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Global location choices for foreign direct investments by MNCs aim to benefit both from the advantages of collocation with other activities of the firm (internal agglomeration) and the advantages of proximity to local industry clusters of similar activities (external agglomeration). We submit that there are important trade-offs between internal and external agglomeration because internal knowledge transfer associated with collocation of various value-chain activities of the MNC is confronted with greater risk of knowledge spillovers to rival firms if there is a substantial local cluster. Moreover, we argue that the international connectivity of a location reduces the importance of local agglomeration as a driver of investment location decisions because connectivity allows the MNC to reap benefits from agglomeration at a distance through the (temporary) transfer of people and knowledge. Connectivity changes the trade-offs between internal and external agglomeration because it enhances the spatial reach of internal agglomeration more than external agglomeration. The influence of connectivity is greater for service-related value-chain activities than for production-related activities. We find support for these hypotheses in an analysis of 38,873 greenfield cross-border investment decisions across diverse value-chain activities and industries in 71 global cities, 2008–2016.

We review four decades of research about the corporate governance of multinational corporations (MNCs), which we label International Corporate Governance (ICG). We identify and discuss three main streams of research that draw on different conceptualizations and theoretical lenses of (corporate) governance. After synthesizing their respective findings, we propose several avenues for future research that integrate these three streams of research with the goal of developing a more nuanced understanding of ICG. We hope this review article will inspire international business scholars to continue examining how corporate governance can be an effective tool for MNC success.

For nearly two decades, scholars in international business and management have explored the implications of institutional voids for firm strategy and structure. Although institutional voids offer both opportunities and challenges, they have largely been associated with firms’ efforts to avoid or mitigate institutional deficiencies and reduce the transaction costs associated with operating in settings subject to those institutional shortcomings. The goal of this special issue is to advance scholarship on this topic by (a) exploring institutional voids that are new to the literature, (b) providing a deeper assessment of the different ways in which firms respond to these voids, and (c) utilizing diverse disciplines and theoretical approaches to do so. In this introduction, we first review and synthesize extant research on institutional voids, tracking the evolution of institutional void scholarship since the inception of the concept (Khanna & Palepu, Journal of Economic Literature , 45(2):331–372, 1997 ) and providing our perspective on its contributions and limitations. We then summarize the contributions of the articles included in this special issue. In addition to identifying an array of institutional voids – economic and social – the articles highlight four different strategies for responding to them: internalization, substitution, borrowing and signaling. Drawing on these, we develop new insights on the implications of institutional voids for firm behavior. We conclude with suggestions for future research.

This study reviews research from 1970 through 2016 on developed country multinational enterprises (DMNEs) entering and competing in developing economies. To identify the current state of knowledge of this research and push it further, we review the literature using bibliometric and qualitative content analyses covering leading journals and books. We articulate frontier issues that are understudied yet critical to both theorization and practice of DMNEs in developing economies. We discuss the findings and conclusions from prior research along five key areas: (1) entering developing economies, (2) organizing local activities, (3) managing alliances and joint ventures, (4) competing in dynamic environments, and (5) dealing with institutions, governments and society. We offer prospective insights into future agenda that have important implications for MNE strategies and decisions, and propose frontier directions that encompass strategic localization, reverse transfer and adaptation, co-evolution with local business ecosystems, reorganizing and restructuring, and strategic responses to institutional and market complexity.

The globalization of state-owned multinational companies (SOMNCs) has become an important phenomenon in international business (IB), yet it has received scant attention in the literature. We explain how the analysis of SOMNCs can help advance the literature by extending our understanding of state-owned firms (SOEs) and multinational companies (MNCs) in at least two ways. First, we cross-fertilize the IB and SOEs literatures in their analysis of foreign investment behavior and introduce two arguments: the extraterritoriality argument, which helps explain how the MNC dimension of SOMNCs extends the SOE literature, and the non-business internationalization argument, which helps explain how the SOE dimension of SOMNCs extends the MNC literature. Second, we analyze how the study of SOMNCs can help develop new insights of theories of firm behavior. In this respect, we introduce five arguments: the triple agency conflict argument in agency theory; the owner risk argument in transaction costs economics; the advantage and disadvantage of ownership argument in the resource-based view (RBV); the power escape argument in resource dependence theory; and the illegitimate ownership argument in neo-institutional theory. After our analysis, we introduce the papers in the special issue that, collectively, reflect diverse and sophisticated research interest in the topic of SOMNCs.

