the limits of explanation testing the internalization theory of the multinationial enterprise the paper explores the difficulties of testing the internalization approach in the modern theory of the multinational enterprise the structure of the theory is elaborated and the conclusion drawn that testing cannot occur at the most general theoretical level but that the theory requires careful restricting assumptions to be placed on it to allow rigorous testing several empirical circumstances would constitute refutation if they could be shown to hold however the use of unconventional cases or outliers does not constitute disproof more rigour is required in formulating and testing the theory but the current verdict on the theory must be not disproven

marketing s impact on firm value generalizations from a meta analysis abstractthe interest in the value relevance of marketing investments has given rise to numerous studies on the marketing finance interface this study integrates extant research findings and establishes empirical generalizations on marketing s impact on firm value specifically the authors conduct a meta analysis of prior econometric elasticity estimates of the stock market impact of marketing actions and marketing assets analyses based on 488 elasticities drawn from 83 studies reveal a mean elasticity of 04 for advertising expenditure variables and of 54 for marketing asset variables among marketing assets customer related assets show a higher mean elasticity of 72 compared with 33 for brand related assets further analyses show that advertising elasticities are lower in more concentrated industries and that marketing asset elasticities are higher during recession times researchers should also be aware that characteristics of the research design e g the type of firm value metric used the om

rural wheat consumption in china the share of wheat in china s overall grain production and consumption has increased since economic reform china is also a large wheat importer but imports are erratic in the literature there is disagreement over future prospects for per capita wheat consumption in china and imports most of the wheat is consumed in rural areas where the majority of the population resides and where consumers have shifted from coarse grains and potatoes to wheat we analyze rural wheat consumption using household data from two provinces we find there is evidence to support a contention that china s per capita wheat consumption may not grow very fast in the future and could actually fall

marketed surplus under risk do peasants agree with sandmo using a newly defined notion of aversion to income risk the behavior of the marketed surplus producer under price risk is characterized unlike the familiar case first examined by sandmo output depends on both ordinal preferences for goods and on risk attitudes conditions are found that yield an output level under risk that is smaller than under certainty if these conditions do not hold both risk and risk aversion may have a positive effect on output implications for econometric studies of risk attitudes are considered and illustrated with an example finally we examine the effect of uncertainty on the peasant s long run equilibrium

down with mne centric theories market entry and expansion as the bundling of mne and local assets both anderson and gatignon and the uppsala internationalization model see the initial mode of foreign market entry and subsequent modes of operation as unilaterally determined by multinational enterprises mnes arbitraging control and risk and increasing their commitment as they gain experience in the target market oli and internalization models do recognize that foreign market entry requires the bundling of mne and complementary local assets which they call location or country specific advantages but implicitly assume that those assets are freely accessible to mnes in contrast to both of these mne centric views i explicitly consider the transactional characteristics of complementary local assets and model foreign market entry as the optimal assignment of equity between their owners and mnes by looking at the relative efficiency of the different markets in which mne and complementary local assets are traded and at how these two categories of assets match i am able to predict whether equity will be held by mnes or by local firms or shared between them and whether mnes will enter through greenfields brownfields or acquisitions the bundling model i propose has interesting implications for the evolution of the mne footprint in host countries and for the reasons behind the emergence of dragon mnes

the expansion of foreign direct investments discrete rational location choices or a cultural learning process it is recognized in the literature that experience may affect the cost and the uncertainty of operating in foreign markets and experience and market knowledge may therefore influence the location decisions of fdis economic theory does not however predict a general expansion pattern of fdis across industries on the other hand the theory associated with the internationalization process approach highlights the importance of cultural distance and predicts a movement from close to more distant markets as more experience is acquired by the firm the internationalization process approach is rooted in a behavioral theory of the firm

firm specific assets and the gains from direct foreign investment it is widely held that multinational enterprises arise as a consequence of the existence of knowledge based firm specific assets such as superior technology or management know how these assets are much like public goods within the firm in that they can be costlessly supplied to additional plants thus leading to the efficiency of multiplant production foreign direct investment then consists of supplying the services of the assets to foreign operations and repatriated earnings are payments for these services these notions are formalized in a simple model of the multinational enterprise and welfare implications are analyzed copyright 1989 by the london school of economics and political science

foreign direct investment and exports with growing demand we explore entry into a foreign market with uncertain demand growth a multinational can serve the foreign demand by two modes or by a combination thereof it can export its products or it can create productive capacityvia foreign direct investment fdi the advantage of fdi is that it allows for lower marginal cost than exporting does the disadvantage is that fdi is irreversible and hence entails the risk of creating under utilized capacity in the case that the market turns out to be small the presence of demand uncertainty and irreversibility gives rise to an interior solution where the multinational under certain conditions both exports its products and does fdi

