foreign direct investment mode choice entry and establishment modes in transition economies in this study we bridge two streams of foreign direct investment literature specifically studies on establishment mode choice i e the choice between an acquisition and a greenfield establishment and studies on entry mode choice i e the choice between a wholly owned outlet and a subsidiary with shared ownership we arrive at a conceptual synthesis for an examination of the effects of the same predictors on the dual entry establishment mode choice made in the context of a single foreign investment we demonstrate that a parent firm s technological intensity international strategy and experience determine both establishment and entry mode choices moreover we apply williamson s new institutional economics to investigate the influence of institution building on multinational enterprises dual investment choice in the context of transition economies we test empirically the possible moderating effect of a host country s institutional environment we conclude that the degree of the host country s institutional advancement moderates the effect of both technological intensity and international strategy on the establishment and entry mode choice

dynamic multiproduct optimal hedging in the soybean complex do time varying correlations provide hedging improvements optimal multiproduct time varying hedge ratios are determined for a soybean complex and their risk mitigating impact is contrasted over single commodity time varying and naive hedge ratios a parsimonious regime switching dynamic correlation model is employed with the estimated dynamic correlation matrix among prices varying between two different levels and the time varying correlations being applied to the multiproduct setting findings obtained are three fold first there is significant evidence that estimated simultaneous correlations among different commodities prices e g soybean spot and soybean meal futures attain different values along the time series second there is a substantial reduction in margin variance provided by the optimal multiproduct time varying hedge ratios over single time varying and naive hedge ratios for both in and out of sample data third average optimal multiproduct time varying hedge ratios for soybean and soybean meal 0 82 and 0 74 respectively for out of

foreign entry cultural barriers and learning this paper examines the longevity of foreign entries hypotheses are developed on the mode start ups vs acquisitions and ownership structure wholly owned vs joint ventures in relation to cultural distance the hypotheses are tested within a framework of organizational learning using data on 225 entries that 13 dutch firms carried out from 1966 onwards results show that the presence of cultural barriers punctuates an organization s learning cultural distance is a prominent factor in foreign entry whenever this involves another firm requiring the firm to engage in double layered acculturation we also identify locational paths of learning the longevity of acquisitions is positively influenced by prior entries of the firm in the same country similarly the longevity of foreign entries in which the firm has a majority stake improves whenever the expanding firm engaged in prior entries in the same country and in other countries in the same cultural block

the pace of mnes sequential entries cumulative entry experience and the dynamic process this study examines the pace with which multinational enterprises undertake sequential entries in a foreign market we focus on learning effects from cumulative entry experience of different modes within a host market moreover we investigate the dynamic process of entry mode switch and how cumulative entry experience reduces the expansion constraint using a dataset of sequential entries by us firms in china during 1979 2002 we find that the impact of cumulative entry experience on the pace of sequential entries varies across different modes further firms with more cumulative entry experience can cope with the constraint of entry mode switch

cost value and foreign market entry mode the transaction and the firm this paper compares and contrasts the mode of foreign market entry decision from the transaction cost internalization and organizational capability perspectives each of these perspectives operates at a different level of analysis respectively the transaction and the firm and consequently differs in the primary arena of attention namely transaction characteristics and the capabilities of firms in making the comparison a key distinction is made between the cost and the value aspects in the management of know how based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined the main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose the paper shows how the value based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that even though tc internalization theory raises some valid concerns the organizational capability framework may be more in tune with today s business context some of the assumptions of the tc internalization perspective both direct opportunism exploitation of existing advantage and indirect preservation of the value of know how across locational contexts asymmetry between bounded rationality for transaction and production purposes are critically examined and questioned implications of a shift from a cost to a value based framework are discussed and the need for a shift in research focus is emphasized

asymmetric pass through and risk of interest rate an empirical exploration of taiwan and hong kong this study employs the asymmetric threshold cointegration test suggested by enders and siklos 2001 and creates asymmetric ec egarch 1 1 m model to investigate the pass through of money market rate to banking retail rates in taiwan and hong kong it further explores the impact of interest volatility on interest rates over the period of february 1988 to december 2004 we find that the interest pass through mechanism of these two markets is noncomplete in addition based on the asymmetric threshold cointegration test we discover the existence of asymmetric cointegration relationship between retail rates and market rate in both markets in particular while employing asymmetric ec egarch 1 1 m model to test for the influence of money market rate adjustment and volatility on retail rates in short run we find robust evidence that there exist the upward rigidity in deposit rate and the downward rigidity in lending rate in both taiwan and hong kong this finding supports the hypothesis of the collusiv

mutual holding companies evidence of conflicts of interest through disparate dividends abstract the mutual holding company mhc structure establishes a dual class stock that creates a unique opportunity to transfer wealth from thrift depositor owners to new minority shareholders through the disparate payment of dividends we show that mhcs are priced higher than comparable non mhcs and dividend policy is a significant component of this valuation we also show that mhc thrifts pay significantly higher dividends than non mhc thrifts and that an office of thrift supervision ots ruling reducing the potential for disparate dividends between the two classes of shareholders resulted in lower dividends these results have policy implications of special significance given that the ots reversed its position in 2000 and because of the current controversy over the use of the mhc structure in the financial service industry

