Purpose This study aims to examine the role of the incoming CEO as a precipitating circumstance that converts latent divestment pressures into foreign divestments. The authors develop a governance-based theoretical framework explaining when and why incoming CEOs increase the likelihood of foreign divestments.Design/methodology/approach Drawing on Boddewyn's condition-motivation-precipitating circumstances framework and information asymmetry, the authors argue that CEO succession creates acute information asymmetry between the board and the incoming CEO, triggering heightened monitoring and generating incentives for early, visible and attributable strategic action. They test the predictions using an unbalanced panel of 8,682 firm-year observations from 835 publicly listed European firms.Findings Incoming CEOs are more than three times as likely as incumbent CEOs to initiate foreign divestments. This effect is stronger for outsider CEOs, non-native CEOs and CEOs appointed following unplanned successions - contexts in which information asymmetry between the board and the incoming CEO is most pronounced.Research limitations/implications The study relies on archival data and does not directly observe information asymmetry or board monitoring processes. Future research should examine these mechanisms more directly.Practical implications Boards can reduce unintended incentives for early-tenure divestments through more structured succession planning. Incoming CEOs should be attentive to how their succession context shapes their interpretation of early strategic actions.Originality/value This study integrates Boddewyn's precipitating circumstances logic with information asymmetry theory to provide a novel governance-based explanation for foreign divestments. It shifts attention from structural and environmental antecedents toward the managerial and informational dynamics surrounding CEO succession.
Purpose The purpose of this study is to examine the conundrum between engage or non-engage nonmarket strategy approaches and its impact on firm internationalization strategy process. Engage or not to engage: the host market’s political and institutional business environment has become a key question that managers must consider during the internationalization strategy process. Design/methodology/approach By leveraging a comprehensive search of international business, management and political journals, the authors synthesize empirical and conceptual articles through a systematic literature review to clarify when firms choose engagement versus non-engagement, the mechanisms through which each strategy creates value or imposes costs and the consequences for firm internationalization performance, legitimacy and public welfare. Findings In advancing international business and NMS literature, the authors aggregated previous research under the framework of engaged and non-engaged NMS approaches and provided an interactive NMS model that organizations can use to enhance their internationalization performance. The authors reveal the role of the Dynamic Capabilities (DC)-Nonmarket Strategy (NMS) relationship and propose how DCs can be used to strategically influence corporate political activity, corporate social responsibility and enhance firm legitimacy in a foreign country. They show the performance implications of integrating both market and nonmarket strategies as a means to achieve sustainable internationalization performance. Originality/value The authors’ contributions enable to provide future research directions on the relationship between NMS-DCs and offer justification for the engaged approach adopted by NMS scholars in the International Business literature.
Purpose The purpose of this study is to develop a more nuanced understanding of how institutions (home–host contextual influences) impact MNE strategic choices. Although research on real options reasoning (ROR) has grown rapidly over the last 20 years in international business (IB) research, the understanding of how institutions (the influences of home and host countries) impact multinational enterprise (MNE) strategic decision-making remains limited. Most studies have treated the national contexts of MNEs as homogeneous, largely drawing on indices and scores (e.g. Hofstede) while overlooking the wide variety of IB contexts in which MNEs operate and originate. Design/methodology/approach This study proposes a framework-based, systematic literature review based on 96 real options studies published in the last 20 years and provides directions for future research. Findings This review provides a detailed literature review on ROR studies, offering a contextual perspective that highlights how context has been treated as a simple dichotomy of developed vs emerging economies or through an index-based approach, while proposing how different institutional contexts impact decision-making. This is accompanied by an integrated framework resulting from the review findings, which identifies the research gaps and forms recommendations for future research. Originality/value Focusing on home–host contextual influences, this study proposes a holistic perspective on how combinations of home and host environments affect MNE strategic choices. Through the authors’ review, the authors develop an integrated framework that incorporates contextual (home–host) influences into strategic choices. This study also extends the boundaries of the ROR perspective by introducing additional contextual factors from the institutional domains of the economy, grounded in economic sociology (varieties of capitalism) and international political economy (patrimonial capitalism).
