divestment of foreign production operations this study investigates some determinants fo the divestment of foreign manufacturing operations by norwegian companies to date very few studies have taken a closer look at what might influence whether foreign subsidiaries are divested or not although foreign direct investment in principle represent long term commitments to foreign manufacturing operations divestments are in fact quite common this study shows that more than half of a sample of foreig subsidiaries woned by norwegian companies in 1982 wee divested within a period of ten years the empirical findings indicate that foreign divestment is inversely related to economic growth in the host country and that the propensity to divest is significantly higher for subsidiaries that had been acquired than for greenfield establishments also related horizontal subsidiaries are less likely to be divested than unrelated non horizontal subsidiaries

new venture survival ignorance external shocks and risk reduction strategies abstract although scholars have long recognized the increased mortality risk that new ventures face in terms of a liability of newness most of the discussion around this risk has been in terms of the contextual constraints that new ventures face and the difficulties that managers have in overcoming them this emphasis is in part a reflection of the perils of newness but also stems from the retrospective and aggregate perspective taken by researchers although the macro level perspective of new venture mortality has made a significant contribution to our knowledge of mortality risk patterns there has been little interest in identifying how venture managers can address the risks that all new organizations face we argue that in order to make progress in explaining new venture survival a theoretical model is required that uses a more micro level perspective to explain new venture failure and the flip side new venture survival in this paper we develop such a model we establish a definition of mortality risk and argue that the liability of newness is largely dependent on the degree of novelty ignorance associated with a new venture novelty is viewed in three different dimensions viz to the market to the technology of production and to management novelty to the market concerns the degree to which the customers are uncertain about the new venture novelty in production concerns the extent to which the production technology used by the new venture is similar to the technologies in which the production team has experience and knowledge novelty to management concerns the entrepreneurial team s lack of business skills industry specific information and start up experience we argue that mortality risk increases with the degree of novelty in each dimension and with the number of dimensions in which the new venture is novel we propose that the decline in mortality risk occurs as the venture s novelty in each of the three dimensions is eroded by information search and dissemination processes this allows the new firm to become an established business and explains what we term the evolutionary path of mortality novelty and risk decline monotonically after a period of adolescence as ignorance decays over time due to passive learning we also propose that there is a strategic mortality risk path that reflects the impact of positive and negative shocks shocks are exogenous events that alter the overall degree of novelty at a point in time positive shocks decrease overall novelty while negative shocks increase overall novelty and reversals endogenous actions that increase the overall novelty of the new venture at a point in time on the mortality risk of a new venture if the incidence and effects of these disruptions can be managed then venture managers may be able to mitigate the mortality risk for their venture we argue that risk reduction strategies can be employed most of which impact on one or more of the dimensions of mortality risk in order to increase the firm s chances of survival a series of risk reduction strategies are proposed and their impact on the determinants of mortality risk is considered

operating flexibility global manufacturing and the option value of a multinational network the multinational corporation is a network of activities located in different countries the value of this network derives from the opportunity to benefit from uncertainty through the coordination of subsidiaries which are geographically dispersed we model this coordination as the operating flexibility to shift production between two manufacturing plants located in different countries a stochastic dynamic programming model treats explicitly this flexibility as equivalent to owning an option the value of which is dependent upon the real exchange rate the model is extended to analyze hysteresis effects and within country growth options we show that the management of across border coordination has led to changes in the heuristic rules used for performance evaluation and transfer pricing

reconciling the advantages and liabilities of foreignness towards an identity based framework this article leverages identity theory to address the question of when and how foreignness acts as an advantage and liability for the mne subsidiary applying an organizational identity lens i delineate how subsidiaries manage their foreignness by accentuating and attenuating internal and external organizational attributes drawing on this conceptualization i theorize how an accentuated foreign identity moderates context specific advantages and liabilities in offering a more nuanced understanding of how subsidiaries actively manage their foreignness and its contextual implications an identity based framework helps to both explain and reconcile the advantages and liabilities of foreignness

foreign and domestic divestment and investment decisions like or unlike the managerial literature on foreign investment and divestment is much less developed than the economic literature on foreign direct investment theory nevertheless surveyed with the purpose of better understanding foreign divestment decisions the research to date reveals some noticeable differences between investment and divestment divisions whether foreign or domestic and even more substantial differences between foreign divestment and domestic divestment decisions additional research however is clearly in order

