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This paper investigates whether firms from developing countries that lag the global technological frontier can learn from technologically successful peers as a means of closing the technological gap with leaders from developed countries. We define technologically successful peers as those that hail from similar home countries, operate in the same industry, and have achieved a certain degree of success in closing the gap with the global technological frontier. We argue that technologically successful peers represent an important reference group for lagging firms and, as such, offer opportunities for lagging firms from developing countries to hasten technological development. We find that lagging firms from developing countries that build upon the knowledge of technologically successful peers achieve higher rates of technological improvement. Moreover, learning from technologically proximal successful peers helps even further with technological improvement. However, there are limits to such learning, with diminishing marginal returns to lagging firms that over rely on successful peers.

Extant research on inward foreign direct investment (FDI) suggests that foreign entrants bring superior technology with them to host countries, thereby providing local firms the opportunity to learn and upgrade their technologies. However, foreign entrants also increase competition in the local market, potentially harming domestic firms. In this study, we extend existing work on inward FDI by investigating the moderating role of technological capabilities on the relationship between inward FDI and local firm innovation. Building upon firm capabilities arguments, we expect that domestic firms with existing technological capabilities are better positioned to stave off foreign competition and better able to learn from foreign entrants. However, we find, somewhat surprisingly, that local technological leaders apply for fewer patents and introduce fewer new products than do local technological laggards subsequent to foreign entry. These results imply that technological capabilities do not buffer domestic firms from the deleterious competition consequences associated with inward FDI.

It is widely acknowledged that foreign firms are at an institutional disadvantage relative to domestic firms operating in the local market. This “liability of foreignness” typically manifests as inferior performance for foreign firms relative to domestic competitors. Although myriad studies document the liability of foreignness, few demonstrate how individual host country institutions generate specific liabilities. In this study, we explore the regulatory liabilities that foreign firms face using a sample of 189 foreign banks operating in the United States. We find that regulators initiate more enforcement actions, on average, against foreign banks than they do against domestic banks. The effects, however, vary by regulation type and firm characteristics. For example, foreign banks are no more likely to receive risk-related sanctions, but far more likely to receive stakeholder-related sanctions. Foreign banks with higher quality of human capital and more host country experience are less likely to run afoul of all regulations. Foreign banks with more third country experience are less likely to receive risk-related sanctions, but more likely to receive stakeholder-related sanctions. The results highlight the contingent nature of regulatory liabilities, the role of information asymmetry versus regulatory bias in enforcement outcomes, and the liability-reducing effects of resources and capabilities.

Research summary In this study, we introduce a new statistical technique to the field of strategy that accounts for complex interrelated decisions. The technique is meant for situations in which one strategic decision depends critically upon another—e.g., where companies must commit to one decision before making another. We demonstrate the value of the technique in the context of companies choosing countries in which to invest, followed by areas within those countries in which to locate their facilities. We then describe the generic benefits of the statistical technique, offer guidance for how to use it, and provide the programming code so that others can implement it. We explain how the technique is particularly well suited to problems in which companies must decide between multiple options and the sample size is small relative to the number of initial options. Managerial summary Research in strategy and international business has increasingly adopted two-stage models to account for endogeneity. Established approaches, however, deal most effectively with problems characterized by binary first-stage models. We introduce an alternative that allows for multiple choices in the first stage. We use the technique to examine the agglomeration patterns of foreign firms, while accounting for country selection. We find that, conditional on country selection, foreign firms tend to agglomerate in host countries characterized by collectivist cultures, political uncertainty, and economic uncertainty. The results imply that host country characteristics exert a strong influence on the agglomeration preferences of foreign firms. We provide guidance on when to use the empirical estimation technique and furnish details of the estimation procedure so that others can apply the technique to a broader class of selection problems.

