The relationship between contractual and relational arrangements in interorganizational relationships has been subject to an ongoing debate. We propose that in the context of cross-border ...partnerships, the governance mechanisms can be both substitutes and complements depending upon contingencies posed by uncertainties of two different origins: environmental and behavioral. We argue that environmental uncertainty (i.e., instability and unpredictability of the external environment) drives the formal and relational arrangements into a more substitutive relationship by elevating the adaptation complications in which increasing reliance on either form of governance inhibits the effective operation of the other. Contrastingly, behavioral uncertainty (in the form of inadequate common grounds and shared frameworks among collaborating firms) encumbers the understanding of partner behavior and conduct and drives the governance mechanisms into a more complementary relationship in which contractual and relational mechanisms facilitate the effective operation of each other. Empirical results from 205 cross-border partnerships of large U.S. firms support our theorized relationships.
Interfirm relationships among partners from institutionally distant environments are subject to governance difficulties, owing to the paucity of shared cognitive and regulatory frameworks. We examine ...the potential of formal contracting and relational governance developed at the partnership level to overcome the formal and informal institutional gap at the country level. Empirical results from a sample of 184 international partnerships of large US firms support an overall substitutive relationship between informal institutional frameworks and interorganizational relational arrangements whereby the performance benefits of relational governance are reinforced at higher degrees of informal institutional distance. Contrastingly, formal institutional frameworks and contractual governance are found to have a complementary relationship, with performance gains from formal contracting undermined at higher degrees of formal distance.
Business groups emerged in developing economies through direct or indirect support from the state in order to overcome a variety of institutional voids and/or to further state objectives of economic ...growth. However, the efficacy of this organizational form and its associated governance structures have been debated given the dual possibility of business groups to allocate resources among its affiliates for cross-subsidization or winner-picking. We argue that elements of the institutional environment comprising of the state’s approach to organizations and the political context of these interactions vary across countries, thereby influencing business groups’ resource allocation strategies and affecting the persistence of affiliated firms’ superior performance. Contrasting the types of state capitalism in China and India, we develop and test our hypotheses. We find that the effect of business group affiliation on firms’ superior performance persistence is stronger in a state-led system of state capitalism (e.g., China) than in a co-governed system (e.g., India) and that this divergence of the business group effect is weakened as affiliated firms internationalize. Our findings have implications for understanding business groups across institutional contexts and the influence of diversity in the types of state capitalism on organizational strategies.
Internationalization and performance Abdi, Majid; Aulakh, Preet S.
Journal of international business studies,
09/2018, Letnik:
49, Številka:
7
Journal Article
Recenzirano
We assess the theoretical underpinnings and associated empirical findings of the three-stage sigmoid–curve relationship between degree of internationalization (DOI) and performance by re-examining ...the results reported in one of the prominent studies in the literature. We further conduct our own analyses of 23,474 observations of 2,620 US manufacturing firms over the period 1976–2008 and account for self-selection of firms into different degrees of internationalization by using a generalized propensity score estimator. Both sets of results show that the relationship between DOI and performance conforms to a mostly negative sigmoid curve and does not support the three-stage theorization. Further examination reveals that two major conceptual and empirical shortcomings underlie the disparity between the theoretical predictions of the three-stage model and these empirical findings. First, whereas theory relies overwhelmingly on enhanced scale of operations as a causal mechanism through which internationalization contributes to performance, empirical studies preclude proper identification of scale-related benefits. Second, theory and empirics tend to confuse temporary difficulties experienced upon entry into international markets with examining the benefits realizable at different levels of DOI, regardless of the firm’s short-term difficulties in realizing those benefits. Our empirical results show that correcting for each of these shortcomings contributes to diminishing the theory–empirics gap.
•Contagious risk perception augurs the dark side in peer to peer transactions.•Pluralistic Ignorance governs the emergence of dark side in P2P transactions.•Pluralistic ignorance is induced by three ...rational considerations.•They are inertial routines, tenure specific transactions & regulatory mandate.•P2P transaction preference from pluralistic ignorance is a rational outcome.
This paper investigates the role of pluralistic ignorance as a credible governance mechanism mitigating the emergence of the dark side in peer-to-peer transactions. Using the empirical context of the Indian banking industry, this paper identifies three underlying dimensions of pluralistic ignorance arising from firm, relationship, and institutional factors and links them to peer-to-peer transaction preferences, especially under conditions of uncertainty. By focusing on a particular type of interorganizational relationship that is recurrent but devoid of specific asset investment, this paper provides an alternative governance mechanism that complements the formal and relational contract-based approaches to mitigating the dark side in interorganizational transactions prevalent in the existing literature.
