the attention stimulus of cultural differences in global services sourcing contrasting with extant research centred on the organizational challenges of sourcing services in culturally distant countries we show that cultural differences between home and host countries do not prevent firms from achieving their cost savings targets instead the effect is positive both for the captive and outsourcing governance models using insight from social psychology research and the theory of organizations we build the argument that the positive effect is due to cultural differences providing an attention stimulus for decision makers to thoroughly gather and process information on the costs and benefits of global sourcing thereby reducing the risk of cost estimation errors the empirical validation uses a data set of 624 global services sourcing initiatives obtained from the offshoring research network complemented with multiple external sources of cross country data on cultural differences languages geographic distance and education levels the main contribution of the article is to add much needed nuance to the otherwise monotonic negative view of cultural differences in extant global sourcing literature moreover the original theoretical framework and resulting attention stimulus argument we develop open new avenues for research on the consequences of cultural differences in international business operations more broadly

managing the protection of innovations in knowledge intensive business services abstract how do knowledge intensive business services kibs protect their inventions from imitation by rival firms when choosing among various protection mechanisms data from the 2003 statistics canada innovation survey on services are used to investigate this issue by looking into complementarities substitution and independence among eight protection mechanisms a multivariate probit mvp model is estimated to take into account the fact that kibs simultaneously consider many alternative intellectual property ip protection methods when they attempt to protect their innovations results show that patents registration of design patterns trademarks secrecy and lead time advantages over competitors constitute legal and informal methods that are used jointly these complementarities suggest that ip protection mechanisms that are interdependent and reinforce each other to protect innovations from imitation by rival firms constitute a pattern on which firms rely to protect their innovations from imitation a second pattern is based on the fact that kibs rely on patents and complexity of designs as substitutes and tend to use registration of design patterns and complexity of designs as substitutes in protecting their innovations from imitation a third emerging pattern concerns protection mechanisms that are independent from each other and exhibit no synergy and do not reinforce each other to protect innovations from imitation by other firms

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

information technology and transnational integration theory and evidence on the evolution of the modern multinational enterprise reflecting amplified hazards in cross border exchange and imperfections in markets for intangibles internalization has been central in multinational enterprise mne theory this centrality notwithstanding the fact is that internalization coheres with lower powered incentives and carries an implicit drawback namely higher realized production costs with the emergence and deployment of information and communication technology ict modern mnes are reshaping their transnational governance to address this cost the modern mne uses ict to mitigate transaction costs and evolves more to arm s length exchange to incentivize lower production costs a testable prediction is that mnes in industries more susceptible to and employing more ict will exhibit a reduced propensity for transnational integration we examine this hypothesis using available data from 1982 to 1997 for us mnes across all manufacturing sectors regression results and robustness tests are strongly congruent with the prediction this study a first to explore empirically the role of ict in the evolution of transnational exchange suggests that mne theory until now founded primarily on transaction cost economics and a cross border control theory of value capture is more likely to keep pace with developments in mne practice by opening up to incentive theories of exchange governance and a cross border coordination theory of value creation

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

new silicon valleys or a new species commoditization of knowledge work and the rise of knowledge services clusters this paper explores knowledge services clusters kscs as a distinct and increasingly important form of geographic cluster in particular in developing countries kscs are defined as geographic concentrations of lower cost skills serving global demand for increasingly commoditized knowledge services based on prior research on clusters and services offshoring and data from the offshoring research network orn major properties and contingencies of ksc growth are discussed and compared with both high tech clusters and low cost manufacturing clusters special emphasis is put on the ambivalent effect of commoditization of knowledge work on ksc growth it is proposed that kscs attract most client projects if service commoditization is medium whereas higher or lower commoditization either increases global competitive pressure or lowers demand and economies of scale and scope ksc attractiveness is further related to the perceived availability of skills at relatively low costs and cluster connectedness with client economies through corporate networks and professional communities findings not only advance current debates on clusters global services sourcing and the geography of knowledge production but also have important policy implications

fragmenting global business processes a protection for proprietary information this study shows that when sourcing business services in foreign countries the fragmentation of processes across production units acts as an operational level adjustment variable for firms to adapt their information protection approach to the regulative environment of the host country they have selected and to the possibility to use internal controls over the activities performed abroad we hypothesize that when the above mechanisms are not available firms are more likely to fragment processes across multiple foreign production units instead of collocating all process tasks in the same unit thanks to it enabled integration capabilities firms can exploit the complementarities between the dispersed fragments of a process while reducing the misappropriation hazard of individual fragments empirical results and robustness tests are strongly congruent with these hypotheses we find also that the propensity to turn to the process fragmentation protection mechanism increases with firm host country specific experience and with the alternative value of the proprietary information involved in the activity sourced abroad