Purpose This study examines whether organizational resilience (OR) has advanced as a strategic construct amid ongoing polycrises. This study aims to clarify its current conceptualization; analyze links with core theories in strategy and organization studies; and assess its relevance for navigating turbulence and grand challenges. Design/methodology/approach The authors conducted a literature review supported by bibliometric and content analysis. A total of 304 articles from Web of Science and Scopus were examined to map key trends and structures. And 40 core contributions were analyzed in depth to assess ontological assumptions, theoretical positioning and the strategic relevance of OR. Findings The authors identified two main perspectives in the literature: a conservative view focused on risk mitigation and continuity (on-crisis resilience), and a more adaptive one linked to learning, ambidexterity and transformation (trans-crisis resilience). The authors propose a third, evolutionary resilience, which builds on institutional and socio-ecological thinking to frame OR as a multilevel, systemic construct. The typology links OR to core strategic debates, including contingency theory, dynamic capabilities, paradox management and stakeholder theory. Research limitations/implications This review provides a broad conceptual foundation for future studies. The authors encourage research on transitions between resilience types and the development of integrative, cross-scale strategies suited to dynamic environments. Practical implications The proposed typology offers managers a structured lens for diagnosing and shaping their organization’s resilience orientation. On-crisis resilience calls for contingency plans and tightly controlled operational processes; trans-crisis resilience is supported by ambidextrous structures, scenario planning and cross-disruption learning routines; and evolutionary resilience demands governance models that integrate stakeholder perspectives, foster ecosystem partnerships and embed sustainability into strategic foresight. The framework is especially actionable for multinational enterprises navigating diverse institutional settings. Originality/value This study contributes a novel and integrative framework for understanding OR as a strategic construct. By bridging organizational theory, strategy and ecological thinking, the authors clarify the conceptual boundaries of resilience and outline its implications for long-term organizational effectiveness in a world shaped by turbulence, uncertainty and grand challenges.
PurposeThis study aims to synthesise fragmented research on Special Purpose Entities (SPEs), defined as entities that have minimal employment, physical presence or operations in host economies yet provide critical services to parent firms. Typically owned by non-residents, SPEs influence firm-level financial flows and complicate foreign direct investment (FDI) statistics. Despite extensive studies across disciplines, the extent of their role and impact remain unclear. This review consolidates existing knowledge, develops an integrative framework based on the antecedents–phenomenon–outcomes structure, highlights research gaps and proposes a future research agenda. Design/methodology/approachThis study adopts a systematic literature review methodology to critically assess the theoretical, methodological and empirical aspects of the literature on SPEs. An exhaustive search of scholarly papers, covering an open-ended period from the inception of relevant research up to August 2024, yields a total of 64 papers published in 37 multi-disciplinary journals for the review. FindingsThe SPE literature draws on diverse theoretical perspectives. Methodologically, studies use large-scale, firm- and country-level panel data sets analysed using statistical methods. Empirically, the extant research examines three core components of SPE use: antecedents, the phenomenon and outcomes. Antecedents: studies identify firm-level characteristics and country-level institutional factors as key determinants of SPE use. Phenomenon: SPEs serve critical functions, including holding strategic intangible assets, facilitating financing and securitisation and enabling tax planning, risk isolation and complex financial structuring. Outcomes: these SPE functions significantly influence the dynamics of global financial flows, often leading to pass-through and round-tripping FDI by MNEs, which can distort the accuracy of country-level FDI statistics. Overall, the review highlights the significant implications of SPEs for international tax and FDI policies. Originality/valueThis review provides the first comprehensive and systematic synthesis of the theoretical, methodological and empirical knowledge base of the extant SPE research, using an antecedents–phenomenon–outcomes framework. The study offers a nuanced understanding of a complex and cross-disciplinary topic and establishes a foundation for advancing future SPE research.
