Ho Wook Shin, Seung-Hyun (Sean) Lee and Min-Jung Lee
The purpose of this study is to examine how the liability of foreignness (LOF), choice of incorporation and an institutional change independently and jointly affect a reverse…
Abstract
Purpose
The purpose of this study is to examine how the liability of foreignness (LOF), choice of incorporation and an institutional change independently and jointly affect a reverse merger (RM) firm’s capital-raising performance.
Design/methodology/approach
The study draws on the data of shell reverse merger transactions in the USA from 2007 to 2016.
Findings
This paper finds that LOF and the choice of incorporation as a signal have a significant effect on RM firms’ capital-raising performance. In addition, this study finds that the effectiveness of the signaling can be affected by LOF. Finally, this paper finds that an institutional change that lowers the entry barrier to the initial public offering (which is a superior alternate to an RM) affects the impacts of LOF and signaling on RM firms’ capital-raising performance.
Originality/value
The study contributes to the international business literature by examining the RM (which has been an under-researched topic in the literature) by drawing on the LOF framework. The study finds that LOF and the choice of state for incorporation affect RM firms’ capital-raising performance; moreover, these relationships are affected by an institutional change.
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Yun Dong Yeo and Seung-Hyun (Sean) Lee
The purpose of this paper is to examine how the risk of war aroused by North Korea’s threatening actions trigger strategic responses from US multinational enterprises (MNEs…
Abstract
Purpose
The purpose of this paper is to examine how the risk of war aroused by North Korea’s threatening actions trigger strategic responses from US multinational enterprises (MNEs) operating in South Korea. The authors compare two competing perspectives of real options and risk diversification to see which prevails when US MNEs are facing risk of war.
Design/methodology/approach
The authors hand collected news articles regarding North Korea’s threatening actions that may trigger strategic responses from MNEs operating in South Korea. The authors use archival data of US MNEs to verify our results.
Findings
Empirical tests of the two competing perspectives reveal that US MNEs adopt the risk diversification strategy when threatened by the risk of war. However, as MNEs have more available foreign markets outside the host country that is at risk of war, MNEs tend to take an operational flexibility approach more seriously and shift their productions to the remaining global operations. The ownership structure of the subsidiary does not appear to have significant effect on US MNEs’ strategic risk management.
Originality/value
This paper compares two perspectives, namely, real options and risk diversification, to observe how US MNEs treat their subsidiaries when facing risk of war in South Korea.
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Jinsil Kim, David H. Weng and Seung-Hyun (Sean) Lee
Drawing on the bribery literature, this paper aims to examine the effect of bribes paid in the home country on firms’ decision to internationalize through exports from transition…
Abstract
Purpose
Drawing on the bribery literature, this paper aims to examine the effect of bribes paid in the home country on firms’ decision to internationalize through exports from transition economies. It also investigates whether the effect of home country bribery may vary from new ventures to established firms, and from those firms that operate in an environment with high to low informal competition.
Design/methodology/approach
This paper tests several hypotheses using a panel data with fixed effects based on a sample of firms in transition economies from the Business Environment and Enterprise Performance Survey.
Findings
First, home country bribery in transition economies can make domestic markets more lenient and dampen firms’ motivation to seek opportunities abroad. Second, new ventures have a higher motivation to focus on their domestic markets after paying bribes. Finally, despite the benefits accrued in the home country through bribery, firms that face a higher level of informal competition in the home country are more likely to seek opportunities abroad.
Practical implications
Managers in transition economies should consider their home country bribery activities in their evaluation of foreign market opportunities. Firms that use money to influence home country government officials, especially new ventures, are advised to have a more holistic view in evaluating foreign market opportunities so they will not miss out on new opportunities.
Originality/value
This paper advances literature on home country institutions and the research on firm global strategies. Moreover, it also highlights several contingencies that shape the effect of home country bribery on firms’ foreign market focus.
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George O. White III, Tazeeb Rajwani and Thomas C. Lawton
The international strategies of multinational enterprises are increasingly augmented by insights on, and approaches to, external stakeholders and nonmarket dynamics. The rise of…
Abstract
Purpose
The international strategies of multinational enterprises are increasingly augmented by insights on, and approaches to, external stakeholders and nonmarket dynamics. The rise of populism and increased geopolitical uncertainty have accelerated these efforts, particularly for business leaders anticipating and engaging external agents, events, and issues that challenge the strategic objectives of their enterprises.
Design/methodology/approach
In this paper we explain why the increased preponderance of populism and geopolitical uncertainty are concurrently posing an existential threat to the post-Cold War global economy predicated on free trade and (relatively) open borders and, consequently, challenging the structures and strategies of international business.
Findings
We provide an overview of the four papers in our special issue and consider how each advances insights on how multinational enterprises effectively navigate the nonmarket uncertainties of the contemporary global economy. We then advance four important areas for international business research on multinational nonmarket strategies: (i) resilience and legitimacy; (ii), diversification; (iii), market and nonmarket strategy integration; and (iv), institutional arbitrage.
Research limitations/implications
We anticipate that nonmarket strategy scholars can build on these themes to assess how nonmarket strategies can better enable multinational enterprises to survive and thrive in an age of heightened global risk and uncertainty.
Originality/value
This paper and the related special issue provides novel theoretical insights by drawing attention to the relatively under-researched realm of multinational enterprise nonmarket strategy, particularly in populist contexts and during periods of geopolitical uncertainty. Importantly, we identify four promising domains – resilience and legitimacy, diversification, the integration of market and nonmarket strategy, and institutional arbitrage – for international business scholars investigating nonmarket strategy to consider. We anticipate that our paper, as well as other papers in this special issue, contribute further momentum to this burgeoning area of research.