Dear friends and colleagues,
We are delighted to share the third issue of Global Strategy Journal for 2024. It is available at
https://onlinelibrary.wiley.com/toc/20425805/2024/14/3. This issue contains papers accepted through the regular process and grouped around the topic of HQ-subsidiary relationships and microfoundation. It also includes a perspective on the trade-off of blockchain technology for MNC global strategy.
In the context of HQ-subsidiary relationships, Erifili-Christina Chatzopoulou, Spyros Lioukas and Irini Voudouris examine the conditions under which agency-driven controls can effectively minimize agency costs to the HQ and identify procedural justice as a motivational contingency. Wen Helena Li, Bin Guo, Vikas Kumar, Jinlong Gu and Wentao Hu study how the parent company evaluates its foreign subsidiaries' poor performance against various aspirations and makes multifaceted ownership change decisions. N. Nuruzzaman, Erin E. Makarius, Debmalya Mukherjee, Ajai Gaur bring the conversation of corporate social irresponsibility in HQ-subsidiary relationships. They leverage the cognitive view of stakeholder evaluation to analyze MNCs' corporate social irresponsibility across geographical boundaries and foreign subsidiary performance and the mitigating role of foreign subsidiaries' product innovation and marketing campaigns. The next three articles delve into the realm of microfoundations. Mikael Eriksson and Esther Tippmann examine the microfoundations of how firms deal with internal groups' diverse views when trying to make international commitment decisions. Yannick Thams and Marketa Rickley consider the role of national origin in CEO dismissals and study whether they are held to the same performance standard as native-born CEOs. Kristina Vaarst Andersen, Mark Lorenzen and Agnieszka Urszula Nowinska look at the mobility of workers laid off due to the failure of a MNC employer and the consequences on their legitimacy. The issue closes with a perspective article by Tuuli Hakkarainen, Anatoli Colicev and Torben Pedersen on blockchain technology, which discusses how and why such a novel technological development and its relevant applications affect the global strategy of the MNC
The papers are open-access, and you can get them by clicking on their titles.
If you are interested in reading forthcoming papers accepted but not yet published in an issue, you can find them at onlinelibrary.wiley.com/toc/20425805/0/0.
We look forward to receiving your best work for consideration for publication.
Best wishes,
Gabriel R. G. Benito, Stewart Miller and Grazia Santangelo
Co-editors of Global Strategy Journal
HQ controls, agency costs, and procedural justice
Erifili-Christina Chatzopoulou, Spyros Lioukas, Irini Voudouris
Monitoring, incentive alignment, and social controls are used to minimize the agency costs to headquarters (HQ) resulting from subsidiaries' opportunistic behaviors by aligning subsidiaries' behaviors and interests with those of the HQ. Subsidiaries' motivation to comply with these controls, however, is contingent on the social context that links the subsidiary to the HQ. In this context, we propose to identify procedural justice as a motivational contingency that shapes the conditions under which agency-driven controls can effectively minimize agency costs. Our results show that monitoring and social control reduce agency costs when procedural justice is high, whereas the use of incentive alignment mechanisms can have the opposite effect.
The multifaceted ownership change of foreign subsidiaries: The diverse responses to different types of negative performance feedback
Wen Helena Li, Bin Guo, Vikas Kumar, Jinlong Gu, Wentao Hu
By integrating performance feedback theory and ownership management literature, we examine how parent multinational companies (MNCs) evaluate their foreign subsidiaries' poor performance against various aspirations and make multifaceted ownership change decisions. Our results show that social aspirations matter more than historical aspirations in ownership change decisions. When a focal subsidiary is underperforming relative to industry peers or overseas subsidiary peers, its parent MNC tends to change its ownership of foreign subsidiaries and by a high degree. However, regarding the direction of ownership change, a foreign subsidiary with performance below industry peers tends to experience an ownership decrease, whereas the opposite is true when a subsidiary's performance is below overseas subsidiary peers. Overall, we extend existing theories that downplay the role of aspirations in ownership changes.
