Comparative Business Failures of Foreign-Controlled Firms in the United States

Li, Jiatao; Guisinger, Stephen

doi:10.1057/palgrave.jibs.8490300

Cited by 239 publications

(132 citation statements)

References 26 publications

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“…Notwithstanding the effects of organizations' strategic goals on their strategic behavior, the literature indicates that many frequently fail to fully achieve their strategic objectives (e.g., Dimitras et al 1996;Li & Guisinger 1991). Our theory framework suggests that those with stronger architectural capabilities may be better able to deal with environmental uncertainty and thus reduce such strategic goal-realization gaps.…”

Section: The Role Of Capabilitiesmentioning

confidence: 86%

Strategic goal accomplishment in export ventures: the role of capabilities, knowledge, and environment

Spyropoulou

Katsikeas

Skarmeas

et al. 2017

J. of the Acad. Mark. Sci.

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The management literature suggests that setting strategic goals facilitates the identification of appropriate business strategies and focuses management attention and available resources on their accomplishment, enabling subsequent goal realization. Yet, the literature also indicates that firms often find it difficult to realize their strategic goals and may find it even more challenging to do so when operating in foreign markets. However, little is known empirically about the extent to which strategic goals enable desired strategic positions to be achieved and factors that may affect this relationship. We examine this important issue using primary data from a sample of exporting manufacturers. Results support the existence of previously theorized strategic goal-realized strategic position gaps and show that these negatively impact performance. Thus, simply setting strategic goals does not necessarily aid in accomplishing the desired outcomes, and any failure to do so is costly. Drawing on organization theory, we find that internal capabilities and knowledge, and external market factors play important roles in minimizing such strategic goal-realized strategic position gaps. Specifically, we show that businesses with stronger architectural capabilities, those with higher levels of internationalization, and those operating in less dynamic market environments, are better able to realize their intended strategic objectives and thereby enjoy superior performance.

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Section: The Role Of Capabilitiesmentioning

confidence: 86%

Strategic goal accomplishment in export ventures: the role of capabilities, knowledge, and environment

Spyropoulou

Katsikeas

Skarmeas

et al. 2017

J. of the Acad. Mark. Sci.

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“…In this study, these include: industry type; the age or duration of operations of the parent firm (DT), size and multinational experience of the parent firm (MULTI); geographic scope of the subsidiary's mandate (GSCOPE); employment in the subsidiary (EMPL); relative levels of macroeconomic risk factors such as the inflation rate (RINF); relative levels of country risk (RLOCRSK); and levels of host country investment supports (GOVTAID). These variables are based on the predictions of theory (Anderson and Gatignon, 1986) and are comparable with those used in several related studies of FDI (Kogut and Singh, 1988;Li and Guisinger, 1991;Woodcock, Beamish and Makino, 1994;Mudambi, 1995;Phatak, Muralidharan and Chandran, 1996). This study examines the importance of these variables in the decisions made by firms in the data set.…”

Section: Research Questions and Hypothesesmentioning

confidence: 99%

“…Although product diversification has long been a popular strategy, the effects of product diversification on firm performance are mixed and inconclusive (Hoskisson and Hitt, 1990;Sashi and Stern, 1995). Performance has been measured directly through measures of rates of return (Hitt, Hoskisson and Kim, 1997;Hoskisson and Hitt, 1990;Kim, Hwang and Burgers, 1993;Palepu, 1985;Thompson, 1985) and indirectly through measures of survival (Li and Guisinger, 1991;Mitchell, Shaver and Yeung, 1994). The dynamics are complex.…”

Section: Introductionmentioning

confidence: 99%

Diversification and market entry choices in the context of foreign direct investment

