The Past, Present and Future of International Business & Management: Volume 23

This is the first volume of Advances in International Management under the new editorial team of Timothy Devinney, Torben Pedersen and Laszlo Tihanyi. We hope to continue the tradition established by our predecessors, Joseph Cheng and Michael Hitt, and also will work to bring a new perspective to the series. It is our intention to use the series less as a journal or book series and more as a forum for ideas and discussion – a view that builds on the tradition of the series but also aims to put it in juxtaposition to traditional publication outlets.

The Booz & Co./strategy+business Eminent Scholar in International Management is an annual award given by the International Management Division of the Academy of Management and Sponsored by Booz & Co./strategy+business.

For most of my career I studied the relationship between culture and psychological process, and the implication of such relationships for managerial and other behaviors. That has certainly become an important research area. Since I published my Individualism and Collectivism book (Triandis, 1995), for instance, this topic has become important in the social sciences. For example, the Kitayama and Cohen's (2007) Handbook of Cultural Psychology has many chapters that use some of that work. I assume that the Academy has honored me for that work.

The focus of this paper is to provide an overview and conceptual summary of various contributions made by Professor Harry Triandis of the University of Illinois, Urbana-Champaign. Known throughout the world as a preeminent scholar in the field of cross-cultural psychology, Triandis has achieved the status of a founding father in this field extending his work into related disciplines including management and business, sociology, political science just to name a few. I address these contributions through the rhetoric of five questions, namely, how has his work – (1) shaped a field (self in context), (2) integrated a field (analysis of subjective culture), (3) extended a field (INDCOL), (4) populated a field (students and colleagues), and (5) ensured the future of a field.

In comparative research across cultures, there is an implicit norm against the evaluation of cultures. Researchers, especially from outside of a culture, tend to restrain from describing the studied culture in negative terms, such as “primitive,” “ineffective,” and “immoral.” This nonjudgmental stance springs partly from the need to be objective and partly from the avoidance of neocolonialist and imperialist impressions.

International business (IB) and international management (IM) are at a crossroads of sorts. The question is whether the roads emanating from this crossroad lead to somewhere or to nowhere and whether all roads lead to the same place.

We conceptualize new ways to qualify what themes should dominate the future international business and management (IB/IM) research agenda by examining three questions: Whom should we ask? What should we ask, and which selection criteria should we apply? What are the contextual forces? Our main findings are the following: (1) wider perspectives from academia and practice would benefit both rigor and relevance; (2) four key forces are climate change, globalization, inequality, and sustainability; and (3) we propose scientific mindfulness as the way forward for generating themes in IB/IM research. Scientific mindfulness is a holistic, cross-disciplinary, and contextual approach, whereby researchers need to make sense of multiple perspectives with the betterment of society as the ultimate criterion.

The success of multinational enterprises (MNEs) is at least as much a function of management ability and behavior as it is of industry characteristics or environmental factors. MNE managers, like all managers, display human limitations, e.g., overconfidence that affect judgment. Yet IB researchers still tend to ignore management in their research, treating the firm as a black box. To the extent that the top management team is considered, rational behavior in the classical economic sense is assumed, yet, clearly, managers behave according to different rules than those assumed in much of the IB literature. Further, managers are not part of a herd, but unique. The result of such a lacuna is that theory fails to predict actual behavior and does not allow best guidance for policy options. The paper summarizes research on behavioral decision making and calls for its application in future research in international business.

Managerial intentionality has been assumed to be the most differentiating, but also the most neglected factor influencing internationalization. Although various scholars have emphasized its relevance, the key question still remains unanswered: What is managerial intentionality and why and how does it matter? Researchers share the view that internationalization paths are a joint outcome of environmental factors, path dependence and learning, and managerial intentionality. However, although managerial intentionality is argued to be an important factor, it is rather taken as a “given.” Therefore, we step back and take a closer look at its very nature and relevance for international business research.

