New Perspectives in International Business Research: Volume 3

This volume is the outcome of the 33rd European International Business Academy (EIBA) conference held at the Faculty of Political Science of the University of Catania (Italy). This conference brought together more than 300 scholars from around the world to discuss theoretical and empirical issues in international business (IB), as well as their consequences and challenges to IB scholars and policy-makers. Organized around 10 thematic tracks, the conference is the annual forum for discussing major research issues in the IB realm. This volume is a collection of the best papers, which, selected through a blind refereeing process for presentation at the conference, make significant contributions by providing fresh new perspectives on a variety of relevant topics.

Purpose – Multinational corporations (MNCs) are often presented as harbingers of global practices, thus promoting a process of convergence between different national business systems. However, this view disregards the fact that MNCs, too, are rooted in countries of origin, and that this may have an enduring influence on the practices employed within these organizations. This chapter aims to throw new light upon this issue.

Methodology – Using a survey methodology we compare company practices for around 150 MNC subsidiaries from four different countries (the USA, the UK, Germany, and Japan) at two points of time (1995 and 2002).

Findings – Our findings show that even the most internationalized companies in the world continue to show unique country patterns. In particular, strong differences between US and Japanese MNCs endure. However, MNCs from the US and from the UK, already very similar in 1995, have become even more alike in 2002. German MNCs show an interesting picture. While remaining similar to Japanese MNCs (and very different from their US and UK counterparts), in some limited respects German MNCs seem to have adapted to the US/UK practices.

Originality – Previous studies, focusing at different groups of countries and different practices, and conducted at various points in time, have been insufficiently cumulative to form a basis for firm conclusions. This study provides a systematic comparison of MNC company practices at two points in time.

This chapter is part of a research project examining the role of culture and culture differences in foreign partnerships. We build on prior research on culture distance to explore the influence of perceptions of cultural differences on perceived relational risk. Perceived relational risk is defined here as the degree of satisfaction of being involved in business activities with nationals of a given country. Contrary to expectations, our analysis suggests that cultural differences are sometimes perceived as a desirable characteristic and may be associated with lower relational risk. We speculate that culture distance is an asymmetric construct in which the perception of a cultural difference may be interpreted as positive or negative depending on the perspective from which the reading is made and the nature of the task in which the perception is formed.

Purpose – This chapter explores the determinants of trust, a manifestation of the relational dimension of social capital, between interaction partners in multinational corporations at interpersonal and inter-unit levels of analysis.

Methodology – The study is based on two quantitative data sets from the Finnish subsidiaries of foreign MNCs, one at the individual level and another at the unit level (n= 265/102).

Findings – Our results indicate that the drivers of trust exhibit similar patterns across both levels of analysis, but are stronger at the interpersonal level. Trust was significantly and positively related to the length of the relationship between the two individuals or units, and to the frequency of the communication between them whereas it was found to be unrelated with cultural distance.

Limitations – The key limitations of the study were as follows. First, the samples at both levels were relatively small, a factor that may partly explain why some of the statistical relationships were relatively weak. Second, the study was carried out in one location only, and our findings need to be corroborated in other cultural settings. Third, we only examined the level of trust from one side of the relationship, as a dyadic analysis was not possible with the present data.

Practical implications – For practicing managers, the main message from our research is that communication frequency and the length of the relationship matter for the relational social capital that exists within MNCs – both at the interpersonal and unit levels.

Purpose – The purpose of the chapter is to introduce an actor-centered conflict perspective into research on multinational company (MNC) coordination. We first develop a theoretical framework of conflictual processes in MNC coordination and then use an empirical study of a German MNC in Japan to illustrate how cultural coordination in MNC subsidiaries triggers conflict processes.

Methodology/approach – The chapter integrates conflict theory and models of MNC coordination. The empirical study is based on qualitative data.

Findings – Coordination programs in MNC such as cultural integration through shared values lead to substantial conflictual processes. Local actors apply micro-political tactics to resist, delay or adjust coordination instruments developed by MNC headquarters.

Originality/value of chapter – The chapter applies conflict theory to MNC coordination issues, a field of research which so far is dominated by contingency approaches.

Although examples of governance abound in the study of export theory, dyadic relationships (importers and exporters) in import theory have thus far received scant attention in the international business literature. Our study aims to explore how high-quality relationships, manifested by trust, respectful engagement and vitality, augment relationship commitment between importer and exporter, while controlling for years of importing, exporter visits, exporter reputation, substitutes, and industry conditions. Data collected from 97 importing companies show that both trust and respectful engagement had a positive effect on relationship commitment. However, vitality mediated the relationship between respectful engagement and relationship commitment. The findings also indicate that the presence of product substitutes had a significant impact on relationship commitment.

This chapter aims to advance economic development theory through the concept of jurisdictional advantage; demonstrating how places might strategically position themselves to gain economic advantage; then considering how this place-specific advantage might be constructed. We choose the term “jurisdiction” to define the set of actors that have a common interest in a spatially bound community. Jurisdictions are entities with a legitimate political ability to influence social and economic outcomes within their boundaries. Borrowing from the literature on corporate strategy, the uniqueness of local capabilities becomes a source of advantage for jurisdictions. We consider how to measure and construct jurisdictional advantage.

