This paper examines the role of language in foreign subsidiary performance.
Abstract
Purpose
This paper examines the role of language in foreign subsidiary performance.
Design/methodology/approach
We develop hypotheses relating to the effects of language difference and its interplay with cultural distance and market size. Considering languages that can be directly used and that can be acquired by MNEs, we employ language variables representing major languages and a population of 60 home and 57 host countries to study the performance of a sample of 1,751 subsidiaries between 2002 and 2013.
Findings
Language difference is found to have a negative impact on subsidiary performance. The positive effects of cultural distance on performance become stronger when the language difference is smaller. The language effects are also more pronounced in small markets.
Practical implications
This study reveals that subsidiary success depends on language difference, and such effects are more pronounced in small markets. The results also suggest that MNEs need to give more attention to bridging language barriers when they invest in culturally distant countries so that they can benefit from the positive effects of cultural distance.
Originality/value
Given that there is no systematic research investigating the role of language in the foreign subsidiary performance of MNEs, we make an important contribution by presenting a quantitative investigation of the language–performance relationship. The novelty of the paper also lies in examining the interplay of language difference with cultural distance and market size.
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Xinming He, Zhibin Lin and Yingqi Wei
This paper aims to provide a transaction cost analysis (TCA) perspective to exporting firms' selection of foreign markets and the performance consequences of this international…
Abstract
Purpose
This paper aims to provide a transaction cost analysis (TCA) perspective to exporting firms' selection of foreign markets and the performance consequences of this international market selection (IMS) decision. This paper proposes a conceptual framework that hypothesizes the relationship between transaction cost factors, IMS and export performance.
Design/methodology/approach
This paper tests the proposed framework with a database of Chinese manufacturing firms using regression models and controlling for possible endogeneity. The endogeneity issue may arise due to IMS being influenced by unobserved industrial/firm attributes.
Findings
The results show that transaction cost factors are able to explain IMS. Furthermore, firms whose decisions have incorporated transaction cost factors perform significantly better than their rivals.
Research limitations/implications
Understanding transaction costs helps decision-makers formulate more efficient IMS strategy to achieve superior export performance. Future research on IMS may examine “passive exporting”, i.e. exporting initiated by overseas buyers, consider the role of institutional distance and use other approaches toward cultural distance-based IMS.
Originality/value
This study adds a new theoretical underpinning for IMS by developing a framework based on TCA, and thus broadens the applications of TCA into IMS. Our empirical results support this extension.
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Corporate environmental innovation (CEI) is a proactive type of response to increasing public scrutiny regarding firms’ environmental performance. While past studies have…
Abstract
Purpose
Corporate environmental innovation (CEI) is a proactive type of response to increasing public scrutiny regarding firms’ environmental performance. While past studies have overwhelmingly focused on coercive mechanisms and assumed a closed national institutional field, less attention has been given to non-coercive and transnational inter-firm mimetic mechanisms. This paper aims to investigate the joint effect of coercive isomorphic mechanisms from domestic institutions and mimetic isomorphic mechanisms from foreign multinational enterprises (MNE) on CEI adoption in domestic firms.
Design/methodology/approach
The study’s empirical analysis is based on data from 1,967 firms from the 2010 Korean Innovation Survey, as well as other official statistics.
Findings
This study reports the following results: the direct effects of domestic institutions on CEI adoption in domestic firms vary according to institution type; foreign MNEs have a positive effect, whether using global or local CEI strategies; and the positive effect of foreign MNEs strengthens when the stringency of domestic environmental regulation increases.
Originality/value
This paper shows that CEI diffusion is driven by both coercive institutional pressures and inter-firm mimetic mechanisms, including their joint effects. Foreign MNEs act as boundary-spanners that activate a dual isomorphic mechanism, affecting social as well as economic development in host countries. Finally, evidence of interaction between domestic coercive and transnational mimetic mechanisms supports the authors’ contention that national institutional fields are increasingly interconnected.
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Jianhong Zhang, Jan P.A.M. Jacobs and Arjen van Witteloostuijn
Multinational enterprises (MNEs) play a dominant role in the international business (IB) literature. Traditionally, by far the majority of IB studies deal with issues at the micro…
Abstract
Multinational enterprises (MNEs) play a dominant role in the international business (IB) literature. Traditionally, by far the majority of IB studies deal with issues at the micro level of the individual MNE, or at the meso level of a sample of individual MNEs in industries. This paper focuses on the impact of MNE behavior through foreign direct investment (FDI) on a country’s international trade, and vice versa. In so doing, this study responds to a recent plea for more macro‐level studies in IB into the effect of MNE behavior on the macroeconomic performance of countries as a whole, particularly developing and emerging economies. In the current study, we focus on the largest developing or emerging economy of all: China. Applying sophisticated econometric techniques, we unravel the causality and direction of FDI‐trade linkages for the Chinese economy in the 1980‐2003 period.
