Presented On: July 5, 2013 - 10:55-12:10
Chair: Jörg Zimmermann, European Commission - Joint Research Center
Learning or Competition? The Impacts of Domestic Enterprises on Foreign Direct Investment Productivity in a Transition Economy
Yi Tang, Hong Kong Polytechnic University Cuili Qiang, City University of Hong Kong Haibin Yang, City University of Hong Kong
This study investigates the impacts of domestic enterprises on the productivity of foreign invested enterprises (FIEs) in the transition economy of China. Specifically, domestic enterprises that differ by ownership type are expected to affect their foreign counterparts’ productivity differently. We propose that the presence of state-owned enterprises (SOEs) exerts a negative impact on the productivity of FIEs both within and across industries. In contrast, the presence of private enterprises is likely to exert a negative impact on FIEs’
productivity within the same industry, but a positive impact across industries. We further argue that the above Page 119
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relationships are moderated by FIEs’ age in the host country market. Empirical analyses using a large panel dataset in China from 1998 to 2007 render strong support to our theoretical predictions. (For more information, please contact: Yi Tang, Hong Kong Polytechnic University, Hong Kong, SAR-PRC: [email protected])
The Sectoral and Spatial Impacts of Inward Foreign Direct Investment on Indigenous New Firm Creation in the Republic of Korea
Eunsuk Hong, SOAS, University of London Laixiang Sun, SOAS, University of London In Hyeock (Ian) Lee, Loyola University Chicago
This paper examines the impact of inward foreign direct investment (FDI) on the variation in the creation of new firms across high- versus low-technology industrial sectors and geographic space. Using a dataset of 44,434 newly created small firms in 234 regions of South Korea in 2000-2004, this study finds that while the spillover impacts of FDI in the low-tech industry are positive and significant across almost all four possible combinations of the intra-/inter-regional and intra-/inter-sectoral channels, the impacts in the high-tech industry are largely intra-sectoral within the host region and across neighboring regions. Moreover, all statistically significant spillover effects follow an inverted ‘U’-shaped curvilinear trend. (For more information, please contact: Eunsuk Hong, SOAS, University of London, United Kingdom: [email protected])
MNC Subsidiary Closure: What Stays When the MNC Leaves?
Pedro de Faria, University of Groningen
Miguel Torres Preto, Technical University of Lisbon and Center for Innovation, Technology and Policy Research
Wolfgang Sofka, Copenhagen Business School
We investigate the consequences of MNC subsidiary closures for employees who lose their jobs. We ask to what degree the foreign knowledge that they were exposed to is valued in their new job. We argue theoretically that this foreign knowledge is both valuable and not readily available in the host country but is also distant and therefore difficult to absorb. We predict an inverse u-shaped relationship between the exposure to foreign knowledge and the salary in the new job. We empirically support our predictions for a sample of almost 140,000 affected employees in Portugal from 2002 to 2009. (For more information, please contact: Pedro de Faria, University of Groningen, Netherlands: [email protected])
The Impact of Foreign Direct Investment on Local Venture Founding: Evidence from China Junichi Yamanoi, Chuo University
Xufei Ma, Chinese University of Hong Kong
Although previous studies have investigated the foreign direct investment (FDI) spillover effects on incumbent local firms’ productivity and survival, they have virtually ignored the impact of FDI on local venture founding.
Using the theoretical framework of entrepreneurial and institutional processes, we argue that FDI in an industry in a geographic region has a nonlinear impact on the founding rate of new ventures; it initially enhances entrepreneurial opportunities for potential entrepreneurs due to learning from foreign entrants, but gradually depreciates them through intense competition with competitive foreign entrants and improved local incumbents.
However, FDI in related industries would promote the founding rate, because potential entrepreneurs discovering entrepreneurial opportunities in a focal industry can avoid direct competition with the foreign entrants and improved local incumbents by exploiting the opportunities in its related industries. Additionally, we argue that, as aspects of the institutional environment, governmental hands-off policy on market economy and intellectual property rights protection will encourage potential entrepreneurs to exploit opportunities brought from FDI. Using data from Chinese manufacturers from 1998 to 2009, we found general support to our hypotheses. (For more information, please contact: Junichi Yamanoi, Chuo University, Japan:
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AIB 2013 Conference Proceedings Session: 2.2.7 - Competitive
Track: Track: 1 - Institutions, Governance, and CSR
Politics and Strategy
Presented On: July 5, 2013 - 10:55-12:10
Chair: Charles Hermann, Texas A&M University
How Corruption Matters on FDI Flows: Home and Host Country Effects Manuel Portugal Ferreira, Uninove - Universidade Nove de Julho Helder Costa Carreira, Instituto Politecnico de Leiria & globADVANTAGE Dan Li, Indiana University
Fernando Ribeiro Serra, Uninove - Universidade Nove de Julho & globADVANTAGE
Prior research has identified a negative impact of corruption on countries’ ability to attract Foreign Direct Investment (FDI). Only a few scholars have argued that corruption can act as “grease”, perhaps attracting FDI.