Mudambi

2002

International Business Review

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Multinational enterprises consider many factors when making decisions in the context of foreign direct investment (FDI). In deciding what to produce, the multinational enterprise (MNE) must decide whether to diversify or to concentration on its main line of business. This paper offers insights into influences on this choice, and identifies a number of conditions under which diversification is more likely to be chosen. Factors affecting the foreign entry mode decision are also analyzed. The international business literature has generally treated these strategic choices as independent. This paper introduces a more realistic selection model, in which the diversification choice and the entry mode choice are made sequentially and are therefore related. The model is tested using a data set of FDI into the United Kingdom by MNEs in engineering and related industries. The analysis indicates a strong relationship between the diversification choice and the entry mode decision. In virtually all cases, the statistical significance of the selection model is higher than that of the independent model, indicating an improvement over previous research. Overall, the choice of a diversification strategy has a significant positive effect on the probability of greenfield entry. The paper also identifies a number of managerially relevant factors affecting these relationships.

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“…There is a rich stream of literature investigating the survival of firms in foreign markets in comparison with domestic firms (Bernard & Sjö holm, 2003;Gö rg & Strobl, 2003a, 2003bKronborg & Thomsen, 2009;Li & Guisinger, 1991;Mata & Portugal, 2002). The overwhelming conclusion is that after controlling for characteristics that make foreign firms different than domestic ones, foreign firms tend to exit with greater likelihood.…”

Section: Introductionmentioning

confidence: 99%

Economic slowdowns, hazard rates and foreign ownership

Varum¹,

Rocha²,

Silva³

2014

International Business Review

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This paper evaluates the link between foreign ownership and firm exit during crises, using a longitudinal micro dataset over an 18-year period. We address two main questions: first, if foreign affiliates have different failure rates than domestic firms during economic downturns, and second if the foreignness effect differs between two different economic downturns. The results partially confirm the liability of foreignness argument, suggesting that when the crisis was more pronounced at home than abroad, the differences in hazard rates between foreign and domestic firms reduce. The footloose argument is also only partially confirmed. For policy makers, our results on survival dynamics during crises are not against policies stimulating inward investment. There is no need to fear that foreign firms destabilize more than usual the host economy during economic slowdowns by immediately closing down operations.ß 2013 Elsevier Ltd. All rights reserved. Author's personal copy downturns because foreign firms hold some sort of ownership advantages over domestic ones. Foreign multinationals may have better conditions to face the crises owing to their multinationality advantages or they may resist more due to the sunk costs associated with their investment (Chung, Lu, & Beamish, 2008;Desai, Foley, & Forbes, 2004;Ghosal, 2010). Studies about the importance of foreign ownership during crises are relatively scarce, the notable exceptions being the studies by Á lvarez and Gö rg (2009), Lee and Makhija (2009) and Varum and Rocha (2011). Hence, in this paper we use longitudinal firm-level data for a large time span to assess, first, whether foreign ownership contributes to differentiating the incidence of firm exit during crises, controlling for other determinants that may affect the exit risk of firms. We use discrete time hazard models that account for firm-level unobserved heterogeneity to answer our research questions. In addition, we analyze whether the foreign ownership effect differs between two crises, which occurred in the same economy, in different periods of time and with different characteristics. To our knowledge the paper is unique in these respects. We analyze manufacturing firms created in Portugal in the period 1988-2005 by following their paths during the whole period and the economic slowdowns of early 1990s and 2000s. Portugal in particular is an interesting case as the economy experienced these significant slowdowns which provide us with 'a natural experiment to identify directly the ''footloose nature'' of multinationals' (Á lvarez & Gö rg, 2009).Results from past lessons may be of value in understanding more modern recessions, such as the one from which the world economy is currently recovering. For the Portuguese case we add to the previous important contributions of Portugal (2002, 2004), by enlarging the time span of their study and focusing on the potential effect of foreign ownership during (different) downturn periods. Compared to Varum and Rocha (2011), who examined the link between foreign ownershi...

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Comparative Business Failures of Foreign-Controlled Firms in the United States

Cited by 239 publications

References 26 publications

Strategic goal accomplishment in export ventures: the role of capabilities, knowledge, and environment

Strategic goal accomplishment in export ventures: the role of capabilities, knowledge, and environment

Diversification and market entry choices in the context of foreign direct investment

Economic slowdowns, hazard rates and foreign ownership

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