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Abstract:
This paper examines why and how corporate governance practices are implemented across countries. We look at the worldwide development and adoption of codes of good governance, a set of best practice recommendations regarding the behavior and structure of the board of directors. We find that codes of good governance serve to compensate for deficiencies in the legal system covering shareholders' rights. The results also show that size of capital markets, degree of government intervention, and percentage of foreign investors in the stock market are predictors of the existence of codes of corporate governance, while country openness has no significant effect.

corporate governance, boards of directors, legal system, international practices.

Abstract:
We study the causes of the difficulties faced by firms when they internationalize in search of new markets. We build on the resource-based theory to argue that the difficulties in internationalization can be separated into three main sets based on their relationship to advantage: loss of an advantage of resources transferred abroad, creation of a disadvantage by resources transferred abroad, or lack of complementary resources required to operate abroad. In each set, we further distinguish difficulties that are specific to a firm from those that are common to a set of firms. We argue that only few of the resulting types of difficulties of internationalization are exclusive to the cross-border expansion, and propose solutions that address the root cause of each type.

cost of doing business abroad, liability of foreignness, internationalization, multinational enterprises, resource-based theory

Abstract:
I study the multinationalization - the decision to establish foreign direct investment (FDI) - of developing country firms, in particular Latin American ones or Multilatinas. Despite a long exporting tradition, many firms in Latin American have only recently become multinational enterprises (MNEs). The analysis of case studies reveals three insights. First, Multilatinas take a long time to become MNEs, reflecting the additional challenges and need for sophisticated advantages for establishing FDI. Second, Multilatinas are induced to become MNEs by the transformation of the conditions of operation in the home country that follows the process of economic reform. These induce firms to upgrade their competitiveness. As a result, they can overcome the difficulties of establishing FDI and become MNEs. Third, Multilatinas follow four alternative strategies for selecting countries where to establish FDI first. The strategies are explained by the balancing of the ease of overcoming difficulties and the advantages derived from foreign operations.

Multinational enterprises, Multilatinas, developing country, internationalization process, incremental internationalization, eclectic paradigm, Latin America

Abstract:
This paper examines the impact of corruption on foreign direct investment (FDI). It argues that corruption results not only in a reduction in FDI, but also in a change in the composition of country of origin of FDI. It presents two key findings. First, corruption results in relatively lower FDI from countries that have signed the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. This suggests that laws against bribery abroad may act as a deterrent against engaging in corruption in foreign countries. Second, corruption results in relatively higher FDI from countries with high levels of corruption. This suggests that investors that have been exposed to bribery at home may not be deterred by corruption abroad and instead seek countries where corruption is prevalent.

corruption, foreign direct investment, international management

Abstract:
This article studies the relative impact on product innovation of R&D collaborations with universities, suppliers, customers, and competitors. It argues that each type of R&D collaboration differs in terms of the breadth of new knowledge provided to the firm and in the ease of access of this new knowledge, resulting in a different impact on product innovation. As a result, it proposes that R&D collaborations with universities are likely to have the highest impact on product innovation, followed by R&D collaborations with suppliers, customers and, finally, competitors. The tests find that R&D collaborations with suppliers have the highest positive impact on product innovation, followed by collaborations with universities. Surprisingly, R&D collaborations with customers do not appear to affect product innovation, and collaborations with competitors appear to harm it. Moreover, the positive influence of R&D collaborations with universities and suppliers is sustained over the long term, but the negative influence of R&D collaborations with competitors is, fortunately, short-lived. These findings indicate that ease of knowledge access, rather than breadth of knowledge, appears to drive the success of R&D collaborations for product innovation.

R&D collaboration, product innovation, knowledge breadth, knowledge access, knowledge-based view

Abstract:
We analyze the advantages and disadvantages of developing-country multinational enterprises (MNEs) in comparison to developed-country MNEs. Developing-country MNEs tend to be less competitive than developed country counterparts, partly because they suffer the disadvantage of operating in home countries with underdeveloped institutions. We argue that this disadvantage can become an advantage when both types of MNEs operate in countries with difficult governance conditions because developing-country MNEs are used to operating in such conditions. The empirical analysis shows that although developing-country MNEs rarely appear among the largest MNEs in the world, they are more prevalent among the largest foreign firms in the least developed countries (LDCs), especially in LDCs with poorer regulatory quality and lower control of corruption.

multinational enterprises, competitive advantage, competitive disadvantage, least developed countries, governance, institutions