declining nutrient intake in a growing china does household heterogeneity matter summary this paper uses chinese household data for 1989 2009 to explain why mean nutrient intake has declined despite economic growth we focus on household heterogeneity in nutrient intake response to increases in household income allowing for its endogeneity a quantile instrumental variable fixed effects panel estimation shows that rising income tends to reduce inequality in macronutrient intake in both urban and rural areas in 2004 09 this is driven by increases in nutrient intake for the urban nutrient poor and falls in nutrient intake for the rural nutrient non poor on the other hand fluctuations in prices of meat eggs and oil increase nutrition poverty

how to maximize domestic benefits from foreign investments the effect of irreversibility and uncertainty when a foreign monopolist facing uncertain future demand can either export to a host country or serve the market by undertaking an irreversible foreign direct investment the host government maximizes net domestic benefits by nearly fully subsidizing the investment cost in combination with taxing away benefits that exceed the gains from exporting without the subsidy maximization of domestic benefits leads to underinvestment from a world welfare point of view

patient or physician oriented marketing what drives primary demand for prescription drugs abstract the authors analyze primary demand effects of marketing efforts directed at the physician detailing and professional journal advertising versus marketing efforts directed at the patient direct to consumer advertising the analysis covers 86 categories or approximately 85 of the u s pharmaceutical market during the 2001 2005 period primary demand effects are rather small in contrast with the estimated sales effects for individual brands by using a new brand level method to estimate primary demand effects with aggregate data the authors show that the small effects are due to intense competitive interactions during the observation period but not necessarily to low primary demand responsiveness in contrast with previous studies the authors also find that detailing is more effective in driving primary demand than direct to consumer advertising a category sales model cannot provide such insights in addition a category sales model likely produces biased predictions about period by perio

foreign direct investment and investment under uncertainty we show that in uncertain environments ownership and internalization advantages may be negatively rather than positively associated with fdi this reversal from extant theory occurs because ownership advantages often serve to make fdi delayable while internalization advantages often serve to make it less reversible when fdi becomes either more delayable or less reversible it is less likely to occur at a point in time our approach enriches the who where and why explanations offered by current fdi theory to incorporate the question of when

towards more realistic conceptualisations of foreign operation modes we address a long standing discrepancy between theory and practice regarding how firms choose use and modify their modes of operation in foreign markets theory typically treats foreign operation modes as choices between well specified discrete alternatives observation of business practice reveals a messier reality we commonly observe mode packages within mode adjustments and mode role changes yet by and large these aspects of international business development have been relatively ignored in the literature and in theoretical and empirical research we propose richer and more realistic conceptualisations of foreign operation modes and look at their implications for theory and practice

unionised labour market and strategic production decision of a multinational i show that a foreign firm may sell the same product through both foreign direct investment fdi and export and this decision depends on the size of the product market it happens irrespective of whether the labour market in the domestic country or in the foreign country is unionised unlike the existing works focusing on risk diversification in presence of demand or cost uncertainty i explain the co existence of fdi and export in a world with certainty the endogenous determination of the wage rate plays an important role for my results my analysis shows the effects of the fixed cost of fdi and competition in the product market on the production strategy of the foreign firm

foreign direct investment and exports a time series approach the impact of the accelerated internationalization of the last decade on the austrian economy is a controversial issue granger s concept of casuality is used to investigate one aspect of the internationalization of production the realtionship between foreign outward direct investment and exports using aggregate flow data from the austrian economy the stationarity of the time series is examined and cointegration tests for the adequacy of the multivariate time series approach are performed the estimation results suggest significant causality of austrian foreign outward direct investment and exports in both directions impulse response analysis and varience decomposition show a very slow dynamic response of both variables to exogenous shocks of the other it furthermnore indicates the possiblity of a positive effect of exogeneously increased foreign direct investment on exports and a negative effect of export shocks on foreign direct investment however significant long run effects are not established

the internalisation theory of the multinational enterprise a review of the progress of a research agenda after 30 years this paper reviews the progress of the research agenda initiated by the future of the multinational enterprise 1976 focusing initially on the problem of explaining the existence of the multinational enterprise the agenda soon broadened to encompass the analysis of alternative modes of foreign market entry the role of international joint ventures the impact of innovation on corporate growth and the role of culture in international business the core philosophy based on the coasian nature of the firm and on rational action modelling has remained constant while the widening range of applications has encouraged synthesis with theories developed in other fields of research success in answering any one question invariably generates new questions which must in turn be answered through a further extension of the theory and this dynamic continues to drive the development of the theory today internalisation theory has retained its validity and its vitality over the past 30 years and is currently being extended into new fields of international business research

