Torben Pedersen

Ownership structure and economic performance in the largest european companies

The paper examines the impact of ownership structure on company economic performance in 435 of the largest European companies. Controlling for industry, capital structure and nation effects we find a positive effect of ownership concentration on shareholder value (market‐to‐book value of equity) and profitability (asset returns), but the effect levels off for high ownership shares. Furthermore we propose and support the hypothesis that the identity of large owners—family, bank, institutional investor, government, and other companies—has important implications for corporate strategy and performance. For example, compared to other owner identities, financial investor ownership is found to be associated with higher shareholder value and profitability, but lower sales growth. The effect of ownership concentration is also found to depend on owner identity. Copyright

Transferring Knowledge in MNCs: The Role of Sources of Subsidiary Knowledge and Organizational Context

We link up with the recent literature on the differentiated MNC and in particular with its stress on intra-MNC knowledge flows. However, rather than focusing on the characteristics of knowledge as determinants of knowledge transfer within MNCs, we focus instead on levels of knowledge in subsidiaries, the sources of transferable subsidiary knowledge and on the organizational means and conditions that realize knowledge transfer as the relevant determinants. We find largely positive support for the relevant hypotheses. These are tested on a unique dataset on knowledge development in subsidiary firms [the Centre of Excellence (CoE) project].

Reconceptualizing the Firm in a World of Outsourcing and Offshoring: The Organizational and Geographical Relocation of High-Value Company Functions

In the largest sense, global strategy amounts to (1) the optimal disaggregation or slicing of the firms value chain into as many constituent pieces as organizationally and economically feasible, followed by (2) decisions as how each slice should be allocated geographically (‘offshoring’) and organizationally (‘outsourcing’). Offshoring and outsourcing are treated as strategies that need to be simultaneously analysed, where just ‘core’ segments of the value chain are retained in-house, while others are optimally dispersed geographically, as well as dispersed over allies and contractors. This amounts to a reconsideration of the nature of the firm that captures the dynamic changes in global configuration and a reconsideration of what constitutes ‘core’ activities that need to be retained internally. The article proposes a new research agenda that searches for each firms optimal degree of disaggregation and global dispersion given that further scattering of value chain activities entail benefits as well as increased complexity and costs.

European Patterns of Corporate Ownership: A Twelve-Country Study

A number of qualitative studies have shown striking international differences in corporate governance systems. This paper presents a quantitative analysis of ownership structures among the hundred largest companies in twelve European countries. The existence of a highly significant nation effect is confirmed. Further statistical analysis indicates that the nation effect is party explained by institutional differences.

Learning Paths to Offshore Outsourcing - From Cost Reduction to Knowledge Seeking

A corporations offshore outsourcing may be seen as the result of a discrete, strategic decision taken in response to an increasing pressure from worldwide competition. However, empirical evidence of a representative cross-sector sample of international Danish firms indicates that offshore sourcing in low-cost countries is best described as a learning-by-doing process in which the offshore outsourcing of a corporation goes through a sequence of stages towards sourcing for innovation. Initially, a corporations outsourcing is driven by a desire for cost minimization. Over a period of time the outsourcing experience lessens the cognitive limitations of decision-makers as to the advantages that can be achieved through outsourcing in low-cost countries: the insourcer/vendor may not only offer cost advantages, but also quality improvement and innovation. The quality improvements that offshore outsourcing may bring about evoke a realization in the corporation that even innovative processes can be outsourced.

Subsidiary performance in multinational corporations: the importance of technology embeddedness

Subsidiaries have access to different types of resources and therefore perform differently in their market-place and within a multinational corporation (MNC). Yet, even though subsidiaries are the object of intense interest, remarkably little has been written about the assessment of subsidiary performance. In short, the strategic opportunities of subsidiaries seem to generate more attention in the literature than their results. The two distinctive features of this paper are the development of the concept of subsidiary performance and the exploration of the linkage between subsidiary business context and performance. More specifically, by drawing on the literature about organizational learning, absorptive capacity and embeddedness in business relationships, some hypotheses will be formulated about the causal link between subsidiary environment and subsidiary performance. These hypotheses are then tested in a LISREL model based on data concerning 98 subsidiaries belonging to Swedish MNCs. Our empirical results indicate that technology embeddedness has a positive, direct, impact on subsidiary market performance, and a positive, but indirect, impact on subsidiary organizational performance.

Learning About Foreign Markets: Are Entrant Firms Exposed to a “Shock Effect”?

This study addresses how managers’ perceived familiarity with local markets develops during a period of entry or expansion. The authors derive different predictions of how foreign-market familiarity changes during periods of entry from the internationalization process literature. They then subject the predictions to an empirical examination, using a data set that covers foreign business operations as reported by managers of international firms from small, open economies (Denmark, Sweden, and New Zealand). In addition to addressing these predictions, the empirical study gives insight into the incidence and character of “shock effects” in foreign-market entries. The effects are evident in managers’ inclination to underestimate differences between the home and host countries in terms of business environments. The data support the supposition that, in general, managers of entrant firms experience these shock effects. For example, the authors find the lowest level of market familiarity among managers of entrant firms that are in the eighth year after entry or initiation of foreign-market expansion. The company data indicate that, in general, managers of entrant firms experience shock effects in relation to entry into adjacent but not into distant countries. Thus, the hypothesis of the psychic-distance paradox that the authors put forward is supported. Entrant firms also experience shock effects with respect to the acquisition of tacit rather than explicit knowledge; furthermore, the data suggest that shock effects befall producers of customized products but not producers of standardized products.

Governance Mechanisms for the Promotion of Social Capital for Knowledge Transfer in Multinational Corporations

The aim of this paper is to extend social capital approaches to knowledge transfer by identifying governance mechanisms that managers can deploy to promote the development of social capital. In order to achieve this objective, insights from the micro-level, knowledge governance approach are combined with theory on the determinants of social capital. Three governance mechanisms are identified: market-based mechanisms, hierarchical mechanisms, and social mechanisms. The findings, based on data from two Danish MNCs, indicate that although the use of social governance mechanisms promotes positive assessment of social capital, hierarchical governance mechanisms constrain its development. The application of market-based governance mechanisms has no significant effect. In addition, the findings provide evidence that social capital has a positive impact on knowledge transfer.

MNC Strategies and Linkage Effects in Developing Countries

The paper addresses the question of which implications MNC strategies have to FDI linkage effects in developing countries. Two contrasting MNC strategies reflecting an integration-responsiveness dichotomy are scrutinized as to their job effects on local linkage partners in developing countries. It is hypothesized that compared to investments undertaken by MNCs following strategies of global integration, investments of MNCs pursuing local responsiveness create more jobs but imply less job upgrading in developing countries. The hypotheses are tested on a sample of Danish MNCs with extensive investments in developing countries.

Determining Factors of Subsidiary Development

The literature on subsidiary development has greatly expanded over the last 20 years, evaluating the dynamics behind the evolution of subsidiary roles. The literature emerged out of a critique of the traditional ‘center-periphery’ view where the firm-specific advantages are developed and controlled by the parent company, while the foreign subsidiaries are the long-arm of the parent company in exploiting the firm-specific advantages in the local market. The observation that some subsidiaries have a strategic role in the multinational corporation (MNC) that reaches beyond their local undertakings (e.g. Etemad and Dulude, 1986; Bartlett and Ghoshal, 1989; Gupta and Govindarajan, 1994) was the starting point of research on different subsidiary roles and the evolution of subsidiary roles.