Purpose This study aims to address a significant gap in the International Business (IB) literature by analysing the implications of adopting a Circular Economy (CE) strategy on the competitiveness of the fashion sector in emerging economies, based on an Action Research Project experience in Colombia. This study develops an empirically validated conceptual model tailored to the sector’s high environmental impact potential and the limited availability of CE literature from the perspective of developing countries. Design/methodology/approach This research used a rigorous Action Research Project spanning two iterative cycles (Exploratory and Improvement), a recognised methodology for generating new academic insights while solving real-world business problems. This study is supported by an extensive literature review and qualitative methods, including focus groups and semi-structured interviews with experts, expanding the scope to include practitioners with extensive experience across Latin American contexts. Findings This research proposed the Advanced Competitive and Circular ENterprise Development model (ASCEND) to organise competitiveness drivers at the business, structural and systemic levels, framed by six CE fields of action. Seven key drivers were confirmed: environmental management, infrastructure, innovation capacity, economic capacity, technology, organisational performance and operational performance. Human Talent Management emerged as a vital driver, especially in this labour-intensive sector. Innovation was confirmed as essential across all CE fields to empower workers to “think circular”. The model is supported by mapping CE fields to RBV, DC, IO and IB perspectives. Research limitations/implications The ASCEND model provides actionable insights by proposing that CE strategic models must serve as an “equaliser,” balancing external systemic factors with the internal capacity to develop and reconfigure capabilities in uncertain, emerging markets. Future research should use the replicable Action Research Project methodology for cross-country comparative studies and the quantitative validation of the ASCEND model to the most effective implementation methodologies. Practical implications The findings of this study provide a strategic lens for international policymakers, MNE managers and SME owners of regions where the fashion sector plays a pivotal economic role. This research highlights the contribution of the CE and the need for supportive legislative tools, such as Extended Producer Responsibility (EPR) policies, and coordinated efforts to overcome the four identified barriers: economic, cultural, technical and institutional/legislative. Social implications Implementing the model can provide an opportunity to create sustainable jobs in the current uncertain economic reality, contribute to mitigating the fashion industry’s environmental impact and increase the concern of governments and institutions in strengthening entities that enhance regional competitiveness, such as clusters and trade chambers. Originality/value This research advocates for the implementation of the CE in the fashion sector within developing countries, particularly in the Latin American region. This paper is original in its focus on linking the CE as a source of competitive advantage in the global market. Therefore, this study highlights the fashion sector in Latin American emerging economies as a topic that has been confirmed to be insufficiently explored in detail within the academic literature. This study contributes theoretically by positioning the model within core competitive advantage frameworks (RBV/DC) and an IB context, offering crucial guidance for international trade management and sustainable development.
Purpose This study aims to investigate the interpretation and reaction of European multinational corporations (MNCs) to the 2014-2016 EU-Russian sanctions regime, treating sanctions and countersanctions as institutional signals that may shape firm-level strategic responses.Design/methodology/approach Drawing on signaling, stakeholder and international business theory, the authors analyze 364 Russian subsidiaries owned by 212 EU-based MNCs. Subsidiaries operating in sanctioned sectors constitute the treatment group, while those in unaffected sectors act as controls. They estimate mixed-effects models of employment and current assets and apply a Monte Carlo EM algorithm to probabilistically identify which sanctioned subsidiaries complied with the signals (i.e. reduced activity) versus ignored them.Findings They find that few companies complied with the sanctions' signals: only 1.3-2.7% of sanctioned subsidiaries reduced employment and 2.4-7.0% reduced assets. Yet, firms that did comply reduced headcount by approximately 65% and assets by up to 97%. The likelihood of a compliance-oriented response declines sharply as the subsidiary's share of group revenue increases, whereas geographic, institutional and economic distance exhibit no consistent influence. Overall, most EU MNCs maintained their Russian operations despite policy signals. The findings have managerial implications and suggest that policymakers cannot assume that corporations will automatically align with foreign policy objectives.Originality/value The study shifts sanctions research from macroeconomic outcomes to firm strategy, introduces a novel latent-class estimator for quasi-experimental sanction settings and provides large-sample evidence on European corporate responses to the EU-Russian sanctions of 2014.