MNCs' corporate social irresponsibility and foreign subsidiary performance
N. Nuruzzaman, Erin E. Makarius, Debmalya Mukherjee, Ajai Gaur
Building on the cognitive view of stakeholder evaluation, we propose that multinational corporations' (MNCs') socially irresponsible acts transcend geographic boundaries and negatively affect foreign subsidiary performance. Moreover, we propose that foreign subsidiaries' product innovation and marketing campaigns create strategic noise in the information space that can mitigate the negative effect of MNCs' corporate social irresponsibility (CSI) incidents occurring elsewhere on the performance of their foreign subsidiaries. We test our arguments on 335 subsidiaries of 42 multinational grocery retailers from 18 different home countries. Our analyses, based on a sample of 2185 subsidiary-year observations over the period of 9 years (2012–2020), largely support our core argument that CSI incidents negatively influence the sales growth of foreign subsidiaries.
The microfoundations of international commitment decisions: Creating joint opportunity meanings
Mikael Eriksson, Esther Tippmann
Despite a vast body of theory on internationalization processes, little is known about the microfoundations of how firms deal with internal groups' diverse views when trying to make international commitment decisions. Drawing on the concept of opportunity formation and a detailed case study, we develop a model that shows how, under the condition of diverse internal meanings, firms can make an international commitment decision by creating "joint opportunity meanings." We show how imagination plays an essential role in achieving this decision. Our study contributes to global strategy in multiple ways, including detailing some microfoundations of internationalization process theory, assessing group-level dynamics in global strategy decision-making, and advancing insights into the relationship between opportunity formation and imagination.
Are foreign-born CEOs held to a higher performance standard? The role of national origin in CEO dismissals
Yannick Thams, Marketa Rickley
Foreign-born chief executive officers (CEOs) are increasingly common in US corporations. However, little is known about whether they are held to the same performance standard as native-born CEOs. We examine whether CEO national origin moderates the relationship between firm performance and CEO dismissal. Drawing on social identity and attribution theories, we argue that CEO foreignness becomes more salient when firm performance is poor, increasing foreign-born CEOs' dismissal likelihood. Using a large sample of US firms, we find that at low levels of performance, the dismissal probability for foreign-born CEOs is 15.96% compared to 4.02% for native-born CEOs. While the increase in foreign-born CEOs in US corporations may reflect the declining importance of national origin for C-suite appointments, boards' evaluations of these "elite migrants" may be biased.
Scarce resources or damaged goods? On the legitimacy of laid-off workers following MNC failure
Kristina Vaarst Andersen, Mark Lorenzen, Agnieszka Urszula Nowinska
We contribute to theorizing global human resource strategy by analyzing the mobility of workers laid off due to the failure of a MNC employer. The job opportunities of laid-off workers are affected by their industry legitimacy. Focusing on scarce specialized workers, we propose that prospective MNC employers share an interest in retaining such workers' legitimacy. However, in the light of organizational failure, they may suffer from cross-border legitimacy loss conditioned by their former employer's MNC structure-specifically, their former organizational units or geographical locations. We present an illustrative case study of traders laid off by a spectacular bankruptcy in the global bunker industry. This inspires a discussion of how MNC top management can manipulate worker legitimacy following an organizational failure.
A perspective on three trade-offs of blockchain technology for the global strategy of the MNC
Tuuli Hakkarainen, Anatoli Colicev, Torben Pedersen
New technology plays a key role in shaping the global strategy of the MNC. We propose a perspective on how and why a novel technological development-blockchain technology-and its relevant applications affect the global strategy of the MNC. We focus on the trade-offs associated with cryptocurrencies, smart contracts, and blockchain data, and provide several real-world examples. While cryptocurrencies could lower financial costs and broaden consumers' payment options, they require new investments in cybersecurity and payment infrastructure. Smart contracts could increase trust in collaboration due to their automated, transparent, and inflexible rules, but their rigidity can harm collaboration. Finally, while blockchain data can enhance the MNC's analytics capabilities, it can also jeopardize consumer privacy.
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Grazia Santangelo
Professor
Copenhagen Business School
Copenhagen
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