Pol Herrmann

CEO Experiences: Effects on the Choice of FDI Entry Mode*

abstract Drawing on the strategic management and international business literatures, this study examines the relationships between the experiences of newly selected CEOs and their choice of foreign direct investment (FDI) entry modes. Based on a sample of 380 foreign market entry events involving acquisitions, greenfield investments, and joint ventures, our findings indicate that CEOs with less firm experience preferred acquisitions and greenfield investments to joint ventures and, older CEOs were more likely to opt for joint ventures over greenfield investments. In addition, CEOs with throughput functional experience favoured acquisitions over joint ventures and greenfield investments. Finally, CEO international experience was associated with a greater propensity to choose greenfield investments and acquisitions over joint ventures and also greenfield investments over acquisitions. The implications of the findings from the perspective of theory and managerial practice are discussed, along with possible directions for future research.

Board Characteristics, Managerial Incentives, and the Choice Between Foreign Acquisitions and International Joint Ventures

Drawing on the agency theory, corporate governance, and international business literatures, the authors link board characteristics and managerial incentives to the choice between acquisitions and joint ventures by firms entering foreign markets. Hypothesized relationships are examined in the context of 383 acquisition and 171 joint venture entries undertaken by relatively nondiversified firms in the U.S. manufacturing sector during the period 1991 to 1999. Findings indicate that firms with boards characterized by a higher proportion of outside directors and independent leadership structures (i.e., the absence of duality) are more inclined to favor acquisitions over joint ventures in foreign market entry. Likewise, the data reveal that firms where insiders have greater equity ownership and compensation structures that are more closely linked to long-term firm performance prefer acquisitions over joint ventures. Implications of the findings along with directions for future research are discussed.

An Empirical Analysis of the Relationship Between Capital Acquisition and Bankruptcy Laws

Ineffective capital acquisition decisions at start‐up may lead to business failure and bankruptcy; a result which is both costly and disruptive to the owners and other stakeholders of the firm. To cope with the risk of failure, owners embark on a variety of risk‐reducing activities whereas the U.S. government attempts to moderate the downside effects of such failures through the rules surrounding bankruptcy. Previous studies imply that as owners become more aware of the protections offered through the government regulation of bankruptcy, they should become less concerned with the effects of failure and be willing to raise higher levels of initial capital. Raising higher levels of initial capital, in turn, leads owners to take actions intended to reduce firm risk and to minimize the threat to their personal financial security. Data from a sample of small firms confirm our hypothesis by showing that as the level of initial capital acquisition increases, owners embark on activities intended to reduce firm risk. However, capital acquisition is not associated with the owners familiarity with bankruptcy regulations. As a result, governmental objectives in establishing these regulations may not be achieved. Our findings have implications for firms’ owners, consultants, and policymakers, in terms of the relationship between an entrepreneurs knowledge of bankruptcy laws and the financing of their enterprises.

Promotability of Host-Country Nationals: A Cross-Cultural Study

Drawing on person environment fit and national identity theory, the article proposes that person national culture fit is likely to influence the promotability of host-country nationals in multinational firms. Focusing on fit with upward influence tactics, it suggests that the parent companys national culture influences managerial expectations of host-country nationals in foreign subsidiaries. It argues that host-country managers who demonstrate upward influence tactics that are culturally appropriate to the parent companys national culture will be more promotable than those who do not. Higher-level supervisors were asked to assess the promotability of two direct subordinates, who were independently surveyed about the upward influence tactics they used. The study contrasted ingratiation, exchange of benefits and coalition, and directness influence tactics of host-country nationals in domestic Ecuadorian firms with American and German multinationals in Ecuador. Compatible with our hypotheses, data from a sample of 79 firms suggest that exchange of benefits and coalition are more likely to be associated with promotability in German than in domestic Ecuadorian firms. In addition, upward-appeal assertiveness is more likely to be associated with promotability in American than in domestic Ecuadorian firms.

The role of corporate governance in R&D intensity of US‐based international firms

Purpose – The purpose of this paper is to study the influence of corporate governance and internationalization on research and development (R&D) investments in US‐based international firms.Design/methodology/approach – The paper draws from agency theory to examine the influence of corporate governance mechanisms and internationalization on R&D intensity by the use of longitudinal data from 1991, 1994, 1997, and 2000 in a sample of large, manufacturing US firms with international operations.Findings – The paper finds that CEO total compensation is positively associated with R&D intensity, whereas equity voting power, insider ownership, and duality are negatively associated.Research limitations/implications – The findings regarding insider ownership confirms agency theory, in that agents will tend to make decisions to maximize their own utility and thus would be expected to reject R&D investments. In terms of duality, the augmented discretion that CEOs assume when they also hold the chairmanship position ma...

Does Ethnic Similarity Influence Foreign Equity Position in Joint Ventures? An Empirical Analysis of IJVs in China

ABSTRACT The notion that firms seek structural control (higher ownership) in international joint ventures (IJVs) to protect competitive advantages underlies transaction cost theory and has been supported by studies involving developed-country investors. Researchers, however, question the generalizability of these findings, especially ownership preferences in the presence of “ethnic similarity” between home and host countries. Results from 1,763 Chinese IJVs suggest that Overseas-Chinese (Hong Kong, Singapore, and Taiwan) and Non-Chinese (Japan, South Korea, and Western countries) investors have the same propensity for “structural control,” except for labor-intensive firms, providing credence to classic transaction-cost explanations and downplaying the role of ethnic similarity.

Adoption of new technologies in the face of economic crises: the case of Ecuador

We draw from resource-dependence theory to study main factors influencing adoption of new technologies in Ecuador. Based on a field survey of managers conducted in 1995 and in 2001, we found that strategic variables are major factors that motivate adoption of technology and variables indicating lack of resources are most likely to retard it. Additionally, strategic variables are consistently considered more important than organisational variables, whereas lack-of-resources variables are seen as more important than implementation-related variables. However, after a series of economic crises, the importance attributed to strategy has diminished as the national economy and costs increasingly inhibit the adoption of new technologies.