foreign venture capitalists and the internationalization of entrepreneurial companies evidence from china we use a comprehensive database of venture capital backed companies from china to test whether and how foreign venture capitalists vcs can facilitate international initial public offerings of entrepreneurial companies foreign vcs increase the likelihood that a portfolio company will list on a foreign exchange and use a top lawyer banker or accountant when doing so the propensity to list overseas is moderated by the number of venture backers the fund s size and governance in the domestic market foreign vcs encourage foreign listings in domestic backed companies we take steps to address sample selection and endogeneity concerns overall we show that foreign vcs encourage internationalization in entrepreneurial companies

the liability of foreignness in international equity investments evidence from the us stock market using foreign institutional ownership data in the us from 1990 to 2007 we examine whether foreign institutional investors face liabilities of foreignness lof in the us stock market we find that foreign institutional investors prefer low information asymmetry stocks more than domestic institutional investors do and this preference for low information asymmetry stocks is particularly strong among foreign institutional investors from countries with high lof more importantly we find that a change in foreign institutional ownership is negatively related to future returns whereas this relation does not exist for domestic institutional ownership the negative relation between the change in foreign institutional ownership and future returns is more pronounced when investors face a greater lof in the us stock market for instance when they are from countries with higher institutional distance information asymmetry unfamiliarity and cultural differences the negative effect of country specific lof factors on the return forecasting power of foreign institutional investors is more evident when they trade stocks with higher information asymmetry overall these findings suggest that foreign institutional investors face significant lof costs in the us stock market resulting in their poor ability to forecast returns

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

relative importance of foreign and domestic shocks in the venezuelan economy this paper uses a cholesky factorization in a var analysis to investigate the relative importance of foreign and domestic shocks in the venezuelan economy during the 1960 i2004 ii period the economy is assumed to be driven by foreign u s gdp and oil prices and domestic exchange rate fiscal monetary inflation and output orthogonal shocks as shown by the empirical evidence foreign shocks tend to be relatively more important than domestic shocks precisely oil price and u s gdp shocks tend to have permanent

economic distance and the survival of foreign direct investments taking a theoretical perspective contrasting resource exploitation with resource exploration we argue that foreign direct investments fdis hazard rates are lower in countries that are either m

a note on the relation between size ownership status and plant s closure sunk costs vs strategic size liability abstract in this paper we test both sunk cost and strategic size liability predictions by looking at the exit behavior of a sample of italian manufacturing plants for this purpose we focus on plants size and ownership status in particular we distinguish independent plants from plants that belong to multi unit organizations as to these latter we further distinguish state owned from privately owned plants we also consider the impact upon the likelihood of closure of the size and nationality of the parent firm in addition and contrary to previous empirical work data allow us to control for differences in the cost structure of plants namely we use technology adoption dummies to take into account plants technological heterogeneity

subsidiary expansion contraction during times of economic crisis this paper compares two real options within country growth and across country operational flexibility to examine subsidiary expansion contraction during times of economic crisis specifically we examine how the real options orientations of individual subsidiaries interact with the general characteristics of multinational enterprise networks our main findings are that a economic crises can be detrimental for subsidiaries with stronger within country orientations and advantageous for those with stronger across country orientations and b network characteristics are not the sole determinants of subsidiary expansion contraction what really matters is how the real options orientations of individual subsidiaries mesh with the overall characteristics of the network they belong to

international relocation firm and industry determinants this article is the first to explore the determinants of international relocation of a firm it is found that labour intensive firms in a highly industrialized and open economy such as belgium tend to relocate more to other countries than their highly productive capital intensive counterparts access to a global network firm size and the rate of innovation have a positive effect on the probability of relocation uncertainty has a negative impact on the probability of relocation the positive effect of firm size and profitability on the relocation decision is clearly distinct from its effect on the exit decision of a firm

relocation of headquarters and international taxation about 6 of multinationals relocated their headquarters to another country in the 1997 2007 period this paper presents empirical evidence on the role of taxes in these relocation decisions it considers a sample of 140 multinationals that relocated their headquarters over the past decade and compares them to a control group of 1943 multinationals that did not relocate it is found that the additional tax due in the home country upon repatriation of foreign profits has a positive effect on the probability of relocation the empirical results suggest that an increase in the repatriation tax by 10 percentage points would raise the share of relocating multinationals by 2 2 percentage points equivalent to an increase in the number of relocations by more than one third furthermore the presence of controlled foreign corporation legislation also has a positive effect on the number of relocations