a perspective on regional and global strategies of multinational enterprises multinational enterprises mnes are the key drivers of globalization as they foster increased economic interdependence among national markets the ultimate test to assess whether these mnes are global themselves is their actual penetration level of markets across the globe especially in the broad triad markets of nafta the european union and asia yet data on the activities of the 500 largest mnes reveal that very few are successful globally for 320 of the 380 firms for which geographic sales data are available an average of 80 3 of total sales are in their home region of the triad this means that many of the world s largest firms are not global but regionally based in terms of breadth and depth of market coverage globalization in terms of a balanced geographic distribution of sales across the triad thus reflects a special and rather unusual outcome of doing international business ib the regional concentration of sales has important implications for various strands of mainstream ib research as well as for the broader managerial debate on the design of optimal strategies and governance structures for mnes journal of international business studies 2004 35 3 18 doi 10 1057 palgrave jibs 8400073

information marketing and pricing in the u s antiulcer drug market introduced into the united states in 1977 tagamet was the pioneer product in the class of antiulcer drugs known as h2antagonists by promoting ulcer healing through inhibiting acid secretion tagamet was able to heal ulcers and treat pre ulcer conditions pharmacologically on an outpatient basis thereby substituting for more costly hospital admissions and surgeries in 1983 another h2 antagonist called zantac entered and by early 1987 u s zantac sales surpassed those of the pioneering tagamet today there are four h2 antagonists sold in the united states tagamet zantac pepcid and axid zantac is now the world s largest selling prescription drug having estimated worldwide sales in 1994 of about 4 billion each of the four h2 antagonists is among the top 100 in world drug sales although tagamet lost u s patent protection on may 17 1994 in this paper we examine empirically the role of information in facilitating and explaining growth of the overall antiulcer drug market as well as in shaping the changing market shares of the four patented products the dissemination of information is due largely to the use of marketing channels such as visits by manufacturers representatives to physicians called detailing advertising in medical journals and most recently by direct to consumer advertising we examine these and also explore pricing policies product differentiation and orderof entry 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

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

beyond entry mode choice explaining the conversion of joint ventures into wholly owned subsidiaries in the people s republic of china while there is a vast amount of research on firms choice of ownership form when entering a foreign market little attention has been paid to changes in ownership forms of operation abroad after initial entry using transaction cost economics and institutional theory we identify a number of factors that may help to explain the likelihood of foreign firms converting their joint venture with a local firm into a wholly owned subsidiary we formulate a number of hypotheses and test them against data collected through a questionnaire survey of managers representing foreign subsidiaries in the people s republic of china prc that are run either as international joint ventures ijvs or as wholly owned foreign subsidiaries wfoes that have recently been converted from ijvs into a wfoe the paper contributes to research by showing that transaction cost based thinking is useful for explaining not only the initial choice of ownership mode when entering a new market but also the potential subsequent changes of this ownership mode by combining transaction cost theory with arguments from institutional theory the study identifies a number of factors that contribute to explaining post entry changes of foreign firms ownership forms in the prc and provides empirical evidence of this phenomenon

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

asymmetric demand information and foreign direct investment we examine the fdi versus exports decision of firms competing in an oligopolistic quantitysetting market under demand uncertainty and asymmetric information compared to a firm that chooses to export a firm that chooses to set up a plant in the host market has superior information about local market demand in addition to the well known tension between the fixed set up costs of investment the additional variable costs of exports and oligopoly sizes the incentive to invest abroad is explained by the strategic learning effect fdi may be observed even if trade costs are zero the analysis is robust to price competition and to the possibility that a foreign firm can engage in both fdi and exports

marketing budget allocation across countries the role of international business cycles a key conundrum facing organizations is how to adjust marketing budgets in response to the business cycle while most firms use procyclical spending spending less during economic contractions academic studies often recommend countercyclical spending spending more during contractions which begs the following question what is the right thing to do the spending problem is compounded further when demand is not just driven by one country s business cycle but by the nonsynchronized business cycles of multiple countries as is the case for tourism marketing aiming to attract tourists originating from different countries we derive insights into the best way to allocate marketing budgets across countries under varying economic conditions we show that the allocation decisions are driven by the procyclical versus countercyclical nature of three factors unit sales marketing effectiveness and per unit profit contribution to study how unit sales and marketing effectiveness respond to the business cycle

the optimal timing of a foreign direct investment analyses of the optimal timing of foreign direct investment fdi decisions have been curiously lacking in the general literature on multinational enterprises cf buckley 1979a b although comparative static analyses exist comparing exporting to the host country with market servicing from a production unit sited in the host country horst 1971 hirsh 1976 the only attempt to predict the timing of the switch from exporting to foreign based production is that of aliber 1970 although vernon 1966 gives a cost based rationale for the switch this chapter attempts to fill this gap in the theory of fdi section 2 1 outlines and criticises previous attempts to deal with the problem sections 2 2 4 present a simple model which ignores set up costs and sections 2 5 and 2 6 give a more detailed analysis including such costs further extensions of the theory are considered in section 2 7 and the conclusions are summarised in section 2 8 the problem emerges as being more complex than had previously been appreciated

