Journal articles on the topic 'Multinational firms'
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1
Tintelnot, Felix. "Global Production with Export Platforms*." Quarterly Journal of Economics 132, no. 1 (October 13, 2016): 157–209. http://dx.doi.org/10.1093/qje/qjw037.
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Abstract Most international commerce is carried out by multinational firms, which use their foreign affiliates both to serve the market of the host country and to export to other markets outside the host country. In this article, I examine the determinants of multinational firms’ location and production decisions and the welfare implications of multinational production. The few existing quantitative general equilibrium models that incorporate multinational firms achieve tractability by assuming away export platforms—that is, they do not allow foreign affiliates of multinationals to export—or by ignoring fixed costs associated with foreign investment. I develop a quantifiable multicountry general equilibrium model, which tractably handles multinational firms that engage in export platform sales and that face fixed costs of foreign investment. I first estimate the model using German firm-level data to uncover the size and nature of costs of multinational enterprise and show that the fixed costs of foreign investment are large. Second, I calibrate the model to data on trade and multinational production for twelve European and North American countries. Counterfactual analysis reveals that multinationals play an important role in transmitting technological improvements to foreign countries and that the pending Canada-EU trade and investment agreement could divert a sizable fraction of the production of EU multinationals from the U.S. to Canada.
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Alozie, Benedicta Chinyere, and Alasa Paul Kadiri. "Conflict Management Styles by Multinational Oil Firms in the Niger Delta Region of Nigeria." Elizade University International Journal of Management 1, no. 1 (November 22, 2022): 19–33. http://dx.doi.org/10.57000/euijm/2022.0101.02-cm.
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Conflicts between oil multinationals and host communities have become a recurring decimal resulting in hostility between the parties and in some cases the shutdown of oil exploration of oil multinationals by host communities in the past decades in Nigeria. This study ascertains the relationship between the use of integrating, dominating, obliging, avoiding, and compromising styles of managing conflicts and the quality of relationship multinational oil firms have with host communities. The questionnaire was used to gather data from 200 top managers and personnel in the public relations department sampled from thirteen (13) multinational oil firms. Data analysis was carried out using multiple regression. It was revealed that the quality of relationship multinational oil firms have with host communities is negative and significantly related to the use of dominating and compromising styles of handling conflict, but positive and significantly related to the use of integrating, obliging, and avoiding styles of handling conflict. The study recommends that multinational oil firms should change from the deployment of dominating style to integrating and obliging styles in handling conflict with host communities.
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Ferragina, Anna Maria, Rosanna Pittiglio, and Filippo Reganati. "DOES MULTINATIONAL OWNERSHIP AFFECT FIRM SURVIVAL IN ITALY?" Journal of Business Economics and Management 15, no. 2 (April 29, 2014): 335–55. http://dx.doi.org/10.3846/16111699.2012.707622.
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The aim of this paper is to investigate whether and how multinational status and foreign ownership affect the survival of Italian manufacturing and service firms. To this end, we analyze firm survival by distinguishing Italian firms as foreign multinationals (FMNEs) domestic multinationals (DMNEs) or domestic non-multinational firms (NMNEs). The empirical analysis is based on the Kaplan-Meier survival estimator and on the Cox proportional hazard model, in which we look for the impact of ownership dummies on firm survival, controlling for several firm and industry specific covariates. Our findings reveal that manufacturing and service firms owned by foreign multinationals are more likely to exit the market than either DMNEs or NMNEs. Moreover, DMNEs show a higher chance of survival in services. By decomposing firm activities into different technological classes, we also find that foreign ownership still exerts a negative influence on firm survival in both static and dynamic industries, while domestic multinationals in less-knowledge-intensive services appear more persistent.
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Jäckle, Robert, and Georg Wamser. "Going Multinational: What are the Effects on Home-Market Performance?" German Economic Review 11, no. 2 (May 1, 2010): 188–207. http://dx.doi.org/10.1111/j.1468-0475.2009.00473.x.
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Abstract This paper compares the home-market performance of German multinational enterprises (MNEs) and national firms, both before and after switching from national to multinational activities. Regarding the former case, our results show that future multinationals outperform domestic firms. When assessing the ex post performance of multinationals, selectivity issues must be taken into account. Applying an endogenous treatment model, it turns out that after switching, both productivity and wage growth are higher at newly founded MNEs. While capital intensities increase compared with those of national firms, employment growth rates are negatively related to switching, suggesting that home and foreign employment are substitutes.
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Keller, Wolfgang, and Stephen Ross Yeaple. "The Gravity of Knowledge." American Economic Review 103, no. 4 (June 1, 2013): 1414–44. http://dx.doi.org/10.1257/aer.103.4.1414.
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We analyze the international operations of multinational firms to measure the spatial barriers to transferring knowledge. We model firms that can transfer bits of knowledge to their foreign affiliates in either embodied (traded intermediates) or disembodied form (direct communication). The model shows how knowledge transfer costs can be inferred from multinationals' operations. We use firm-level data on the trade and sales of US multinationals to confirm the model's predictions. Disembodied knowledge transfer costs not only make the standard multinational firm model consistent with the fact that affiliate sales fall in distance but quantitatively accounts for much of the gravity in multinational activity. (JEL F12, F14, F23, L25, O33)
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Girma, Sourafel. "The Domestic Performance of UK Multinational Firms." National Institute Economic Review 185 (July 2003): 78–92. http://dx.doi.org/10.1177/00279501031851009.
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This paper analyses the domestic performance of UK multinational firms from two perspectives: (i) their productivity relative to foreign multinationals, domestic exporters and non-exporters, and (ii) their ability to benefit newly acquired affiliates. Nonparametric analysis shows that the productivity distribution of UK multinationals is dominated by their foreign counterparts (especially US firms), and quantile regressions reveal that the performance disadvantage of UK multinationals is more pronounced at the higher end of the productivity distribution. Using a difference-in-differences methodology, it is found that, unlike foreign acquisitions, take-overs of domestic non-exporting firms by UK multinationals do not appear to lead to any productivity improvements.