Purpose Small and medium-sized enterprises (SMEs) in transitional periphery economies face persistent turbulence stemming from economic volatility, institutional voids and geopolitical shocks. This study aims to investigate how SMEs develop and enact strategic agility (SA) in such environments, with a focus on Kazakhstan.Design/methodology/approach Drawing on 31 in-depth interviews with owners, directors and senior managers from 16 SMEs, the authors adopt an exploratory qualitative research design with grounded-theory coding techniques to inductively develop a framework of the enablers, mechanisms and manifestations of SA.Findings The findings reveal that SA is fostered through multi-level enablers - environmental, network, firm and individual - that interact to shape organizational responses. These enablers operate via three mechanisms: sensing (detecting and interpreting turbulence), coping (absorbing shocks and ensuring survival) and adapting (reconfiguring resources and strategies). The authors show how coping replaces the canonical "seizing" stage in dynamic capability theory, reflecting the survival imperative in resource-constrained, institutionally fragile contexts. SA is manifested across four functional domains: marketing, human resources, product and service offerings and relational ties.Originality/value By demonstrating how SMEs in Kazakhstan re-sequence and operationalize SA under conditions of scarcity and instability, this study refines dynamic capability theory, extends the literature on SME agility in transition economies and offers practical insights for managers seeking to sustain competitiveness in turbulent environments.
Purpose This study aims to synthesize literature on documented and undocumented migration across countries of different levels of development. It emphasises what is known about their economic activity and its impact. Design/methodology/approach The literature on migration is fragmented across various social science disciplines, and this piece integrates work that is relevant to international business scholars from across a wide range of fields. Findings Middle-income countries are the main sources of documented migrants who are increasingly concentrated in developed, high-income countries. In contrast, undocumented migrants go to countries at various levels of development, where they often earn a living in the informal economy. Some migrants cannot be neatly categorised as “documented” or “undocumented”, or as from a specific type of sending to a specific type of receiving country, i.e. onwards migrants, return migrants, diasporans and digital migrants. Research limitations/implications This paper does not cover migrants who are forced to leave their home country, instead focusing on self-selected migration. Originality/value This paper offers international business scholars a map and suggestions for future research to guide them through the distributed literature on a complex topic.
Purpose - This study examines when environmental, social and governance (ESG) disclosure improves the financial performance of multinational enterprises (MNEs). Prior research shows that the ESG-financial performance relationship is mixed and context-dependent, yet less is known about how home-country institutions shape stakeholders' interpretations of ESG disclosure. This study addresses that gap by examining how institutional conditions influence the credibility and financial value of firm-level ESG disclosure. Design/methodology/approach - Drawing on signalling theory and institutional theory, this study introduces the concept of institutional meta-signals, defined as macro-level regulative, cognitive and normative conditions that shape stakeholder interpretation of ESG disclosure. Using panel data on 826 MNEs across 28 countries from 2013 to 2019, the study tests whether auditing and accounting standards, press freedom and social capital moderate the relationship between ESG disclosure and financial performance. System GMM and two-stage least squares estimation techniques are used. Findings - ESG disclosure is, on average, negatively associated with financial performance. However, this relationship becomes more favourable in countries with stronger institutional meta-signals. Stronger auditing and accounting standards, greater press freedom and higher social capital enhance the credibility of ESG disclosure and improve its financial value. The results indicate that the performance effects of ESG disclosure depend on the credibility infrastructure of the home-country institutional environment. Research limitations/implications - This study extends ESG and international business research by showing that the financial outcomes of ESG disclosure depend on home-country institutions. It contributes to signalling theory by conceptualising institutional meta-signals as second-order cues that shape stakeholders' interpretations. The study is limited by its focus on large MNEs and country-level institutional indicators. Future research could examine other institutional