The Changing Strategies of International Business

How MNEs Manage in a Changing Commercial and Political Landscape

Agnieszka Chidlow, Pervez N. Ghauri, Thomas Buckley, Emma C. Gardner, Amir Qamar, Emily Pickering, Agnieszka Chidlow, Pervez N. Ghauri, Thomas Buckley, Emma C. Gardner, Amir Qamar, Emily Pickering

• Publisher: Palgrave Macmillan
• Year: 2019
• Print ISBN: 9783030039301
• eBook ISBN: 9783030039318
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

The ACADEMY OF INTERNATIONAL BUSINESS (UK and Ireland Chapter)
Published in association with the UK and Ireland Chapter of the Academy of International Business.

In line with the 45^th AIB-UKI conference, this edited collection brings together fresh perspectives on international business strategy, with a focus on the challenges faced by multinational enterprises (MNEs) in today's changing commercial and political landscape. With a diverse range of contributors from varying international backgrounds, this book discusses the different strategies employed by MNEs, and analyses how they cope with the current global business environment. An extremely useful read for those studying globalisation and MNEs, this book provides an interdisciplinary and timely approach to international business strategy.

Part I

Risky Business: Multinationals, Governments and Political Risk

In recent years, a number of significant and unprecedented occurrences have happened on the global stage. For example, in the developed world, these can relate to the events relating to the election of Mr Donald Trump as the 45th President of the United States and to the decision of the British public to pursue an independence from the European Union, following the Brexit referendum in 2016. However, in the developing world, these can be linked to the plight of the Rohingya refugees, the actions of the Nicolás Maduro Moros’s presidency and the prevailing economic war in Venezuela as well as the controversy surrounding Zimbabwe’s recent presidential elections.

All of these events highlight widespread challenges that political actors, institutions and firms face when embarking on international business activities. Therefore, by including three chapters, the aim of the first chapter of this book is to offer a reader a lens to look at those challenges and their possible solutions.

The first chapter (Chap. 1), titled “Legitimacy and Institutional Governance Infrastructure: Understanding Political Risk from a Chinese MNE Perspective” by Xia Han and Xiaohui Liu, seeks to determine how legitimacy affects the international expansion of Chinese multinationals. Using the institutional theory to understand how social acceptance influences perceptions of host-country political risk, the authors draw upon 148 observations to propose that home-country biases affect the legitimacy afforded to Chinese multinationals in host-country environments. They advocate that acceptance from particular host-country stakeholders can act as an alternative mechanism for gaining legitimacy .

Chapter 2, titled “Applying Theory to Understand How Multinational Firms Address Brexit ” by Saad Laraqui and Bert J. Jarreau, adopts Dunning’s eclectic paradigm, alongside other frameworks, to understand a competitive advantage in order to examine and discuss the implications of the UK referendum on leaving the European Union. According to the authors, the economic disintegration of Brexit presents a challenge for economic rationality; hence, in order to overcome this they propose recommendations designed to minimize the damage and to hasten a recovery.

The final chapter (Chap. 3), titled “Bureaucrats in International Business: A Review of Five Decades of Research on State-Owned MNEs” by Asmund Rygh, provides a holistic review of state-owned multinational firms. By examining 137 studies, the author suggests that despite a common domestic bias ascribed to a business model, state-owned enterprises in emerging economies are internationalizing more and have a greater tolerance to political risk. Nevertheless, despite an increasing interest in these types of firms, this paper propagates the need for more empirical work, particularly with regard to multi-country investigations and in contexts other than China, to develop a much deeper understanding.

© The Author(s) 2019

Agnieszka Chidlow, Pervez N. Ghauri, Thomas Buckley, Emma C. Gardner, Amir Qamar and Emily Pickering (eds.)The Changing Strategies of International BusinessThe Academy of International Businesshttps://doi.org/10.1007/978-3-030-03931-8_1

Begin Abstract

1. Legitimacy and Institutional Governance Infrastructure: Understanding Political Risk from a Chinese MNE Perspective

Xia Han¹ and Xiaohui Liu²

(1)

Alliance Manchester Business School, University of Manchester, Manchester, UK

(2)

Birmingham Business School, University of Birmingham, Birmingham, UK

Xia Han

Email: [email protected]

Xiaohui Liu (Corresponding author)

Email: [email protected]

End Abstract

Introduction

What determines Chinese multinational enterprises’ (MNEs) perceived level of political risk in host countries? Research based on developed-country MNEs’ experiences has examined the effect of the host-country institutional governance infrastructure on Chinese firms’ locational choices, entry strategies, and performance (Ramasamy et al. 2012; Lu et al. 2014). While some studies found that Chinese MNEs have boldly ventured into politically risky contexts (Liu et al. 2016), others reported that these new players have tended to follow their developed-country counterparts by avoiding underdeveloped institutional environments. Given the inconclusive findings of previous research, one may question the extent to which the traditional way of understanding political risk is valid for Chinese MNEs. Yet, little attention has been paid to examining whether the conventional analytical framework focusing on the host-country institutional governance infrastructure can be extended to explain Chinese firms’ perception of political hazards in overseas markets.

More recent research has recognized that other factors, apart from host-country institutional governance infrastructure, also affect the political perils as perceived by Chinese MNEs. For example, Globerman and Shapiro (2009) suggest that affiliation with the home-country government can augment the political obstacles experienced by Chinese firms in the US. Stevens and Newenham-Kahindi (2017) noted the importance of home-country legitimacy with host-country stakeholders in affecting Chinese MNEs’ survival in East Africa. As extreme hazards, such as direct expropriation, have faded out, emerging-market MNEs, especially Chinese firms, can be exposed to political challenges that go beyond host-country institutional governance conditions (Bremmer 2014). Given their distinctive home-country characteristics, such as heavy state involvement in business operations and the underdeveloped institutional environment, research has pinpointed the need to understand political risk from a broader perspective. However, extant literature has largely been silent regarding the determinants of Chinese MNEs’ perceived level of political risk in global marketplaces.

In this chapter, we draw on the notion of legitimacy from institutional theory to examine (1) whether, and to what extent, the traditional analytical framework focusing on host-country governance conditions can explain the political risk perceived by Chinese firms; and (2) what determines their perceived level of such a risk when venturing abroad. Institutional theory, especially the sociological tradition or neo-institutional theory, has been widely adopted as the theoretical basis in research on emerging markets (Meyer and Peng 2016). A central premise of this perspective concerns the importance of gaining acceptance from institutional constituents in helping organizations to secure their position within an organizational field (DiMaggio and P...

Table of contents

• Cover
• Front Matter
• Part I
• Part II
• Part III
• Back Matter