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Hanna, Rema. "US Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms." American Economic Journal: Applied Economics 2, no. 3 (July 1, 2010): 158–89. http://dx.doi.org/10.1257/app.2.3.158.
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This paper measures the response of US-based multinationals to the Clean Air Act Amendments (CAAA). Using a panel of firm-level data over the period 1966–1999, I estimate the effect of regulation on a multinational's foreign production decisions. The CAAA induced substantial variation in the degree of regulation faced by firms, allowing for the estimation of econometric models that control for firm-specific characteristics and industrial trends. I find that the CAAA caused regulated multinational firms to increase their foreign assets by 5.3 percent and their foreign output by 9 percent. Heavily regulated firms did not disproportionately increase foreign investment in developing countries. (JEL F23, K32, L51, Q52, Q53, Q58)
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Egan, Patrick J. W. "R&D in the periphery? Foreign direct investment, innovation, and institutional quality in developing countries." Business and Politics 15, no. 1 (April 2013): 1–32. http://dx.doi.org/10.1515/bap-2012-0038.
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This paper considers the relationship between assessments of institutional quality in developing countries and the innovative activities of multinational corporations. Firm entry mode literature has established links between domestic institutions and ownership equity patterns among multinationals, but institutionalist analyses have not adequately addressed the types of activities pursued by multinational firms. I argue that in addition to various socioeconomic indicators, the quality of domestic political institutions in developing countries is an important determinant of local innovative activity. I argue that institutional quality in host countries reinforces consistent patterns of interaction between states and firms, leading to reduced risk of technological expropriation and other undesirable outcomes for firms. I test this argument by examining the impact of institutional assessments, carried out by firms themselves and by outside observers, on R&D effort among multinationals, using firm-level surveys conducted in developing countries between 2002 and 2005. The multilevel empirical analysis suggests that multinational firms are likely to both locate R&D activities and pursue them intensively in developing countries with well-regarded institutions, and that the impact of institutional variables is more significant than other likely predictors, such as education levels in host countries.
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Dardati, Evangelina, and Meryem Saygili. "Multinationals and environmental regulation: are foreign firms harmful?" Environment and Development Economics 17, no. 2 (January 31, 2012): 163–86. http://dx.doi.org/10.1017/s1355770x11000398.
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AbstractThe rise of globalization has directed the attention of economists to the effect of trade and multinational production on the environment. We explore whether multinational firms, frequently the target of environmentalists, are harmful for a host country's environment. We introduce environmental regulation in a two-country model of heterogeneous firms with monopolistic competition. Using plant-level data from Chile, we test the model implications. We find that foreign firms are cleaner than domestic plants even after controlling for productivity that is likely to be negatively correlated with emissions. We also show that increasing the stringency of environmental regulations in a previously unregulated market affects the domestic firms more than the multinationals.
10
Setzler, Bradley, and Felix Tintelnot. "The Effects of Foreign Multinationals on Workers and Firms in the United States." Quarterly Journal of Economics 136, no. 3 (May 3, 2021): 1943–91. http://dx.doi.org/10.1093/qje/qjab015.
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Abstract Governments go to great lengths to attract foreign multinationals because they are thought to raise the wages paid to their employees (direct effects) and to improve outcomes at local domestic firms (indirect effects). We construct the first U.S. employer-employee data set with foreign ownership information from tax records to measure these direct and indirect effects. We find the average direct effect of a foreign multinational firm on its U.S. workers is a 7% increase in wages. This premium is larger for higher-skilled workers and for the employees of firms from high GDP per capita countries. We find evidence that it is membership in a multinational production network—instead of foreignness—that generates the foreign-firm premium. We leverage the past spatial clustering of foreign-owned firms by country of ownership to identify the indirect effects. An expansion in the foreign-multinational share of commuting-zone employment substantially increases the employment, value added, and—for higher-earning workers—wages at local domestic-owned firms. Per job created by a foreign multinational, our estimates suggest annual gains of US$13,400 to the aggregate wages of local incumbents, two-thirds of which are from indirect effects. Our estimates suggest that—via mega-deals for subsidies from local governments—foreign multinationals are able to extract a sizable fraction of the local surplus they generate.
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Alfranca, Oscar, Ruth Rama, and Nicholas Von Tunzelmann. "Estrategias sobre innovación en las empresas multinacionales agroalimentarias." Economía Agraria y Recursos Naturales 3, no. 6 (October 22, 2011): 21. http://dx.doi.org/10.7201/earn.2003.06.02.
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Agrifood multinationals are usually considered the world’s most important innovators in the F&B field and fundamental agents for technological change in the Spanish agrifood sector. The innovative behaviour of agrifood multinational firms issue is interesting because 50% of technology related to food is linked to innovative activities of these kind of firms. This paper includes a survey on several subjects related to innovation in the agrifood industry, such as the economic conditions for innovation production and the persistence of innovation. The main conclusions based on empirical work with patent data are: 1. Agrifood multinationals combine technical and design innovation rather than using one type of innovation as a substitute for the other. 2. Becoming a permanent innovator is relevant for agrifood multinational firms because the stock of knowledge, which is strategically important, is cumulative. 3. Agrifood multinationals are more prone than other multinationals to globalize their R&D activities. This is particularly true for European agrifood multinationals. 4. Agrifood multinationals are multi-technology companies.
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Bilir, L. Kamran. "Patent Laws, Product Life-Cycle Lengths, and Multinational Activity." American Economic Review 104, no. 7 (July 1, 2014): 1979–2013. http://dx.doi.org/10.1257/aer.104.7.1979.