internationalisation conceptualising an entrepreneurial process of behaviour in time this paper presents a three stage process of conceptual development in response to the call for a unifying direction for research in the emergent field of international entrepreneurship drawing on classic approaches to internationalisation and importing insight from entrepreneurship as a separate and distinct field of study the paper develops three potential models of internationalisation as a time based process of entrepreneurial behaviour the models evolve from the simple through general to precise levels of conceptualisation research implications are discussed

prior conditions and early international commitment the mediating role of domestic mindset our study investigates why some firms engage in low international commitments such as exports in the early phases of internationalization whereas others leapfrog the internationalization process and start with high international commitments in the form of foreign direct investment fdi process models of internationalization propose that firms start with low commitment activities and gradually increase their commitments to international markets however recent empirical evidence has shown that many firms make high international commitments from the start our findings suggest that domestic resources and competitive action propensity affect early international commitments indirectly through domestic mindsets a domestic mindset refers to the knowledge structures of the top management team prior to starting international activities based on their managerial experience and learning in domestic markets our results suggest that knowledge and learning gained in domestic markets through diverse resource and competitive activities may be crucial in early international commitments

modal choice in a world of alliances analyzing organizational forms in the international hotel sector in the new management landscape where interfirm collaborations are common international companies today have fully owned operations and equity joint ventures as well as non equity alliances which in the service sector include franchising and management service agreements what determines the optimum choice of organizational mode the new syncretic theory developed in this paper combines concepts from transaction costs theory agency theory corporate knowledge and organizational capability theories to answer this question the paper then tests these concepts to explain the incidence of these modes in the international hotel business using canonical discriminant analysis as well as logistical regression using a generalized logit model the choice of entry mode is shown to be determined by both country or environmental variables as well as firm specific variables

mode of entry mode into a foreign market the case of u s mutual funds in canada abstract u s mutual fund companies offer funds in canada through two channels foreign direct investment or trade in advisement services the total value of u s controlled funds amounts to 18 of the canadian equity fund market this paper investigates how the fund level and firm level characteristics affect the channel used to enter the canadian market empirical results indicate that the funds offered through fdi are not especially successful in the u s market but are associated with dominant companies whereas the funds offered through trade in advisement services are highly successful in the u s market and are from companies with relatively few successful funds

antecedents and performance implications of channel integration in foreign markets this study enhances our understanding of channel integration in foreign markets on two fronts first the eclectic approach to foreign entry mode proposed by hill hwang and kim 1990 and kim and hwang 1992 is used to examine transaction specific organizational capability and strategic factors that influence channel choices in foreign markets empirical results based on survey of u s firms support the combined relevance of these factors in predicting the degree of channel integration second the study empirically examines the performance consequences of channel integration the results suggest that although the degree of channel integration does not have a direct influence on channel performance a contingency model based on the fit between the contextual factors and the actual channel choice is significantly related to performance in foreign markets

tests for a systematic risk component in deviations from uncovered interest rate parity in the intertemporal asset pricing model investments in spot foreign currencies involve time varying risk proportional to the conditional covariance of the value of the position with the intertemporal marginal rate of substitution of domestic currency we detect such risk premia in deviations from uncovered interest rate parity using weekly spot currency prices and eurocurrency interest rates our tests use the conditional capital asset pricing model with a world equity index as benchmark to represent aggregate wealth

choice of foreign market entry mode impact of ownership location and internalization factors firms interested in servicing foreign markets face a difficult decision with regards to the choice of an entry mode the options available to a firm include exporting licensing joint venture and sole venture several factors that determine the choice of a specific foreign market entry mode have been identified in previous literature these factors can be classified into three categories ownership advantages of a firm location advantages of a market and internalization advantages of integrating transactions this study examines the independent and joint influences of these factors on the choice of an entry mode multinomial logistic regression model is employed to test the hypothesized effects

analyzing foreign market entry strategies extending the internalization approach a new fully integrated analysis of the foreign market entry decision is presented encompassing the choice between exporting licensing joint venturing and wholly owned foreign investment the choice between acquisition and greenfield investment is examined and so too are options based on subcontracting and franchising the model extends the insights of internalization theory and draws on concepts from the economics of industrial organization a special feature of the model is the distinction between investment in production facilities and investment in distribution facilities an important practical distinction that has been overlooked in much of the international business literature the strength of competition from indigenous rivals is emphasized as a determinant of entry strategy into both production and distribution

how mncs choose entry modes and form alliances the china experience this study examine two dimensions of firms foreign market entry strategy mode of entry and formation of alliances based on the existing literature we propose a model that describes how host country home country and industry specific factors affect foreign firms decisions on how they enter the market and whether they will enter with a partner firm or not the model also describes how operation related factors i e the location and the level of local government affect these decisions seven major hypotheses were tested using a longitudinal sample of 2 998 foreign business activities in china between 1979 and 1993 our sample consists of foreign investing firms from the u s europe japan and other asian countries by choosing china as a host country the study offers insights into how firms of different regional groups adapted their strategies to a changing host environment