dimensions, alternative firm settings and more fine-grained mechanisms linking ESG credibility to financial outcomes. Practical implications - Managers should not assume that ESG disclosure will automatically improve firm performance. Its value depends on whether stakeholders perceive the disclosure as credible within the firm's institutional context. For firms headquartered in weaker institutional environments, ESG disclosure may require stronger assurance, governance and reporting practices. The findings also suggest that policymakers can enhance the value of ESG disclosure by strengthening institutional conditions that support the credibility of reporting. Social implications - The study shows that the effectiveness of ESG disclosure depends not only on firm communication but also on the broader institutional environment that enables stakeholders to trust it. Stronger auditing systems, freer media and higher social capital can improve transparency and accountability in ESG reporting. National institutions, therefore, play an important role in shaping whether ESG disclosure contributes to more responsible business conduct and more trustworthy capital markets. Originality/value - This study develops the concept of institutional meta-signals to explain how home-country institutions shape the financial value of ESG disclosure. It reconceptualises institutions as interpretive infrastructures that influence stakeholder responses to firm communication. By integrating signalling theory with institutional theory, the study offers a new explanation for cross-national variation in the ESG-financial performance relationship and advances research on ESG disclosure, non-market strategy and MNE performance.
Purpose Foreign divestment is attracting increasing attention, but its implication for environmental pollution remains underexplored. This paper aims to analyse how foreign divestment influences environmental pollution in the host country. Design/methodology/approach Using matched production and pollution data for Chinese industrial enterprises from 2007 to 2014, this study investigates horizontal, forward-linked and backward-linked spillover effects of foreign divestment on the environmental pollution of domestic firms. Findings The results of this study show that foreign divestment generates significant emission-reduction spillovers for domestic firms, mainly driven by backward linkages. The exit of downstream foreign-invested enterprises creates a negative demand shock that directly lowers the pollution intensity of upstream domestic suppliers, lending support to the pollution haven hypothesis. In addition, the environmental performance of local firms responds differently to foreign divestment depending on the modes of divestment, the origin of divested firms, the ownership structure of domestic firms and industry input factor intensity. Originality/value These findings contribute to a more nuanced understanding of the environmental benefits associated with foreign direct investment, as well as the multifaceted effects of foreign divestment.
Purpose This paper aims to explore how government, industry and society strengthen value chains in Latin America's national drinks sector of Tequila (Mexico), Pisco (Peru), Singani (Bolivia) and Cacha & ccedil;a (Brazil), to enhance community resilience through adaptive capacities amid global challenges.Design/methodology/approach The study uses a qualitative route through a global value chain (GVC) analysis in a multiple case study. The data collection instruments are an exhaustive literature review and document analysis from secondary sources as well as interviews with experts in the four countries.Findings The multiple case study shows that differences in GVC governance and power asymmetries shape community resilience by affecting specific adaptive capacities across four Latin American national drinks. The authors assess ten community resilience factors and identify eight adaptive capacities that enhance resilience: social networks, institutional capacity, economic resources, infrastructure, economic diversification, environmental responsiveness, skills and innovation and technology. The strongest cross-case contrasts emerge in institutional capacity, social networks and innovation/technology, showing how governance configurations, such as consolidated multistakeholder coordination versus fragmented or inconsistent regulation, enable or constrain these capacities.Originality/value This article contributes to the IB and GVC literature by arguing that community resilience in Latin America's emblematic beverage sectors depends less on GVC participation and more on local adaptive capacities. It extends GVC governance theory by integrating adaptive governance and offers original empirical insights into how institutional arrangements shape inclusive development in fragile contexts. The findings reveal upgrading is not only economic or technological, but also social, institutional and legitimacy-based, challenging dominant frameworks focused only on firm-level capabilities.