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Do intellectual property rights influence multinationals' manufacturing location decisions? My theoretical model indicates that countries with strong patent laws attract multinational activity, but only in sectors with relatively long product life cycles. By contrast, firms with short life-cycle technologies are insensitive, because offshore imitation is less likely to succeed before obsolescence. I document strong empirical regularities consistent with the model using a panel dataset on the global operations of US-based multinational firms and a new measure of product obsolescence. Moreover, my identification strategy allows me to isolate the causal effect of patent laws on multinational activity. (JEL D92, F23, K11, L60, O34, R32)
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Mutinelli, Marco, and Sergio Mariotti. "L'evoluzione delle imprese multinazionali italiane e il ruolo del quarto capitalismo." ECONOMIA E POLITICA INDUSTRIALE, no. 1 (April 2009): 123–34. http://dx.doi.org/10.3280/poli2009-001008.
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- The purpose of this article is to outline the evolution of Italian multinational firms during the 2001-2007 period. The descriptive statistics show that a selected group of medium-sized firms has outperformed the other Italian multinationals in terms of growth rate. The evidence is consistent with the hypothesis of the emergence in Italy of the so-called "fourth capitalism", as an alternative successful model to both the industrial districts and the large chandlerian corporations. Some limits of this structural evolution are also discussed. Keywords: foreign direct investments (FDIs), Italian multinational firms Parole chiave: investimenti diretti esteri (IDE), imprese multinazionali italiane Jel Classification: F23
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Zafar Abdullayev, Aida Guliyeva, Zafar Abdullayev, Aida Guliyeva. "MULTINATIONAL FIRMS IMPACT ON THE ECONOMIC GROWTH OF THE WORLD ECONOMY." PAHTEI-Procedings of Azerbaijan High Technical Educational Institutions 29, no. 06 (May 1, 2023): 06–14. http://dx.doi.org/10.36962/pahtei29062023-06.
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Multinational firms have been expanding rapidly and have become major players in the world economy. This paper aims to examine the impacts of multinational firms on economic growth in the world economy. Using secondary data analysis, this research explores the literature on multinational firms and their effects on economic growth. The study finds that multinational firms have a positive impact on economic growth in both developed and developing countries. Multinational firms bring new technologies, expertise, and knowledge to host countries, which can lead to increased productivity and competitiveness. In addition, they create employment, increase investment, and promote trade countries. However, there are also potential negative impacts associated with multinational firms, such as environmental degradation and the exploitation of labor in developing countries. This paper concludes that multinational firms play a significant role in shaping the world economy and contributing to economic growth. Policymakers should consider the potential benefits and drawbacks of multinational firms and create policies that promote their positive impacts while mitigating negative effects. Overall, this research provides valuable insights into the impacts of multinational firms on the world economy and can inform future discussions and policies related to global business and economic development. Keywords: multinational firms, world economy, economic growth.
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Smith, C., M. Ogutu, M. Munjuri, and J. Kagwe. "The Effects of Foreign Market Entry Strategies on Financial Performance of Listed Multinational Firms in Kenya." European Journal of Business and Management Research 6, no. 3 (June 28, 2021): 216–25. http://dx.doi.org/10.24018/ejbmr.2021.6.3.517.
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The objective of this study was to establish the effects of foreign market entry strategies on the financial performance of listed multinational firms in Kenya. Internationalization theory was used as the theoretical foundation of the study. Empirical studies reviewed revealed that several studies had been done on the direct relationship between performance of multinational firms and their modes of entry into foreign firms. However, none of these studies focused on the financial performance of listed multinational firms. The study utilised a cross-sectional descriptive design. Secondary data collected from firms’ annual reports and financial statements for a period of four years (2014 to 2017) was used. The firms’ financial indicators of Sales Growth, Return on Equity, Return on Assets and Return on Capital Employed were employed to measure their performance. Franchising, exporting, wholly owned subsidiary and acquisitions were assessed as the entry strategies used by multinational firms. Data was collected from all the 62 listed multinational companies in Kenya and analysed using quantitative methods. This analysis was most preferred for data collected was quantitative in nature. The relationship between the independent and the dependent variable was tested using simple linear regression. The results show that the performance of multinational firms operating through franchises and as wholly owned subsidiaries as well as acquisitions was lower than the performance of multinationals operating as export companies. The study concludes that the mode of entry into foreign markets chosen by a firm significantly affected its financial performance in the said market. It is therefore recommended that multinational firms wishing to expand their operations globally to come up with long term strategies that have gone through rigorous scrutiny for the benefit of the firm. The study gave a contextual understanding of the internationalization theory. The theory managed to emphasize on reasons why multinational firms should expand their operations beyond their national boundaries. Actual ingredients for policy makers to undertake a well thought through policy formulation to fully understand the importance of choosing the right entry strategy was provided for in the results. Recommendations of the study are that a thorough marketing evaluation of the country of interest should be undertaken to ensure that proper measures are put in place for the selection of an entry strategy that will address the goals and objectives of a firm. The study also recommends that employees of a firm who are at the forefront in the internationalization process should be well informed and trained ahead of the firm’s plans. Policy makers and advisories in countries are advised to streamline the processes of foreign firms’ registration so to attract foreign investors.
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Cozza, Claudio, and Antonello Zanfei. "Multinational firms and the creation of technological linkages in Italy." Cuadernos de Economía 37, no. 74 (July 1, 2018): 429–42. http://dx.doi.org/10.15446/cuad.econ.v37n74.58077.
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Using empirical evidence from the Italian R&D survey, we assess the ability of multinational firms in setting-up technological linkages (Extra-muros R&D and R&D cooperation). We have found that Italian multinationals are more prone to perform Extra-muros R&D, while foreign multinationals are better at developing R&D cooperation. However, when selecting only the linkages with local counter-parts, we find that foreign multinationals have no advantage vis-à-vis Italian firms; while multinationals still have some advantages in setting-up R&D cooperation with local universities. Results suggest that foreign multinationals can generally exploit “economies of common governance” when setting-up technical linkages, but they face relative disadvantages in terms of embeddedness in local systems.
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Cravino, Javier, and Andrei A. Levchenko. "Multinational Firms and International Business Cycle Transmission*." Quarterly Journal of Economics 132, no. 2 (November 15, 2016): 921–62. http://dx.doi.org/10.1093/qje/qjw043.