price discovery and volatility spillovers in index futures markets some evidence from mexico abstract this paper investigates the hypotheses that the recently established mexican stock index futures market effectively serves the price discovery function and that the introduction of futures trading has provoked volatility in the underlying spot market we test both hypotheses simultaneously with daily data from mexico in the context of a modified egarch model that also incorporates possible cointegration between the futures and spot markets the evidence supports both hypotheses suggesting that the futures market in mexico is a useful price discovery vehicle although futures trading has also been a source of instability for the spot market several managerial implications are derived and discussed

the impact of order and mode of market entry on profitability and market share market share performance and profitability of overseas business activities has long been an important issue in international business in this study we explore the impact of order and mode of market entry into an overseas market we find that early entrants have significantly higher market shares and profitability than late followers we also find that equity joint ventures have a higher profitability than either wholly owned operations or contractual joint ventures a significant interaction exists between order and mode of market entry as expected firm efficiency and size affect the performance of firms these results are based on the business activities of a sample of 14 466 foreign firms in china in 1995

government policies market imperfections and foreign direct investment the internalization eclectic theory of foreign direct investment includes the important insight that government policies create market imperfections which make foreign direct investment an economically rational strategic alternative for firms this paper reexamines the effects of government policies on market imperfections and foreign direct investment fdi it broadens and refines the analysis of the impact of government policies by developing the following arguments 1 there is a wide range of government policies that affect firms fdi decisions via their effects on market imperfections 2 there are numerous dimensions of variability in government policies that need to be identified in order to understand fully the effects of government policies on market imperfections and hence fdi flows 3 some of the effects of government policies on market imperfections and fdi are the opposite of those previously noted in the fdi literature 4 the effects of government policies vary across the several individual components of fdi flows the paper thus examines the following variables and relationships more extensively and precisely than has the previous literature government policy variables as causal factors affecting fdi market imperfection variables as intervening factors in the causal connections between government policies and fdi and the multiple indicators of the various dimensions of fdi as dependent variables

broadening the foreign market entry mode decision separating ownership and control this paper argues that the ownership and control dimensions of foreign market entry mode choice should be separated and that foreign market entry mode decisions should be expanded to business activities beyond production and distribution empirical results from the global hotel industry indicate that the transferability of the entrant s competitive advantages the local market s absorptive capacity and the availability of trustworthy local partners differentially affect the ownership and control dimensions of the entry mode decision

the time variation of risk and return in the foreign exchange and stock markets this paper attempts to determine whether the fluctuations of conditional first and second moments which are observed for many assets are consistent with the sharpelintner mossin capital asset pricing model we test the mean variance model under several different assumptions about the time variation of conditional second moments of returns using weekly data from july 1974 to december 1986 that include returns on a portfolio composed of dollar deutsche mark sterling and swiss franc assets together with the u s stock market the results indicate that estimated conditional variances cannot explain the observed time variation of risk premia rates of return on international financial assets are characterized by statistical properties that are quite common to all financial markets they are highly volatile and largely unpredictable these properties make it very difficult to extract statistically reliable estimates of systematic exchange rate and assetprice movements and are at the root of the generally poor empirical performance of international asset pricing models nevertheless two important results have been uncovered by empirical researchers and can be considered a fair characterization of the data a expected returns on foreign assets vary over time cumby and obstfeld 1981 and the numerous articles that followed recently surveyed by frankel and meese 1987 b the volatility of returns of foreign assets also changes over time cumby and obstfeld 1984 hodrick and srivastava 1984 and hsieh 1988 among others as giovannini and jorion 1987 suggest the

global strategy and multinationals entry mode choice this paper makes a case directed towards establishing the importance of global strategic considerations in choosing multinationals entry mode specifically it is our contention that beyond the environmental and transaction specific factors well established in the literature to affect the entry mode decision we should also consider the strategic relationship a multinational envisages between its operations across borders in reaching this decision after incorporating various global strategic variables into an eclectic framework of the factors influencing the entry mode choice this paper tests both the validity of the overall framework and the importance of each entry mode determinant in differ entiating among entry modes this is done based on ninety six multinational managers responses to a survey questionnaire concerning their entry mode decision experiences the results suggest that an express incorporation of global strategic variables into an analysis of the entry mode decision is warranted

the eclectic paradigm of international production a restatement and some possible extensions this article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade and restates its main tenets the second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to mne activity as well

the impact of corruption on entry strategy evidence from telecommunication projects in emerging economies with globalization and the growth in emerging economies multinational enterprises mnes now frequently confront challenges associated with corrupt governments already a growing body of research has demonstrated that corruption significantly reduces a countrys aggregate inflows of foreign direct investment through its effects on firm performance we move the analysis of corruption from aggregate financial flows toward managerial theory and practice by examining how firms adjust their strategy for entering foreign markets in corrupt environments and how different types of corruption affect firms choices building on institutional theory we predict that mnes will respond to pervasive and arbitrary corruption in a host country by selecting particular types of equity and nonequity modes of entry using data on 220 telecommunications development projects in 64 emerging economies we find that firms adapt to the pressures of corruption via short term contracting and entry into joint ventures we also find that the arbitrariness surrounding corrupt transactions has a significant impact on firms decisions in addition to the overall level of corruption in contrast to extant research we show that mnes use nonequity entry modes or partnering as an adaptive strategy to participate in markets despite the presence of corruption