brand performance volatility from marketing spending although volatile marketing spending as opposed to even level spending may improve a brand s financial performance it can also increase the volatility of performance which is not a desirable outcome this article analyzes how revenue and cash flow volatility are influenced by own and competitive marketing spending volatility by the level of marketing spending by the responsiveness to own marketing spending and by competitive response from market response theory we derive propositions about the influence of these variables on revenue and cash flow volatility in addition we extend the dorfman steiner theorem to derive the optimal level and volatility of expenditures if volatility effects are taken into account based on a large sample of 99 pharmaceutical brands in four clinical categories and four european countries we test for the empirical relevance of the propositions and assess the magnitude of the different sources of marketing induced performance volatility we find broad support for the

international expansion of emerging market enterprises a springboard perspective in this article we present a springboard perspective to describe the internationalization of emerging market multinational corporations em mnes em mnes use international expansion as a springboard to acquire strategic resources and reduce their institutional and market constraints at home in so doing they overcome their latecomer disadvantage in the global stage via a series of aggressive risk taking measures by aggressively acquiring or buying critical assets from mature mnes to compensate for their competitive weaknesses we discuss unique traits that characterize the international expansion of em mnes and the unique motivations that steer them toward internationalization we further delineate peculiar strategies and activities undertaken by these firms in pursuit of international expansion as well as internal and external forces that might compel or facilitate their propulsion into the global scene we finally explain the risks and remedies associated with this international springboarding strategy and highlight major issues meriting further investigation

licensing versus direct investment a model of internalization by the multinational enterprise a firm must decide whether to serve a foreign market by exporting building a foreign branch plant or licensing the production to an existing foreign producer the existence of reputations implies that any licensing agreement must provide a licensee with the incentive to maintain the reputation this creates a motive for the firm to internalize transactions by building a branch plant i e by becoming a multinational the model reflects a more general notion that the inability of the firm to control a licensee s agent s actions can provide incentives for multinational activity the paper explores the determinants of the firm s mode of operation as well as the consequences of certain government policies

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

a policy analysis of china s wheat economy this paper examines the impacts of china s historical and anticipated future reforms on its domestic wheat economy and how it affects the import demand for wheat using a stochastic coefficient regression method the results strongly support the hypothesis that producers and consumers in the post reform era were responsive to a less controlled economy furthermore the higher import forecasts indicate that china will interact more with the world wheat market

misreading liberalisation and privatisation the case of the us energy utilities in europe in response to energy market liberalisation and privatisation initiatives promoted by the eu and other european states in the 1990s a large number of us energy utilities expanded their activities in europe mainly through acquisitions the size of their investment was a decade later matched by the ensuing scale of their retreat wealth destruction and often forced exit combining interviews industry studies published financial data and company reports this article examines critically their strategy and in light of widespread failures seeks to answer the question of what went wrong it is argued that mistakes might have been avoided through greater appreciation of how market liberalisation evolves given changing government priorities and general sovereign risk

rice in asia is it becoming an inferior good empirical results using time series and cross sectional data indicate that rice in asia is becoming an inferior good income elasticities declined and in some cases became negative between 1961 and 1985 in most of the fourteen asian countries studied accordingly domestic demand for rice in these countries is not likely to grow as rapidly as it has in the past as a consequence there is a potential for excess supplies of rice to develop in asia putting downward pressure on rice prices while governments in asian countries may need to adjust their rice policies in the future world rice suppliers may need to develop new markets for rice

strategic second sourcing by multinationals multinationals often serve foreign markets by exporting as well as by investing directly in foreign production facilities we argue that if the multinational competes in an oligopolistic market characterized by strategic complements then there are strategic reasons to use two production facilities committing to a second source allows the firm to keep average cost low while increasing its marginal cost the increase in marginal cost softens product market competition resulting in higher profits we argue that this theory also has implications for the make or buy literature in production management and the literature on second sourcing in industrial organization

mnes and market valuation of firms a cross sectional study of indian electrical and electronic goods manufacturing firms this paper argues that inter firm differences in the direction of change in market valuation will depend mainly on the salience and unique risk characteristics of the firms these characteristics are largely influenced by mulinational enterprise mne affiliation the sample for the study consists of electrical and electronic manufacturing firms in india for 1994 1996 maximum likelihood estimates of the probit model show that even during a downswing in the stock market mne affiliates were able to hold their own and increase their market valuation these results hold good for a wide variety of products produced in this sector where both mnes and local firms compete the results have implications for theories relating to mnes stock market valuation and also for policy makers