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Abstract We investigate how multinational firms contribute to the transmission of shocks across countries using a large multicountry firm-level data set that contains cross-border ownership information. We use these data to document two novel empirical patterns. First, foreign affiliate and headquarter sales exhibit strong positive comovement: a 10% growth in the sales of the headquarter is associated with a 2% growth in the sales of the affiliate. Second, shocks to the source country account for a significant fraction of the variation in sales growth at the source-destination level. We propose a parsimonious quantitative model to interpret these findings and to evaluate the role of multinational firms for international business cycle transmission. For the typical country, the impact of foreign shocks transmitted by all foreign multinationals combined is non-negligible, accounting for about 10% of aggregate productivity shocks. On the other hand, since bilateral multinational production shares are small, interdependence between most individual country pairs is minimal. Our results do reveal substantial heterogeneity in the strength of this mechanism, with the most integrated countries significantly more affected by foreign shocks.
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Qi, Xinyue. "Research of the Development Strategies of Multinational Corporations in Emerging Markets." Advances in Economics, Management and Political Sciences 22, no. 1 (September 13, 2023): 291–95. http://dx.doi.org/10.54254/2754-1169/22/20230324.
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Emerging markets are significant target markets for a range of goods and services due to their large consumption potential. Yet, because of the general lack of market liquidity in emerging markets, the growth of multinational firms just so happens to increase market liquidity and draw in additional investors. Therefore, the development of multinational corporations plays a vital role in promoting the prosperity of emerging markets. This paper focuses on the development strategies of multinational corporations in emerging markets. Through searching and collecting the development process and relevant information and data of well-known old multinational corporations, this paper analyzed and compared them, and summed up three important strategies. It can be concluded that in order to make established multinationals play a bigger role in emerging markets and get more emerging market companies to become multinationals, there are three important strategies: stick to direct investment, create unique business models, and promote internationalization.
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Bustos, Sebastián, Dina Pomeranz, José Vila-Belda, and Gabriel Zucman. "Challenges of Monitoring Tax Compliance by Multinational Firms: Evidence from Chile." AEA Papers and Proceedings 109 (May 1, 2019): 500–505. http://dx.doi.org/10.1257/pandp.20191045.
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This paper reviews common challenges of taxing multinational firms, using Chile as a case study. We briefly describe key international tax avoidance methods: profit shifting to low-tax jurisdictions through transfer pricing and debt shifting. We discuss the prevalent policy to tax multinationals--the arm's length principle--and alternative proposals using apportionment formulas. Novel data from Chile show that multinationals make up a large share of GDP but report lower profit and effective tax rates than local firms. In 2011, Chile implemented a reform following OECD guidelines to enforce the arm's length principle. We discuss potential effects on tax collection and welfare.
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Dang, Trung A., and Randall W. Stone. "Multinational Banks and IMF Conditionality." International Studies Quarterly 65, no. 2 (March 17, 2021): 375–86. http://dx.doi.org/10.1093/isq/sqab010.
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Abstract We find firm-level evidence that US banks receive preferential treatment in countries under IMF conditionality. We rely on investment location decisions to infer firms’ expectations about future profits and find that US firms are approximately 53 percent more likely to acquire financial firms in countries under financial conditionality. IMF programs without financial conditionality and FDI in other sectors serve as placebo tests. Financial conditionality has weak effects on investment decisions by non-US firms, which implies a political-economy interpretation. Firm-level data indicate that the distinctive behavior of US firms is not due to advantages of scale or to a US-firm fixed effect, but to US influence in the IMF. Firms from other major IMF shareholders benefit as well, but the effects are much weaker. The effects are concentrated in the politically relevant firms that have local affiliates, which is consistent with the interpretation that firms lobby for preferential treatment.
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Adetayo, Adeola, Oludayo Ariyo, and Adebiyi Abosede. "Effect of Product Attribute and Pricing Strategy on Multinational Firms Competitiveness." Izvestiya Journal of the University of Economics - Varna 65, no. 2 (June 2021): 191–206. http://dx.doi.org/10.36997/ijuev2021.65.2.191.
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In today‘s dynamic and turbulent environment, organizations are increasingly entering into the international market to sustain competitive advantage and explore special skills and knowledge and the need to improve their performance. This study examined how competitiveness could be achieved using product attributes and pricing strategy in Nigerian multinational firms. The survey research design was adopted. A structured questionnaire was employed in collecting data from 313 respondents in Nestle Nigeria Plc, Unilever Nigeria Plc, and P.Z. Cussons Nigeria Plc, which was obtained through Raosoft sample estimator at 95% confidence level and 5% error margin using selected multinationals in fast-moving consumer goods. Categorical regression was used to determine the effect of product attribute and pricing strategy on multinational firms‘ competitiveness in Nigeria. The study revealed that product attributes and pricing strategy have positive, significant, and joint effects on multinational firms‘ competitiveness with coefficient and p-value of β1 =0.288 (p-value<0.000) and β2 =0.289 (p-value<0.000) at F-stat=67.795 (0.000) and adj. R2 =0.381. Therefore, it is concluded that competitiveness can be achieved using product attributes and pricing strategy. It is recommended that firms place greater emphasis on their products‘ attributes and pricing to improve their competitiveness posture.
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Sturgess, Jason. "Multinational Firms, Internal Capital Markets, and the Value of Global Diversification." Quarterly Journal of Finance 06, no. 02 (May 5, 2016): 1650004. http://dx.doi.org/10.1142/s201013921650004x.
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Over the past 30 years, multinational firms’ investment grew four times faster than worldwide GDP. Yet the evidence on whether global diversification is valuable is inconclusive. This paper uses detailed foreign direct investment (FDI) data for 251 UK multinational firms and 4,676 subsidiaries for the period 1999–2005 to show that multinational firms exhibit, on average, a global diversification premium. I investigate this result and show that the premium is positively related to “winner-picking” transfers in internal capital markets, and more so for better-governed firms. The findings help explain why multinational firms’ investment and global diversification have significantly increased over the past three decades.
