Abstract

It has been recognized that previous experiences can provide different types of feedback. However, it has not been systematically explored why firms are more likely to learn effectively from certain types of experience than others. From a feedback-based learning perspective, we argue that it is useful not only to focus on feedback valence (success or failure experiences) but also to examine feedback saliency (the magnitude of the experience’s influence). Based on a sample of acquisitions by U.S. firms, our results indicate that a firm’s success experience drives up the premium that it pays for a subsequent acquisition, whereas a failure experience reduces this subsequent premium. Moreover, we find that the magnitude of the effects of the four types of experiences—small failure, big failure, small success, and big success—does not follow a symmetrical pattern of inverse effects.

Keyword

acquisition experience ;  acquisition premium ;  feedback-based learning ;  feedback saliency ;  feedback valence

Abstract

This case deals with a Chinese startup, Testin, forging partnerships with multiple large multinational corporations (“MNCs” in short, e.g., Microsoft, IBM, ARM, Intel). In order to help developers economize the time spent on quality assurance (QA), Testin was founded by Jun Wang with six of his former colleagues working at Pica Corporation in June 2011. In the past years, Testin had served over 800,000 app developers by conducting more than 150 million quality and security tests on over 2.5 million mobile apps through its automated Cloud Testin (云测) service supported by its testing labs and its Crowd Testin service for solving further problems by part-time qualified testers. It had received several rounds of financing totaling over USD 80 million. Many Chinese Internet companies tried to acquire Testin, and a well-known multinational company asked Testin to sign an exclusive service contract. Wang and his partners resisted such offers and were determined that Testin should maintain neutrality. Thinking about the five-year old enterprise, Wang wondered how to ensure Testin could “stay hungry and stay foolish”. A striking feature of these relationships discussed in this case is that the venture is based in an emerging market context (China) whereas several of the key large corporate partners are headquartered in advanced markets. Thus the partnerships being forged are arguably between non-traditional allies.

Keyword

New Startup ;  multinational corporations (MNCs) ;  partnership ;  Technology-Based Entrepreneurship ;  Emerging/Developing Market ;  China

Abstract

This case describes the process of entering the Chinese market undertaken by Zotter Chocolate, an Austrian chocolate producer. There are several things that make this company stand out: it is a small, family-run entrepreneurial firm from Austria which makes a wide range of unconventional flavours of chocolate. It prides itself on being organic and fair trade, and has attracted a number of loyal customers and visitors to its “chocolate factory” in its headquarters located in Bergl, Austria. After successfully entering the German market, an “obvious” target for a firm from Austria, the founder, Josef Zotter, and his family considered where to go next in 2010. After comparing the US and Chinese chocolate markets, Zotter Chocolate selected China as its first major non-European market. The case introduces how Zotter sought out a local partner in Shanghai, and decided to enter the market with an “experience” offering in its first chocolate factory outside its home market, overseen by the founder's daughter Julia. Their innovations and learning process are also presented in this case. The case ends with Julia's key concerns about Zotter China's next step when she had to leave China for the headquarters of Zotter Chocolate in Austria in August 2017.

Keyword

Market Access ;  China Market ;  Innovation ;  Globalization ;  Family Business ;  International Entrepreneurship

Abstract

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Abstract

Having established their first overseas operation, the next big challenge for many emerging economy multinational enterprises (EMNEs) is to align their HRs with their strategic ambition. Their lack of internationally experienced talent has become a major obstacle to strategy implementation: they need to fill leadership roles with international responsibility based abroad and at home, and they need to develop talent for future international leadership roles. The key challenge for catch-up strategies thus is to attract, develop, and retain talents who can lead international operations. In this paper, we develop a research agenda on strategic management and HRM in EMNEs that aims to explain the obstacles EMNEs face and facilitates the development of better talent management practice. In particular, we propose to integrate strategic management and HRM perspectives not only to advance theories but to enhance the relevance of both lines of scholarship to practice.

Keyword

Emerging economy multinationals ;  expatriates ;  human resource management ;  international management capabilities ;  strategic management ;  talent management

Abstract

Despite the clearly visible effects of analysts’ pressures on C-level executives in the popular press, there is limited evidence on their effects on marketing spending decisions. This study asks two questions. First, how do analysts’ pressures affect firms’ short-term marketing spending decisions? Based on a sample of 2706 firms during 1987–2009 compiled from Institutional Brokers Earning System, COMPUSTAT, and CRSP databases we find that firms cut marketing spending. Second, more importantly, we ask if firms which remained more committed in the past to marketing spending under analysts’ pressures have higher longer-term stock market performance. We find that the stock market performance of firms more committed to marketing spending under past periods of analysts’ pressures is higher. The findings are replicated for R&D spending and are robust across measures, controls, and methodologies. Consideration of two industry-based moderators, R&D spending and revenue growth, and one firm-based moderator, whether the firm is among the industry’s top four market share or other lower share firms, reveals that the findings are stronger for high R&D and growth industries and lower market share firms. One key implication is that top executives respond to analysts’ pressures by cutting marketing spending in the short term; however, if they can resist these pressures, longer-term stock market performance is higher.