While overseas acquisitions by emerging-economy firms are gaining increased attention from the business press, our understanding of whether and why this inorganic mode of international expansion ...creates value to acquirer firms is limited. We argue that international acquisitions facilitate internalization of tangible and intangible resources that are both difficult to trade through market transactions and take time to develop internally, thus constituting an important strategic lever of value creation for emerging-economy firms. Furthermore, the magnitude of value created will be higher when the target firms are located in advanced economic and institutional environments: country markets that carry the promise of higher quality of resources, and therefore, stronger complementarity to the existing capabilities of emergingeconomy firms. An event study of 425 cross-border acquisitions by Indian firms during 2000-2007 supports our predictions.
Research Summary
In this article, we examine the influence of owner CEOs’ motivations and authority on strategic risk‐taking behavior of firms as reflected by their investments in foreign markets. We ...theorize that owner CEOs, aided by their strategic leadership, long‐term orientation, and less‐restricted decision‐making powers, will facilitate their firms’ strategic decisions that are exploratory in nature and, thus, are more risky. We further propose that the owner CEO effect is likely to differentially interact with performance aspirations and governance structures of firms in influencing internationalization. We test our predictions on a longitudinal panel dataset of 226 Indian manufacturing firms over the 10‐year period from 2002 to 2011 and find support for our hypotheses. We contribute to the emerging literature on microfoundations and behavioral strategy.
Managerial Summary
Given that a large number of firms around the world are characterized by concentrated ownership and owners who also assume CEO roles, we explore the influence of owner CEOs on firms’ strategic risk‐taking behavior. We propose that firms with owner CEOs, particularly founder owner CEOs, are likely to exhibit a higher degree of internationalization as compared to firms with professional CEOs. Further, we propose that the positive owner CEO effect is stronger when the firm performance is above its aspirations and also in stand‐alone firms when compared to firms affiliated to business groups. We test our predictions using a sample of 226 Indian manufacturing firms over the 10‐year period from 2002 to 2011 and find support for our predictions.
Overseas acquisitions as a mode of international expansion entail a high level of risk, especially for firms from emerging economies which face considerable liabilities of foreignness and newness in ...international markets. Building on the behavioral risk-taking perspective, we examine the role of ownership characteristics on the propensity of Indian firms to make foreign acquisitions. Empirical results from a sample of BSE 500 Indian firms during the 2002–2011 period show that after controlling for firm level resources and capabilities identified in the prior literature, international experience of firm CEOs, promoter shareholding, and ownership share of foreign institutional investors positively influence firms' acquisition propensities in foreign markets. Furthermore, our results show that the effects of these determinants on overseas acquisitions are stronger for stand-alone independent firms than for those affiliated to business groups.
This paper investigates whether and when affiliation to business groups enables or constrains firms’ international search behavior during institutional transitions. We theorize that given the unique ...structure and complex form of business group organizations, the search behavior of affiliated firms is influenced by the degree of (mis)alignment in outlook at the group and affiliate levels of management. We identify the scope of institutional changes, business group attributes, and affiliate characteristics as sources of such (mis)alignment. The results from panel data on 298 firms from the Indian pharmaceutical industry for the 1992–2007 period show that the constraining effects of business group affiliation are observed only when institutional changes are specific to the affiliates’ industry and not when broad institutional changes affect the business group as a whole. Moreover, we observe heterogeneity in the search behavior of group affiliated firms. First, the degree of misalignment is greater in the case of affiliates belonging to older business groups and those that are more distant in terms of age and industry since the group’s founding. Second, by contrast and suggesting an alignment in outlook, we find that affiliated firms that occupy a prominent position within a group or industry are able to bargain for and receive attention and support from the business group to undertake international search. Our findings have implications for research on the role of business groups in a changing institutional context and for the strategic adaptation of firms embedded in complex organizational and institutional settings.
This article investigates the journey of the Komagata Maru in 1914, and the multiple exclusions of its primarily Sikh passengers from various colonial jurisdictions, through the lenses of global and ...local legitimacy contestations across the British Empire at the beginning of the twentieth century. The paradox of its subjects' mobility (i.e. accommodating the aspirations of 'white-only' self-governing colonies and disapproving the race-based exclusion of its 'non-white' subjects) had consumed the Empire for almost two decades. This contradiction necessitated justifications of exclusion that would be compatible with the liberal ideology of all subjects having equal rights and palatable to the political expediency considerations of different colonies. The transformation of the legal identities of the ship's passengers from 'farmers' to 'labourers' to 'seditionists' during a short span of five months facilitated the institutionalisation of alternative logics of exclusion based on class and loyalty to the Empire. Through an in-depth study of an important episode in colonial history, this article attempts to foreground how intricate linkages among law, legitimacy and identity played out during a critical juncture for the British Empire.
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