlights the importance of considering the different degrees of contextual influence on different underlying dimensions of a practice and of configuring each dimension accordingly further we suggest that the sequence and configuration of adaptation across different practice dimensions matter to the successful implementation of a practice across borders

the effect of national culture on the choice of entry mode characteristics of national cultures have frequently been claimed to influence the selection of entry modes this article investigates this claim by developing a theoretical argument for why culture should influence the choice of entry two hypotheses are derived which relate culture to entry mode choice one focusing on the cultural distance between countries the other on attitudes towards uncertainty avoidance using a multinomial logit model and controlling for other effects the hypotheses are tested by analysing data on 228 entries into the united states market by acquisition wholly owned greenfield and joint venture empirical support for the effect of national culture on entry choice is found

management and ownership effects evidence from five countries despite the growing recognition in the corporate governance literature that the relationship between ownership concentration and profitability is context dependent this issue has not yet been subjected to direct empirical investigation using a single cross national sample this study empirically examines the ownership concentration performance relationship across the nations of canada france germany the united kingdom and the united states essentially we argue that the correlation if any between ownership concentration and firm profitability differs across countries in a systematic way determined by the national system of corporate governance results indicate that important and statistically significant differences do in fact exist across the countries studied 1998 john wiley sons ltd

the determinants of expatriate staffing by japanese multinationals in asia control learning and vertical business groups we empirically examine the determinants of the decision whether or not to appoint an expatriate as the managing director of overseas affiliates for a sample of 844 japanese manufacturing affiliates operating in asia in 1995 confirmation is found for hypotheses derived both from a control and coordination perspective on expatriation and from a knowledge creation and learning perspective strategic dependence of the parent on the affiliate increases the propensity to appoint expatriates whereas localisation of the affiliate reduces it organisational experience in the country both by the affiliate and by the firm increases the probability that host country nationals will be appointed inter firm relationships within vertical keiretsu groups impact on expatriation policies through inter organisational knowledge exchange in host countries and the mitigation of localisation requirements owing to intra group transactions

the effect of national context on perceptions of risk a comparison of planned versus free market managers a model is developed to explain the effect of national context on risk related decisions an essential feature of risk related decisions is substantial uncertainty or inadequate information as well as significant consequences regarding future outcomes we argue that differences in information flows and consequences across national institutional environments affect the perceived uncertainty of decision situations for this reason the institutional environment in which managers reside should play a fundamental and systematic role in influencing their perceptions of risk we test our model on managers from two environments that contrast in terms of information and consequences related to risk a free market economy the u s and a centrally planned economy the czech republic in 1992 our results indicate that the institutional environment does indeed play a strong and systematic role in explaining managers risk related decisions thus national environment appears to be an important contextual condition to which the propensity to take risks is sensitive

credence goods efficient labelling policies and regulatory enforcement we analyse the optimality of information revelation of hidden attributes of credence goods via alternative labelling procedures when consumers are heterogeneous in their willingness to pay for the hidden attribute producers can either self label their products or have them certified by a third party the government can impose self or third party labelling requirements on either the green or the brown producers our benchmark model develops a condition that links the optimal imposition of third party labelling to the relative market share of each type of the good under complete information we extend our analysis to incorporate asymmetric information and cheating by the producers when corrupt producers can affix spurious labels the government needs to supplement the labelling policy with costly monitoring activities we find that mandatory self labelling schemes generally dominate mandatory third party labelling unless the market share effect greatly exceeds the incentive to cheat effect

product quality and imperfect information this paper considers markets in which consumers are imperfectly informed about both product prices and quality levels offered by firms we characterize necessary and sufficient conditions for existence of the various equilibrium configurations of price and quality that can arise in two paradigm cases when all consumers prefer higher quality and when all consumers prefer lower quality our results suggest that firms will exploit imperfect information by charging noncompetitive prices as well as by offering other than ideal quality in the former case but only by changing noncompetitive prices in the latter case

a resource based theory of the firm knowledge versus opportunism this paper develops a resource based knowledge based theory of the firm its thesis is that the organizational mode through which individuals cooperate affects the knowledge they apply to business activity we focus on the polar cases of organization within a firm as compared to market contracting there will be a difference in the knowledge that is brought to bear and hence in joint productivity under the two options thus as compared to opportunism based transaction cost theory we advance a separate yet complementary answer to the question why do firms exist our aim is to develop an empirically relevant and complementary theory of why firms are formed a theory based on irreducible knowledge differences between individuals rather than the threat of purposeful cheating or withholding of information we assume limited cognitive abilities on the part of individuals bounded rationality and assume that opportunistic behavior will not occur the latter allows us to determine whether resource based