the role of duration in multinational investment strategies the location of investment by multinational enterprises has been investigated from many perspectives it has been suggested that investment may be motivated by experience of a particular location represented by tenure of operations in contrast portfolio considerations suggest that increased investment in a given location increases risk exposure in this paper the question of whether a multinational with a longer duration of operations at a particular location is more likely to invest further is addressed after taking portfolio risk into account a conceptual model of multinational investment strategy is developed and empirically tested using data from a survey of multinational enterprises operating in the west midlands region of the united kingdom two innovative non parametric tests for duration dependence are applied after normalising for portfolio considerations it is found that multinational investment is significantly duration dependent i e firms with a longer tenure of operations are significantly more likely to invest in any given period this finding has important implications for the strategy of inward investment agencies in particular an investment agency is short sighted if it seeks to attract new investors if that is at the expense of neglecting multinationals with current operations in its jurisdiction

quantifying the structure of food demand in china an econometric approach this article examines food demand structure and its dynamics for 11 commodities in urban china the analysis is based on household level expenditure survey data for two cross sectional surveys of chinese households pertaining to food expenditure patterns during 1995 and 2003 pre committed components of commodity demands that are insensitive to economic variables are explored we use the generalized quadratic almost ideal demand system gqaids for its empirical superiority to the generalized almost ideal demand system gaids and estimate the associated parameters via full information maximum likelihood procedure fiml accounting for endogeneity of total expenditures on food for home consumption fah we also use quality adjusted commodity unit values to control for quality differences resulting from commodity aggregation and food choice furthermore we derive gqaids elasticity formulas and estimate income elasticities without restrictions the results partially support the hypothesis that an average chinese household has incorporated elements of western diet fine grains into traditional chinese food diet over time moreover the outcome of a simple test developed here points to possible preference changes for a majority of food staples under study

a meta analysis of marketing communication carryover effects abstractto optimally set marketing communication marcom budgets reliable estimates of short term elasticities and carryover effects are required empirical generalizations from meta analyses of prior field studies can help guide these decisions however the last such meta analysis of marcom carryover effects was performed on koyck model based estimates collected before 1984 and was confined to mass media advertising the authors update and extend extant empirical generalizations via two meta analyses of carryover estimates compiled from studies encompassing personal selling targeted advertising and mass media advertising using diverse model forms until 2015 the first is focused on and utilizes 918 estimates of the carryover proportion of the total effect termed long term share of the total effect and the second focuses on 863 derivable estimates of 90 implied duration intervals the authors find the mean long term shares of the total effect for personal selling 687 and targeted advertisin

timing of investment and international expansion performance in china this study examines the multivariate and univariate performance effects of timing of fdi in an emerging economy at the business unit level a longitudinal analysis of industry wide firm specific data on fdi timing and foreign venture performance in china reveals that timing has a significant influence on overall as well as on individual aspects of venture performance it is observed that early entrants outperform late movers in terms of local market expansion and asset turnover whereas late movers are superior to early entrants with regard to risk reduction and accounting return during the initial period of international expansion factor analysis confirms that the importance of timing in affecting fdi decisions is as significant as that of internalization ownership or location factors

internalization and the mne a note on the spread of ideas this paper examines the reasons for the impact of buckley and casson s the future of the multinational enterprise 1976 on research in international business ib earlier work concentrated on ownership specific advantages or locational determinants rather than the central concept of internalization the few exceptions were incomplete or not well known internalization as applied to the mne spread rapidly because of the appeal to ib researchers of an analytically powerful idea that was based on institutional economics and involved an accessible methodology the spread was also helped by the parallel growth of transaction costs in the domestic theory of the firm and the publication activity of the authors and their associates