Abstract:
I analyze the effectiveness of laws against bribery abroad in inducing foreign investors to reduce their investment in corrupt countries. The laws are designed to reduce the supply of bribes by foreign investors by increasing the costs of bribing abroad. Such increase in costs will make foreign investors more sensitive to corruption and induce them to reduce their investments in corrupt countries. However, I argue that these laws need to be implemented and coordinated in multiple countries to become effective. Otherwise, investors in a country will have incentives to bypass them when competitors from other countries are not bound by similar legal constrains. The empirical analysis shows that investors from countries that implemented the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transaction of 1997 reduced their investments in corrupt countries. Investors from the US, which were bound by the Foreign Corrupt Practices Act of 1977, also reduced investments in corrupt countries, but only after the OECD Anti-Bribery Convention was in place.

corruption, foreign direct investment, law, institutions

Abstract:
The paper analyzes the internationalization process of service firms. The analysis of the internationalization of Banco Santander illustrates three arguments. First, the idea that the distance between home and host country determines the selection of countries where to invest varies with the type of distance analyzed (cultural, political, geographic, or economic). Second, the influence of distances on the internationalization process of service firms differs from the influence on industrial firms. Third, the impact of the distances on the process of internationalization diminishes with the expansion of the firm in multiple countries.

internationalization process, service firms, distance, Banco Santander

Abstract:
Corruption has a negative impact on foreign direct investment (FDI). However, transition economies show high levels of corruption and also high levels of FDI. I argue that it is not the level but rather the type of corruption that affects FDI in transition economies. Pervasive corruption, or corruption that is widely present, acts as a deterrent to FDI because it increases the known costs of investing, while arbitrary corruption, or corruption that is uncertain, does not have such a deterring influence because it becomes part of the uncertainty of operating in transition economies. In transition economies, investors prefer to deal with an unknown evil - the arbitrariness of corruption - rather than a known one - the pervasiveness of corruption.

corruption, foreign direct investment, institutions, transition economies

Abstract:
This paper studies the sequence of value-added activities in the multinationalization of firms from developing countries. Analysis of twenty Latin American multinational firms, or Multilatinas, reveals three alternative sequences: start multinationalizing with marketing subsidiaries in all countries, start multinationalizing with production subsidies in all countries, or start multinationalizing with marketing subsidiaries in some countries and production subsidiaries in others. These alternative sequences are explained through the integration and extension of arguments from the incremental model of internationalization and its discussion of difficulties, and the eclectic paradigm of foreign production and its discussion of advantages. I argue that firms that benefit from a location advantage in the country of origin are more likely to start multinationalizing using marketing subsidiaries, firms that benefit from a location advantage in the host country are more likely to start multinationalizing using production subsidiaries, and firms that face difficulties in the transfer of products across countries are more likely to start multinationalizing using production subsidiaries.

sales subsidiaries, production subsidiaries, multinationalization, foreign direct investment, developing countries, multinational enterprises

Abstract:
We extend the literature on the difficulties of internationalization by discussing their types and specific consequences associated with each type. The types of difficulties can be separated into three main groups based on their cause and specificity: the inabilities to transfer advantage and to create value, the disadvantages of transfer and of foreignness, and the liabilities of expansion, newness, foreignness, and infrastructure. We discuss how each type has specific consequences associated with it, and suggest strategies for identifying them.

difficulties in internationalization; cost of doing business abroad; liability of foreignness; internationalization; multinational enterprises

Abstract:
We clarify what business groups are and analyze their various types. We first distinguish business groups from other types of firm networks based on the strategic relationships among companies; business groups are defined as those networks that exhibit unrelated diversification under common ownership. We then separate business groups into three types based on their ownership: family-owned, widely-held, and state-owned. We argue that each type has different agency costs and diversification logics. As a result of these differences, their performance varies, with family-owned business groups outperforming widely-held ones, and these in turn outperforming state-owned business groups.

business groups, diversification, family-ownership, theory of the firm

Abstract:
Multinational firms from Latin America, or Multilatinas, have recently emerged among the largest multinational firms in the World. This paper describes the phenomenon and argues that the emergence of Multilatinas is a consequence of the process of economic liberalization of the decade of the eighties and nineties. The reduction in the protection that Latin American firms had during the period of import substitution and the increase in foreign competition that accompanies the economic liberalization have force Latin American firms to improve their levels of competitiveness. This improvement has enabled them to overcome the difficulties in internationalization and become Multilatinas.

Multilatinas, multinational firms, Latin America, economic liberalization, foreign direct investment

Abstract:
This chapter analyzes the ways in which firms can use their interactions with customers to generate innovations and better foresight future trends in the marketplace. We discuss how the interaction with customers varies depending on the type of innovation the firm is aiming to achieve: Product improvement, product versioning, new product development, and new product discovery. Each of them has distinct knowledge creation challenges in terms of the identification, transfer, and integration of customer knowledge to create innovations that fulfill their needs and preferences.