organizing knowledge processes in the multinational corporation an introduction this introduction discusses the contrast between on the one hand the current popularity of addressing mnc organization in knowledge terms and on the other the lack of adequate understanding of many of the causal mechanisms and contextual factors in relations between knowledge processes and organizational factors a number of the relevant research challenges are identified and it is clarified how the five articles in this focused issue addresses some of these

project appraisal and foreign exchange constraints a rejoinder in their comment on blitzer dasgupta and stiglitz i98i bds dinwiddy and teal i987 dt state that many of the points made in this note apply to bell and devarajan i983 however for clarity we confine ourselves to commenting on only bds the purpose of this note is to point out that none of dt s criticisms of the bds piece applies to our i 983 paper in fact we make essentially the same points using a somewhat more general model than dt our results are consistent with but not subsumed by those of dt and are therefore sometimes at variance with those of bds dt s main claim is that bds s assertion that the border price rule fails to hold when commodity taxation is used as the equilibrating device is false this stricture does not apply to our i 983 paper for in every single case we consider the relative shadow prices of the two tradeable goods are shown to be their relative border prices see our equations 22 and 23 28 and 29 and 33 and 34 dt show that when commodity taxation is the equilibrating device shadow prices are proportional to world prices in contrast to bds s claim we derive the same result in the case when the tariff on one of the tradeable goods is the equilibrating device p 474 moreover dt s specific criticisms of bds s treatment of the public sector s budget do not carry over to our model unlike bds we do specify how tax revenues are incorporated in the system see our equation i4 nor did we overlook the accounting relationship between the public sector budget deficit and the current account deficit 1 we state t he government s budget deficit or surplus registers an equal change in the government s net foreign assets through foreign borrowing or lending p 46i hence endogenous foreign borrowing in our model arises precisely in the case when the public sector s budget constraint is not satisfied due to tax rates and public expenditures being exogenously given to conclude while dt make several valid criticisms about the bds paper their attempt to tar our i983 paper with the same brush is unwarranted

on evaluation costs in strategic factor markets the implications for competition and organizational design this paper uses a formal model to study how evaluation costs affect competition for resources in strategic factor markets it finds that relative scarcity may not always benefit resource sellers rather when competition among resource investors passes a certain threshold intensity miscoordination among investors increases to the point that sellers expected profits decline this paper extends the model to consider how investors organize to overcome managerial agency in resource evaluation two organizational designs are considered a incentivization wherein a lower level manager is motivated by an incentive contract to evaluate resources for an investor and b supervision wherein evaluation is either handled directly or closely monitored by headquarters the model suggests that competition among investors will be associated with a greater use of supervision and that investors using supervision will tend to make lower offers this paper also finds that supervision will be more common when valuable resources are rare this paper was accepted by bruno cassiman business strategy

shadow prices for project evaluation under alternative macroeconomic specifications for purposes of social cost benefit analysis a project may be viewed as a disturbance to the economy displacing it from some initial equilibrium to a new one but the new configuration will depend on which particular variables adjust to restore equilibrium this paper examines the shadow prices for project evaluation under alternative assumptions about how equilibrium is restored when the government reacts by altering its foreign exchange reserves the shadow prices coincide with those advocated in the manuals on social cost benefit analysis however if the government adjusts its domestic expenditures or tariff rates the shadow prices will differ from those of the manuals except insofar as the relative shadow prices of tradeables remain their relative border prices the paper first presents the model followed by two cases in which domestic prices and wage rates do not vary because ad valorem tariffs are fixed and one case in which they are endogenous

inattentive consumers and product quality this paper studies a model in which some consumers shop on the basis of price alone without attention to potential differences in product quality a firm may offer a low quality product to exploit these inattentive consumers in the unique symmetric equilibrium of the model firms choose prices with mixed strategies similarly to varian 1980 in which some consumers purchase from a random seller without attention to market prices in our model though firms also choose quality stochastically and there is both price and quality dispersion two stylized policy interventions are considered competition policy which acts to increase the number of sellers and market transparency reforms which act to increase the fraction of attentive consumers with fewer inattentive consumers firms are less likely to cheat i e cut quality which therefore improves welfare but profit and consumer surplus can either increase or decrease when there is a large number of sellers approximately half the sellers cheat regardless of the fraction of inattentive consumers and introducing more sellers boosts consumers surplus and reduces profit while the impact on welfare is ambiguous