This paper explores whether and what kind of distance can be considered a relevant factor for managers of multinational enterprises (MNEs). In the so-called era of globalization, traditional measures such as geographical, cultural or psychic distance have become less relevant or surrounded by growing ambiguity. Instead, institutional distance, governance or administrative distance have been introduced as variables in understanding success or failure of MNEs. Relative institutional distance, thereby, proves more important than absolute distance. This paper argues that further advances in international management studies critically depend on whether it is possible to, first, move the study of internationalization from ‘factors’ to ‘actors’ and, secondly, add societal relevance to managerial relevance. Now and in the future, therefore, two final dimensions of distance are increasingly relevant: stakeholder distance and normative/development distance.

In recent years, international management research has focused on the cognitive development of managers as increasingly important in a complex and dynamic business environment. As part of what might be called a cognitive revolution in international management research, several individual difference constructs have been introduced that promise to improve upon our ability to link culture to action beyond the study of dimensions of cultural variability and inventories of cultural competence. In this paper, I review three of these ideas: multicultural personality, global mindset, and cultural intelligence. I examine their conceptual similarities and level of development, and identify five criteria that need to be satisfied for these new ideas to have utility in international management research.

What we know is that the concept of cultural distance is frequently used, hotly debated and for many intuitively appealing. Suffering from a series of illusionary properties, it is argued to have outlived its usefulness. What we need to know is how to conceptualize the complexity of culture as a multi-dimensional, multi-level concept, taking context into account to measure quality rather than quantity (or distance). It is our ambition to do justice to the idea that cultural diversity not only leads to friction or problem creation, but also to enrichment and to generation of solutions. We discuss cultural conceptualizations and suggest cultural profiling and cultural positioning as alternative ways of comparing and contrasting critical cultural differences.

Culture is important to many aspects of business life, especially when a business must interface with people, either as customers, employees, suppliers, or stakeholders.– M. L. Jones (2007, p. 2)

We contend that the concept of liability of foreignness is inadequate to describe the set of disadvantages faced by emerging economy multinational enterprises (MNEs) in international markets. In order to address this theoretical gap, we develop the concept of “liabilities of origin” (LOR). We propose that the concept of LOR explains how the national origins of the MNE shape its disadvantages in international markets through three distinctive contexts of the MNE's ongoing activity: the home country context, the host country context, and the organizational context. We argue that in order to understand how emerging economy MNEs overcome their LOR, we need to engage simultaneously with the theoretical perspectives provided by the institutional entrepreneurship and organizational identity literatures. We suggest, further, that the concept of LOR may be useful to understand the character of MNE disadvantage in any international foray where the national origins of the MNE engender legitimacy-based and capability-based disadvantages for the MNE in a host country.

Past research examining country-level corruption found that corruption reduces foreign direct investment. However, this research lacks implications for multinational corporations considering operating in high corruption countries. Recent international research has examined subsidiary challenges beyond initial investment decisions, but has not addressed operational challenges posed by corruption. Research investigating country-level corruption as a liability of foreignness (LOF) is needed because this theoretical perspective specifically examines mechanisms for managing and controlling subsidiaries. This paper utilizes the LOF perspective, integrating learning, international human resource management, and agency theories, to understand how corruption affects subsidiary adaptation strategies.

Liability of foreignness (LOF) has been one of the central constructs in the field of international business and management. Over the past two decades, a significant body of theoretical and empirical research has accumulated, theorizing on the sources of these LOFs, investigating their magnitude, and prescribing approaches to mitigate these disadvantages. However, much of this research is almost exclusively related to firms expanding their products, services, and operations to other countries as part of their global expansion. The difficulties firms face in foreign product markets is just one dimension of the costs they can face in their attempts to secure resources abroad.

