Yama Temouri

Self-selection into export markets by business services firms – Evidence from France, Germany and the United Kingdom

This study investigates business services firms that (start to) export, comparing exporters to firms that serve the national market only. We estimate identically specified empirical models using comparable enterprise data from France, Germany, and the UK. Our findings show that exporters are on average more productive and pay higher wages in all three countries. However, results for profitability differ across borders, where profitability of exporters is significantly smaller in Germany, significantly larger in France, and does not differ significantly in the UK. The results for wages and productivity hold in the years before firms start exporting, which indicates self-selection into exporting of more productive services firms that pay higher wages. The surprising finding of self-selection of less profitable German services firms into exporting does not show up among firms from France and the UK. In all three countries we do not find evidence for positive effects of exporting on firm performance.

Institutions and Equity Structure of Foreign Affiliates

Question/Issue: We combine agency and institutional theory to explain the division of equity shares between the foreign (majority) and local (minority) partners within foreign affiliates. We posit that once the decision to invest is made, the ownership structure is arranged so as to generate appropriate incentives to local partners, taking into account both the institutional environment and the firm-specific difficulty in monitoring. Research Findings/Insights: Using a large firm-level dataset for the period 2003-2011 from 16 Central and Eastern European countries and applying selectivity corrected estimates, we find that both weaker host country institutions and higher share of intangible assets in total assets in the firm imply higher minority equity share of local partners. The findings hold when controlling for host country effects and when the attributes of the institutional environment are instrumented. Theoretical/Academic Implications: The classic view is that weak institutions lead to concentrated ownership, yet it leaves the level of minority equity shares unexplained. Our contribution uses a firm-level perspective combined with national-level variation in the institutional environment, and applies agency theory to explain the minority local partner share in foreign affiliates. In particular, we posit that the information asymmetry and monitoring problem in firms are exacerbated by weak host country institutions, but also by the higher share of intangible assets in total assets. Practitioner/Policy Implications: Assessing investment opportunities abroad, foreign firms need to pay attention not only to features directly related to corporate governance (e.g., bankruptcy codes) but also to the broad institutional environment. In weak institutional environments, foreign parent firms need to create strong incentives for local partners by offering them significant minority shares in equity. The same recommendation applies to firms with higher shares of intangible assets in total assets.

Corporate social responsibility and multinational enterprise identity: insights from a mining company's attempt to localise in Ghana

ABSTRACT This paper investigates how a US gold mining multinational enterprise (MNE) – one of the worlds largest – operates its subsidiaries in various parts of the world by creating a unique ‘glocal identity’. The US parent company has experienced several significant challenges across its network of subsidiaries. These challenges were mostly linked to the enforcement of the MNEs identity and culture in its host environment. We contribute by describing, in detail, the attempts made by this company to localise its corporate social responsibility practices in Ghana as it sought to gain legitimacy and create an identity that would overcome the issues relating to the liability of foreignness. Our data come from a combination of sources, including questionnaires and detailed semi-structured interviews conducted with the key management employees of the mining company, members and opinion leaders of the companys host communities, and secondary sources. Our main finding is that the construction of a ‘host-friendly’ identity was centred around the mining companys involvement with the Newmont Ahafo Development Foundation.

International business and institutions after the financial crisis

Introduction: International Business, Institutions and Performance after the Financial Crisis Yama Temouri and Chris Jones 1. The Role of International Business in the Global Spread of Technological Innovation John Cantwell 2. Internationalisation of Firms From Emerging Markets Location Choice and the Impact of Institutions and State Ownership Saul Estrin PART I: INSTITUTIONS AND FOREIGN INVESTMENT 3. The Entry of Multinational Companies to the Base of the Pyramid: A Network Perspective Misagh Tasavori, Pervez Ghauri and Reza Zaefarian 4. FDI and Property Rights in Resource-Rich Countries Chiara Amini 5. The Impact of the Financial Crisis on the Performance of European Acquisitions Rekha Rao Nicholson and Julie Salaber 6. Internal Capital Markets and outward Foreign Investment from India and China Abubakr Saeed and Suma Athreye 7. The Investment Development Path in the Context of Polands Accession to the European Union and the Global Financial and Economic Crisis Ewa Kaliszuk and Agata Wancio 8. Adoption of the Global Reporting Initiative by FT500 firms: Overcoming the Liability of Foreignness Stephen Chen and Petra Bouvain PART II: KNOWLEDGE FLOWS AND PERFORMANCE 9. Inward Investment, Technology Transfer and Innovation: Direct Evidence from China Meng Song, Nigel Driffield and Jun Du 10. Knowledge Sources of Persistent Exporters: Effects on the Growth and Productivity of Firms Hans Loof, Pardis Nabavi, Gary Cook and Borje Joansson 11. Financing Patterns, Multinationals and Performance: Firm-level Evidence from 47 Countries Sushanta Mallick and Yong Yang 12. The Role of Language in Bilateral FDI: A Forgotten Factor? Palitha Konara and Yingqi Wei 13. The Impact of Foreign Direct Investment on Economic Performance in the Enlarged Europe: a Meta-Regression Analysis Randolph Luca Bruno and Maria Cipollina 14. Drivers of Technology Upgrading: Do Foreign Acquisitions Matter to Chinese Firms? Sourafel Girma, Yundan Gong, Holger Gorg and Sandra Lancheros 15. International R and D Spillovers, TFP and Institutional Distance Dolores Anon Higon and Miguel Manion-Antolin

