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Research summary: When war occurs in a country, some foreign multinational enterprises (MNEs) stay on, while others flee. We argue that MNE responses to external threats depend on the firm's vulnerability, which we decompose into exposure (proximity to threat), at-risk resources (potential for loss), and resilience (capacity for coping). We test the independent and interactive effects of these dimensions using a geo-referenced sample of 1,162 MNE subsidiaries in 20 war-afflicted countries between 1987 and 2006. We find that highly valuable resources can become liabilities when exposed to harm, and the best way to cope with external threats may be to exit. Our findings extend the resource-based view and real options theory by demonstrating the bounded value of resources and options in the face of environmental contingencies. Managerial summary: A recent survey of multinational enterprise (MNE) executives revealed that 30 percent of the respondents believed that their firms were exposed to collateral damage from war, with more than 90 percent expecting risks to rise. Yet, 25 percent of the executives indicated that their firms had no continuity plan. Our study of MNEs in war-afflicted countries highlights the costs of not having a response strategy in place. We find that, in war zones, otherwise highly valuable locations and resources can become sources of vulnerability that prompt early withdrawal from a host country. Our work further highlights the value of real options thinking—where structural solutions such as building redundancy into a portfolio of options may exist in advance of problems—for navigating hostile environments.

While extant theory suggests that the pervasiveness of host market government corruption should influence the equity ownership decisions of foreign-investing multinational enterprises (MNEs), empirical research has produced inconclusive results. We leverage insights from transaction cost economics to advance an uncertainty-oriented framework which can be used to explain the impact of host market government corruption on the equity-based entry strategies of MNEs. We disaggregate government corruption into two distinct components (grand corruption and petty corruption). We propose that grand and petty corruption precipitate different types of uncertainty (environmental and behavioral) which motivate MNEs to vary their equity-based foreign entry strategies (entry mode and partnering). Hypotheses pertaining to the entry strategies of MNEs under conditions of more pervasive grand and petty corruption are developed and tested with a sample of 643 Japanese investments in 30 countries between 2004 and 2007. We find that the main effect of grand corruption and the interaction between grand and petty corruption significantly impact a MNE’s entry mode. Further, while more pervasive grand corruption increases the likelihood that a MNE will engage in a joint venture investment with a host country partner, we find that an increase in petty corruption heightens a MNE’s preference to invest with a home country partner.

We examine the timing and mode of firm exits from host-country conflict zones. We argue that timing and mode are interdependent decisions where decision ordering matters, and show that a firm’s prioritizing of either exit timing or mode is dependent on the relative salience of two behavioral stimuli: (1) the firm’s own experience (i.e., its performance shortfall), and (2) the experience of peer firms (i.e., their exits). Using instrumental variables modeling on a sample of 101 Japanese MNE exits from 11 conflict-afflicted countries between 1991 and 2005, we demonstrate that, when mode is prioritized over timing, partial exits tend to occur earlier and whole exits later. However, when timing is prioritized over mode, the decision choices reverse: earlier exits tend to be whole and later exits partial. The outcome of one decision therefore affects that of the other in a unique and predictable manner, such that the ordering of the decisions both produces and precludes strategic choices. Our findings, based on a multidecision problem that has traditionally been treated as a single decision (i.e., foreign exit), delineate expanded boundary conditions for satisficing, as well as reconcile optimizing and satisficing behaviors.

Extant research has found that more pronounced levels of corruption in foreign host emerging markets increase the likelihood that subsidiaries established by multinational enterprises (MNEs) from developed countries will exit. We synthesize insights from the organizational perspective of corruption and the integration-responsiveness paradigm to propose that integration-oriented strategies will weaken the positive relationship between corruption and the likelihood of exit at high levels of host market corruption. We develop and test hypotheses pertaining to the main effect of corruption on the likelihood of subsidiary exit, as well as the moderating impacts of a firm’s equity ownership strategy and its expatriate staffing strategy upon this relationship. We theorize that uncertainty operates as the mechanism that underpins the corruption-market exit relationship, and that an MNE’s strategic choices with respect to its subsidiary investments contribute to reducing this uncertainty. We find that an increase in the foreign-investing MNE’s equity ownership share negatively moderates the positive relationship between corruption and the likelihood that foreign subsidiaries established by developed market MNEs will exit host emerging markets when corruption is high. However, the marginal effects results do not support the expatriate staffing strategy hypothesis. Our work provides guidance to developed country MNEs that seek insights with respect to the utility of strategies that might be implemented in host emerging markets characterized by more pronounced levels of corruption.