risk uncertainty and exchange rates this paper is motivated by two facts failure of log linear empirical exchange rate models of the 1970 s and the observed variability of risk premiums in the forward market rational maximizing models predict that changes in conditional variances of monetary policies government spendings and income growths affect risk premiums and induce conditional volatility of exchange rates i examine theoretically how changes in these exogenous conditional variances affect the level of the current exchange rate and attempt to quantify the extent that this channel explains exchange rate volatility using autoregressive conditional heteroscedastic models

equity ownership in international joint ventures the impact of source country factors this study examines the impact of four source country factors on the equity ownership in international joint ventures ijvs these factors are exchange rate cost of borrowing export capability and management orientation based on a sample of 8 078 ijvs in china this study shows that equity ownership tends to be higher for parent firms from a source country with strong currency low cost of borrowing strong export capability and high uncertainty avoidance

the role of insider influence in mutual to stock conversions using a sample of 347 demutualizing thrifts from 1991 to 2004 we show that the level of inside participation is not a traditional signal of firm performance we conclude that unanticipated inside participation reflects the incentives of insiders to reduce the size of the offer to influence the level of expected initial public offer ipo returns we find unanticipated inside participation is related to lower offer size and higher initial returns but we do not find a relationship between inside participation and post ipo performance

balancing private and state ownership in emerging markets telecommunications infrastructure country industry and firm influences bargaining between host states and investors over the terms of investment in sensitive sectors of the economy generates political and economic tensions in this study we investigate the factors that contribute to the outcomes of those negotiations as measured by the private vs state owned share of newly consummated telecommunications infrastructure projects we find that private ownership is positively associated with overall economic development and investment liberalization in the host country and with greenfield vs divestiture and joint venture vs wholly owned projects private ownership is negatively associated with existing telecommunications infrastructure higher levels of state ownership of foreign investing firms and the technological sophistication of the projects our analysis also shows a curvilinear inverted u shaped relationship between investment policy hazards and private ownership this finding supports the insight from transaction cost economics that potential gains from internalization are greatest at intermediate levels of uncertainty

demutualization determinants and consequences of the mutual holding company choice we investigate the determinants and consequences of the mutual holding company mhc structure that allows mutual thrifts to issue stock to outside shareholders while maintaining the mutual form capital constrained firms with greater profit opportunities are more likely to choose a full demutualization demonstrating that the mhc choice can be used to control for over and under investment costs during periods of greater regulatory constraints mhc firms have lower offer day returns than full demutualizations mhc firms are also less likely to be acquired as the mhc structure provides protection from the market for corporate control demonstrating a clear preference by minority shareholders for the elimination of the mhc structure the announcement of a second stage conversion generates a 12 return

asymmetric effect of basis on dynamic futures hedging empirical evidence from commodity markets abstract the dynamic minimum variance hedge ratios mvhrs have been commonly estimated using the bivariate garch model that overlooks the basis effect on the time varying variance covariance of spot and futures returns this paper proposes an alternative specification of the bgarch model in which the effect is incorporated for estimating mvhrs empirical investigation in commodity markets suggests that the basis effect is asymmetric i e the positive basis has greater impact than the negative basis on the variance and covariance structure both in sample and out of sample comparisons of the mvhr performance reveal that the model with the asymmetric effect provides greater risk reduction than the conventional models illustrating importance of the asymmetric effect when modeling the joint dynamics of spot and futures returns and hence estimating hedging strategies

strategic investments by us firms in transition economies studies in international business have considered both theoretical and empirical analyses of investment strategies by multinational firms in transition economies however there is scant research on the impact of firm specific factors on the likelihood timing and mode of entry decisions in these economies we provide evidence on three aspects of the strategic decisions by us firms to invest in transition economies first we find that firms entering the region have greater advertising intensity and sales growth than industry peers that did not enter the region suggesting that market seeking considerations motivate expansion second we find that earlier entry is undertaken by firms with fewer industry competitors and higher sales growth suggesting that the desire to secure market share ahead of competitors motivates entry timing finally we investigate the choice of entry mode into the region and find that firms from concentrated industries are more likely to enter the region with high equity commitment consistent with market seeking motives we also find that firms incorporate the degree of progress with market oriented reforms in making decisions concerning entry timing and mode