costa contribution optimizing sales territory alignment the alignment of sales territories has a considerable impact on profit and represents a major problem in salesforce management practitioners usually apply the balancing approach this approach balances territories as well as possible with respect to one or more attributes such as potential or workload unfortunately this approach does not necessarily guarantee maximizing profit contribution thus it does not provide an evaluation of the profit implications of an alignment proposal in comparison with the existing one in consequence several authors proposed nonlinear integer optimization models in the 1970s these models attempted to maximize profit directly by considering the problems of allocating selling time calling plus travel time across accounts as well as of assigning accounts to territories simultaneously however these models turned out to be too complex to be solvable therefore the authors have either approximated the problem or proposed the application of heuristic solution procedures on the basis of the suboptimal principle of equating marginal profit of selling time across territories to overcome these limitations we propose a new approach costa an acronym for contribution optimizing sales territory alignment in contrast to previously suggested profit maximizing approaches costa operates with sales response functions of any given concave form at thelevel of sales coverage units scus that cover a group of geographically demarcated individual accounts thus costa works with sales response functions at a more aggregated level that requires less data than other profit maximization approaches costa models sales as a function of selling time which includes calling time as well as travel time assuming a constant ratio of travel to calling time in addition the formulation of the model shows that an optimal solution requires only equal marginal profits of selling time across sales coverage units per territory but not across scus of different territories basically costa consists of an allocation model and an assignment model both of which are considered simultaneously the allocation model optimally allocates the available selling time of a salesperson across the scus of his or her territory whereas the assignment model assigns the scus to territories thus costa predicts the corresponding profit contribution of every possible alignment solution which enables one to perform what if analyses the applicability of the model is supported by the development of a powerful heuristic solution procedure a simulation study showed that costa provided solutions that are on average as close as 0 195 to an upper bound on the optimal solution the proposed heuristic solution procedure enables one to solve large territory alignment problems because the computing time increases only quadratically with the number of scus and proportionally to the square root of the number of salespersons in principle we also show how costa might be expanded to solve the salesforce sizing as well as the salespersons location problem the usefulness of costa is illustrated by an application the results of this application indicated substantial profit improvements and also outlined the weaknesses of almost balanced territories it is quite apparent that balancing is only possible at the expense of profit improvements and also does not lead to equal income opportunities for the salespersons this aspect should be dealt with separately from territory considerations by using territory specific quotas and linking variable payment to the achievement of these quotas furthermore the superiority of costa turned out to be stable in a simulation study on the effect of misspecified sales response functions costa is of interest to researchers as well as practitioners in the salesforce area it aims to revive the stream of research in the 1970s that already proposed sales territory alignment models aimed at maximizing profit such profit maximizing models are theoretically more appealing than approaches that strive to balance one or several attributes such as potential or workload costa s main advantage over previous profit maximizing approaches is that it is less complex consequently costa demands less data so that even large problems can be solved close to optimality within reasonable computing times

planning marketing mix strategies in the presence of interaction effects companies spend millions of dollars on advertising to boost a brand s image and simultaneously spend millions of dollars on promotion that many believe calls attention to price and erodes brand equity we believe this paradoxical situation exists because both advertising and promotion are necessary to compete effectively in dynamic markets consequently brand managers need to account for interactions between marketing activities and interactions among competing brands by recognizing interaction effects between activities managers can consider interactivity trade offs in planning the marketing mix strategies on the other hand by recognizing interactions with competitors managers can incorporate strategic foresight in their planning which requires them to look forward and reason backward in making optimal decisions looking forward means that each brand manager anticipates how other competing brands are likely to make future decisions and then by reasoning backward deduces one s own optimal decisions in response to the best decisions to be made by all other brands the joint consideration of interaction effects and strategic foresight in planning marketing mix strategies is a challenging and unsolved marketing problem which motivates this paper this paper investigates the problem of planning marketing mix in dynamic competitive markets we extend the lanchester model by incorporating interaction effects constructing the marketing mix algorithm that yields marketing mix plans with strategic foresight and developing the continuous discrete estimation method to calibrate dynamic models of oligopoly using market data both the marketing mix algorithm and the estimation method are general so they can be applied to any other alternative model specifications for dynamic oligopoly markets thus this dual methodology augments the decision making toolkit of managers empowering them to tackle realistic marketing problems in dynamic oligopoly markets we illustrate the application of this dual methodology by studying the dynamic lanchester competition across five brands in the detergents market where each brand uses advertising and promotion to influence its own market share and the shares of competing brands empirically we find that advertising and promotion not only affect the brand shares own and competitors but also exert interaction effects i e each activity amplifies or attenuates the effectiveness of the other activity normatively we find that large brands underadvertise and overspend on promotion while small brands underadvertise and underpromote finally comparative statics reveal managerial insights into how a specific brand should respond optimally to the changes in a competing brand s situation more generally we find evidence that competitive responsiveness is asymmetric

out of africa locational determinants of south african cross border mergers and acquisitions abstractsouth africa is the africa s biggest source of outward foreign direct investment this study examines the principal locational motives of cross border mergers and acquisitions cbma by south african firms for the 1990 2014 period the role of inter country cultural and economic linkages is also studied firm level data of south african merger and acquisition activities in 74 host countries are used to estimate a number of model specifications that control for host country economic geographical cultural and institutional characteristics estimations are carried out using random effects negative binomial panel model capturing the host economy market and enhancing efficiency are found to be the two major motives driving south african corporations cbma activities natural resources acquisition seems a less important motive while strategic assets such as patents and technology do not appear to be attractive the role of cultural and economic linkages between the home and the host country is found t