travel time and the liability of distance in foreign direct investment location choice and entry mode measures of geographic distance are often used to proxy for the impact of spatial separation on firm decisions and performance we develop a construct dyad travel time to measure the friction of interacting and costs of uncertainty from ex post behavioral monitoring across non collocated sites we measure the actual time required to travel between 1171 parent subsidiary dyads and show that dyad travel time but not geographic distance has significant predictive power in firm governance and location decisions while prior literature has independently modeled these we specify a simultaneous model offering stronger support for the interrelation of these decisions

performance effects of added cultural distance in the path of international expansion the case of german multinational enterprises this paper contributes to the debate on the performance impact of added cultural distance in the multinational enterprise s mne s expansion path our research focuses on the ability of mnes to handle complexity associated with added cultural distance in international expansion and on the effect this may have on profitability we hypothesise that firms that make expansion moves involving a high level of added cultural distance per unit of time and those that expand in culturally distant countries in an irregular fashion that is with a higher variability will be less profitable we test these hypothesised relationships using detailed data on 2404 expansion moves undertaken by our panel of 91 german mnes whose expansion paths we tracked during periods ranging between 5 and 20 years

does being r d intensive still discourage outsourcing evidence from dutch manufacturing being r d intensive has traditionally been seen as an impediment to outsourcing this study confirms that empirically this was the case for a set of manufacturing industries in the netherlands in the early 1990s but also shows that r d intensity became a positive predictor for changes in outsourcing levels over the 1990s suggesting firms in r d intensive industries have increasingly started to rely on partnership relations with outside suppliers this confirms the need to move the analysis from scale opportunism and appropriation concerns to a relational perspective when studying outsourcing in r d intensive industries

determinants of patent rights a cross national study abstract this paper presents an index of patent rights for 110 countries for the period 1960 1990 the index is used to examine what factors or characteristics of economies determine how strongly patent rights will be protected the evidence does indicate that more developed economies tend to provide stronger protection but the underlying factors which influence patent protection levels are the country s level of research and development r d activity market environment and international integration which are correlated with its level of development the results qualify however that r d activity influences patent protection levels after a nation s research sector reaches a critical size an implication of this is that to raise patent protection levels in weakly protecting countries it is important to foster a significant research base in those countries and thereby create incentives for protecting patent rights

the relative effectiveness of patents and secrecy for appropriation abstract changes in patent law global competition and the rise of several new technologies suggest that patents could be of greater value than secrecy for many innovative firms particularly small firms that are unable to use market power or other factors to appropriate their investments in innovation data from the 1993 european community innovation survey cis for up to 2849 r d performing firms is analysed to determine the relative importance of secrecy vs patents this particular combination of appropriation methods is interesting because secrecy can act as a mutually exclusive alternative to patents the results show that a higher percentage of firms in all size classes rate secrecy as more valuable than patents however ordered logit regressions show that the probability that a firm rates secrecy as more valuable than patents declines with an increase in firm size for product innovations while there is no relationship for process innovations the firm s r d intensity has no effect on the relative value of secrecy vs patents there is weak evidence to show that participation in cooperative r d increases the value of patents over secrecy for product innovations the results are relevant to ongoing debates over changes to the patent system and the need for policies to encourage small firms to patent more

transactional characteristics institutional environment and joint venture contracts this study examines how transactional characteristics and the institutional environment influence contractual governance for international joint ventures ijvs unlike previous studies that view joint venture contractual governance as a unidimensional construct clause specificity thus causing a debate upon whether ijv contracts should be more specific contractual governance herein is defined as a three dimensional construct that includes the extent to which contractual terms are clearly specified term specificity possible contingencies are accounted for contingency adaptability and joint venture parties are legally bound to the contract contractual obligatoriness our analysis of ijvs in china suggests that term specificity and contractual obligatoriness increase when the proprietariness of resources to be invested in the ijv or the incompleteness of the host country s legal system increase contractual obligatoriness appears to be an increasing function of economic exposure and environmental volatility whereas contingency adaptability in a contract rises when interparty dependency investment uncertainty and knowledge proprietariness intensify or when environmental hazards escalate these results suggest that an ijv contract if structured multidimensionally as above can curtail opportunism and guide venture evolution at the same time these contractual dimensions should not be prefixed but properly aligned with transactional and institutional characteristics this alignment has strong implications in reducing transaction costs and spurring ijv evolution in the complex and volatile institutional environment

