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

rewarding risk taking or skill the case of private equity fund managers abstract we examine whether typical private equity fund compensation contracts reward excessive risk taking rather than managerial skill our analysis is based on a novel model of investment value cash flows and fee dynamics of private equity funds given the embedded option like fee components our results demonstrate that fund managers indeed have an incentive for excessive risk taking when only fee income from the current fund is considered however when managers also consider potential compensation from follow on funds their risk taking incentives depend on their individual skill levels and skilled managers will have an incentive to reduce fund risk we also show that managers must generate substantial abnormal returns in order to compensate investors for the given fee components

language friction and partner selection in cross border r d alliance formation how does language friction affect alliance formation language friction is a form of cultural friction arising from structural differences in the respective languages used by potential partners to reason and solve problems together a little language friction may prompt partners to rethink solutions thereby enhancing collaboration but excessive friction may impede collaboration we develop a language friction index lfi to quantify relative differences in linguistic structure for any language pair utilizing a unique data set of semiconductor design activities 1988 2001 our empirical analysis finds an inverted u shaped relationship between partners lfi and the likelihood of cross border research and development rd 2 the effects of language friction are economically significant and strategically consequential 3 certain aspects of language friction occur independent of language proficiency and persist despite the use of lingua franca to reduce language barriers 4 linguistic diversity is an indirect marker of cognitive diversity which is useful in boosting creativity especially in first time collaborations 5 beyond r d alliances language friction may also influence other types of strategic interactions and organizational processes

complementarity and external linkages the strategies of the large firms in biotechnology in biotechnology large firms enter into different kinds of linkages with universities and small medium sized research intensive firms we test the hypothesis that the strategies of external linkage of the large firms with other parties are complementary to one another we show that if any two strategies are complementary i e undertaking more of one strategy raises the marginal value of the other then they are positively correlated using data for a sample large us european and japanese chemical and pharmaceutical producers we find that the strategies above are positively correlated even after controlling for firm specific characteristics

linguistic gender marking and its international business ramifications darwin 1859 considered language a form of memory that stores information in a genome like mode grammar according to cognitive science research boroditsky schmidt phillips 2003 impacts a speakers cognitive framework and mental representation of social reality gender is among the most stable grammatical features wichmann holman 2009 and comparing languages is valuable for understanding their social role corbett 2011 such research should have significant value for international business ib where national variations are of focal interest but where the study of linguistics has mostly been relegated to a subset of culture culture based research currently relies on aggregate values based measures of culture e g hofstede 1980 1998 hofstede hofstede minkov 2010 house hanges javidan dorfman gupta 2004 making it susceptible to endogeneity problems and contemporaneous to gender outcomes in contrast a language s grammatical structure is a stable feature inherited from the distant past unbiased by present social political and economic forces

a bottom up approach to the risk adjusted performance of the buyout fund market we use the burgiss dataset to study private equity buyout fund performance our findings on performance before risk adjustments are consistent with those in the literature and indicate significant outperformance of buyout fund investments using a bottom up approach we identify the systematic risks of underlying companies in buyout funds to inform an appropriate risk adjusted benchmark which we determine to be a levered size and sector adjusted public index after making these risk adjustments we find no significant outperformance of buyout fund investments versus the public market equivalent on a dollar weighted basis we contend that even without significant risk adjusted outperformance buyout funds can play a valuable role in institutional investors portfolios

beyond hofstede and globe improving the quality of cross cultural research journal of international business studies 2010 41 1259 1274 doi 10 1057 jibs 2010 41 overview of 41 8 hofstede and globe in cross cultural research while hofstede s work was not the first systematic study on crossnational cultures his seminal book culture s consequences international differences in work related values 1980 succeeded in putting cross cultural analysis at the forefront of international business ib research in a later paper he boldly asserted that the business of international business is culture 1994 1 despite the criticisms that have been voiced against his work see mcsweeney 2002 oyserman coon kemmelmeier 2002 hofstede s influence on the fields of ib and management is undeniable according to harzing s publish or perish citation index as of june 2010 there were over 54 000 citations to his work this is a remarkable record that attests to first the growing popularity of cross cultural research in light of continued internationalization of the world economy and second hofstede s personal impact on scholarly research this jibs issue brings together 10 articles on culture and ib all of which were submitted to the editorial team led by jibs editorin chief lorraine eden while the articles were independently submitted through the regular double blind reviewing process the decision to join them in one collection creates in effect a special issue on culture in international business research which the jibs editors hope will be widely read and cited by ib scholars in general terms the papers in this collection fall into one of two categories 1 articles and commentaries about conceptual and methodological issues associated with hofstede s oeuvre vs the global leadership and organizational behavior effectiveness globe project s cultural dimensions and 2 articles and perspectives that use culture and or cultural dimensions as well as the operational measurement thereof to explain differences in behavior and practices across countries the common feature of all these scholarly pieces is that they challenge particular assumptions often made too easily in conventional cross cultural research the first paper in this collection is a perspective written by franke and richey that cautions against questionable generalizations from small numbers of countries in international business research using statistical analysis to support their assertion franke and richey argue that in order to draw credible generalizations in ib a minimum of 7 10 countries must be used this is an important message researchers should never formulate strong conclusions about the impact of cultural dimensions on journal of international business studies 2010 41 1259 1274 2010 academy of international business all rights reserved 0047 2506