All business contributes to environmental crises because of its focus on profit. We argue that international business (IB) contributes more than its fair share. IB's focus on cross-border arbitrage has led to the over-extraction of natural resources and the accumulation of waste. This is a problem because natural resources are limited in quantity and embedded in their local environment. It is time for IB researchers to step up and substantially and meaningfully address IB’s contribution to environmental crises by embracing the principles of natural systems processes within its core assumptions and improving its theorizing of natural resources. In this paper, we take a step forward in this direction by revisiting and refining the theoretical dimensions of country-specific advantages (CSAs) and firm-specific advantages (FSAs) to recognize natural resources more explicitly. We propose three natural resource-based strategies for multinational enterprises (MNEs): reducing, replacing, and regenerating. This article offers a new theoretical perspective on understanding how IB can create value and steward the natural environment, contributing to the sustainability of business, society, and the planet.

This paper develops theory suggesting that, relative to purely domestic firms, multinational enterprises (MNE) have greater incentives and strategic and operational means to respond to expanding carbon emissions constraints. We test our resulting hypotheses with data on changes in carbon emissions by over 6,000 industrial plants during Phase 2 (2008–2012) of the European Union’s Emissions Trading Scheme. We find that MNE maintain: (1) consistent carbon reductions across institutional contexts, and (2) an overall carbon performance edge over domestic firms. The carbon performance gap between MNEs and domestic firms narrowed, however, in host countries transitioning towards more stringent market regulatory systems. By demonstrating that the effects of national and international carbon regulations on firm behavior interact in important ways with each other and with firm characteristics, this paper deepens understanding of how institutions are likely to shape the ongoing energy transition towards a low-carbon economy.

The COVID-19 pandemic has led to economic and health crises (“twin crises”) worldwide. Using a sample of firms from 73 countries over the period January to December 2020, we examine stock price reactions of multinational corporations (MNCs) and purely domestic companies (DCs) to the crisis. We find that, on average, MNCs suffer a significantly larger decline in firm value relative to DCs during the stock market crisis caused by the pandemic with notable heterogeneity in this underperformance across both industry and region. The evidence of MNC underperformance is robust to using abnormal returns, an alternative crisis window, a matched sample that accounts for differences in characteristics between MNCs and DCs, alternative model specifications, and alternative proxies for multinationality. Further analysis on the effect of government responses on the valuation gap suggests that stringent government responses exacerbate MNCs’ underperformance. Finally, we show that a stronger financial system mitigates negative crisis returns, especially under stringent government responses, while real factors, such as the firm’s supply chain, investments in human capital, research and development, exacerbate negative crisis returns. Our findings have important implications for managers of MNCs and government policymakers alike and contribute to studies on the international diversification–performance relation by demonstrating a dark side of globalization during a tail-risk event.

The field of international business is fundamentally concerned with the implications of managerial actions that affect multinational risk and performance outcomes. While portfolio diversification and real options theory are often used to describe the outcomes of multinational investment, existing work often confuses the actions and predictions proposed by these theories. This is concerning, as the two theories emphasize different causal mechanisms, managerial actions, and conceptions of risk and performance. Whereas portfolio theory argues that passive management affects symmetric outcomes, such as variance in returns by attaining a well-diversified portfolio, real options theory posits that managers actively shift subsidiary resources to affect asymmetric outcomes, such as upside potential or downside risk by monitoring and responding to environmental changes affecting the portfolio. This paper disentangles these two theories by focusing on unique predictions from real options theory – that geographic dispersion of MNE activities is associated with asymmetric outcomes, that this association is contingent on management being aware of real options logic, and that these effects are moderated by the degree of market uncertainty. Our findings confirm these predictions and suggest differences in the types of managerial strategies and actions required to effectively implement these distinct theories of the MNE.

We aim to build a greater understanding of how young entrepreneurial firms internationalize fast through foreign subsidiaries to become a multinational enterprise (MNE). Despite the prevalence of fast-paced international expansion, theory development on how it is achieved through high-commitment entry modes has been scarce. Our work substantially addresses this gap by conceptualizing how rapid multinationalization occurs. Using qualitative case studies, we explore eight young entrepreneurial firms operating in the software-as-a-service industry aspiring to achieve early market dominance internationally through rapid multinationalization. Drawing on the concept of industry recipes, we explain how recipe heuristics and recipe augmentation enable rapid multinationalization and showcase the economic and knowledge acquisition logics which underpin these endeavors. This study introduces internationalization via industry recipe, explains the micro-level regulation of internationalization speed, and contributes to aligning international entrepreneurship and MNE perspectives on internationalization.