PurposeThis study aims to examine how ownership structure moderates the impact of local and global economic and political (EP) uncertainty shocks on the resource commitment by multinational companies (MNCs) to their subsidiaries in the Latin America and Caribbean (LAC) region. In addition, the authors explore the differences in these effects between LAC-based and non-LAC-based multinational parent companies.Design/methodology/approachUsing a panel vector autoregression model, the authors analyze a data set of 941 MNC subsidiaries to evaluate the effects of EP uncertainty at the host country and global levels on multinational resource commitment in LAC.FindingsLocal EP uncertainty stimulates multinational resource commitment in subsidiaries in LAC, though responses differ by institutional origin: non-LAC-based parent companies act more assertively, while LAC-based parent companies remain cautious. Global EP uncertainty uniformly discourages MNC resource commitment. In addition, while higher degrees of ownership by parent companies enhance the capacity to manage local EP uncertainty, particularly among subsidiaries of LAC-based parent companies, it offers little protection against Global EP uncertainty for MNCs.Practical implicationsFirms should tailor their ownership strategies to different types of uncertainty, balancing local knowledge with flexibility to manage global risks effectively. Furthermore, firms need to pay more attention to the implications of the governance structure.Social implicationsThe results highlight the importance of stronger institutions and policies to support the subsidiary against EP shocks in the LAC region.Originality/valueThe authors contribute to the growing literature on uncertainty shocks by distinguishing between local and global EP uncertainty and demonstrating their distinct effects on multinational resource commitment to their subsidiaries in the host country. In addition, the authors explore how MNCs' ownership levels affect their management of different types of uncertainty. The work highlights the need for a tailored model of investment decision by MNCs under different contexts of uncertainty.
PurposeIt is expected that firms will be deterred from engaging with tax havens by formal and informal institutions. However, the understanding of how tax haven use is influenced by varying institutional deterrents and organizational contexts remains limited. Combining the institutional complexity perspective with behavioral theory, this study aims to explore the extent to which formal and informal institutions deter FDI into tax havens. The authors theorize and explain how variance in the organizational context, such as the firm's degree of managerial discretion and influence act to "sensitize" or "de-sensitize" organizational decision-makers to institutional deterrents.Design/methodology/approachDrawing on a comprehensive data set of tax haven subsidiaries by 2,857 firms between 2009 and 2017, this study provides a firm fixed effect analysis of the relationship between institutional deterrents, firm-level factors and tax haven use.FindingsWhile prior studies had suggested that informal institutions can play a substantive, equal or even dominant role in curtailing undesirable corporate conduct, the results indicate that this may not always be the case. Instead, the authors find that informal institutional deterrence, in the form of enhanced media scrutiny, can oftentimes be weak and even embolden firm tax haven participation. Indeed, the findings further suggest the important role played by formal institutions and firm-level contextual factors in influencing tax haven use.Research limitations/implicationsBy exploring the relationship between institutional deterrents and FDI into tax havens, the authors examined the "functioning" of institutions at a deeper, more granular level. Yet, given the chosen context of FDI into tax havens, the authors focused on a specific government enforcement agency (the UK's tax enforcement agency and the HMRC). As such, the authors posit that there is still much more to be unearthed by following the approach of "matching" (negative/undesired) corporate conduct with specific enforcement agencies, tasked with permanently upholding institutional policies. Overall, the research generally questions the significance and "quasi-regulatory" role of informal regulatory efforts.Originality/valueBy exploring the relationship between institutional deterrents and FDI into tax havens, the authors examined the "functioning" of institutions at a deeper, more granular level.