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Autrey, Romana L., and Francesco Bova. "Gray Markets and Multinational Transfer Pricing." Accounting Review 87, no. 2 (November 1, 2011): 393–421. http://dx.doi.org/10.2308/accr-10199.
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ABSTRACT Gray markets arise when a manufacturer's products are sold outside of its authorized channels, for instance when goods designated by a multinational firm for sale in a foreign market are resold domestically. One method multinationals use to combat gray markets is to increase transfer prices to foreign subsidiaries in order to increase the gray market's cost base. We illustrate that, when a gray market competitor exists, the optimal transfer price to a foreign subsidiary exceeds marginal cost and is decreasing in the competitiveness of the domestic market. However, a multinational's discretion in setting transfer prices may be limited by mandatory arm's length transfer pricing rules. Provided gray markets exist, we characterize when mandating arm's length transfer pricing lowers domestic social welfare relative to unrestricted transfer pricing. We also demonstrate that gray markets can lead to higher domestic tax revenues, even when gray market firms do not pay taxes domestically.
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Xu, Gangxiang, Bin Guo, Wen Li, and Xiaoting Wang. "Foreign sequential entry mode choice." Baltic Journal of Management 13, no. 4 (October 1, 2018): 544–63. http://dx.doi.org/10.1108/bjm-09-2017-0280.
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Purpose The purpose of this paper is to use the theoretical perspective of structural inertia as a unique lens to study foreign sequential entry mode choices of multinational firms. Design/methodology/approach It adopts quantitative analysis of a sample of 121 Chinese publicly listed firms with 564 foreign entry incidents in the 2001-2012 period to test the hypotheses. Findings The empirical results show that multinational firms have a tendency to adopt the same mode in the subsequent entry as the number of prior entry mode choice of a given type (joint venture (JV) in this study) increases. The results support the theoretical prediction that organizations repeat their past activities due to structural inertia. Moreover, such an inertia effect in foreign sequential entry mode choices becomes stronger for older multinational firms, larger multinational firms and state-owned multinational firms. Research limitations/implications Consistent with existing research, this study focuses on the entry mode choice between JV and wholly owned subsidiaries. However, it is better to examine the relationship identified in the study for different types of entry mode choices to assess result generalizability. Practical implications It reminds managers of multinational firms that they should be cautious to the influence of structural inertia that can be a barrier to strategic flexibility when they make entry mode choices. Originality/value The main contribution of this study resides in introducing structural inertia perspective to help understand the determinants of foreign sequential entry mode choices of multinational firms.
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May, Anthony. "Multinational Corporations and SEO Discounts." International Journal of Finance & Banking Studies (2147-4486) 11, no. 4 (February 1, 2023): 66–77. http://dx.doi.org/10.20525/ijfbs.v11i4.2297.
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The fact that publicly traded companies incur substantial costs when issuing new equity has been extensively documented in the empirical finance literature. In particular, numerous studies show that seasoned equity offerings (SEOs) tend to be priced significantly below prevailing market prices, thereby causing issuers to leave money on the table. Offer price discounting is an indirect flotation cost borne by pre-SEO shareholders that, according to extant theoretical and empirical research, arises due to asymmetric information. A heretofore unrelated literature argues that corporate multinationalism, i.e., establishing operations in one or more foreign countries, exacerbates the asymmetric information problem via greater costs to shareholders of monitoring the activities and performance of foreign subsidiaries. Motivated by these lines of thought, I investigate the relation between SEO discounting and corporate multinationalism. Using a sample of SEOs completed by U.S. firms between 1998 and 2016, I show that offer price discounting is significantly higher in offerings conducted by multinational firms relative to those conducted by purely domestic firms after controlling for known determinants of SEO discounts. This effect is stronger for multinational firms with foreign subsidiaries spread across a greater number of countries and weaker for multinationals that hire a high-reputation underwriter to lead the underwriting syndicate. These findings suggest that asymmetric information costs borne by seasoned equity issuers are increasing in the geographic scope of a firm’s operations, which can be mitigated by certification from a highly reputed lead underwriter.
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Fillat, José L., and Stefania Garetto. "Risk, Returns, and Multinational Production *." Quarterly Journal of Economics 130, no. 4 (September 4, 2015): 2027–73. http://dx.doi.org/10.1093/qje/qjv031.
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Abstract This article starts by unveiling a strong empirical regularity: multinational corporations exhibit higher stock market returns and earning yields than nonmultinational firms. Within nonmultinationals, exporters exhibit higher earning yields and returns than firms selling only in their domestic market. To explain this pattern, we develop a real option value model where firms are heterogeneous in productivity and have to decide whether and how to sell in a foreign market where demand is risky. Selling abroad is a source of risk exposure to firms: following a negative shock, they are reluctant to exit the foreign market because they would forgo the sunk cost they paid to enter. Multinational firms are the most exposed because of the higher costs they have to pay to invest. The calibrated model is able to match both aggregate U.S. export and foreign direct investment data, and the observed cross-sectional differences in earning yields and returns.
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Chen, Chusheng, Yun Zhan, Changjun Yi, Xue Li, and Yenchun Jim Wu. "Psychic distance and outward foreign direct investment: the moderating effect of firm heterogeneity." Management Decision 58, no. 7 (April 2, 2020): 1497–515. http://dx.doi.org/10.1108/md-06-2019-0731.