separable but not equal the location determinants of discrete services offshoring activities in this paper we explore the question of why firms offshore particular services to specific geographic locations we draw on research related to the unique characteristics of services in trade and commerce and more recent analyses of the transnational unbundling and spatial dispersion of business processes we move beyond a simple assessment of the cost sensitivity or relative sophistication of offshoring services and develop a typology emphasizing the degree to which offshoring services activities are interactive repetitive or innovative we suggest that the location of offshoring projects will depend on the particular mix of these attributes and test this assertion using a data set of 595 export oriented offshore services projects initiated from 2002 to 2005 by us and uk company parents in 45 developed and developing countries we find that offshore location choices greatly depend on these services characteristics and in sometimes surprising ways and draw implications from our findings for international business theory policy and practice

international patent protection 1960 2005 abstract this note provides an update to the index of patent protection published in this journal in 1997 the original paper presented the index for 1960 1990 for 110 countries the index has now been updated to 2005 and extended to 122 countries the adoption of stronger patent laws and the composition of patent rights vary across countries by level of economic development

knowledge seeking and location choice of foreign direct investment in the united states to what extent do firms go abroad to access technology available in other locations this paper examines whether and when state technical capabilities attract foreign investment in manufacturing from 1987 1993 we find that on average state r d intensity does not attract foreign direct investment most investing firms are in lower tech industries and locate in low r d intensity states suggesting little interest in state technical capabilities in contrast we find that firms in research intensive industries are more likely to locate in states with high r d intensity foreign firms in the pharmaceutical industry value state r d intensity the most at a level twice that of firms in the semiconductor industry and four times that of electronics firms interestingly not only firms from technically lagging nations but also some firms from technically leading nations are attracted to r d intensive states this suggests that beyond catching up firms use knowledge seeking investments also to source technical diversity

why are companies offshoring innovation the emerging global race for talent this paper empirically studies determinants of decision by companies to offshore innovation activities it uses survey data from the international offshoring research network project to estimate the impact of managerial intentionality past experience and environmental factors on the probability of offshoring innovation projects the results show that the emerging shortage of highly skilled science and engineering talent in the us and more generally the need to access qualified personnel are important explanatory factors for offshoring innovation decisions moreover contrary to drivers of many other functions labor arbitrage is less important than other forms of cost savings the paper concludes with a discussion of the changing dynamics underlying offshoring of innovation activities suggesting that companies are entering a global race for talent

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

temporal dependence in asset pricing models abstract estimating and testing conditional models in an unconditional statistical context often results in model disturbances that display temporal dependence this paper presents an economic explanation for temporal dependence found in disturbances of financial returns in many studies

institutions transaction costs and entry mode choice in eastern europe the process of change from a centrally planned system to a market economy generates an institutional framework that is only partially reformed and therefore inconsistent and unstable this leads to high transaction costs for economic agents multinational enterprises entering transition countries have to adapt their strategies to the local institutions and reduce exposure to highly imperfect markets this paper analyzes how the costs of organizing business in transition environments influence entry mode choice the empirical results show that host country institutions in transition economies have an impact on the choice of entry modes moreover different mechanisms determine the internalization of managerial and technological knowledge

why are different services outsourced to different countries the tradability revolution in services has led to a dramatic expansion of offshore outsourcing of services allowing firms to take advantage of lower production costs in foreign countries however production costs alone cannot explain the location determinants of offshore outsourcing of services in this paper we argue that minimizing transaction costs is also an important determinant of the location of offshore outsourcing of services we empirically analyze characteristics of services and characteristics of foreign countries that may impact on transaction costs in an outsourcing relationship and hence determine where services will be outsourced offshore we derive measures of service characteristics routineness complexity and interactiveness based on the tasks required to provide them further we posit that there are interaction effects between service and country characteristics using bureau of economic analysis data on us service outsourcing across 11 types of services to 31 countries between 1992 and 2005 we find that 1 services that are more routine less complex or less interactive are outsourced more to foreign countries 2 services are outsourced more to countries with higher institutional quality and greater cultural proximity 3 non routine complex and interactive services are outsourced relatively more to countries with a better institutional quality

yes we really do need more entry mode studies a commentary on shaver in a recent commentary published in this journal shaver raises the provocative question of whether we need more entry mode studies after assessing the reasons for shaver s doubts and further developing his broad research suggestions we conclude that this question should be answered affirmatively we derive three important questions for future entry mode research 1 what determines the evolution of operations resulting from suboptimal mode choices 2 what causes the replication of past mode choices 3 how is the entry decision process structured focusing on these questions should assure a bright future for entry mode research