cross border venture capital investments the impact of foreignness on returns against the background of the growing internationalization of venture capital vc investing this is the first global comparison of the returns generated by individual domestic and cross border deals we examine investments worldwide during 1971 2009 and find that cross border investments significantly underperform compared with equivalent domestic investments returns are negatively affected by geographic distances cultural disparities and institutional differences between the home and host countries returns on cross border and domestic deals also decline after the late 1990s international portfolio diversification and the saturation of domestic markets may explain why vc investors make cross border investments despite poor expected returns

beyond cultural distance switching to a friction lens in the study of cultural differences my 2001 article provided a critical review of one of the most popular constructs in international business and in the management and business literature as a whole namely cultural distance it listed various illusions implicit yet unsubstantiated and refutable assumptions that underpinned a construct set to capture the essence of cultural differences the paper questioned the validity of the measure the resultant findings obtained in such international business applications as foreign direct investment patterns sequence entry mode and performance and ultimately the wisdom of continuing the use of the measure and its underlying construct in this retrospective i review subsequent work that tested some of the original observations the impact the article has had and in particular how we can redirect research away from the static cultural distance paradigm toward the dynamic interaction of the actual entities that come into contact in international business

the paradox of technological capabilities a study of knowledge sourcing from host countries of overseas r d operations we investigate the factors that influence the extent to which a multinational corporation s headquarters mnc hq sources knowledge from the host countries of its r d labs we propose that the technological capabilities held by mnc hqs present a paradox on the one hand they enhance mnc hqs learning capabilities on the other hand they reduce mnc hqs motivations to outsource knowledge from host countries we also argue that it is important to consider both relative and absolute levels of technological capabilities because relative levels can influence mnc hqs motivations to source knowledge from host countries statistical findings generally support our arguments

entrepreneurial finance and innovation an introduction and agenda for future research the increasingly large role played by financial intermediaries such as venture capitalists and angels in nurturing entrepreneurial firms and in promoting product market innovation has led to great research interest in the area of entrepreneurial finance and innovation this paper introduces the special issue of the review of financial studies dedicated to entrepreneurial finance and innovation and highlights some of the promising topics for future research in this area the special issue combines papers presented at the june 2010 entrepreneurial finance and innovation efic conference which was jointly sponsored by the kauffman foundation and the review of financial studies with other related papers

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

institutional theory and the cross national transfer of employment policy the case of workforce diversity in us multinationals this paper uses a comparative institutionalist approach combined with a power interests perspective to examine the processes whereby diversity policy is internationalised by us multinational companies it argues that the process of policy transfer to uk subsidiaries is complicated by incomplete and contested institutionalisation of diversity within the us itself and by differing conceptions of diversity between the us and the uk the ability of actors within the uk subsidiaries to mobilise and deploy specific power resources allows them to resist the full implementation of corporate diversity policy leading to a range of compromise accommodations it is argued that the findings have more general implications for analysing the transfer of hr practices between national business systems

post listing performance and private sector regulation the experience of london s alternative investment market abstract we investigate the experience of companies listing and raising capital on the aim which is privately regulated and relies on nominated advisors who compete for listings and provide regulatory oversight aim firms underperform newly listed firms on traditionally regulated exchanges based on post listing returns and failure rates comparable to firms listing on the unregulated us pink sheets and exhibit abnormally high pre listing accruals and post listing reversals high quality auditors and nomads partially mitigate underperformance suggesting that aim firms have limited ability to bond through more stringent oversight underperformance is particularly pronounced for firms with higher proportions of retail investors

distance without direction restoring credibility to a much loved construct in this commentary we build on shenkar s 2001 award winning critique of cultural distance arguing that most distance constructs in fact suffer the same flaws because they oversimplify the relationship between countries overlook their subjective and context specific nature and pay insufficient attention to the mechanisms through which distance operates the idea of distance however has intrinsic value moreover its considerable appeal and undeniable effectiveness have made it a well entrenched construct therefore we see merit in redressing its weaknesses and offer several suggestions for doing so these include allowing for the influence of firm level characteristics that either moderate the effects of distance or render distance at least in part subjective with varying consequences for different mnes maintaining directionality by distinguishing between distance and the tendency toward a particular characteristic and acknowledging asymmetry and conceptualizing the effects of distance and the mechanisms through which it operates more carefully by drawing on concepts and measures from a variety of disciplines by offering ways to strengthen both its theoretical foundations and measurement we hope to enhance the usefulness of one of international business theory s most central constructs