Research summary: Research demonstrates that foreign firms from institutionally distant countries imitate the practices of domestic firms (i.e., adopt an isomorphism strategy). The conjecture has been that pursuing such a strategy can help foreign firms counteract the deleterious performance consequences associated with institutional distance; yet there is scant evidence of such. This study treats isomorphism as an endogenously selected strategy influenced by institutional distance to examine its performance consequences. Using a dataset of 80 foreign banks from 25 countries operating in the United States, we find that foreign firms from institutionally distant home countries benefit initially from selecting an isomorphism strategy. However, the benefits diminish with experience. Managerial summary: Multinational companies experience great difficulty in managing institutional distance, and research suggests that one way to overcome distance-related constraints is to imitate the strategies of local companies. Unfortunately, we do not know enough about the performance-related consequences of engaging in such imitative behavior. This study examines whether imitating local firms improves performance for multinational companies from institutionally distant markets. We find that imitation improves a firm's performance at first; however, with experience those same strategies result in performance decrements. Managers of multinationals should therefore be careful not to get locked into imitative strategies that provide performance benefits upon entry, but that fail to provide benefits over time. Copyright © 2015 John Wiley & Sons, Ltd.

Building on Barnett’s (2007) theoretical argument that a firm’s ability to profit from social responsibility depends upon its stakeholder influence capacity (SIC), we bring together contrasting literatures on the relationship between corporate social performance (CSP) and corporate financial performance (CFP) to hypothesize that the CSP-CFP relationship is U-shaped. Our results support that hypothesis. We find that firms with low CSP have higher CFP than firms with moderate CSP, but firms with high CSP have the highest CFP. This supports the theoretical argument that SIC underlies the ability to transform social responsibility into profit.

We hypothesize that several characteristics of a country's institutional environment encourage firms to agglomerate. To test our hypotheses, we examine the collocation pattern of 931 plant investments made by 266 firms across 29 countries in the global semiconductor industry from 1975 to 2004. The results show that the decision to agglomerate is strongly dependent on a country's institutional context. Specifically, firms prefer to agglomerate when investing within countries with collectivist cultures, and those characterized by political and economic uncertainty. We assess the robustness of the results across multiple indicators of these institutional conditions. Copyright 2010 The Author 2010. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

In recent years the international trade literature has focused on the effects of exporting and its benefits in an open economy. Scholars note that engaging in trade enhances knowledge spillovers, and results in income growth and income convergence among trading partners. Although the macro-literature has long addressed economic convergence, there has been relatively little research examining the effect of exporting on ex post firm performance. Likewise, there has been little research that examines the differential learning-by-exporting effects across industries. In this paper we build upon the convergence literature to argue that engaging in exporting provides firms, especially firms in technologically lagging industries, the opportunity to benefit disproportionately from knowledge spillovers. Using a sample of Spanish manufacturing firms from 1990 to 1997, we investigate empirically how exporting differentially influences the innovative outcomes of firms in technologically leading vs lagging industries. We find evidence that firms in technologically lagging industries (in which Spain lags the global technology frontier) learn more from exporting than those firms in technologically leading industries (in which Spain is at, or near, the global technology frontier). The results enrich the traditional convergence argument by suggesting that industry heterogeneity matters to knowledge transfer, and stands to play a substantial role in reducing knowledge gaps. Journal of International Business Studies (2008) 39, 132–150. doi:10.1057/palgrave.jibs.8400320

Although a substantial body of research has investigated spillovers to FDI, we know very little about whether, and how, firms stand to benefit from spillovers without making such crossborder investments. In this study I investigate this issue by examining the ex-post innovative benefits that accrue to exporting firms. I argue that exporters access diverse knowledge inputs not available in the domestic market.This knowledge spills back to the focal firm and results in increased innovation. I explore how exporters derive such knowledge-based advantages by examining the relationship between export strategies and innovative productivity. Specifically, I contend that firms that export to developed countries will experience increased innovative productivity. Similarly, firms that reach the foreign market directly rather than relying on export brokers should innovate more, as they maintain closer ties with their information conduits.The empirical analysis is conducted using a stratified representative sample of Spanish manufacturing firms from 1990 to 1997. The dependent variable (innovation) is measured using several widely employed proxies including patent counts and innovation counts. I find that export strategies influence innovation in complex ways. I discuss the relevance of these findings for research in international business, strategy, and innovation.