Keyword

Analysts’ earnings expectations ;  Marketing spending ;  Stock market return ;  Value of marketing

Abstract

Firms and governments operate in broad networks in which the home government and its diplomatic service are a critical node – or a “referral point” – between firms and potential partners in foreign locations. Thus diplomatic relations between countries matter for the choice of foreign investment location. Using a network perspective, we argue that the extent to which good diplomatic relations induce firms to invest in friendly host countries depends on their political connections to home governments. Those with stronger ties to home governments can better access and leverage intergovernmental diplomatic connections, thus benefiting potentially from enhanced access to information, reduced political risks, and increased legitimacy. Such ability of politically connected firms is more useful where weak institutional impartiality in the host country inhibits neutral treatment of foreign investors. Empirically, using overseas investment location decisions by Chinese firms, we find that the types of home government ties (i.e., whether they are organizational or personal and whether those relationships are with central or local goverments) and the impartiality of host institutions are both important contingencies affecting firms’ utilization of diplomatic relations. We discuss the implications of our study to research on network theory, political ties, and internationalization of emerging market firms. 公司和政府在广阔的网络中运营,其中本国政府及其外交服务是公司和在外国地点的潜在合作伙伴之间的关键节点或“引荐点”。因此,国家之间的外交关系对外国投资地点的选择是重要的。使用网络视角,我们认为,良好的外交关系引导公司投资友好东道国的程度取决于它们与本国政府的政治联系。那些与本国政府有着更密切联系的公司可以更好地获得和利用政府间的外交关系,从而潜在地得益于增加的信息获取,减少的政治风险和增加的合法性。有政治关系公司的这种能力在脆弱的东道国制度公正性抑制对外国投资者的中立待遇的情况下更为有用。实证上,采用中国公司海外投资定位决策,我们发现,本国政府关系的类型(无论是组织上的还是个人的,无论是中央的还是地方政府的)和东道国制度公正性都是影响企业利用外交关系的重要的偶发事件。我们讨论我们的研究对网络理论,政治关系以及新兴市场公司国际化研究的启示。

Keyword

Chinese multinationals ;  diplomatic relations ;  foreign location choice ;  network theory ;  political ties ;  state-controlled firms

Abstract

In this conceptual paper, we ask: How does the larger cultural context influence the way that groups of managers deal with paradoxical tensions in strategy episodes? We focus on three sources of tension in the conduct and design of strategy episodes – inclusion, formality and coordination/communication. We argue that in each case, cultural influences affect the extent to which these facets of strategy episodes are dealt with using a paradox lens. Specifically, in Western cultural contexts, managers tend to have a lower proclivity for adopting a paradoxical frame resulting in a separation of tensions in strategy episodes; by contrast, managers in Eastern cultural contexts such as China more readily adopt a paradoxical frame, and embrace tensions in strategy episodes. We suggest that, over time, non-paradoxical thinking likely promotes inter-episode plurality and planned emergence, while paradoxical thinking tends to foster intra-episode plurality and emergent planning. We contribute to a deeper understanding of strategy episodes as culturally embedded practices.

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Recent research suggests that subnational regions can explain the variation in foreign subsidiary performance. However, most studies either treat subnational regions as a whole or focus on formal institutions at the subnational level. This study examines how general social trust, an important dimension of informal institutions at the subnational level, affects foreign subsidiary performance. In a sample of 17,886 foreign investments in China in 2012, we find that the level of social trust in subnational regions has a positive effect on the performance of foreign subsidiaries, reducing the liability of outsidership faced by foreign subsidiaries. Our results also show that this positive effect is contingent on local embeddedness of the foreign subsidiaries. Our findings highlight the importance of incorporating informal institutions at the subnational level in examining strategies and strategy outcomes.

Keyword

hierarchical linear modeling ;  informal institutions ;  institutional theory ;  liability of outsidership ;  social trust ;  subsidiary performance

Abstract

Pressure to meet or beat earnings forecasts from securities analysts leads managers of publicly traded firms to improve short-term earnings by cutting strategic investments at the expense of long-term competitiveness. Drawing on the behavioral theory of the firm, we explore how different dimensions of performance feedback moderate managerial responses to this pressure. We find that the negative impact of earnings pressure on a firm's strategic investments is strengthened when it receives performance feedback from lower stock returns but is weakened when the firm receives performance feedback from lower sales growth. When both dimensions of performance feedback are present, we find that sales growth has a stronger moderating effect. Our paper contributes to the developing literature on multiple dimensions of performance feedback by demonstrating how stock price and sales growth differentially influence managerial responses to earnings pressure. From a management standpoint, we highlight the possibility that performance feedback influences managerial responses to earnings pressures in ways that managers may not fully consider.

Keyword

earnings pressure ;  multiple performance feedback ;  securities analysts ;  strategic investments