extending the bargaining power model explaining bargaining outcomes among nations mnes and ngos participants in international bargaining include different types nation states mnes ngos and multilateral organizations and different numbers of these actors our theoretical contribution is to extend the bargaining power paradigm with a framework that models bargaining in this complex environment as a network the configuration of supports and constraints among all participating actors in the bargaining environment is captured in the structure of the network antecedents of an actor s bargaining influence in the network include the actor s basis of power network position bargaining outcome preferences and motivation to influence bargaining the network bargaining power nbp model uses network theory to build upon and integrate insights from previous literature in a way that allows us to simultaneously apply these different insights to explain bargaining outcomes these insights include effects of coalitions strategies of less powerful actors leveraging more powerful allies integration of international and domestic politics and applicability to mne related issues beyond fdi finally we illustrate nbp in a scenario of privatized utilities in the dominican republic in which the bargaining power outcome predicted by nbp differs from that of the canonical bargaining power perspective

the survival of international new ventures international new ventures invs are a popular mode of entry into foreign markets invs those companies that enter foreign markets at inception often suffer the two liabilities of newness and foreignness which may increase the odds of their failure this paper empirically examines the survival of invs by comparing them with other sequential modes of international operations e g acquisitions data from 275 british firms show that invs have lower unconditional survival probabilities than other modes of foreign market entry our analyses also show that differences in survival probabilities disappear when the firms competitive strategies are considered

on the growth of foreign affiliates multinational plant networks joint ventures and flexibility we take a flexibility perspective to analyse employment growth in a large sample of japanese manufacturing affiliates in nine asian countries during the years leading up to and into the asian financial crisis 1995 1999 we find that joint ventures are less flexible than wholly owned affiliates in responding to changing environmental conditions in the focal country and underperform in high growth environments multinational enterprises mnes use the flexibility created by their multinational plant network to adjust affiliate employment in response to labour cost changes in other countries in which they operate plants however no evidence was found that the presence of joint ventures in multinational plant networks reduces this network flexibility our findings suggest that more research is needed on the heterogeneous responses of mnes and their affiliates to changing economic environments

multinational enterprises and climate change exploring institutional failures and embeddedness this paper explores how climate change affects multinational enterprises mnes focusing on the challenges they face in overcoming liabilities and filling institutional voids related to the issue climate change is characterized by institutional failures because there is neither an enforceable global agreement nor a market morality climate change is also a distinctive international business issue as its institutional failures materialize differently in different countries as governments are still highly involved mnes need to consider carefully their strategies to cope with non market forces including their embeddedness in multiple institutional settings using some illustrative examples of mne responses to climate related components in stimulus packages we explore mnes balancing act concerning their institutional embeddedness or lack thereof in home host and supranational contexts as input for further research on the dynamics of mne activities in relation to climate change

foreign and domestic divestments evidence on valuation effects of plant closings this study examines the valuation consequences of domestic and foreign divestments by comparing the stock price reaction to announcements of domestic plant closings and foreign plant closings a domestic plant closing could indicate firm wide problems and impending firm deterioration a foreign plant may serve to exploit arbitrage opportunities specific to that plant location closing a foreign plant need not signify firm wide problems our comparison of stated reasons for closings supports these propositions therefore foreign plant closing announcements should produce a smaller stock price decline that domestic plant closing announcements empirical results indicate a significant negative stock price reaction for domestic plant closings and an insignificant negative stock price reaction for foreign plant closings differences in stock price reaction remain after controlling for firm specific factors

the dynamics of the liability of foreignness a global study of survival in financial services we study the impact of foreignness on survival in interbank currency trading worldwide over the period 1974 93 in particular we develop hypotheses on the behavior of the liability of foreignness over time and on the consequences of evolving sources of firm level competitive advantage on this liability we test these hypotheses on the population of 2667 market making trading rooms located in 47 countries worldwide that either existed in 1974 or entered the industry between 1974 and 1993 the results show that there is a liability of foreignness and that it changes over time further strategic and organizational factors such as the adoption of technology by these firms and their mode of internal control significantly influenced survival as did location related factors such as the intensity of local and foreign competition 1997 by john wiley sons ltd