Purpose - States are the most prolific perpetrators of terrorism. State terrorism constitutes a pervasive form of political violence and represents a prominent source of human insecurity and human rights violations worldwide. While state terrorism serves various political, economic and social purposes, some evidence shows it is often deployed to protect corporate interests, particularly multinational enterprise (MNE) operations in emerging markets. Despite this reality, international business (IB)-terrorism literature has predominantly focused on non-state terrorism, and research on MNEs and political violence has typically examined the topic within the context of organised conflict situations. However, state terrorism occurs both within and outside of political conflicts. This study aims to understand how MNEs are linked to state terrorism. Design/methodology/approach - This conceptual paper draws on critical terrorism studies and integrates these with resource dependency theory, new institutional economics and non-market strategy research to provide insights into the relationship between state terrorism and MNEs. Findings - The author shows the controversial connections between MNEs and two forms of state terrorism; limited and generalised. Some MNEs provide products and services used in mass terror campaigns, attracting criticism from both civil society and their employees. Other MNEs take advantage of state-driven forced major displacement of local populations to acquire land for investment projects. MNE involvement in state terrorism can stem from resource interdependencies between states and MNEs, facilitated by both formal and informal institutional conditions. The author also presents several research directions to advance this understudied area. Originality/value - To the best of the author's knowledge, this is the first paper to comprehensively explore how MNEs and state terrorism are interlinked and offers a useful foundation for future conceptual, theoretical and empirical research on this topic.
PurposeThis study aims to investigate the institutional determinants of firms' environmental, social and governance (ESG) performance. Drawing on stakeholder and institutional theories, the authors examine how three distinct types of national institutions - formal, informal and financial market institutions - shape firms' ESG performance. By analyzing the differential effects of these institutional types on each component of ESG performance, the study offers a more nuanced understanding of the relationship between institutional environments and corporate social performance.Design/methodology/approachThe authors developed and tested a multi-source data set analyzing the ESG performance of 3,872 firms across 49 countries over 15 years (2002-2016) using data from the ASSET4 database. To assess the relationships between the three types of institutions and firms' ESG performance, the authors used multilevel random-effects models with lagged independent variables.FindingsThis research provides a comprehensive analysis that links specific types of institutions to each component of ESG performance, rather than to aggregate corporate social responsibility performance. It advances stakeholder and institutional theories by demonstrating how distinct stakeholder groups - represented through different institutional arrangements - shape specific ESG outcomes, thereby offering valuable insights for policymakers and managers.Originality/valueThis study provides a comprehensive examination of how distinct types of institutions are linked to individual ESG dimensions.
PurposeThe purpose of this study is to examine how institutional distance impacts unrealized cross-border mergers and acquisitions (CBMAs) deals of firms from China and Russia after they have been rumored. Prior research on CBMAs has acknowledged that only a small percentage of all evaluated target firms are acquired. Using institutional distance theory, the authors contribute to the research literature by examining the institutional distance relating to the regulative, normative and cognitive institutional distance between China and Russia and their respective host countries to identify the determinants of unrealized CBMA deals after they have been rumored.Design/methodology/approachThe authors test hypotheses using data on CBMA rumors by examining a sample of CBMA deals by Chinese and Russian multinational enterprises from January 2003 to December 2019.FindingsFor Russia and China, rumored deals are less likely to remain unrealized in host countries with higher business and investment freedom than in the acquiring country (China or Russia). Rumored deals are less likely to be unrealized in host countries with lower corruption levels than in the acquiring country. Greater cultural distance between the home and host countries increases the likelihood of unrealized deals.Originality/valueThe authors make a unique contribution to the literature, as no prior studies have investigated the influence of institutional distance on unrealized rumored CBMA deals, particularly in the comparison of Chinese and Russian multinational enterprises.