endogenous protection foreign direct investment and protection building trade abstract we introduce the possibility of foreign direct investment fdi in a strategic oligopolistic setting with endogenous protection and find that a number of unique subgame perfect equilibria may arise including a new result we call protection building trade this phenomenon occurs in our model when foreign firms locating production in the home country try to increase protectionist pressures in the home country through increased exports to provide larger barriers against other foreign competitors in future periods we discuss how the foreign firm behavior surrounding significant u s protectionist actions including the vers on japanese automobiles may be consistent with protection building trade behavior

speed of the internationalization process the role of diversity and depth in experiential learning by analyzing internationalization as a dynamic process we attempt to explain the speed of international operations in terms of learning acquired in the course of past international activities we consider that the speed of the internationalization process depends on the type of experiential learning that results from decisions implicit in the internationalization process choice of location and modes of operation firms develop two types of learning activities with respect to the selection of foreign markets and modes of operation diversity and depth of accumulated international activities we propose that depth of international activities has an inverted u shaped impact on the speed of the internationalization process while diversity of international activities has a u shaped influence on the speed of internationalization process the results of our longitudinal study of 889 firms over 23 years 1986 2008 suggest that diversity of international activities promotes long term learning by exposing the firm to richer experiences although such learning only takes place over time depth of international activities may accelerate the internationalization process in the short term but it eventually restrains its potential for development in the long term our research highlights the short term vs long term consequences of different types of decisions related to the internationalization process

personal selling elasticities a meta analysis abstract this article presents a meta analysis of prior econometric estimates of personal selling elasticity that is the ratio of the percentage change in an objective ratio scaled measure of sales output e g dollar or unit purchases to the corresponding percentage change in an objective ratio scaled measure of personal selling input e g dollar expenditures the authors conduct a meta analysis of 506 personal selling elasticity estimates drawn from analyses of 88 empirical data sets across 75 previous articles they find a mean estimate of current period personal selling elasticity of 34 they also find that elasticity estimates are higher for early life cycle stage offerings higher from studies set in europe than from those set in the united states and smaller in more recent years in addition elasticity estimates are affected significantly by analysts use of relative rather than absolute sales output measures by cross sectional rather than panel data by omission of promotions by lagge

practice prize winner dynamic marketing budget allocation across countries products and marketing activities previous research on marketing budget decisions has shown that profit improvement from better allocation across products or regions is much higher than from improving the overall budget however despite its high managerial relevance contributions by marketing scholars are rare in this paper we introduce an innovative and feasible solution to the dynamic marketing budget allocation problem for multiproduct multicountry firms specifically our decision support model allows determining near optimal marketing budgets at the country product marketing activity level in an excel supported environment each year the model accounts for marketing dynamics and a product s growth potential as well as for trade offs with respect to marketing effectiveness and profit contribution the model has been successfully implemented at bayer one the world s largest pharmaceutical and chemical firms the profit improvement potential is more than 50 and worth nearly 500 million in incremental discounted cash flows

multinational plant location as a game of timing we study the problem of when firms should switch from exporting to producing at an onshore plant which will cater to a local market the model incorporates factors such as rivalry differences between costs of domestic and offshore production differences in consumer preferences for offshore and domestically produced goods and the capital costs associated with switching to domestic production we find equilibrium timing patterns where there is a leader and a follower diffusion equilibria to be most typical furthermore we find that a firm with lower switching costs has a competitive advantage in the determination of which firm will lead it is found in the duopoly model that market growth and production and transportation unit costs have a relatively greater impact on the timing of the switch than do changes in demand elasticities or changes in the fixed costs of switching with more firms and increased competition however the effect of changes in fixed costs become relatively greater

a simple and flexible dynamic approach to foreign direct investment growth the canada united states relationship in the context of free trade in the post war period the world economy has seen the rise and expansion of regional trading blocs and regional economic integration 1 the prime example has been the evolution of the european union since the early 1950s also significant has been the creation of the asia pacific economic cooperation area in 1989 and development of the north american free trade area dating also from 1989 this paper will focus on the canada united states relationship while the intentions of the partners to a free trade agreement are clear in the case of trade the effect on foreign direct investment fdi is ambiguous the question this paper addresses is that of how the north american free trade agreements have affected us foreign investment behaviour in canada