the role of expatriates in the management of interdependence complexity and risk in multinational corporations a multilevel analysis of environmental country and organizational affiliate factors is used to explain the differential utilization rates of u s nationals in overseas professional positions of a major u s bank with 84 branches in 43 countries the research suggests that to the extent that the affiliates of a multinational corporation operate in environments with differing levels of political risk cultural distance and competition and have operations with different levels of complexity and interdependence a single staffing policy may be inappropriate

balancing subsidiary influence in the federative mnc a business network view the contest for intra organisational power in the multinational corporation mnc has gradually become a prominent issue on the research agenda as long as 25 years ago hedlund 1980 investigated the strategic roles of subsidiaries in mncs and doz and prahalad 1981 raised the issue of how difficult it is for headquarters to remain in control of its subsidiaries and to influence their strategies over time since then several researchers have suggested that mncs can be considered to be dispersed structures of power in which the top management s authority does not necessarily result in hierarchical power being the ultimate control mechanism hedlund 1986 forsgren 1989 ghoshal and bartlett 1990 doz and prahalad 1993 ferner and edwards 1995 kristensen and zeitlin 2001 morgan and whitley 2003 birkinshaw and hood 1998 examined the evolution of capabilities at the subsidiary level and recognised that in most corporations there is an internal competition for charter that implies a process of change in subsidiary roles birkinshaw and hood 1998 782 case research has also indicated that changes in the charters of divisions or subsidiaries in mncs constitute a strong feature of horizontal or vertical competition in the corporate marketplace galunic and eisenhardt 1996 birkinshaw and fry 1998 the tension between the headquarters and overseas laboratories caused by the laboratories desire for autonomy and influence is an example of such a competition asaka wa 2001

intellectual capital configurations and organizational capability an empirical examination of human resource subunits in the multinational enterprise building on the organizational capabilities literature and theories of the multinational enterprise this paper develops and tests a framework that examines the relationship between intellectual capital configurations and organizational capabilities in human resource hr subunits looking at 187 subunits from 20 mnes findings show that intellectual capital dimensions vary in their usefulness for generating sharing and implementing hr management practices in particular while certain resources may help in the development of one capability they may harm the development of another implications are that an organization s intellectual capital investments will differ depending on the desired capability

prices product qualities and asymmetric information the competitive case recent developments in the economics of information emphasize the informational content of prices we examine the degree to which prices convey information on product quality to uninformed agents under perfect competition we show that a rational expectations equilibrium may not exist when an equilibrium does exist the information on quality conveyed by prices depends on the shape of the average cost curves and the relative numbers of informed and uniformed agents

a cultural explanation of the foreign bias in international asset allocation abstract this paper examines the foreign bias in international asset allocation following extant literature in behavioral finance we argue that a society s culture and the cultural distance between two markets play an important role in explaining the foreign bias in particular we hypothesize that the degree of a nation s uncertainty avoidance affects the foreign bias more uncertainty avoiding countries allocate less to foreign markets as does the degree of a country s individualism in individualistic countries performance is more directly attributed to a person and less to teams causing these individuals to be more aggressive in their foreign asset allocations we further expect that the degree of cultural distance between two countries affects the amount of money allocated to that market based on extensive robustness analyses we find support for our hypotheses on the role of culture in international asset allocation

an institutional approach to cross national distance cross national distance is a key concept in the field of management previous research has conceptualized and measured cross national differences mostly in terms of dyadic cultural distance and has used the euclidean approach to measuring it in contrast our goal is to disaggregate the construct of distance by proposing a set of multidimensional measures including economic financial political administrative cultural demographic knowledge and global connectedness as well as geographic distance we ground our analysis and choice of empirical dimensions on institutional theories of national business governance and innovation systems in order to overcome the methodological limitations of the euclidean approach we calculate dyadic distances using the mahalanobis method which is scale invariant and takes into consideration the variance covariance matrix we empirically analyze four different foreign expansion choices of us companies to illustrate the importance of disaggregating the distance construct and the usefulness of our distance calculations which we make freely available to managers and scholars

a microfoundations approach to transnational capabilities the role of knowledge search in an ever changing world scholars seeking to understand the origin of dynamic capabilities have struggled to articulate specific capabilities and locate their source of variation within the firm we propose that the transnational imperative and a microfoundations approach to knowledge search can help to develop this topic adopting an engaged scholarship approach hypotheses are tested in a global consulting company counter to traditional capabilities arguments we find that drawing from globally dispersed colleagues will more strongly impact local responsiveness than drawing from locals outside the company though both may still be needed efficiency increases when teams draw upon codified knowledge but decreases when they draw upon embedded tacit knowledge finally through continual learning teams can change and re direct the composition of their responsiveness and efficiency activities in ways sensitive to an ever changing world