We extend prior research by, first, distinguishing the pervasiveness and arbitrariness of host country corruption and their effects on FDI inflows, and second, testing whether the level of corruption of the investors’ home country affects FDI decisions. Our results show that the pervasive corruption negatively drives FDI but not the arbitrariness component. Our results reveal that home country corruption negatively impacts the overall FDI outflows, but investors from countries with high levels of corruption do not seem to be deterred by a high level of corruption in the host country. (For more information, please contact: Manuel Portugal Ferreira, Uninove - Universidade Nove de Julho, Brazil: [email protected])
Political Geography and Foreign Direct Investment Performance: Is Spatial Proximity to Central Government Politicians and Bureaucrats of Capital Value?
Marie-Ann Betschinger, NRU Higher School of Economics
This paper investigates if spatial proximity to central government politicians and bureaucrats matters for foreign direct investment performance. We argue that proximity to national government politicians and bureaucrats, and the formal and informal communities they are part of, permit firms to obtain wider and quicker access to information and gain weight in influencing political or bureaucratic outcomes. Analyzing a sample of 6,698 foreign affiliates of 1,339 Japanese parent firms in 76 countries, we find that a capital city location increases foreign affiliate performance. A country’s institutional environment, parent firm, and affiliate-level characteristics moderate the effect. (For more information, please contact: Marie-Ann Betschinger, NRU Higher School of Economics, Russia: [email protected])
Multilevel Normative Institutions: Host Market Bribery and Multinational Enterprise Strategy Michael A. Sartor, University of Western Ontario
This study investigates whether petty corruption and grand corruption differ in their impact upon the entry strategies of foreign-investing MNEs. While extant theory suggests that the pervasiveness of host market corruption will influence the equity ownership decisions of these MNEs, subsequent research has not found a statistically significant relationship that empirically validates these propositions. These results seem
counterintuitive, particularly given the substantial evidence that has been garnered which suggests that host market corruption influences the global location of foreign direct investment. We synthesize insights from institutional theory and integrative social contracts theory to argue that host market normative institutions, such as public sector corruption, should be conceptualized as multi-level phenomena. We theoretically distinguish between petty corruption and grand corruption in order to develop hypotheses pertaining to the relationship
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between each type of corruption and three foreign entry decisions undertaken by MNEs (entry mode, partner choice and expatriate staffing). We test the hypotheses with a longitudinal sample of 961 subsidiaries
established in 35 countries. The results reveal that the normative institution of corruption is a multilevel
phenomenon and that each of the two types of public sector corruption exerts a different impact upon the three foreign entry decisions. (For more information, please contact: Michael A. Sartor, University of Western Ontario, Canada: [email protected])
Transparency and Corruption: MNCs Relationship with Political Actors Amjad Hadjikhani, Uppsala University
Cecilia Pahlberg, Uppsala University Pervez N. Ghauri, King's College London
Globalization and increasing availability of information frequently face international firms with the serious issue of transparent business activities and avoidance of corruptive behavior. The main question in this paper is how international firms handle these issues. Standing on business network theory the paper presents an analytical view on business and political actors’ relationship with emphasis on transparency and corruptive behavior. We build on the relationship elements of knowledge and legitimate/illegitimate commitment and illustrate with cases showing two European MNCs and their behaviors in foreign markets. The main contribution is that deeper understanding is obtained by including the concept of trust/distrust in the relationship. Further, while transparent behavior means that the actors keep their ground for legitimacy, corruptive behavior means the opposite. (For more information, please contact: Amjad Hadjikhani, Uppsala University, Sweden:
Session: 2.2.8 - Competitive
Track: Track: 6 - Innovation and Knowledge Mgmt.