Impact of institutions on emerging European high-growth firms

Purpose Based on the multi-faceted nature of High growth firms (HGFs) and the significant investments by governments to make the business environment more conducive to firm growth, the effects of changing institutions impacting on HGFs has not been explored in any great detail. While we have a very clear understanding of the spatial variations of HGFs and their firm characteristics in various advanced countries, we are lacking such insights for emerging countries. Design/methodology/approach Given the growth prospects and economic reforms, we chose emerging Central and Eastern European (CEE) countries as our research context. Utilising a cross-country panel data set spanning 11 countries, we investigate the share of HGFs across these countries and further examine how changes in institutions impact firms to become HGFs. We frame our arguments around three institutional dimensions, namely corruption, investment climate and bureaucratic quality. Findings Our findings suggest that the rates of HGFs are signif...

The changing nature of South Korean FDI to China

The purpose of this paper is to explore the changing motives and location choice patterns of foreign direct investment (FDI) from South Korea to China. Prior to the global financial crisis of 2008, South Korean multinational enterprises (MNEs) invested in China for efficiency-seeking motives in order to take advantage of low costs. While evidence is emerging that MNEs from developed countries are now investing in China for market-seeking reasons, no such evidence exists for MNEs from Asia. This study exploits a unique data set to uncover a change in strategy by South Korean MNEs in China, both in terms of motive and location, something that has received little attention in the international business literature.

Inward investment and the drivers of post recession recovery in Germany

Summary This paper examines changes in the drivers of productivity in Germany over the period 1997-2012. We start by comparing the performance of German firms and inward investors before and during the recovery from the recent global financial crisis of 2008 across a range of sectors, and subsequently examine the channels through which different firms are able to generate productivity. Our results show that foreign investors are more productive than German MNEs and purely domestic firms, with the gap narrowing in the manufacturing sector, but growing in the service sector during the recovery period. We also contrast those firms for whom productivity growth is related to greater use of intangible assets, compared with those for whom productivity is linked to cash flow. Productivity of inward investors is driven by cash flow rather than intangible assets, these being limited to high-technology investors from the EU and the USA.

Introduction: International Business and Institutions after the Financial Crisis

The theme for the Academy of International Business (UK and Ireland chapter) 2013 Conference was International Business, Institutions and Performance after the Financial Crisis. Developed economies are still reeling from the aftermath of the worst financial crisis since the Great Depression. The bursting of the US housing bubble triggered huge losses in securities, led to questions regarding bank solvency, and tightened credit, all of which forced large declines in international trade and foreign direct investment (FDI). As the effects fed through into the real economy, unemployment began to rise and bank bailouts had a huge impact on public finances, with countries recording large deficits and debt ratios approaching 100 percent of gross domestic product (GDP). This has been compounded by the effects of the Eurozone crisis and the bailouts afforded to countries on the periphery such as Greece and Cyprus. Furthermore, unpredictable macroeconomic policy via unconventional monetary policy and the controversy surrounding the use of fiscal policy to control the public finances has created much uncertainty for international business. Indeed, OECD outward and inward FDI flows in 2012 still rest at 45 per cent and 54 per cent below their peak levels in 2007 respectively.

The Importance of Location: Does Outward FDI lead to Unemployment?

The purpose of this chapter is to examine the spread of high-tech manufacturing and services away from the West, and the subsequent impact on output and employment in the home country. There is a large amount of work that seeks to examine the extent to which low skill workers in high-income countries are vulnerable to competition from workers in developing countries. Initially, this literature focussed on trade as the mechanism of reallocation, assuming that firms from the developing world compete with western firms through exports. However, the focus has since moved to the relocation of activities by Western firms, to more low-cost locations. This literature is discussed in detail in Driffield and Chiang (2009), for example, who also show that countries such as Taiwan are not immune to this. However, the focus of this literature has been on the low-tech firms, seeking to relocate low-skill, low-productivity activities to low-cost locations. The purpose of this chapter is to examine the extent to which other parts of a developed economy are also vulnerable to the attractions of relocation. To this end we focus on high-tech firms, and on services as well as manufacturing.