market attractiveness resource based capabilities venture strategies and venture performance abstract this research seeks to identify variables that should be related to venture performance it is hypothesized that both market attractiveness and resource based capabilities are directly related to new venture performance in addition specific resource based capabilities are hypothesized to be directly related to the competitive strategies chosen by a firm finally the fit between strategies and resource based capabilities is hypothesized to be related to venture performance the sample consisted of all manufacturing businesses sic codes 20 39 started or reorganized in the corporate form between 1980 and 1991 in nine counties in northwestern pennsylvania as identified by a major marketing research service of the 800 companies surveyed completed questionnaires were returned for 155 representing a 19 response rate the 155 responding companies had a median age of 5 years with a median of 15 employees the major products of companies in the sample included flour lumber household and office furniture plastic containers tools and dies ready mixed concrete pipe fittings measuring devices paint and varnish machine tools electroplate carbon and graphite composite products plastic laminated products circuit boards electronic components and parts for internal combustion engines in general the results confirm the validity of the measures of environmental and organizational characteristics as we have adapted them for new ventures as hypothesized perceived market attractiveness and the overall abundance of resource based capabilities were significantly related to venture performance also in two of three cases the evidence suggests that specific resource based capabilities are related to the firm s stated competitive strategies finally although the relationship between fit and performance is not supported in all cases the performance of the emerging manufacturing ventures included in this sample appears to be enhanced when resource based capabilities are supportive of a cost leadership strategy and when firms seeking to differentiate based on product and service quality have the resource based capabilities to support that strategy the results of this emerging research stream will make an important contribution to our understanding of the factors that impact firm performance for scholars the results provide additional information needed to develop comprehensive new venture performance models a clear understanding of the factors that have a strong influence on venture performance will enable practitioners to better identify viable business opportunities and academicians to provide potential business founders with tools to help them recognize opportunity in addition the identification of appropriate levels of abstraction will provide building blocks for future research that seeks to integrate environmental and firm level constructs

asset specificity and foreign market entry mode choice of small and medium sized enterprises the moderating influence of knowledge safeguards and institutional safeguards according to transaction cost economics tce reasoning firms choose equity as opposed to non equity foreign market entry modes to safeguard specific assets the present paper contextualizes the well researched relationship between asset specificity and foreign market entry mode choice by introducing knowledge safeguards international experience host country networks and imitation and institutional safeguards property rights protection and cultural proximity as alternative mechanisms for securing a firm s specific assets testing our hypotheses on a sample of 206 small and medium sized enterprises we find that knowledge safeguards and institutional safeguards weaken the effect of asset specificity on the choice of equity foreign market entry modes contextualizing the relationship between asset specificity and foreign market entry mode choice helps to enhance our understanding of the scope conditions of tce based entry mode studies and beyond

market knowledge diversification and export expansion the research focuses on the export expansion process of small and middle sized manufacturing firms and some of its correlates diversification and geographical market distribution means of acquiring information and modes of international distribution the study reveals the overwhelming influence on export expansion of information acquired from business transactions as opposed to reliance on private or public information services the impact of market diversification and its nature is confirmed policy implications are suggested

disentangling the incentive and entrenchment effects of large shareholdings this article disentangles the incentive and entrenchment effects of large ownership using data for 1 301 publicly traded corporations in eight east asian economies we find that firm value increases with the cash flow ownership of the largest shareholder consistent with a positive incentive effect but firm value falls when the control rights of the largest shareholder exceed its cash flow ownership consistent with an entrenchment effect given that concentrated corporate ownership is predominant in most countries these findings have relevance for corporate governance across the world

choosing between direct investment and licensing theoretical considerations and empirical tests this paper focuses on the conditions under which an international firm would expand overseas via the transfer of technology and rights to its own controlled equity affiliates as opposed to resorting to the market by selling its technology to independent foreign licensees the relative propensity of u s firms to use licensing versus equity investment is then examined statistically in regression models using data of the department of commerce a second paper in this series forthcoming in the summer 1985 issue will examine strategic and negotiation issues involved in combining equity investment licensing and intra firm trade into one agreement

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

exchange rate theory and practice this volume grew out of a national bureau of economic research conference on exchange rates held in bellagio italy in 1982 in it the world s most respected international monetary economists discuss three significant new views on the economics of exchange rates rudiger dornbusch s overshooting model jacob frenkel s and michael mussa s asset market variants and pentti kouri s current account portfolio approach their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today including those of the european monetary system

cooperative strategies between foreign firms in an overseas country in this paper we study the cooperative strategies between two firms in an overseas country in part 1 we examine the circumstances under which foreign firms would cooperate with another foreign firm in a third country market drawing upon existing literature we develop and test a set of hypotheses using a longitudinal data set from china the types of cooperative arrangements include all the major modes of operation in part 2 we further investigate what types of operation and level of control exist among the cooperative arrangements between two foreign firms in china we used a sample of 483 cooperative arrangements between two firms from hong kong the u s japan germany or britain this study offers interesting insight as to why foreign firms form cooperative arrangements in an overseas country and what types of cooperative arrangements these firms prefer

a markov regime switching approach for hedging energy commodities abstract this paper estimates constant and dynamic hedge ratios in the new york mercantile exchange oil futures markets and examines their hedging performance we also introduce a markov regime switching vector error correction model with garch error structure this specification links the concept of disequilibrium with that of uncertainty as measured by the conditional second moments across high and low volatility regimes overall in and out of sample tests indicate that state dependent hedge ratios are able to provide significant reduction in portfolio risk