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PurposeThis study investigates the effect of psychic distance (PD) on outward foreign direct investment (OFDI) by multinational firms originating in emerging economies and the moderating effect of firm heterogeneity on this relationship.Design/methodology/approachAn empirical analysis based on a negative binomial regression model is conducted using OFDI data from 2008 to 2017 on companies listed on the Shanghai and Shenzhen Stock Exchanges in China, an emerging economy.FindingsThe results suggest a U-shaped relationship between PD and OFDI by firms in emerging economies. Both executive foreign experience and state ownership negatively moderate the U-shaped relationship between PD and OFDI.Practical implicationsEmerging economies should encourage and guide multinational firms in engaging in OFDI and emphasize the advantages and disadvantages of PD for multinational firms. Additionally, non-sate-owned firms should recruit those who have a foreign education to provide support for OFDI by firms in emerging economies. Multinational firms should determine investment locations by consulting with executives with foreign experience to improve their ability to engage in OFDI.Originality/valueThis study combines macro and micro perspectives and integrates PD and firm heterogeneity into the same model with a sample of multinational firms originating in China. The findings support the existence of a PD paradox, which helps to enriching the theory on foreign direct investment.
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Garetto, Stefania. "Input Sourcing and Multinational Production." American Economic Journal: Macroeconomics 5, no. 2 (April 1, 2013): 118–51. http://dx.doi.org/10.1257/mac.5.2.118.
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I propose a general equilibrium framework where firms decide whether to outsource or integrate input manufacturing, domestically or abroad. By outsourcing, firms may benefit from suppliers' technologies, but pay mark-up prices. By sourcing intrafirm, they save on mark-ups and pay possibly lower foreign wages. Multinational corporations arise when firms integrate production abroad. The model predicts that intrafirm imports are positively correlated with the mean and variance of the firms' productivity distribution and with the degree of input differentiation. I use the model to quantify the US welfare gains from intrafirm trade, which amount to about 0.23 percent of consumption per-capita. (JEL D21, F12, F23, F41, L11, L24)
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Arsyad, Nuruzzaman, and Peter Hwang. "Multinational expansion of ASEAN firms." Journal of Asia Business Studies 8, no. 2 (April 29, 2014): 104–17. http://dx.doi.org/10.1108/jabs-11-2012-0049.
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Purpose – The purpose of this study is to investigate the type of resources that firms draw on to expand internationally within the Association of Southeast Asian Nations (ASEAN) context. The authors seek to understand the impact of technological, political and knowledge resources on ASEAN firms’ multinationality, moderated by labor intensity, the type of ownership and the stage of economic development. Design/methodology/approach – The hypotheses are tested on a sample that comprises 4,056 manufacturing firms in five ASEAN countries: Indonesia, Lao PDR, Philippines, Vietnam and Timor-Leste. Findings – The authors found that technology resource is not positively associated with multinationality. However, this relationship is moderated by labor intensity and type of firm ownership. Political resources, such as lobbying activities and informal payment to government, are important for ASEAN firms for foreign expansion. However, excessive informal payment may prove to be counterproductive. The authors also found that local firms tend to exploit more political resources than foreign counterparts and firms operating in the lower stage of economic development tend to spend more on lobbying activities, but pay less informal contribution. Finally, for the manager industry experience, they found an inverted U-shaped relationship with respect to multinationality, but for manager education, the association was unexpectedly negative. Practical implications – From a practical perspective, the findings have three important implications for management of ASEAN multinationals. First, multinationals can systematically exploit and internalize political ties by carefully integrating political activities, through informal contribution and lobbying, into their strategic planning or corporate structure. The findings suggest that political networking will offset weak technological resources, particularly for local firms. Second, managers of multinationals operating in ASEAN should not rely excessively on political actors, as the extra costs associated with the above optimum political resources exceed its marginal benefit. Moreover, excessive reliance on political actors will expose the firm to the threat of opportunism. Even though political resources are important managers need to maintain the utilization of political resources at the optimal level. Third, besides technological and political resources, managers’ knowledge is also crucial for ASEAN firms’ internationalization. The authors provide evidence showing that the positive effect of managerial experience is limited only to a certain level, even though tmanagers’ education has positive linear relationship with multinationality. This implies that at the early stage of international activities, both manager’s experience and education will have positive impact on the firm. However, when international activities are getting more complicated, the manager’s education takes over the manager’s experience. Above its optimum point, the manager’s experience will limit the manager’s capability to create innovative solutions for international expansion, and therefore it is the manager’s education that is able to stimulate revolutionary solution. Originality/value – In this paper, the authors examine the resource impact on multinationality or the extent to which business activities span across national boundaries to shed light on the antecedents of foreign expansion in ASEAN. They discuss three types of resources (i.e. technological, political and knowledge resources) and seek to understand the impact of these resources on multinationality. Political resources are highlighted in addition to technological and knowledge resources in this paper because ASEAN firms are generally situated in a weak institutional environment in which the political resource is crucial for firms’ entry, operation and exit in international markets (Boddewyn and Brewer, 1994; Hillman and Keim, 1995; Rodriguez et al., 2005).
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Vitriya, Rezza. "Multinationality, Capital Structure, and Cost of Capital of Non-Financial Firm Listed on Indonesia Stock Exchange." Relevance: Journal of Management and Business 3, no. 2 (December 15, 2020): 146–59. http://dx.doi.org/10.22515/relevance.v3i2.2964.
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Multinational firms are firm that do business internationally, the higher degree of multinationality of a firm, they have more ability to get greater funding because there are more chances to get funding from foreign country. Because of that condition, multinational firms have different cost of capital with domestic firms. The main purpose of this study is to understand the impact of degree of multinationality, capital structure, firm size, profitability and growth opportunity to cost of capital. Panel data is used on this research and multiple linear regression analysis is used as analytical model. The result suggest that Indonesia multinational firms have lower cost of capital, cost of equity, and cost of debt than Indonesia domestic firms. The study found that capital structure is negatively related to cost of capital, this means that Indonesia multinational firm use more debt than Indonesia domestic firms, and so lower the cost of debt after tax and hence the cost of capital.
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Egger, Peter, Christian Keuschnigg, Valeria Merlo, and Georg Wamser. "Corporate Taxes and Internal Borrowing within Multinational Firms." American Economic Journal: Economic Policy 6, no. 2 (May 1, 2014): 54–93. http://dx.doi.org/10.1257/pol.6.2.54.