private equity performance what do we know we study the performance of nearly 1400 u s buyout and venture capital funds using a new dataset from burgiss we find better buyout fund performance than has previously been documented performance consistently has exceeded that of public markets outperformance versus the s p 500 averages 20 to 27 over a fund s life and more than 3 annually venture capital funds outperformed public equities in the 1990s but underperformed in the 2000s our conclusions are robust to various indices and risk controls performance in cambridge associates and preqin is qualitatively similar to that in burgiss but is lower in thomson venture economics

do private equity returns result from wealth transfers and short termism evidence from a comprehensive sample of large buyouts we test whether the well documented high returns of private equity sponsors result from wealth transfers from other financial claimants and counterparties and from a focus on short term profits at the expense of long term value debt investors who finance buyouts as well as buyers of private equity portfolio companies represent the two potential sources of wealth transfers however we find that on average public companies benefit when they buy financial sponsors portfolio companies experiencing positive abnormal returns upon the announcement of the acquisition and long run posttransaction abnormal returns indistinguishable from zero we further find that large portfolio company payouts to private equity on average have no relation to future portfolio company distress suggesting that debt investors are not suffering systematic wealth losses either however we find some evidence of wealth transfers from both strategic buyers and debt investors in some special situations finally we find that portf

network location and learning the influence of network resources and firm capabilities on alliance formation this paper presents a dynamic firm level study of the role of network resources in determining alliance formation such resources inhere not so much within the firm but reside in the interfirm networks in which firms are placed data from extensive fieldwork show that by influencing the extent to which firms have access to information about potential partners such resources are an important catalyst for new alliances especially because alliances entail considerable hazards this study also assesses the importance of firms capabilities with alliance formation and material resources as determinants of their alliance decisions i test this dynamic framework and its hypotheses about the role of time varying network resources and firm capabilities with comprehensive longitudinal multi industry data on the formation of strategic alliances by a panel of firms between 1970 and 1989 the results confirm field observations that accumulated network resources arising from firm participation in the network of accumulated prior alliances are influential in firms decisions to enter into new alliances this study highlights the importance of network resources that firms derive from their embeddedness in networks for explaining their strategic behavior copyright 1999 john wiley sons ltd

the economics of private equity funds this article analyzes the economics of the private equity industry using a novel model and dataset we obtain data from a large investor in private equity funds with detailed records on 238 funds raised between 1993 and 2006 we build a model to estimate the expected revenue to managers as a function of their investor contracts and we test how this estimated revenue varies across the characteristics of our sample funds among our sample funds about two thirds of expected revenue comes from fixed revenue components that are not sensitive to performance we find sharp differences between venture capital vc and buyout bo funds bo managers build on their prior experience by increasing the size of their funds faster than vc managers do this leads to significantly higher revenue per partner and per professional in later bo funds the results suggest that the bo business is more scalable than the vc business and that past success has a differential impact on the terms of their future funds jel g10 g20 g24

the outsourcing of r d through acquisitions in the pharmaceutical industry abstract we examine the performance of 160 pharmaceutical acquisitions from 1994 to 2001 and find evidence that on average acquirers realize significant positive returns these returns are positively correlated with prior acquirer access to information about the research and development activities at target firms and a superior negotiating position a unique desperation index is employed to determine the current status of a firm s internal productivity we find that firms experiencing declines in internal productivity or which are more desperate are more likely to engage in an outsourcing type acquisition in an effort to replenish their research pipelines

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

the cultural relativity of organizational practices and theories this paper summarizes the author s recently published findings about differences in people s work related values among 50 countries in view of these differences ethnocen tric management theories those based on the value system of one particular country have become untenable this concept is illustrated for the fields of leadership organization and motivation a key issue for organization science is the influence of national cultures on introduction management twenty or even 10 years ago the existence of a relationship be management and tween management and national cultures was far from obvious to many and it national cultures may not be obvious to everyone even now in the 1950s and 60s the dominant be lief at least in europe and the u s was that management was something univer sal there were principles of sound management which existed regardless of na tional environments if national or local practice deviated from these principles it was time to change local practice in the future the universality of sound manage ment practices would lead to societies becoming more and more alike this ap plied even to the poor countries of the third world which would become rich as well and would be managed just like the rich countries also the differences be tween management in the first and second world capitalist and socialist would disappear in fact under the surface they were thought to be a lot smaller than was officially recognized this way of thinking which dominated the 1950s and 60s is known as the convergence hypothesis during the 1970s the belief in the unavoidable convergence of management prac tices waned it was too obviously in conflict with the reality we saw around us at the same time supranational organizations like the european common market which were founded very much on the convergence belief had to recognize the stubbornness of national differences even within existing nations regional dif ferences became more rather than less accentuated the welsh the flemish the basques the bangladeshi the quebecois defended their own identity and this was difficult to reconcile with a management philosophy of convergence it slowly became clear that national and even regional cultures do matter for management the national and regional differences are not disappearing they are here to stay in fact these differences may become one of the most crucial problems for man agement in particular for the management of multinational multicultural orga nizations whether public or private