Purpose – In this chapter, we seek to extend understanding of the ‘international’ dimension of comparative international entrepreneurship (IE), by undertaking exploratory empirical research within a global industry viz. the software industry, and focusing on two local ecologies, namely a regional agglomeration (Bangalore, India) and less developed niche (Lahore, Pakistan) about which little is known.

Methodology – On the basis of in-depth interviews in Bangalore and Lahore, exemplar case studies from both sub-national regions are presented, which highlight the relative significance of local milieu and ethnic ties in IE.

Findings – The global nature of the software industry and the central role of the innovative milieu in the USA have important implications for the comparative IE literature. These refer particularly to the coordination and integration of the entrepreneurial processes of opportunity discovery, evaluation and exploitation across frontiers. Close inter-milieu links provide the opportunity to access complementary assets and business networks. While Indians have influenced the development of Silicon Valley, their ties with Bangalore seem primarily to be based on hard-nosed business relations. But in relation to Pakistan, while the US milieu is critical for all aspects of the entrepreneurial process, closed networks may be a barrier to long-term growth.

Originality/value of chapter – Where our study goes beyond the literature is by highlighting the role of cross-border linkages between milieux.

Cochlear's first product, the 22-channel Nucleus implant, was the result of a research programme that has been dated back to 1967, when Graeme Clark, an ear, nose and throat (ENT) surgeon, commenced doctoral work on the electrical stimulation of the hearing nerve. Following the completion of his PhD in 1969, Clark was appointed the inaugural Chair in Otolaryngology at the University of Melbourne. When he joined the university in 1970, his primary objective was the practical application of his PhD research: namely, the development of a ‘bionic ear’, an electronic device that would stimulate the hearing nerve in the profoundly deaf. He realised early on that lack of resources would be one of his major impediments:across the road [from my office] the experimental research laboratory was in a disused hospital mortuary. When I looked at the mortuary my heart sank. It was dilapidated and bare. There was a stone table in the centre, but little else. The walls needed painting, and the light diffused poorly through the high windows. Anyway, I had no money to buy equipment even if the laboratory itself were satisfactory. (Clark, 2000, p. 54)

Microfinance – the provision of financial services to the poor – is high on the public agenda. We discuss and evaluate three myths regarding microfinance based on new data from rated microfinance institutions (MFIs). The first myth is that an efficient MFI needs to be shareholder owned; second that its governance should first and foremost address the potential conflict between owners and managers; and third that MFIs are drifting away from their poorer customers towards serving the wealthier. The data do not support any of these myths. We conclude that microfinance is a viable business model.

The purpose of the chapter is to analyze how firms’ R&D investment decisions are affected by asymmetries in knowledge transmission, taking into account different sources of asymmetry, such as unequal know-how management capabilities and spillovers localization within an international oligopoly. We follow a game theoretic approach and consider a two-country imperfect competition model with two firms – one from each country – producing a homogeneous good. Both the firms’ mode of foreign expansion and R&D level are endogenously determined. We find that a better ability to manage knowledge flows incentivates the firm to invest more in R&D. By introducing geographically bounded spillovers, we also show that one-way foreign direct investment (FDI) stimulates the multinational enterprise (MNE) to raise its own R&D, due to both the elimination of transport cost and a greater ability to source. Furthermore, it emerges that when geographical proximity increases the MNE's capability to source local know-how, FDI is more likely to occur. The originality of this chapter relies on the analysis of the impact of asymmetries within an oligopoly model with endogenous R&D. Differently from other studies, this framework allows us to provide neat analytical results.

This chapter examines intra-industry spillover effects from inward foreign direct investment (FDI) in Swiss manufacturing firms. It suggests that (a) the assessment of spillovers calls upon a detailed analysis of these effects according to the mechanisms by which they occur (viz. the increase of competition, demonstration effects, and worker mobility), and (b) spillovers depend on the interaction between their mechanisms and the levels of domestic absorptive capacity. Results are affirmative in that high-technology firms benefit from FDI heightening competition, while mid-technology firms benefit from demonstration effects. And low-technology firms, which are not able to benefit from foreign affiliates via demonstration effects alone, manage to reap the benefit via the recruitment of MNCs labor. In addition, only firms which largely invest in absorbing foreign technology benefit from spillovers.

Purpose – Firm acquisitions have been shown to serve as a way to gain access to international markets, technological assets, products or other valuable resources of the target firm. Given this heterogeneity of takeover motivations and the skewness of the distribution of the deal value we show whether and how the importance of different takeover motivations changes along the deal value distribution.

Methodology/approach – On the basis of a comprehensive dataset of 652 European mergers and acquisitions in the period from 1997 to 2003, we use quantile regressions to decompose the deal value at different points of its distribution.

Findings – Our results indicate that the importance of technological assets is higher for smaller target firms while the importance of non-technological assets seems to be higher for larger targets. The findings support the view on small acquisition targets to complement the acquirer's technology portfolio while larger acquisition targets tend to be used to gain access to international markets.

Research limitations/implications (if applicable) – Our findings suggest that the average firm as a reference for study might not be appropriate to address as the size of the target firm influences the value attribution to the target's assets.

Practical implications (if applicable) – Managers in the acquiring firm should be aware that they might overpay for the technological assets of a small firm. However, the acquisition of larger targets requires a well-developed integration strategy.

Originality/value of paper – For the first time, the broad merger motive of technology acquisition has been further qualified according to the size of the target which exhibits a considerable impact.