This study focuses on the role of geography in foreign subsidiary survival in host countries afflicted by political conflict. We argue that survival is a function of exposure to conflicts, and depends on the characteristics of place (the conflict zone) and space (geographic concentration and dispersion of other home-country firms). The roles of place and space are explored using street-level analysis of geographic information systems data for 670 Japanese multinational enterprises (MNE) subsidiaries in 25 conflict-afflicted host countries over 1987—2006. Through dynamic modeling of conflict zones as stretchable and shrinkable places relative to subsidiary locations, we develop a means of characterizing a foreign subsidiary's exposure to multiple threats in its geographic domain. Our results show that greater exposure to geographically defined threats, in both a static and a dynamic sense, reduces the likelihood of MNE survival. The findings indicate, moreover, that both concentration and dispersion with other firms affect survival; however, the effects depend on where the firm is spatially located (whether the firm is in a conflict zone) and with whom (home-country peers or sister subsidiaries).

This study aims to bridge the research on the internationalization of small-and medium-sized enterprises (SMEs) with the literature on initial public offerings (IPOs). It investigates how IPOs affect SMEs’foreign investment decisions as they internationalize. We argue that IPOs enable SMEs to engage in a period of accelerated foreign expansion, resulting in a wave-like pattern, as suggested by Håkanson and Kappen’s (J Int Bus Stud 48 (9): 1103–1113, 2017) ‘Casino model’ of internationalization. We also propose that there will be a post-IPO shift in SMEs entering less familiar locations and towards taking higher ownership stakes in new subsidiaries. We use a difference-in-differences design combined with coarsened exact matching to isolate the effects of IPOs. Our analysis of overseas investments by a matched sample of newly listed Japanese manufacturing SMEs and their private counterparts provides strong evidence that SMEs accelerate the pace of establishing new foreign subsidiaries after going public. The results also reveal nuanced changes in the location and ownership patterns in the post-IPO period. This study identifies the IPO as a significant antecedent to SME foreign expansion and offers a new explanation for intertemporal variance in the pace, direction, and commitment of the SME internationalization process.

Measures of geographic distance are often used to proxy for the impact of spatial separation on firm decisions and performance. We develop a construct, dyad travel time, to measure the friction of interacting and costs of uncertainty from ex post behavioral monitoring across non-collocated sites. We measure the actual time required to travel between 1171 parent—subsidiary dyads, and show that dyad travel time (but not geographic distance) has significant predictive power in firm governance and location decisions. While prior literature has independently modeled these, we specify a simultaneous model offering stronger support for the interrelation of these decisions.

International business research is only beginning to develop theory and evidence highlighting the importance of supranational regional institutions to explain firm internationalization. In this context, we offer new theory and evidence regarding the effect of a region's \"institutional complexity\" on foreign direct investment decisions by multinational enterprises (MNEs). We define a region's institutional complexity using two components, regional institutional diversity and number of countries. We explore the unique relationships of both components with MNEs' decisions to internationalize into countries within the region. Drawing on semiglobalization and regionalization research and institutional theory, we posit an inverted U-shaped relationship between a region's institutional diversity and MNE internationalization: extremely low or high regional institutional diversity has negative effects on internationalization, but moderate diversity has a positive effect on internationalization. Larger numbers of countries within the region reduces MNE internationalization in a linear fashion. We find support for these predicted relationships in multilevel analyses of 698 Japanese MNEs operating in 49 countries within 9 regions. Regional institutional complexity is both a challenge and an opportunity for MNEs seeking advantages through the aggregation and arbitrage of individual country factors.

This paper examines the impact of alliance network diversity on multinational enterprise (MNE) economic performance. We consider competing hypotheses derived, alternatively, from transaction cost theory and network theory. Using a latent variable structural equation modeling approach on a sample of 580 large MNEs, we find that MNEs with more diverse alliance networks experience lower economic performance on average than those with less diverse alliance networks.

We discuss and explore the effects of internationalization, an entrepreneurial strategy employed by small and medium-sized enterprises (SMEs), on firm performance. Using concepts derived from the international business and entrepreneurship literatures, we develop four hypotheses that relate the extent of foreign direct investment (FDI) and exporting activity, and the relative use of alliances, to the corporate performance of internationalizing SMEs. Using a sample of 164 Japanese SMEs to test these hypotheses, we find that the positive impact of internationalization on performance extends primarily from the extent of a firm's FDI activity. We also find evidence consistent with the perspective that firms face a liability of foreignness. When firms first begin FDI activity, profitability declines, but greater levels of FDI are associated with higher performance. Exporting moderates the relationship FDI has with performance, as pursuing a strategy of high exporting concurrent with high FDI is less profitable than one that involves lower levels of exports when FDI levels are high. Finally, we find that alliances with partners with local knowledge can be an effective strategy to overcome the deficiencies SMEs face in resources and capabilities, when they expand into international markets.