career and marriage in the age of the pill genuine change in the economic and social status of u s women did not emanate simply from their increased labor force participation but rather from their increase in professions and as career women those changes first began in the late 1960 s and early 1970 s we examine here one factor of momentous importance in this break with the past the economist 31 december 1999 recently named it the greatest science and technology advance in the twentieth century it is the oral contraceptive known worldwide by its moniker the pill in 1960 18 4 percent of professionals were women as were 4 7 percent of high powered professionals by 1998 36 4 percent of professionals and 25 1 percent of the high powered subset were women we explore in this article a series of connections that link the birth control pill to the increase of women in professional occupations our evidence for the impact of the pill relies largely on the timing of various changes changes in laws giving minors certain adult rights and lowering the age of majority enabled young and unmarried women to obtain the pill young women s control over their fertility directly reduced the costs to them of engaging in long term career investments the pill also served to increase the age at first marriage and thus indirectly reduced a potential penalty of delaying marriage to pursue professional education and training all of these changes began in the late 1960 s and early 1970 s the late 1960 s and early 1970 s were years of tumultuous social and political change how can we separate the impacts of affirmative action the resurgence of feminism changes in social norms and abortion reform from the impact of the pill the simple answer is that the timing of several of these changes is far less convincing than is that of the pill in affecting career investment but that is not the complete answer the economic impact of the pill did not occur in isolation legal change made it possible for young women to obtain contraceptives these changes paradoxically did not stem primarily from concerns regarding access to contraception they were instead part of the larger political movement of the 1960 s the pill moreover unleashed social change by enabling an increase in the age at first marriage there is also no doubt that the rebirth of feminism long in the making served to complement and reinforce the pill s impact our argument for the importance of the pill in affecting women s career decisions relies on the correspondence among breaks in various time series and in the logic of the relationships among the pill career and marriage we will begin with the time series on career and marriage which can be viewed as the dependent variables the evidence on the diffusion of the pill the independent variable is taken up next the logic of our argument relating pill use career and marriage follows and finally we present our defense for why we believe the pill packed considerable power in altering the social and economic status of american women

service offshoring and productivity evidence from the us the practice of sourcing service inputs from overseas suppliers has been growing in response to new technologies that have made it possible to trade in some business and computing services that were previously considered non tradable this paper estimates the effects of offshoring on productivity in us manufacturing industries between 1992 and 2000 it finds that service offshoring has a significant positive effect on productivity in the united states accounting for around 10 per cent of labour productivity growth during this period offshoring material inputs also have a positive effect on productivity but the magnitude is smaller accounting for approximately 5 per cent of productivity growth

from the editors endogeneity in international business research this essay builds on the exposition by thomas et al and focuses on analyzing cause and effect in international business research we attempt to explain how endogeneity problems occur and why they are so prevalent in international business research in a non technical fashion we then discuss the importance of explicitly identifying how the chosen research design best approximates a randomized controlled experiment finally we provide some guidelines on achieving this goal and emphasize the practices that seem most relevant to jibs reviewers in evaluating high quality international business research

offshoring innovation to emerging markets organizational control and informal institutional distance the literature on innovation offshoring has focused on the dichotomous choice between two distinct investment strategies captive offshoring and outsourced offshoring we use the concept of organizational control to investigate how differences in the informal institutions that prevail in the home and host countries influence multinational enterprise mne strategy or the organizational control decision with respect to subsidiaries established to offshore innovation while the relationship between formal institutions and mne strategy has been the subject of considerable academic scrutiny less is known about the role of informal institutions we propose that the type of uncertainty precipitated by informal institutions is critical to understanding the strategic behavior of foreign investing mnes we hypothesize that an mne s organizational control over a subsidiary will be contingent upon the type of informal institutional uncertainty encountered by the subsidiary more specifically we disaggregate the informal institutions construct and develop three new more explicit latent constructs behaviorally oriented informal institutions boii technology oriented informal institutions toii and demand oriented informal institutions doii our theory posits that while an increase in boii distance will precipitate a preference for greater organizational control heightened toii and doii distances will induce the opposite outcome a preference for lower levels of organizational control

innovation in services the purpose of this article is to lay the foundations of a theory that can be used to interpret innovation processes in the service sector the hypothesis underpinning this article is based on lancaster s definition of the product in both manufacturing and services as a set of service characteristics the article follows the example of those who have sought to apply lancaster s work to technological phenomena various modes of innovation in the service sectors are highlighted and illustrated