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

an analysis of the implications of uncertainty and agency problems on the wealth effects to acquirers of private firms abstract extensive empirical work shows that bidders do not gain from the acquisition of publicly traded targets but experience positive excess returns in the acquisition of privately held firms this study investigates how two important differences between private and public firms namely informational uncertainty and ownership characteristics impact the returns to acquirers a sample of targets that were acquired shortly after filing for an ipo was collected to circumvent the lack of information on private firms in spite of the special characteristics of these targets the listing effect is still prevalent in this sample the results of the analysis are consistent with the hypothesis that acquirers gain in the acquisition of private firms because these targets have a relatively weaker bargaining position due to informational and agency problems and costly access to external capital markets to finance growth opportunities

equity joint ventures and the theory of the multinational enterprise this paper extends the internalization approach to the theory of the multinational enterprise mne to include an expanded role for equity joint ventures using the transaction cost paradigm of williamson this paper explains why joint ventures may sometimes be preferred over wholly owned subsidiaries also presented is empirical work on joint venture performance in developing countries which demonstrates that under certain conditions joint ventures can be the optimal mode of foreign direct investment

crossroads the organization of economic activity transaction costs firm capabilities and the nature of governance in a recent 1993 paper in organization science hennart discussed the underlying logic based on transaction cost and agency theory for explaining the choice between firms and markets and the reason why most transactions have both firm like and market like properties relying on williamson s comparative institutional approach which studies economic organization from a transaction cost minimizing point of view under the assumption of opportunism the argument was made that transaction cost tc logic provides a complete theory of the organization of economic activity in this paper i argue that with its purely incentive based logic governed by assumptions of opportunism tc economics is fundamentally incapable of being a complete theory of economic organization the notion of the firm as a bundle of transactions or contracts is an inadequate and shallow basis for a theory of the firm since it basically ignores the essential notion of the firm as a bundle of knowledge and the underlying processes there

choosing an appropriate alliance governance mode the role of institutional cultural and geographical distance in international research development r d collaborations we identify a variety of r d alliance modes in a knowledge intensive industry e g pharmaceuticals and classify them into four ordered categories which go beyond the traditional binary equity vs non equity alliance classification this enriches our understanding of alliance governance structures and broadens the application of alliance modes in what is today a more complicated international r d collaboration setting we then explore national industry and firm factors that determine the selection of an appropriate r d alliance governance mode using a sample of 237 international alliance deals the likelihood of using a more integrated alliance governance mode decreases as the difference or distance between nations of the partner firms increases in terms of human capital and cultural distance on the other hand a greater geographic and institutional difference is positively associated with the selection of more integrated alliance governance modes furthermore firms in the research stage are more likely to use a more integrated governance mode as opposed to firms in the development stage these findings advance research on alliance governance structure they reveal the factors affecting the r d alliance governance mode choice

futures hedging with markov switching vector error correction fiegarch and fiaparch abstract markov switching vector error correction asymmetric long memory volatility models with fat tailed innovations are proposed bivariate two state versions of the models are applied to a futures hedge of the s p500 regime switches occur between high and low cost of carry states via changes in the error correction term or basis regime identification is therefore dominated by switches in the mean not volatility relative to a number of alternatives the proposed models provide superior out of sample forecasts of the covariance matrix particularly for horizons greater than 10 days ahead when hedging markov switching with long memory improves the tail risk of hedged returns beyond 10 day horizons however there is mixed support for models with volatility asymmetries these findings have important implications for the development of multivariate models and other applications including portfolio management spread option pricing and arbitrage

modeling heteroscedasticity in daily foreign exchange rates this article estimates autoregressive conditionally heteroscedastic arch and generalized arch garch models for five foreign currencies using 10 years of daily data a variety of arch and garch specifications a number of nonnormal error densities and a comprehensive set of diagnostic checks it finds that arch and garch models can usually remove all heteroscedasticity in price changes in all five currencies goodness of fit diagnostics indicate that exponential garch with certain nonnormal distributions fits the canadian dollar extremely well and the swiss franc and the deutsche mark reasonably well only one nonnormal distribution fits the japanese yen reasonably well none fit the british pound

firm ownership preferences and host government restrictions an integrated approach two approaches may explain how multinational enterprises mnes select ownership structures for subsidiaries the first argues that mnes prefer structures that minimize that transaction costs of doing business abroad the second argues that ownership structures are determined by negotiations with host governments whose outcomes depend on the bargaining power of the firm this paper presents a framework integrating these two approaches and uses statistical methods to separate their effects empirically

market interactions in returns and volatilities between spot and forward shipping freight markets abstract the lead lag relationship in both returns and volatilities between spot and futures markets has been investigated extensively in the financial economics literature only a limited number of such studies have appeared on forward markets primarily due to the lack of easy access to empirical data this paper uses a unique database in over the counter forward freight agreements ffa to investigate the issue the underlying commodity is non storable being that of a shipping service with the additional feature of transactions costs being higher in the spot market in comparison to the forward market these features have interesting implications for the markets at the practical level the better understanding of the mean and variance dynamics can improve risk management and budget planning decisions