extending the internationalization process model increases and decreases of mne commitment in emerging economies the internationalization process model suggests that firms internationalize by building positions in foreign markets and networks following iterative cycles of learning and changes in commitment however as subsidiaries evolve commitments may be decreased as well as increased a phenomenon that has rarely been studied moreover it remains an open question why strategic intentions at the outset of an investment project differ from the actual operations established we address these questions by extending the model and combining it with mintzberg and waters framework of strategy formation specifically we suggest that commitment decisions correspond to statements of intended strategy while network positions correspond to realized strategies the processes of learning opportunity creation and trust building triggered by commitment decisions are however moderated by institutional influences that lead to divergences between realized and intended strategies we test propositions derived from this framework on a survey data set of subsidiaries of multinational enterprises in hungary lithuania and poland and find that institutional voids and institutional uncertainty affect subsidiary strategy implementation but in opposing directions under high institutional uncertainty investors prefer low commitment but flexible modes that enable later commitment increases whereas institutional voids increase up front information search and adaptation costs that reduce the likelihood of early post entry adjustments our analysis reinforces the need for more differentiated theoretical analyses of how institutions affect business strategies over time

project escalation and sunk costs a test of the international generalizability of agency and prospect theories previous north american research suggests that aspects of agency theory and prospect theory may explain decisions to escalate commitment to failing projects this study explores the universality of these theories in this context the willingness of north american and asian managers to escalate commitment to losing projects was measured using four go no go decision cases we hypothesized that asian managers would be less willing to act in their self interest a lower agency effect and would be more willing to escalate a decision in the face of negative framing a stronger framing effect we found that agency theory had strong explanatory power for project in our asian sample framing effects were significant in both but they were not significantly different

microfoundations in international management research the case of knowledge sharing in multinational corporations microfoundations have become an important theme in recent macro management research however the international management im field is an exception to this we document the lack of attention on microfoundations in im research by focusing on knowledge sharing a key im research field which we investigate by means of a keyword based literature study of the leading im and general management journals we discuss possible reasons why microfoundations have so far met with less resonance in im research we point to the training and background of im scholars as possible reasons we also highlight the significance that im scholars place on context and structure in explanation these may be seen as contrary to a microfoundations perspective a view that we show is incorrect we end by identifying several microfoundational issues in im research calling for a sustained effort with respect to theory heuristics and empirics

sourcing patterns of foreign owned multinational subsidiaries in europe tavares a t and young s 2006 sourcing patterns of foreign owned multinational subsidiaries in europe regional studies 40 583 599 this paper investigates the determinants of the international sourcing propensities of foreign owned multinational mne subsidiaries in four european union host countries major findings concern the impact of subsidiary roles and economic integration on international sourcing patterns regional and global integration are leading to a greater import orientation among mne subsidiaries including product mandate firms that are assumed to be strongly embedded within host economies the results cast doubts on existing criteria for inward foreign direct investment fdi attraction policy implications are developed relating to the attraction of inward fdi and to corporate development policies tavares a t et young s 2006 la distribution des sources d approvisionnement des filiales multinationales a capital etranger en europe regional studies 40 583 599 cet article che

location and the multinational enterprise in the early development of the international business field the focus of attention moved from the country level to the firm level and interest in location issues declined more recently firm based research has itself become increasingly concerned with the study of firm location interactions when examining two way knowledge flows or spillovers between multinational enterprises mnes and other actors in specific locations the diversity or heterogeneity of firms matters as does the diversity of locational environments the localization of knowledge sources depends on mne group level strategies for growth and organizational decentralization on subsidiary level evolution towards local competence creating efforts and on the development of suitable business networks within locations mnes now have a greater potential to benefit from a synergistic locational portfolio of complementary sources of knowledge the locational composition of the international network for knowledge sourcing of a given mne depends upon the extent of institutional compatibility between the locations in which the mne is active this compatibility between locations in turn affects the capacity of the mne to become an insider in local business systems and to influence the local institutional environment

