Emerging Market Multinationals and Reverse Innovation - Multinationals and Performance
24 important questions on Emerging Market Multinationals and Reverse Innovation - Multinationals and Performance
What shows the prior evidence of the relationship between multinationality and performance? (6)
- a positive linear slope
- to a negative
- linear slope
- U-shaped relationships
- inverted U-shapes
- and S-shaped relationships
What are the contingent factors of a multinational and how do they help? (4)
- firm age
- home country location
- experience, size
- product diversification
What should a theory for international management be able to develop rationals for? (2)
- Why being multinational is generally superior to the firm remaining domestic (but at the same time delineate)
- Conditions under which this general rule does not hold true, by specifying contingencies or strategic situations under which incremental multinational expansion may actually be detrimental to performance
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What are 2 reasons why incremental International expansion can sometimes have a negative influence on profitability?
- The beneficial effect of internationalisation on performance (the 'signal') may be altered by additional firm-specific or country-specific factors (or 'noise' if you will) which counteract the signal so powerfully that incremental international expansion has a negative impact on performance
- We can propose that at certain stages in the firm's international expansion path, the costs of incremental international expansion or the 'liability of foreignness' (liability of outsider ship) outweigh the benefits, producing a net negative slope on the performance versus degree of internationalisation graph
What are the benefits of multinationality? (8)
- Economies of production scale
- Scale economies of amortisation of R&D/ intangible assets/ HQ overheads
- Sourcing cheaper inputs abroad or global rationalisation of the value chain
- Accessing foreign knowledge the firm lacks
- Risk reduction from geographic diversification
- 'Tax planning' or transfer pricing opportunities
- Market power or cartelization
- Gaining general international experience
What types of geographic diversification are there? (4)
- Asynchronous business cycles
- Multi-currency cash flows
- Greater operational flexibility
What is a criticism of theory concept 'economies of production scale' as benefit of multinationality?
What is a criticism of theory concept 'scale economies of amortization of R&D/ intangible assets/ HQ overheads' as benefit of multinationality? (2)
- Depends on R&D intensity and the size of aggregated central fixed costs in the industry
- May have diminishing value beyond the bigger foreign markets
What is a criticism of theory concept 'sourcing cheaper inputs abroad or global rationalisation of the value chain' as benefit of multinationality?
- a firm does not need its own foreign presence
What is a criticism of theory concept 'accessing foreign knowledge the firm lacks' as benefit of multinationality? (2)
- Foreign knowledge can be obtained through 'markets'
- There has been significant growth in cross-border international licensing of patents and technologies
What is a criticism of theory concept 'risk reduction from geographic diversification' as benefit of multinationality? (3)
- Business cycles are not always asynchronous across nations
- Currency risk can be hedged through forward contracts, options or swaps
- no need for a foreign presence
- Multiple plants can also increase global total fixed costs and reduce capacity utilisation
What is a criticism of theory concept 'tax planning or transfer pricing opportunities' as benefit of multinationality?
What is a criticism of theory concept 'market power or cartelization' as benefit of multinationality?
What is a criticism of theory concept 'gaining general international experience' as benefit of multinationality? (2)
- A nebulous concept that is difficult to operationalize
- International experience can be purchased by hiring foreign employees directly or through foreign acquisitions
What are types of costs of multinationality? (7)
- Organizational change and duplication
- Coordination costs
- Supply chain complexity and inventor growth
- Disruption risk in global supply chains because of specialisation
- Monitoring of external providers
- Institutional and cultural distance
- Later stage expansion into smaller, riskier, or less developed markets
What is meant by 'organizational change and duplication' as type of cost of multinational expansion?
What is meant by 'coordination costs' as type of cost of multinational expansion?
What is meant by 'supply chain complexity and inventory growth' as type of cost of multinational expansion?
- and in some MNE's at a higher than linear rate to the number of countries
What is meant by 'disruption risk in global supply chain because of specialization' as type of cost of multinational expansion?
What is meant by 'monitoring of external providers' as type of cost of multinational expansion?
What is meant by 'institutional and cultural distance' as type of cost of multinational expansion?
What is meant by 'later stage expansion into smaller, riskier, or less developed markets' as type of cost of multinational expansion? (2)
- The PPP-adjusted GDP of the 20th largest economy is only 5% the size of the biggest
- beyond the top 20 or 30 nations, further international expansion means entry into much smaller, riskier, and less developed markets
- Each incremental foreign entry entails some irreducible incremental costs
- more than that, the incremental cost per entry, as well as operating and political risk, escalate significantly with considerable internationalization
What are contingent factors concerning Contractor (2012) Do multinationals perform better? (7)
- Extent of geographical dispersion by number of nations
- Institutional and cultural variety of countries served by the MNE
- Home country characteristics
- Product diversification or product variety across the sample of firms
- Mode of serving foreign markets
- Degree of internationalization measured from the input side by firm-specific indicators such as the extent of foreign sourcing or geographic spread of the firm's supply chain
- Other firm-specific discriminator or contingent variables such as R&D intensity or marketing intensity
What are 3 examples of mode of serving foreign markets?
- Sales by foreign affiliates
- Sales by exports
- Sales by licensees
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