influences on foreign equity ownership level in joint ventures in china this study examines the determinants of foreign equity ownership in joint ventures in china drawing upon duning s ownership locational and internalization paradigm and the literature on bargaining power eleven variables that impact foreign ownership preferences and concessions are examined these variables are advertising intensity foreign capital input country risk of china ejv investment amount ejv contractual duration cultural distance competitive intensity local partner state ownership local partner alignment foreign partner alignment and ejv location the empirical findings are largely consistent with the hypotheses the empirical findings are largely consistent with the hypotheses further interesting differences were found among u s european and japanese firms with respect to the impact of these determinants

what determines the value of corporate votes this paper studies the determinants of the value of voting rights in u s corporations results support the hypothesis that the price of a vote is determined by the expected additional payment vote holders will receive for their votes in case of a control contest the size of this differential payment is a function of the probability that a vote is pivotal in a control contest and the magnitude of the private benefits obtainable by controlling the company simple proxies for these two factors explain up to 30 percent of the variation of the voting premium across companies and through time my findings also suggest that the value of managerial perquisites are at least partially reflected in the price of votes

spread and volatility in spot and forward exchange rates abstract this paper is concerned with modeling the conditional heteroscedasticity of the prediction error of foreign exchange rates as spot and forward rates are cointegrated we use a system of error correction models for mean prediction to predict the variance we use a vibariate generalized autoregressive conditional heteroscedasticity garch model as a function of the spread using daily series for seven currencies we find that unmodeled conditional heteroscedasticity by garch can generally be explained by the squared spread this indicates that as the spread is bigger the exchange rates are more volatile jel f31 c32

what differences in the cultural backgrounds of partners are detrimental for international joint ventures an international joint venture implies that a firm has to cooperate with a partner with a different cultural background in this study hypotheses about which differences in national culture are most disruptive for international joint ventures were developed and tested using hofstede s five dimensions the study focused on how these dimensions affect the survival of international joint ventures as well as their incidence relative to wholly owned subsidiaries the hypotheses were tested on longitudinal data about 828 foreign entries of twenty five dutch multinational in seventy two countries between 1966 and 1994 the database which spans almost three decades was also used to provide new evidence on a key assumption of hofstede s work that cultural values are stable over time

revisiting multinational firms tolerance for joint ventures a trust based approach in spite of the increasing popularity of international joint ventures managers express a high level of dissatisfaction with them this paper argues that overemphasis on the outcome has resulted in a neglect of the social processes underlying the outcome the paper elaborates upon the rationale for a cooperative approach towards interorganizational collaborative relationships based on trust and discusses it in the context of joint ventures this is then applied towards understanding multinational ownership preferences and tolerance for joint ventures it is argued that trust centered logic is largely consistent with approaches that emphasize the issue of ownership and deepens and enriches the insights provided by the latter a shift in focus from ownership to relational dynamics is encouraged

financial performance and survival of multinational corporations in china this study investigates the impact of entry timing mode of entry market focus and location advantages on the financial performance and survival of multinational corporations mncs in china three major results were found first mncs that entered china in an earlier year had a higher level of profit than those that entered in a later year second equity joint ventures ejvs had a higher profit level than cooperative operations or wholly foreign owned subsidiaries third mncs that utilized well the location advantages in china had a higher profit we also found that ejvs were more likely to survive compared to cooperative operations while wholly owned subsidiaries did not differ from ejvs the findings are based on a 2 year study of about 1000 mnc operations in china copyright 1999 john wiley sons ltd

comparative business failures of foreign controlled firms in the united states we explore the comparative business failures of foreign owned or controlled firms and domestically owned firms original data are collected regarding foreign controlled firms in the u s that filed for bankruptcy protection were involuntarily liquidated or ceased operations mainly due to poor financial performance during the 1978 1988 period our results show that foreign controlled firms fail less often than domestically owned firms the patterns of foreign controlled business failures and the impacts of entry modes ownership types and national culture on the failures of foreign controlled firms are also examined

choice between non equity entry modes an organizational capability perspective many studies have examined the choice between different types of equity and non equity modes however none has focused on the choice between different types of non equity modes that service firms employ routinely this study develops a theoretical framework based on the organizational capability perspective to explain the choice between two non equity modes franchising and management service contracts while previous studies are based on the premise that foreign market entrants choose a mode equity or non equity that offers them most control given their particular circumstances the premise of this study is that foreign entrants choose a non equity mode that in addition offers effective transfer of the firm s capabilities to the host country venture

licensing duration in foreign markets a real options perspective licensing can be considered an initial trial of a foreign market before a firm fully commits to it through other investment modes the length of trial has great importance because licensing duration represents part of the licensing agreement when it is too short the firm may not acquire the necessary experience and knowledge of the foreign market but if it is too long the firm misses optimal expansion timing arguing that licensing can be considered as a european style real option with a fixed holding period we develop and test a model of the determinants of licensing duration in foreign markets empirical results based on a sample of firms in various countries show that uncertainty and threat of competitive pre emption in the foreign market are related to shorter duration of the technology licensing agreements we also find that irreversibility of the impending investment moderates the relationships between uncertainty and duration specifically market and technology uncertainties in the foreign market induce shorter contracts under low levels of irreversibility