We expand the domain of the LOF construct to include liabilities faced by firms accessing foreign capital markets in light of the increasing integration of capital markets. We identify four sources of LOF in capital markets: regulatory costs, information costs, unfamiliarity costs, and costs arising out of cultural differences. Based on an extensive review of “home bias” in equity markets, we propose four strategies to erase the legitimacy deficits that firms encounter in foreign capital markets: bonding, signaling, adoption of business practices isomorphic with the host country, and certifications and endorsements by third parties. We also offer suggestions for operationalizing and measuring LOF in capital markets as well as several directions for advancing further research on LOF in the context of capital markets.

Understanding institutional distance – i.e., the difference in institutional context between countries – is critical for firms whose operations span national boundaries. Institutional distance impacts the relative attractiveness of country markets, trade-offs among foreign market entry strategies, the management of subsidiaries abroad, and ultimately, firm performance. Although scholars in various disciplines have made great advances in defining and measuring the institutional characteristics of nations, we contend that many of these advances have occurred in a parallel fashion. Moreover, extant empirical studies focus disproportionately on the impact of different subsets of the identified institutional characteristics. We suggest that it is time to find common ground across the disparate literatures. Doing so would allow us to view differences in institutional contexts more holistically, and refine our understanding of their implications for multinational corporations.

Globalization has created an intense competitive environment. As a result, achieving competitive advantage has become the core argument in international management. Some scholars have argued that the development of global leaders is critical (Osland, Bird, & Mendenhall, 2006; Yukl, 2009), while others believe that the global mindset is the key to strategic advantage (Black, Morison, & Gregerson, 1999; Jeannet, 2000; Javidan, 2008). In this paper, we present a review of both literatures (i.e., global leadership and global mindset) to highlight that today's dynamic marketplace requires a shift in thinking. We conclude by drawing attention to existing gaps in these literatures, and shed light on an emerging integrative model of global leadership and mindset.

Although management scholars have displayed a strong interest in top management teams, surprisingly little research has been devoted to the international dimensions of top management teams including their international diversity and their societal and cultural underpinnings. This paper provides a recent overview of empirical studies addressing the international dimension of top management teams and identifies avenues for future research. Particular attention is paid to the role of the institutional and cultural societal context in shaping the configuration of top management.

The fragmentation of the production process is a major theme of research in international business. Trade benefits arise from the “slicing up” of the aggregate value chain, as well as the entry of new countries bearing low labor costs. If, initially, multinational corporations (MNCs) relocated only standardized, low-value manufacturing activities in new emerging economies (exploitative offshoring), now they are also offshoring their knowledge-intensive activities (explorative offshoring). In the past, the literature on internationalization was mainly focused on the characterization of the MNC as a specific monolithic organization active in the international production. In the present, numerous analyses have discussed the international location of R&D activities, mainly in advanced countries. The foreign R&D subsidiaries are still tightly linked to the headquarters, maintaining a controlled position. Future research must address two orders of issues. The first is the progressive autonomy of the foreign subsidiaries, which are more and more developing new and independent lines of research. This process leads MNCs to mobilize and leverage untapped pools of knowledge scattered around the world. The second is the R&D offshoring toward emerging economies. This complex process can be characterized as a move from the smile model discussed extensively by Ram Mudambi (where emerging economies were considered as pools of low-cost labor tout court) to a new model, called here the λ (lambda) model (where emerging economies are also pools of skilled labor). This paper will explore these new trends using some illustrative cases: L'Oréal (FR), Pfizer (US), ST Microelectronics (CH), and Geox (I). The cases reveal the double orientation of MNCs toward emerging economies, where both explorative and exploitative offshoring takes place.

In examining the issues relating to global marketing strategy, scholars have primarily focused on marketing opportunities in the developed world. Recently, rapid rates of growth in emerging market countries have resulted in a growing interest in the market potential of these countries. Developing a global marketing strategy to target these diverse types of markets suggests the need to develop divergent strategies for different types of markets rather than focusing on integrating strategies across markets. To date, however, little is known about how to achieve this effectively. This paper briefly reviews past approaches to these issues and then indicates critical topics for future research.