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This study develops a theoretical model of a multinational firm with an internal capital market. Hypotheses regarding the role of local versus foreign characteristics such as profit tax rates, lack of institutional quality, financial underdevelopment, and productivity for internal debt financing at the level of foreign affiliates are derived and assessed empirically in a panel dataset covering the universe of German multinationals. We show that differences in nontax incentives given by fundamentals in local and foreign markets can offset or reinforce tax incentives. The results point at a many times higher tax-sensitivity of internal debt financing compared to previous research. (JEL F23, G32, H25)
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Casson, Mark. "The economic theory of the firm as a foundation for international business theory." Multinational Business Review 22, no. 3 (September 9, 2014): 205–26. http://dx.doi.org/10.1108/mbr-06-2014-0024.
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Purpose – This paper aims to argue that management capability is a complement to ownership advantage. Ownership advantage determines the potential of the firm, and management capability governs the fulfilment of this potential through overcoming barriers to growth. The economic theory of the firm is central to the theory of the multinational enterprise (MNE). Design/methodology/approach – Multinationals play an important role in coordinating the international division of labour through internal markets. The paper reviews the economic principles that underlie this view. The analysis is applied to a variety of issues, including out-sourcing, geographical dispersion of production and regional specialisation in marketing. Findings – The economic theory of the firm is central to the theory of the MNE. Recent literature on multinationals, however, makes only limited reference to the economic theory of the firm. Optimal internalisation equates marginal benefits and costs. The benefits of internalisation stem mainly from the difficulties of licensing proprietary knowledge, reflecting the view that MNEs possess an “ownership” or “firm-specific” advantage. The costs of internalisation, it is argued, reflect managerial capability, and in particular the capability to manage a large firm. Originality/value – The paper demonstrates the value of the economic theory of the firm in analysing the strategy, structure and size of multinational firms. It restates classic economic principles and applies them to contemporary issues, including the performance and survival of multinational firms in current times.
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Zhang, Kevin Honglin. "Rise of Chinese Multinational Firms." Chinese Economy 42, no. 6 (November 2009): 81–96. http://dx.doi.org/10.2753/ces1097-1475420605.
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Barge‐Gil, Andrés, Alberto López, and Ramón Núñez‐Sánchez. "Technological spillovers from multinational firms." World Economy 43, no. 12 (September 14, 2020): 3184–202. http://dx.doi.org/10.1111/twec.13001.
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Gumpert, Anna, James R. Hines, and Monika Schnitzer. "Multinational Firms and Tax Havens." Review of Economics and Statistics 98, no. 4 (October 2016): 713–27. http://dx.doi.org/10.1162/rest_a_00591.
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Norbäck, Pehr-Johan. "Multinational firms, technology and location." Journal of International Economics 54, no. 2 (August 2001): 449–69. http://dx.doi.org/10.1016/s0022-1996(00)00092-1.
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Mudambi, Ram. "Knowledge management in multinational firms." Journal of International Management 8, no. 1 (January 2002): 1–9. http://dx.doi.org/10.1016/s1075-4253(02)00050-9.
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Markusen, James R. "Multinational Firms, Location and Trade." World Economy 21, no. 6 (August 1998): 733–56. http://dx.doi.org/10.1111/1467-9701.00161.
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Norbäck, Pehr-Johan, Ayça Tekin-Koru, and Andreas Waldkirch. "Multinational Firms and Plant Divestiture." Review of International Economics 23, no. 5 (October 20, 2015): 811–45. http://dx.doi.org/10.1111/roie.12199.
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Glass, Amy Jocelyn, and Kamal Saggi. "Multinational Firms and Technology Transfer." Scandinavian Journal of Economics 104, no. 4 (December 2002): 495–513. http://dx.doi.org/10.1111/1467-9442.00298.
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Kant, Chander. "Multinational firms and government revenues." Journal of Public Economics 42, no. 2 (July 1990): 135–47. http://dx.doi.org/10.1016/0047-2727(90)90009-7.
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Eckel, Carsten, and Hartmut Egger. "Wage bargaining and multinational firms." Journal of International Economics 77, no. 2 (April 2009): 206–14. http://dx.doi.org/10.1016/j.jinteco.2009.01.004.
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Chen, Cheng. "Information, incentives and multinational firms." Journal of International Economics 85, no. 1 (September 2011): 147–58. http://dx.doi.org/10.1016/j.jinteco.2011.05.005.
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Gany, Ira N., and Shubhashis Gangopadhyay. "Multinational firms and government policy." Economics Letters 17, no. 4 (January 1985): 395–99. http://dx.doi.org/10.1016/0165-1765(85)90266-6.
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Becker, Johannes, and Nadine Riedel. "Multinational firms mitigate tax competition." Economics Letters 118, no. 2 (February 2013): 404–6. http://dx.doi.org/10.1016/j.econlet.2012.11.035.
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Beladi, Hamid, and Ralph Frasca. "Regional pollution and multinational firms." Ecological Economics 17, no. 2 (May 1996): 117–25. http://dx.doi.org/10.1016/0921-8009(96)00002-x.
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Farooq, Omar Farooq. "Do Multinational And Local Corporations Differ In Their Leverage Policies? Evidence From The MENA Region." Journal of Applied Business Research (JABR) 32, no. 1 (December 31, 2015): 1. http://dx.doi.org/10.19030/jabr.v32i1.9482.
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<p>This paper examines the leverage policies of multinational corporations (MNCs) in comparison to those of local corporations in the MENA region during the period between 2006 and 2012. Our results show that MNCs have lower leverage levels than local firms. We argue that MNCs have higher information asymmetries than other firms. As a result, managerial opportunism may be higher in these firms, thereby minimizing their ability to raise debt. In case of local firms, we show that their debt ratios are not different from other firms. Furthermore, we also show that our results do not hold for those multinational firms that have lower agency problems. We show that, for a given level of information asymmetries (operational and informational complexity), debt ratios of multinational firms are more than other firms. Our results show no impact of the extent of information asymmetries on debt ratios of local firms. </p>
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Alejandra Gonzalez-Perez, Maria, and Juan Fernando Velez-Ocampo. "Targeting one’s own region: internationalisation trends of Colombian multinational companies." European Business Review 26, no. 6 (October 7, 2014): 531–51. http://dx.doi.org/10.1108/ebr-03-2013-0056.