do language barriers affect trade abstract language barriers may be more important to international trade than previously thought the language barrier index a newly constructed variable that uses detailed linguistic data is used to show that language barriers are significantly negatively correlated with bilateral trade

the public market equivalent and private equity performance the authors show that the public market equivalent approach is equivalent to assessing the performance of private equity pe investments using rubinstein s dynamic version of the capm they developed two insights 1 one need not compute betas of pe investments and any changes in pe cash flow betas due to changes in financial leverage operating leverage or the nature of the business are automatically taken into account 2 the public market index used in evaluations should be the one that best approximates the wealth portfolio of the investor considering the pe investment opportunity

skill and luck in private equity performance we evaluate the performance of private equity pe funds using a variance decomposition model to separate skill from luck we find a large amount of long term persistence and skilled pe firms outperform by 7 to 8 annually but this performance is noisy with a large amount of luck so top quartile performance does not necessarily imply top quartile skills making it difficult for investors lps to identify skilled pe firms buyout bo firms show the largest skill differences implying the greatest long term persistence venture capital vc performance is the most noisy making good vc firms hardest to identify and implying the smallest amount of investable persistence

institutional cultural and transaction cost influences on entry mode choice and performance in this study we examine foreign market entry mode choice and firm performance for a sample of european union firms examining both financial and non financial performance measures we attempt to determine if firms that select their entry mode based on transaction cost institutional context and cultural context variables perform better than firms that make other mode choices we found that mode choice did matter firms whose mode choice could be predicted by the extended transaction cost model performed significantly better on both financial and non financial measures than did firms whose mode choice could not be predicted by the extended transaction cost model implications for future research are discussed

the multinational corporation as a multilingual community language and organization in a global context this paper develops a framework for analyzing the multinational corporation mnc as a multilingual community in which parent functional language and subunit functional languages are concurrently used and recursively linked through an intra corporate communication network the unit breadth and intensity of an mnc s language system are designed to apply global strategies within the context of evolving environmental and organizational realities to the extent that language design is the product of deliberate choice we suggest that headquarters functional language is determined by the mnc s international strategy organizational structure and transnationality while subunit functional language is designed in accordance with organizational form strategic role and expatriate deployment aligning language systems with organizational strategy and dynamics improves mnc communication coordination and knowledge sharing

investment risk allocation and the venture capital exit market evidence from early stage investing abstract this study provides evidence on how venture capitalists vcs allocations of capital to riskier investments as measured by the proportion of early versus late stage investment in an industry are linked to exit market conditions prior research has primarily focused on how vcs adjust aggregate investment to public equity market conditions we develop a more inclusive measure of exit market conditions that accounts for recent secular changes that have affected the industry return structure specifically the sharp rise in the number of failures and m a relative to ipo exits we show that the dollars gained relative to dollars lost in recent exits and failures are significantly positively related to vcs allocations to early stage companies over the period 1990 2008 the changes in allocations are large enough to have an effect on the availability of funding for early stage companies in sum our evidence shows that exit market conditions have a significant and economically meaningful influence on vcs allocations to riskier investments

the effectiveness of incomplete and overlapping pollution regulation evidence from bans on phosphate in automatic dishwasher detergent abstract this paper examines the effectiveness of command and control policies in the presence of incomplete and overlapping regulations we study how recent bans on phosphate in household dishwasher detergent affect pollution loads to waterways costs at wastewater treatment facilities and consumer behavior we show that the effectiveness of the bans in reducing effluent depends critically on regulations at receiving treatment facilities as cost minimizers facilities with an emissions standard on phosphorus face no incentive to deviate from the standard we show that bans have weak effects on effluent especially in the most polluted waterways we also use an early isolated ban in spokane washington to study the effect of the bans on consumers we find that this ban shifted approximately 40 of dishwasher detergent sales from spokane to bordering counties until a state wide ban was implemented using these estimates we find that the welfare loss to consumers from recent bans is likely greater than the cost savings to treatment plants