Economic clusters are global centers of excellence in particular industries or technologies. They consist of interlinked companies, specialized suppliers, support services, and relevant institutional actors in a specific field. Multinational enterprise (MNE) R&D strategy with regard to economic clusters is impacted by two contradictory forces. MNEs locating their R&D activities within economic clusters can benefit by availing of specialized resources and by capturing location-specific tacit knowledge. However, the risks of knowledge leakage can lead to adverse selection whereby clusters attract underperforming firms that have much to gain and little to lose. Further, general disagreement exists on the measurement of performance within economic clusters. We review the literature, assess the evidence, and suggest areas for productive future research.

This paper relates management innovation to multinational corporations (MNCs). We argue that MNCs play two key roles in implementing management innovations. First, they can engage in management innovating by inventing and implementing new management practices. We show that while MNCs have been involved in management innovating, few of their management innovations are specifically international in nature. Second, they can be involved in the diffusion of management innovations, including the transfer of new management practices to other countries. There is more evidence for this role. We propose that international business research should attempt to incorporate management innovation into its body of research themes.

This paper takes stock of past research in international management, zeroing in on the location, organization, and capabilities for innovation in a multinational enterprise. It then reviews current realities and identifies emergent trends of multinational enterprise innovation to outline avenues for future research. It puts forward the need for further exploration of issues, such as emerging markets as an innovation context and emerging multinationals' knowledge creation approaches, as well as the particularities of structuring for open innovation and capabilities for global knowledge sharing.

This paper offers a discussion of the key multilevel issues pertaining to the multinationality–performance (M–P) relationship. Arguably, one of the most important areas of research in international business, firm internationalization and its consequences are multilevel phenomena, influenced by forces at different managerial and structural levels: from the executive, subsidiary and firm, to the country and industry. We suggest that accounting for important factors at each level and for their cross-level interactions may help reconcile inconsistent findings and advance our understanding of the M–P relationship. Based on a critical review of the literature, we offer recommendations regarding the appropriate levels of theory, measurement, and analysis to guide future research.

International business (IB) research has mostly concentrated on two forms of internationalization: the gradual/step-by-step approach, and the “international new venture”/“born global” approach. The existence of nonlinearity – substantial “jumps” in international intensity – has received relatively modest attention. This paper addressed nonlinear internationalization processes: partial and complete de- and re-internationalization and the internationalization of born-again globals and born-again internationals. It concludes that nonlinear internationalization is neither an irregular deviation nor an exceptional case of linear internationalization but that linear internationalization is an exceptional case of nonlinear internationalization.

Diasporas can play a vital role in enhancing a country's international competitiveness. They can act as catalysts to enhance human capital development in their country of origin (COO), use their transnational social networks in both the COO and country of residence (COR) as conduits for trade and investment, introduce COO culture and products in the COR, enhance the COO's soft power and use their social networks to favourably affect the COO effect. In this paper, we examine the vital roles that modern diasporas play, as well as the issues that have led to their increasing importance. These issues are illustrated by looking at the experiences of two of the largest modern diasporas, the Chinese and Indian diasporas. The paper concludes by examining some of the emerging issues for diasporas in the fast changing current global environment, and discusses some of their implications for the diasporas themselves, their COOs and their CORs.

Research on internationalization of emerging market firms (EMFs) has received an increasing attention in the international management field. A central argument in a majority of these studies is that the internationalization of EMFs is different from that of firms from developed economies, and existing internationalization theories are insufficient to fully explain this new phenomenon. We conduct a critical review of important studies on the internationalization of EMFs to address two related questions. First, is the internationalization of EMFs really a new phenomenon, never been witnessed in the past? Second, does it warrant new theoretical developments? Our review suggests that there are important variations in the internationalization strategies of EMFs and developed economy firms, within EMFs from different emerging economies, and during different time periods. A thorough understanding of motivations, paths, processes, and performances of EMFs does require new theoretical approaches that can take into account the unique aspects of EMFs.