PurposeDrawing on organizational learning and dynamic capability perspectives, this study aims to examine the distinct and sequential roles of potential and realized absorptive capacity in influencing firms' innovation performance. Specifically, the authors investigate how firms develop potential absorptive capacity through the acquisition and assimilation of knowledge from international technology partnerships, international suppliers and international customers and how this capacity is subsequently converted into realized absorptive capacity - the transformation and exploitation of knowledge - to generate innovation. By unpacking these absorptive-capacity processes, the authors explain how access to internationally embedded knowledge sources enhances firms' ability to internalize and recombine external knowledge, thereby improving innovation outcomes.Design/methodology/approachThe authors use qualitative interviews and survey data from Canadian small- and medium-sized firms. The authors employ bootstrapped partial least squares structural equation modeling to test the hypotheses. To ensure robustness, the authors ensure the model's validity, reliability and address common method bias. In addition, the authors address endogeneity concerns by applying the Gaussian copula approach.FindingsThe results support the hypotheses that firms engaged in international technology partnerships and sourcing from international suppliers have greater opportunities to develop potential absorptive capacity than domestically focused firms. This enhanced potential absorptive capacity, in turn, facilitates the development of realized absorptive capacity, which positively affects innovation performance.Originality/valueThe study advances existing research by shifting the focus from internationalization-innovation associations to the process-based mechanisms through which firms convert international knowledge exposure into innovation outcomes. Rather than treating absorptive capacity as a unitary construct, the authors distinguish between potential and realized absorptive capacity and theorize their sequential roles in acquiring, assimilating, transforming and exploiting knowledge obtained from international technology partnerships, international suppliers and international customers. By integrating insights from literature on learning through exporting, importing and R&D alliances into a unified process framework, the study provides a more fine-grained explanation of organizational learning by internationalizing. In doing so, it contributes to international business and innovation research by demonstrating how the subprocesses of potential and realized absorptive capacity operate as distinct but interdependent mechanisms linking international engagement to innovation performance.
PurposeThe purpose of this paper is to examine how colonization experience, length and recency in emerging market multinational enterprise (EMNE) home countries may influence the relationship between formal/informal institutional distance and EMNE equity participation in target firms across border.Design/methodology/approachThe study uses panel data of combined measures of formal and informal institutional distance, as well as colonization experience and a variety of firm-level and country-level controls to conduct regression models. The data sample consists of 1,725 mergers and acquisitions (M&As) deals between 2001-2015 across different emerging markets.FindingsThe findings show that EMNEs are generally likely to choose higher equity participation when there is greater formal institutional distance between the home country and the target firm country, while equity participation is lesser when there is greater informal institutional distance. However, for EMNEs from countries that were colonized, the authors found that colonization experience, colonization duration and years since colonization play a significant role in altering how formal and informal institutional distance affects equity participation choices.Originality/valueThis study shows that EMNEs from formerly colonized countries approach cross-border M&As differently, interpreting institutional distance and institution-based view in unique ways. This study shows how postcolonialism shapes decision-making. The authors also extend existing frameworks, such as the liability of foreignness, by introducing colonization experience as an additional theoretical lens to understand institutional distance in acquisition decisions.
PurposeHutzschenreuter and Voll (2008) introduced the "added distance" concept in international business strategy. They showed the negative impact on German multinational enterprise (MNE) performance of multiple investment steps with a high added distance in aggregate. This paper aims to explore the generalizability of this finding using a Penrosean perspective and quasi-replicating their methodology.Design/methodology/approachEmpirically, the authors focus on the context of Indian firms, posteconomic liberalization (1991), where a much wider spectrum of magnitudes of added distance could be observed than in the German case. The authors use data of 109 Indian firms with expansion paths the authors tracked during periods ranging from 6 to 31 years.FindingsThe authors show that moderate added distance enhances performance in the subsequent period, but only up to a threshold. The underlying reason for this outcome is a meta-bounded-rationality challenge: senior managers underestimate how the aggregate of multiple international investment steps with added cultural distance, each supposedly beneficial to the firm, leads to unmet demands for managerial capacity and reduces corporate coherence.Research limitations/implicationsThe major research implication of the work is that studies in international business should not make use of dyadic, macrolevel distances in studies on implications of internationalization on performance.Practical implicationsThe findings highlight that MNEs must match international expansion opportunities with adequate managerial resources. For senior executives, careful planning of internationalization steps and attention to the cumulative distance added in each period is crucial to avoid negative performance effects of over-expansion.Originality/valueTo the best of the authors' knowledge, this is the first empirical study that shows in a comprehensive way, over a long period of time, the impact of "added distance" on the relationship between internationalization in one period and performance in the period immediately following.It demonstrates the vulnerabilities of MNEs when expanding abroad in a too ambitious fashion and extends Penrosean thinking is this realm.
