Danny T. Wang

Foreign direct investment, institutional development, and environmental externalities: Evidence from China

The question of how foreign direct investment (FDI) affects a host countrys natural environment has generated much debate but little consensus. Building on an institution-based theory, this article examines how the institutional development of a host setting affects the degree of FDI-related environmental externalities in China (specifically, industrial sulfur dioxide emissions). With a panel data set of 287 Chinese cities, over the period 2002-2009, this study reveals that FDI in general induces negative environmental externalities. Investments from OECD countries increase sulfur dioxide emissions, whereas FDI from Hong Kong, Macau, and Taiwan shows no significant effect. Institutional development reduces the impacts of FDI across the board. By focusing on the moderating role of institutions, this study sheds new light on the long-debated relationships among FDI, institutions, and the environments of the host countries.

Observer Effects of Punishment in a Distribution Network

In a distribution network, a punishment event not only affects the disciplined distributor but also changes the attitudes and behaviors of others in the network (i.e., observers). By moving beyond a dyadic view of punishment, this article considers the effects of punishment on observers and integrates insights from social learning, fairness heuristic, and social network theories. The resulting framework of the observer effects of punishment in a distribution network, empirically tested with a survey in China, reveals two mechanisms through which punishment leads to reduced observer opportunism: (1) a direct deterrence effect and (2) a trust-building process. Moreover, two information-related constructs moderate the observer effects differently. The disciplined distributors relational embeddedness, which motivates greater information flow to observers, aggravates the problem of information asymmetry against the manufacturer, making punishment less deterrent for observers. In contrast, the manufacturers monitoring capability, which reduces information asymmetry, strengthens observer effects. The authors discuss both theoretical and managerial implications of using punishment to achieve collaboration from a wide network of channel members.

Power or Market? Location Determinants of Multinational Headquarters in China

Multinational corporations (MNCs) have increasingly been establishing regional headquarters in China. However, no study has systematically examined how MNCs make strategic decisions about where to locate Chinese headquarters (CHQs) in this transition economy. The paper makes the first attempt to investigate the issue by focusing on two questions. First, what are the location-specific factors that determine where MNCs locate their CHQs? Second, how do these factors influence making the decision between Beijing and Shanghai, the two largest cities in China? We integrate existing literature and assess the differential roles of (1) path dependency, (2) institutional support, and (3) proximity to superior information. Data were collected through a large-scale survey of MNC CHQs in mainland China. The empirical analysis supports the three-dimensional framework and the central role of proximity to superior information in the decision-making process. The results advance existing understanding of MNC location decisions in China by revealing the unique interplay between power and market in this transition economy, and between Beijing and Shanghai, the two promising cities toward world city status, in particular.

Pride as a Double-Edged Sword: Effects of CEO Hubris on Firm Market Exploration and Exploitation

Grounded in upper echelons theory and regulatory focus theory, this empirical study develops a theoretical model aiming to explicate the effect of CEO hubris, a prominent managerial bias, on market exploration and exploitation, as well as its boundary conditions. We predict that CEO hubris is positively related to market exploration while negatively related to market exploitation. Moreover, this study shows that those factors that affect a CEO’s information processing capacity can effectively moderate the hubris bias: the CEO’s industry experience weakens, whereas a high level of market uncertainty strengthens, the hubris effects. We test our hypotheses using a two- wave, multi-respondent original survey data set of Chinese trading companies. As a balance between market exploration and exploitation can enhance firm market performance, this study highlights the double-edged nature of CEO hubris. The results provide important implications for firms: it is possible to achieve superior market performance by b...

MULTINATIONAL CORPORATIONS' (MNCs) STRATEGIC LOCATION AND THE DEVELOPMENT OF FINANCIAL SERVICE HUBS IN CHINA

Abstract This paper builds a theoretical link between agglomeration economies of Multinational Corporations (MNCs) headquarters and the development of financial service centres, with special account in the extant literature of financial geography. Specifically, four distinctive factors, namely path dependency, asymmetric information, institutional support and exogenous advantage are brought forward as the determinants of managerial considerations for MNCs strategic locations. Among them, the factor of asymmetric information is argued as the key factor to drive geographic agglomerations of financial activities in China. To examine the validity of the theory, Chinas Beijing-Shanghai city-pair is presented as a case. A binary logistic regression model-test is applied to compare the locational behavior of MNCs regional headquarter in the two cities. Finally, a financial centre index (Findex) analysis which quantifies the significance of financial sectors in the city-pair is conducted. The results reveal that contrary to the traditional point of view, Beijing has more advantages than Shanghai in developing to be a strong service and financial centre in China.