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Alain Verbeke, Rob van Tulder, Elizabeth L. Rose and Yingqi Wei
Yingqi Wei, Xiaming Liu, Chengang Wang and Jue Wang
Local sourcing from indigenous firms by multinational enterprises (MNEs) is an important channel through which the former may benefit from the positive externalities generated by…
Abstract
Purpose
Local sourcing from indigenous firms by multinational enterprises (MNEs) is an important channel through which the former may benefit from the positive externalities generated by the latter. The purpose of this study is to analyze the extent and determinants of local sourcing of MNEs.
Design/methodology/approach
Employing a survey dataset covering 493 multinational subsidiaries in China during 1999‐2005, this paper applies the two‐limit Tobit model.
Findings
It is found that an MNE's local sourcing decision is influenced by its strategies, characteristics such as size and learning ability and country‐of‐origin. More specifically, export‐orientation strategy, joint venture strategy and networking with local suppliers positively affect local sourcing. Small and autonomous subsidiaries tend to source more locally. Age has a non‐linear effect. The importance of these determinants varies with regions.
Research limitations/implications
Aiming at capacity building and competitiveness of indigenous firms, the Chinese government has initiated local content requirement. This study shows that such policy intervention could be counterproductive. The creation of a more competitive business environment by the government could promote more linkages.
Originality/value
Given its critical role in economic development, local sourcing by MNEs has attracted much attention. Only limited research has been carried out on FDI linkage effects in China, and the location effect on FDI linkages has not been examined. This study aims to fill the gap by using Chinese survey data.
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Yingqi Wei, Xiaming Liu and Chengang Wang
This paper argues that multinational firms can benefit from indigenous knowledge diffusion in a host developing country so that there can be two‐way productivity spillovers…
Abstract
This paper argues that multinational firms can benefit from indigenous knowledge diffusion in a host developing country so that there can be two‐way productivity spillovers between foreign and local firms even in the developing world. This new argument is confirmed by a very large firm‐level data set from the Chinese manufacturing sector. After grouping firms based on their trade orientation, we find that foreign firms have a positive impact on local‐market‐oriented Chinese firms. When the degree of foreign presence is sufficiently high, there will be negative productivity effects on export‐oriented Chinese firms. On the other hand, local Chinese firms have a positive impact on export‐oriented foreign invested firms. After dividing foreign firms according to their sources, we find that the beneficial spillovers between OECD and local Chinese firms are much greater than those between Hong Kong/Macao/Taiwan and local Chinese firms.
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Yingqi Liu and Ari Kokko
The purpose of the paper is to identify the main determinants of the development of the neighbourhood electric vehicle (NEV) industry in China, including influences from private…
Abstract
Purpose
The purpose of the paper is to identify the main determinants of the development of the neighbourhood electric vehicle (NEV) industry in China, including influences from private stakeholders as well as the government, and domestic as well as foreign interest groups. Particular emphasis is placed on the role of state‐owned enterprises (SOEs) and the relations between the government and the SOE sector.
Design/methodology/approach
The paper follows an inductive approach, and is largely based on interviews with industry actors and representatives for relevant government agencies, complemented with secondary data.
Findings
The preliminary findings suggest that unlike Western market economies, where the impact of public policy on innovation is relatively transparent and well recorded (in the form of fiscal and financial incentives and formal legislation), much of Chinese innovation is driven by less formal decisions taken in the nexus between SOEs and relevant state agencies. Hence, although China suffers no lack of legislation at various levels (including laws, decrees, and guidelines) it is often difficult to identify the specific drivers for change.
Practical implications
The findings are useful for understanding the development of the NEV industry in China.
Originality/value
The current paper is the first application of the GIST (Governance of Innovation towards Sustainability Technology) framework to the case of the Chinese NEV industry.
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Guoliang Frank Jiang and Michael A. Sartor
This study examines the contingent impact of corporate anti-corruption policies on multinational enterprises’ foreign investment strategy. The authors propose that the differences…
Abstract
This study examines the contingent impact of corporate anti-corruption policies on multinational enterprises’ foreign investment strategy. The authors propose that the differences in foreign investment motives will moderate the assumed deterrent effect of anti-corruption policies. Our analysis of overseas production investments by Japanese firms (2011–2017) supports some of the hypotheses. The authors find that the deterrent effect of anti-corruption policies may be diminished when a new subsidiary has an efficiency-seeking purpose. Conversely, the deterrent effect is more prominent when a new subsidiary has a competence-creating purpose. These results not only contribute to the research on control of corruption in international business, but also have implications for research on corporate self-regulation more generally.