letter from the editor in chief time in international business issue 40 4 consists of eight articles seven of which were acceptedfor publication by former jibs editor in chief arie y lewin andone under my watch while each of the articles makes importantcontributions to our knowledge of international business ib studies i would like to highlight those that are related to time time in ibeconomists think of time in terms of statics comparative staticsand dynamics static analyses focus on equilibrium situations e g the price where quantity demanded equals quantity supplied comparative statics focuses on pre vs post situations when anexogenous change affects behavior and outcomes e g changes inincome or tastes affect market price dynamic analyses trace thepath or processes for beginnings transitions and endings whetheralone or in a coevolutionary framework much and perhaps most ib research either ignores time orfocuses solely on the comparative statics of predicting how achange in the business environment or government policies attime t affects mne strategies and performance at time t

models of the multinational enterprise flexibility is identified as the hallmark of recent modelling of the multinational enterprise the focus on flexibility is a response to the rationalization and restructuring of international business which has occurred since the end of the golden age of western economic growth flexibility has been south in factor markets intermediate product markets and markets for final products it has been sought by both governments and firms flexible firms are attracted to locations with flexible host governments this article contrasts the modern research agenda based on flexibility with the more traditional research agenda which predominates in the literature reviewed by caves 1996

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

intra firm trade abstract the study analyses intra firm trade that is the estimated one third of world trade which is transacted between affiliated parties as firms realize the increasing potential for integrating their operations throughout the world they are contributing to significant shifts in the patterns of interntional trade and industrial development as emphasized here international trade is inextricably linked to the growing and substantial share of transactions between affiliated parties conveyed through multinational enterprises

nonparametric advertising budget allocation with inventory constraint abstract in this paper we study the optimization problem of the advertising budget allocation for revenue management faced by a marketer besides the advertising budget the marketer is subject to an inventory constraint during the promotion season the marketer can affect sales by spending on advertising but does not initially know the relationship between the advertising expense and consequent sales we propose a nonparametric learning while doing budget allocation policy for the problem specifically we first conduct a sequence of advertising experiments to learn predict the market sales response through observing realized sales exploration then based on the learned sales function determine the following budget allocation planning exploitation in particular during the exploration and exploitation phases we need to balance the advertising and inventory budgets simultaneously we show that our policy is asymptotically optimal as the size of the market increases by constructing a worst case example we show that our policy achieves near best asymptotic performance we also provide numerical illustrations to show how our policy works and discuss how its performance changes as the system parameters vary we also glen some managerial implications of our model and policy from the numerical results

managerial governance adaptation in the multinational enterprise in honour of mira wilkins we propose an analytical business history approach informed by new internalisation theory to study managerial governance adaptation in the multinational enterprise mne we shed new light on the timing and the scale of managerial governance adaptation these two issues have remained largely unaddressed in mainstream international business theory we uncover the importance of delayed larger scale governance adaptation as a response to cumulative localised commitment failures we illustrate our new perspective on managerial governance adaptation by providing a short retrospective of wilkins and hill s american business abroad ford on six continents cambridge university press cambridge 1964 classic historical account of ford motor company s expansion across six continents between 1903 and 1963 our brief retrospective highlights the value of in depth historical analysis informed by umbrella behavioural assumptions such as those adopted in new internalisation theory based research to gain improved understanding of international strategy and governance trajectories of large mnes

strategic investments and the development of multinationals a model of multinational behavior is presented in which either the existence or absence of multinationals can be a nash equilibrium outcome the key determinant is the relationship between plant scale economies a force for geographic centralization and multiplant economies plus transport costs leading to multinationality the model predicts that multinational enterprise production arises when firm specific and transportation costs are large relative to plant scale economies the latter are both a technological and a strategic variable in the entry decision copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

an economic model of international joint venture strategy the strategic choice between joint ventures licensing agreements and mergers is analysed using eight key factors suggested by internalisation theory the model explains the increasing role of international joint ventures in the 1980s in terms of the accelerating pace of technological innovation and the globalisation of markets it offers a range of predictions about the formation of joint ventures within industries across industries across locations and over time it exploits a powerful modelling technique that has many other applications in international business strategy

an imperfect competition theory of the mne the multinational firm as the central actor in international business has been studied extensively across countries and intensively within companies no single theoretical structure can deal with all important aspects of these firms nonetheless some powerful explanatory tools such as the international product cycle and the transactions cost internalization theory have shed substantial light on mne activities the imperfect competition theory presented here explains 6 major mne decisions for example production location and market servicing methods with a simple model which can be extended to explore other important issues

pricing policies of multinational enterprises host country regulation and welfare abstract this paper examines host country price regulation policies towards a foreign subsidiary the analysis considers two prices namely the transfer prices charged to the subsidiary and the market price of the subsidiary s products it is shown that host countries should regulate both of these prices regulation of the transfer price alone may induce an increase in the subsidiary s market price and cause a loss of host country welfare regulation of both prices is more efficient for it enables the host country to attain a higher level of welfare and allows the foreign firm to earn the same level of profits as would regulation of only one of those prices