international trade constraints and commodity market models an application to the cotton market this paper presents a model that accounts explicitly for quantitative controls on international trade countries are classified into two groups depending upon whether or not their imports and exports are responsive to world prices with the result that all adjustment burdens are borne by a subset of the world market participants the model is tested with pooled time series cross section data for the cotton market m s odels of world commodity markets differentiate among market participants in a variety of ways single equation approaches make strong implicit assumptions about cross country similarities in consumer preferences and producer responsiveness while in other approaches world markets are disaggregated on the basis of time period income group or type of economic system the present paper develops a model that groups countries in terms of the presence or absence of controls on international trade as johnson and others have noted 1 quantitative controls on trade are prominent in the trade of many primary products with such restrictions domestic prices bear no necessary relationship to international prices and movements in world prices may be of limited relevance to explaining global consumer and producer behavior in the model in this paper countries are classified into two groups depending upon whether their consumers and producers are responsive to international prices the international market is then seen as one in which the burden of adjustment falls on the producers consumers and holders of stocks in the price responsive countries the estimation procedure uses a cross section time series data set in which country specific dummy variables allow for differential behavior among the various trade participants cotton is the focus of the paper as the cotton market is an especially good example of a market with quantitative restrictions cotton production is dominated by less developed countries ldcs and centrally planned economies cpes and exports are largely determined by the decisions of state trading monopolies i a trade constrained model the point of departure in developing the model is to group countries a priori according to whether their consumers producers and inventory holders are world price responsive r or non responsive n if x countries are fully insulated from world prices and z countries are responsive to world prices the global production utilization identity can be written as

who gets what the mne the national state and the distributional effects of globalization globalization is the outcome of the interface between national states and mnes it is a negotiated solution rather than perfect market equilibrium even in a global liberalized world national states are trying to generate as much welfare for their residents as they can while mnes try to maximize their value this creates a bargaining situation a stylized game theory model is presented and discussed in order to gain insights into the income distributional effects of the globalization process two important features of the model are a that there is a need for a carefully spelt out strategy and b that optimal solutions depend on an ability to identify the elements of the bargaining where the opportunity cost is low a case study of the negotiation between the state of israel and intel is presented as an illustration for this general model

do multinationals operate flexibly theory and evidence do multinational enterprises operate flexibly i e do they shift production in response to currency changes three theoretical perspectives are developed flexibility optimism premised on information and sunk cost advantages takes a macro efficiency perspective and predicts sizable responses flexibility pessimism premised on inertia and internal opportunism takes an organizational perspective and predicts sticky responses flexibility realism premised on the view that to be flexible in the current period multinational enterprises need to have planned and invested accordingly in previous periods predicts positive but relatively modest responses empirical analysis spanning the period 1977 1993 finds that multinational enterprises systematically exploit currency shifts but even in the face of large exchange rate changes their operational responses are relatively modest the results appear most consistent with flexibility realism and this hypothesis is selected over the alternatives considered

foreignness and exit over the life cycle of firms received wisdom indicates that owing to a liability of foreignness foreign firms exit with greater likelihood than do comparable domestic firms and that the difference attenuates as firms age and overcome the liability we posit that foreign firms are also intrinsically more volatile and footloose than domestic ones and that this leads to an increasing divergence between the exit rates of foreign and domestic firms empirically we find that the difference between exit rates of foreign firms and domestic firms increases with age as exit of foreign firms increases with age while that of purely domestic firms decreases exit rates of domestic based multinationals do not change significantly with age they are between those of foreign and purely domestic firms but are closer to the latter this suggests that the footlooseness observed for foreign firms is due to foreignness more than to multinationality

enhancing the obsolescing bargain theory a longitudinal study of foreign ownership of u s and european multinationals this research attempts to enhance the obsolescing bargain theory for manufacturing companies by statistically testing the effects of nine explanatory variables on the static and dynamic manifestations of bargaining success with longitudinal firm level data in order to highlight those effects it develops a conceptual framework that provides a broader context in which the primary variables operate it demonstrates that the obsolescing bargain took effect in india over a fifteen year period following restrictive legislation unlike previous research this study measures the effect of benefits received by multinationals from the host government in exchange for equity dilution american companies are found to retain a smaller share of their foreign ownership over time than british and other european multinationals some explanatory variables that have previously been found to influence level of foreign ownership static bargaining success are found to be less important or have a different effect in explaining proportion of foreign ownership retained dynamic bargaining success

change in domestic network centrality uncertainty and the foreign divestment decisions of firms abstract we investigate the role of domestic interfirm networks for the foreign divestment decisions of firms we argue that firms foreign operations risk being divested when a firm becomes more central in its domestic network positive changes in firm centrality at home facilitate access to information about new business opportunities but they may also lead firms to consider reconfiguring their value chain activities and resources across locations the resulting opportunity costs of maintaining foreign operations could subsequently lead to their divestment moreover we argue that the positive association between an increase in firm centrality in the domestic network and foreign divestment is stronger under higher uncertainty as pursuing new business opportunities at home becomes more appealing we distinguish between firm specific uncertainty and domestic market uncertainty we test and get support for our hypotheses using foreign subsidiary data from u s firms in the ict industry