human capital in multinational enterprises does strategic alignment matter this research proposes a strategic human capital alignment framework to examine whether the alignment between subsidiary strategy i e export oriented vs local market oriented strategy and human capital i e parent firm vs local specific human capital is positively related to subsidiary performance in multinational enterprises mnes we further explore two important exogenous i e foreign exchange rate change and endogenous i e mne international experience boundary conditions since they may adjust the positive effect of strategic human capital alignment on performance the analysis based on 5604 subsidiary observations of 423 mnes from 1990 to 2012 confirms the positive synergic effect of aligning subsidiary strategy and human capital and shows the moderating effects of foreign exchange rate change and mne international experience by presenting the importance of subsidiary strategy global staffing alignment and the roles of external economic environments and internal organizational capabilities as boundary conditions the strategic human capital alignment framework suggests that what makes human capital valuable for the firm is its alignment with strategic orientation thus managers should carefully deploy the appropriate type of human capital to fulfill the requisite organizational strategy and take into account changing external and internal contextual conditions in applying the framework

honest certification and the threat of capture abstract this paper derives conditions under which reputation enables certifiers to resist capture these conditions alone have strong implications for the industrial organization of certification markets 1 honest certification requires high prices that may even exceed the static monopoly price 2 honest certification exhibits economies of scale and constitutes a natural monopoly 3 price competition tends to a monopolization the results derive from a general principle of reputation models that favors concentration this principle implies benefits from specialization and explains specialized certifiers as efficient market institutions that sell reputation as a service to other firms

searching locally and globally applying daniel levinthal s scholarship to international business daniel a levinthal has made several important contributions to the fields of strategy and management his research has been pivotal in enhancing our understanding of interactions between the internal and external contexts that organizations face as well as the roles of experience search and learning processes despite substantial overlap between the core issues in international business ib and levinthal s work the ib field has yet to fully embrace key tenets of his research we aim to bridge this gap by providing a number of concrete suggestions for areas in which ib research may benefit from levinthal s work and vice versa

deconstructing the liability of foreignness regulatory enforcement actions against foreign banks it is widely acknowledged that foreign firms are at an institutional disadvantage relative to domestic firms operating in the local market this liability of foreignness typically manifests as inferior performance for foreign firms relative to domestic competitors although myriad studies document the liability of foreignness few demonstrate how individual host country institutions generate specific liabilities in this study we explore the regulatory liabilities that foreign firms face using a sample of 189 foreign banks operating in the united states we find that regulators initiate more enforcement actions on average against foreign banks than they do against domestic banks the effects however vary by regulation type and firm characteristics for example foreign banks are no more likely to receive risk related sanctions but far more likely to receive stakeholder related sanctions foreign banks with higher quality of human capital and more host country experience are less likely to run afoul of all regulations foreign banks with more third country experience are less likely to receive risk related sanctions but more likely to receive stakeholder related sanctions the results highlight the contingent nature of regulatory liabilities the role of information asymmetry versus regulatory bias in enforcement outcomes and the liability reducing effects of resources and capabilities

the effects of information voids on capital flows in emerging markets information voids reflect a lack of publicly available information about a country s investment climate and represent the information problems associated with institutional voids we argue that foreign investors differ in their sensitivity to information voids based on their own private information and their flexibility in responding rapidly to change we predict that foreign banks will be least hampered by information voids due to their privileged access to private information about local conditions and ability to adapt quickly to new information portfolio investors while impeded by information voids due to their severely limited access to local private information are able to quickly respond to new information foreign direct investors have moderate access to local private information yet their inability to adapt quickly creates problems dealing with information voids using time series cross sectional data on local public information and capital flows to the thirty largest emerging markets from 1994 to 2012 we find preliminary support for our hypotheses regarding the sensitivity of different investors to information voids we find that direct investors are most sensitive to information voids and banks are least sensitive while portfolio investors are moderately sensitive

a review of research on the growth of multinational enterprises a penrosean lens abstract we provide a comprehensive review of the growth of multinational enterprises mnes based on a quarter century 25 years of scholarly international business publications we synthesize research insights on the determinants of the growth of mnes through the lens of penrose s theory of firm growth which is the most influential theoretical perspective on firm growth the review takes stock of the research findings on the facilitators constraints and the trajectory of growth of mnes and elaborates on the commonalities and differences between research on the growth of mnes that draws on penrose s theory and research that does not this comparison highlights the opportunity to build an internally coherent theory of the growth of mnes that is a theory that connects what an mne is to what determines an mne s growth it also indicates that past research placed a strong emphasis on exogenous factors e g cross country distances as key constraints on growth even though the penrosean lens suggests a close consideration of endogenous factors that drive international growth as well as endogenizing the ostensibly exogenous growth determinants the review highlights the importance of firm specific managerial knowledge and learning which shapes the direction of the growth of mnes and ensures its administrative coherence