Empirical findings across many nations show that exporters have superior productivity compared to nonexporters and that this relationship is driven by productive firms becoming exporters. The conclusion drawn from these studies is that there is little learning from exporting. We, however, assess if there are ex post benefits that accrue to exporting firms by examining innovation outcomes. We argue that exporters can often access diverse knowledge inputs not available in the domestic market, that this knowledge can spill back to the focal firm, and that such learning can foster increased innovation. We examine product innovation and patent application counts of a representative sample of Spanish manufacturing firms from 1990 to 1997. To conduct the analysis, we use a nonlinear GMM estimator for exponential models with panel data that allows for predetermined regressors and linear feedback. We find that exporting is associated with innovation. Moreover, the panel data allow us to explore the temporal relationship between exporting and innovation. In contrast to existing findings, we find evidence of learning by exporting—albeit in dimensions not previously examined in the literature.

Firms face disadvantages when operating abroad. To overcome these disadvantages, foreign firms often adopt mitigating strategies. One such strategy is to imitate the practices of domestic firms (i.e., pursuing a strategy of local isomorphism). We understand little, however, about how firms vary in the extent of local isomorphism. To fill that gap, this paper explores the institutional drivers of local isomorphism decisions. The findings indicate that foreign firms choose a higher level of local isomorphism as the cultural, economic, and regulatory distances between the home country and the host country increase. Moreover, the evidence suggests that such local isomorphism is relatively enduring, as experience does not systematically moderate the relationship between distance and local isomorphism.

This study updates and extends research on foreign entry modes by examining the impacts of knowledge transfer capacity and knowledge tacitness. Research on international corporate expansion has long emphasized that deploying intangible knowledge-based assets is required for successful international expansion. More recently, research from a ‘knowledge-based’ perspective has addressed the role of tacitness in constraining a firm's ability to transfer knowledge internationally. We combine these perspectives to describe how knowledge tacitness affects the relative suitability of four archetypal entry modes: exporting, licensing, establishing an alliance, and wholly owned entry. We then examine and develop conceptually a seldom-studied firm characteristic, knowledge transfer capacity. We offer predictions that describe the combined effects of knowledge tacitness and transfer capacity on entry mode choice. We distinguish between the transfer capacity of the organization that develops knowledge (source transfer capacity) and that of the organization that seeks to access that knowledge (recipient transfer capacity). The discussion addresses how our model generalizes to knowledge-seeking strategies and to the study of ongoing multinational networks. The study enriches and reconciles multiple theoretical perspectives on entry strategy. It brings together the study of knowledge characteristics and firm heterogeneity in the theory of the multinational corporation, and in international and strategic management more generally. Journal of International Business Studies (2003), 34, 356–373. doi:10.1057/palgrave.jibs.8400037

This paper examines the impact of knowledge tacitness on a firm's propensity to establish plants in foreign rather than domestic locations. Our predictions build on knowledge-based, internalization, and evolutionary theories of foreign direct investment. We argue that the tacitness of technology has an inverted-U effect on the propensity to undertake foreign investment. We also expect that as a firm learns about a technology, it will become more likely to make foreign investments. We examine two forms of learning: that which accumulates as a function of the number of plants previously built by the firm (transfer-based learning), and that which accumulates as a function of time since the firm started using a technology (time-based learning). We investigate empirical effects in a sample of investments in the memory segment of the semiconductor industry. Our predictions about the curvilinear effect of tacitness are supported. The results also suggest that learning is a matter of taking time to become acquainted with the use of the technology, and of gaining experience through successive foreign plant investments. The study adds to the understanding of the effects of knowledge on corporate expansion.

Knowledge externalities are an important source of economic growth and competitive advantage. In particular, recent research highlights the role of international trade and foreign markets as a valu...