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Purpose – This paper aims to provide an examination of the ongoing internationalisation processes undertaken by 30 major multinational Colombian-owned firms. It also presents a theoretical overview and a conceptual framework for the understanding of internationalisation patterns from emerging countries’ multinational enterprises. Design/methodology/approach – This study is built based both on the results collected from comparative case studies based in the literature and empirical observations of Colombia’s patterns. This study observed the evolution in terms of commitment and investment decisions that 30 major Colombian companies have undergone specially within the past decade. Findings – Although, it was found that direct exports is the widespread entry mode of Colombian companies to foreign markets, most of the observed firms preferred the consolidation in host markets through Mergers & Acquisitions instead of using Greenfield investments or joint ventures. These observations might suggest similarities with the process of internationalisation of Asian tigers multinationals, which means that they are consolidating their internationalisation process based on their learning, linkages and leverages capabilities. Furthermore, Colombian companies are following the internationalisation pattern of other multilatinas. These companies have first explorer natural markets for them; in other words, they have first attempt to be established in markets that share psychic features, and similar institutional environments, as psychic and physical proximity reduces risk and facilitates foreseen return of investments, and therefore long-term capital accumulation. Research limitations/implications – This study has some limitations that suggest further research. First, although the observed firms share one main characteristic: being Colombian-owned multinationals, they belong to diverse fields, so this might pose difficultly for the creation of a framework that explains other multinationals drivers to internationalise. A second limitation is that this analysis does not deepen into the internationalisation patterns of multilatinas from countries other than Colombia; this leaves room for further research questions that might deal with the issue of analysing advantages and disadvantages in the internationalisation process of developing country multinational corporations (DCMCs). A third limitation is that this study does not have a longitudinal approach, so this paper does not intent to provide definitive information about cause-and-effect relationship regarding the drivers for DCMCs to internationalize, instead, this study is intended to provide an analysis of the outward foreign direct investment decisions of Colombian multinational firms. Practical implications – There is limited research based on primary data on accessing the internationalisation process of Colombian multinational companies. This paper offers a research framework and results which could be replicated in other Developing Country Multinational Corporation (DCMNC), and could also be studied longitudinally. This study includes relevant information on the drivers for international expansion, market selection, perceived obstacles, entry modes and consolidation in host markets via acquisitions that could possibly support managerial decisions. Originality/value – There is limited research based on primary data on accessing the process of internationalisation of Colombian multinational companies. This paper offers research framework and results which could be replicated in other DCMNC, and also could be longitudinally studied. This study includes relevant information on the drivers for international expansion, market selection, perceived obstacles, entry modes and consolidation in host markets via acquisitions that could eventually support managerial decisions.
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Sukali, Ken, and DR R. Musyoka. "INTERNATIONAL MARKET ENTRY STRATEGIES, ORGANIZATIONAL CHARACTERISTICS AND THE PERFORMANCE OF MANUFACTURING FIRMS IN KENYA." Journal of Strategic Management 1, no. 2 (January 17, 2017): 68. http://dx.doi.org/10.47672/jsm.154.
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Purpose: The main purpose of this study was on the influence of international market entry strategies on the performance of manufacturing multinationals in Kenya. Methodology: The research design used in this study was descriptive research design. There are 213 Multinational Corporations in Kenya. Out of the 213 Multinational Corporations, 108 firms are in the manufacturing sector and are located in Nairobi. The population of the study was 108 firms. The sampling frame was retrieved from Mars Group Kenya. It is for this reason that the study considered 50% of the population. This yielded 54 firms. The study used a questionnaire as the preferred data collection tool. Descriptive statistics included frequencies and measures of central tendency mainly means and frequencies. Inferential statistics included regression modeling, t-test and Analysis of Variance (ANOVA).Results: Results indicated that manufacturing multinationals used various international market strategies to venture into business. These strategies include licensing; further indicated that the firms used these market strategy entries to a large extent. Regression results indicated that market entry strategies had an influence on performance of the firm (ROA)Unique contribution to theory, practice and policy: The study recommends that the management to evaluate the factors to consider when choosing an entry strategy thoroughly so as to make sure they know the market very well and that the management to evaluate the factors influencing the choice of market entry modes. This is to ensure that they choose the best mode.
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Ferraris, Alberto, Stefano Bresciani, and Manlio Del Giudice. "International diversification and firm performance: a four-stage model." EuroMed Journal of Business 11, no. 3 (September 5, 2016): 362–75. http://dx.doi.org/10.1108/emjb-10-2015-0048.
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Purpose The purpose of this paper is to investigate the relationship between international diversification (ID) and performance in multinational firms by proposing a new and unified theory of multinationality that incorporates, integrates and extends previous concepts and hypotheses. Design/methodology/approach The study relies on data concerning the world’s largest companies, derived from the Fortune Global 500. An OLS regression analysis has been carried out in order to test a four-stage relationship between ID and performance. Findings On a final sample of 391 multinationals, this paper provides an empirical evidence that support the existence of a four-stage theory by using a relevant sample of “top” multinational firms. Research limitations/implications This study has two main limitations: first, a single indicator was used to measure ID; second, some potential variables have had to be excluded due to data availability. Practical implications This paper offers some intriguing practical implications, as well: first, it points out to some thresholds where performances are higher at certain level of ID; second, it highlights that performance will face two kinds of decreases due to intra-regional and inter-regional liability of foreignness; finally, it individuates differences with regard to some firms’ characteristics such as home or host country’s behaviors and about the kind of industries in which they operate, as well. Originality/value This is one of the first studies that tests and finds positive evidences about a four-stage theory, regarding to the relationship between ID and performance. Moreover, it proposes other interesting results with regard to the differences between home vs host country-oriented firms and between manufacturing vs services multinational firms.