a tale of three countries italian spanish and swiss manufacturing operations in china in this paper the choice of joint venture versus wholly foreign owned enterprise wfoe made by italian spanish and swiss multinationals in china as shaped by the risk of dissipation of intangible assets is investigated probit estimates based on an entirely new firm level dataset constructed by the author show that wfoe is more likely to emerge when know how easily spills over namely for firms endowed with more intangible assets or belonging to high tech sectors in line with the theoretical expectations

does human resource management matter in a transitional economy china as an example this paper investigates the significance of how firms manage their human resources hrs within the confines of powerful social institutions in a transitional economy the people s republic of china china we propose that two dimensions the role of human resource management rhr and followers perception of the leader top are important contributors to firm performance as are the influences of the regional economy and firm ownership we tested our hypotheses with a survey of 180 firms from nine cities in china we found that both role of hrm rhr and follower s perception of top level management top are important to firm performance the study confirms that while social institutions remain powerful in a transitional economy effective hrm is important to firm performance

modes of foreign entry a transaction cost analysis and propositions a frontier issue in international marketing is the appropriate choice of entry mode in foreign markets the objective of this paper is to offer a transaction cost framework for investigating the entry mode decision this framework provides 1 a theoretical basis for systematically interrelating the literature into propositions 2 propositions about interactions which resolve the apparently contradictory arguments advanced to date specifically the paper illustrates the feasibility of clustering 17 entry modes into the degree of control the mode provides the entrant proposes that the most appropriate i e most efficient entry mode is a function of the tradeoff between control and the cost of resource commitment advances testable propositions delimiting the circumstances under which each mode maximizes long term efficiency

forecasting petroleum futures markets volatility the role of regimes and market conditions in this paper we employ regime volatility models to describe time dependency in petroleum markets using a sample of nymex and ice futures contracts we establish the existence of a regime process and link this process to market fundamentals this formulation results in two distinct states a highly persistent conditional volatility process characterised by long memory and low sensitivity to market shocks and a relatively short lived nonstationary process with less memory but higher sensitivity to shocks moreover to investigate the relationship between disequilibrium and volatility of oil futures across high and low volatility regimes we use augmented regime garch models to address in a realistic way the potential diverse response of volatility to forward curve shocks the performance of these models is compared to benchmarks using both statistical tests and risk management loss functions to test the robustness of the forecasting strategies we also perform a reality check employing the stationary bootstrap approach the findings of this paper have important implications for decision making concerning trading and risk management as well as energy market operations such as refining and budget planning by providing valuable information on the oil price volatility dynamics and the ability to predict risk

the hierarchical model of market entry modes in this study we propose and test a hierarchical model of market entry modes entry modes can first be viewed as equity based versus non equity based within equity based modes the choice is between wholly owned operations and equity joint ventures while within non equity based modes the choice is between contractual agreements and export empirically we demonstrate that there are factors that exert substantial influences at the equity versus non equity level but rather weak influences at the lower level of choice hierarchy the empirical results are based on a sample of over 10 000 foreign entry activities into china between 1979 to 1998 the findings provide supportive evidence for the hierarchical model of market entry modes

timing of entry in international market an empirical study of u s fortune 500 firms in china this study attempts to explain the timing of entry of firms in international markets based on the existing literature we propose a framework that consists of firm specific factors industry market factors and host country factors empirical results based on the entry information of u s fortune 500 firms in china between 1979 and 1996 show that larger firms with greater level of internalization and scope economies are likely to enter this foreign market earlier in addition non equity modes competitors behavior in the product market and lower levels of country risk are significantly associated with early entry

common stochastic trends in a system of exchange rates univariate tests reveal strong evidence for the presence of a unit root in the univariate time series representation for seven daily spot and forward exchange rate series furthermore all seven spot and forward rates appear to be cointegrated that is the forward premiums are stationary and one common unit root or stochastic trend is detectable in the multivariate time series models for the seven spot and forward rates respectively this is consistent with the hypothesis that the seven exchange rates possess one longrun relationship and that the disequilibrium error around that relationship partly accounts for subsequent movements in the exchange rates a general consensus has emerged in recent years that many macroeconomic time series such as gnp consumption expenditures disposable income etc can be characterized by a stochastic trend model in particular nelson and plosser 22 described this property as one of being difference stationary so that the first difference of a time series is stationary an alternative trend stationary model where a stationary component is added to a deterministic trend term has generally been found to be less appropriate 1 similarly it has long been recognized that many financial time series such as foreign exchange rates are nonstationary e g in meese and singleton 21 the issue of nonstationary is not merely a statistical curiosity but has several important implications for the modeling of exchange rates for instance many models of exchange rate determination under rational expectations require stationarity assumptions when solving out the expected future values of the fundamentals further there has been some controversy over the appropriate transformations to use when conducting tests of whether the forward rate is an unbiased and efficient predictor of the future spot exchange rate 2 some authors e g frenkel 11 12 have conducted tests in levels while geweke and feige 14