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

the effect of own firm and other firm experience on foreign direct investment survival in the united states 1987 92 we argue that foreign firms operating in a host country generate information spillovers that have potential value for later foreign direct investment we test two predictions first we expect foreign direct investments by firms with experience in a host country to be more likely to survive than investments made by first time entrants second foreign direct investments will be more likely to survive the greater the foreign presence in the target industry at the time of investment subject to two contingencies the first contingency is that the relationship will be weak or nonexistent among firms with no experience in the host country because these firms have difficulty evaluating and taking advantage of the information spillovers the second contingency is that the presence of other foreign firms will not affect investment survival among firms that already have a presence in the target industry and undertake expansion these firms already possess general information about the target industries and are unlikely to gain additional benefit from information spillovers we find supportive evidence based on the survival to 1992 among 354 u s investments undertaken by foreign firms in manufacturing industries during 1987 1997 by john wiley sons ltd strat management j vol 18 811 824 1997 no of figures 1 no of tables 3 no of references 35

closure and divestiture by foreign entrants the impact of entry and post entry strategies we analyze the longevity of foreign entrants explicitly considering two possible ways of exit firm closure and capital divestiture we find that entry and post entry strategies affect the longevity of firms and of foreign equity holdings but in different manners while the ownership arrangements and organizational structure affect the likelihood of divestment they exert no significant effect upon closure the entry mode exerts opposite effects on the two modes of exit greenfield entrants being more likely to shutdown but less likely to be divested only human capital affects closure and divestment in the same manner firms with large endowments of human capital are less likely to exit irrespective of the exit mode considered copyright 2000 john wiley sons ltd

toward a cooperative view of mnc host government relations building blocks and performance implications this study examines cooperation based relations between mncs and host governments we theorize that resource commitment personal relations political accommodation and organizational credibility are four building blocks for improving an mnc s cooperative relationships with governments analysis of 131 mncs in china validates the importance of these blocks in shaping mnc government relations and the importance of these relations in shaping the performance of mnc subsidiaries

real options and foreign affiliate divestments a portfolio perspective this paper develops a real options portfolio perspective on foreign affiliate divestments affiliates are less likely to be divested in response to adverse environmental change if they represent growth or switch option value to the multinational firm under conditions of macroeconomic uncertainty however the affiliate is partially redundant to the option value of the multinational firm s affiliate portfolio if the affiliate shares the manufacturing platform role in the host country with other affiliates or if macroeconomic conditions of the host country are highly correlated with those of other countries in which the multinational firm operates affiliates we find strong support for these arguments in tests on a comprehensive sample of 1078 asian manufacturing affiliates of japanese electronics multinationals

the volatility of offshore investment abstract offshore investment often bears the image of footloose industry with little to hinder movement to the most favorable environment an effort to describe this particular segment of u s direct investment supports some elements of the colorful anecdotal portrait painted by critics in the third world semiconductor assemblers are moderately sensitive to wage rates and adjust quite rapidly in maintaining what they perceive as a diversified portfolio of risky ldc production locations on the other hand this reaction is small enough to guarantee that modest increases in wages will not send all investment fleeing from an export platform new methods of modelling direct foreign investment when risk diversification is important in explaining industrial location decisions are introduced in this paper

foreign subsidiary and parents roles during strategic investment and divestment decisions empirical research is scarce to answer the concerns of governments unions and public opinion at large concerning how multinationals make decisions to restructure their international strategic portfolio or close plants overseas to ensure long run competitiveness based on three in depth analyses of different types of restructing decisions the author concludes that the foreign subsidiaries seem to carry most of the decisionmaking effort for their own plant closures while for strategic portfolio readjustments during which they change owners they are not consulted

liability of foreignness natural disasters and corporate philanthropy this study examines how philanthropy can mitigate liability of foreignness lof in the aftermath of a national disaster a major disaster restructures the social landscape creating an avenue for corporate contributions to play a role in recovery and relief efforts this social restructuring offers a valuable opportunity for multinational enterprises mnes to establish strong local ties in turn mne contributions at such times have a stronger impact on their local acceptance thus mnes can use these events to strengthen their position in the community and mitigate lof using the context of a national disaster in india i test these arguments with a sample of 190 mnes and 660 domestic firms i found that in the aftermath of the disaster the increase in mne contributions was much larger and less strongly tied to promotional activities than the increase in contributions from domestic firms and this difference persisted over time moreover the performance implication of post disaster philanthropy was stronger for mnes than for domestic firms these findings suggest that philanthropy plays a more strategic role for mnes in the aftermath of a disaster and it has a pronounced effect on mitigating lof