Innovation, customers, knowledge, foresight

Abstract:
We analyze the influence of a regional economic integration agreement (REIA) on a firm's investments in research and development (R&D). A country's entry into a REIA creates two competing influences on the firm's R&D investments. On the one hand, increased competition in product markets after the REIA would induce the firm to invest in internal R&D to improve its distinctive technological competitiveness. On the other hand, better access to sources of inputs in factor markets after the REIA would induce the firm to purchase external R&D because it can outsource technology more easily. Surprisingly, the empirical analysis shows that the REIA's impact on R&D investment is driven primarily by product markets rather than by factor markets. After the REIA, product markets induce firms not only to invest more in internal R&D but also purchase more external R&D. In contrast, after the REIA factor markets have limited influence on internal or external R&D investments.

R&D, regional economic integration, product markets, factor markets

Abstract:
We extend agency theory to propose that structural reform positively impacts firm profitability in developing countries because the improvements in external monitoring that accompany structural reform decrease the agency costs faced by firms. However, we also argue that not all firms benefit equally from structural reform because their agency problems are impacted differently. Hence, we propose that structural reform results in higher improvements in profitability for domestic state-owned and domestic private firms than it does for subsidiaries of foreign firms. Results of the analyses of the largest 500 firms in Latin America support the arguments, suggesting that, contrary to the views of many critics of globalization, domestic firms are the main beneficiaries of structural reform in developing countries.

agency theory, structural reform, firm profitability, state-owned firms, private firms

Abstract:
Despite the growing involvement of multinational enterprises (MNEs) in foreign-based research and development (R&D), there has been little research comparing subsidiaries of foreign MNEs to domestic firms. Subsidiaries of foreign MNEs enjoy advantages that help them compete against domestic firms. However, when deciding on R&D investments, these advantages exert competing influences on their R&D investment decision. On the one hand, better access to and transfer of knowledge and technologies from the MNE and other subsidiaries and centers of excellence may encourage the subsidiary of a foreign MNE to invest less in R&D relative to a domestic firm. On the other hand, better access to sources of capital through the MNE and other subsidiaries may induce the subsidiary to invest more in R&D in comparison to domestic firms. We find that subsidiaries of foreign MNEs invest less in total R&D than domestic firms. The reason is that they invest less in external R&D though similarly in internal R&D investments in comparison to domestic firms. These findings support the notion that the transfer of technology and knowledge from other parts of the MNE acts as a substitute for the purchase of external R&D, but that a subsidiary of a foreign MNE must nevertheless invest internally in R&D to complement the technology transferred from other parts of the MNE.

R&D investment, subsidiaries of foreign firms, domestic firms, multinational firms

Abstract:
This paper provides a critical comparative analysis of corporate governance mechanisms in market-oriented (Anglo-Saxon) and large shareholder-oriented (Continental European) systems of corporate governance. Deficiencies in shareholder protection in the legal systems of both corporate governance systems have been addressed through the use of codes of good governance, a set of norms that regulate the behaviour and structure of the board of directors. However, the lower enforceability of norms in Continental Europe limits the applicability of such codes. Therefore, we argue that in Continental Europe, rather than promoting codes of good governance, it is necessary to expand market control mechanisms to facilitate the maximisation of firm value.

Abstract:
We extend the knowledge-based view by providing an explanation of how firms develop the capability to create knowledge. We take the view that firms are distributed knowledge systems composed of individuals who embody knowledge, and theoretically identify and empirically test the existence and effectiveness of two strategies - organization and project team - that promote their interactions to develop this capability. On the one hand, building on what we call the organization-level innovation literature, we identify the organization strategy, which suggests investment in organization-level integrative management practices to facilitate interactions to create knowledge among individuals situated in different parts of the system, independently of when a knowledge-creation task is established and individuals are organized to create knowledge. On the other hand, building on what we call the team-level innovation literature, we identify the project team strategy, which suggests investment in project team-level integrative management practices to facilitate interactions to create knowledge among individuals once a knowledge-creation task is defined and individuals are placed into teams to create knowledge. The two strategies are substitute approaches for the development of the capability, although the organization strategy appears to better predict outcomes of the capability. However, this approach might be more costly, so not all managers will choose to follow it.

Abstract:
Research Question/Issue: We review the recent developments in the area of codes of good governance, a set of best practice recommendations regarding the behavior and structure of the board of directors.

Research Findings/Results: Our review of the literature on codes of good governance highlights their rapid spread around the world and how academic research has lagged behind in analyzing this topic. Despite the criticism that the codes' voluntary nature limits their ability to improve governance practices, codes of good governance appear to have generally improved the governance of countries that have adopted them, although there is need for additional reforms.

Theoretical Implications: Unfortunately, research on codes of good governance has developed in insolation with little cross-fertilization across the different disciplines.We propose a multi-level framework to discuss three main topics that have emerged within the codes literature: the motivations behind the diffusion of codes across countries and its implications for convergence of corporate governance practices; the content of the codes and their comply or explain dimension; and the relationship between code compliance and firm performance. We conclude by proposing four areas of future research.

Practitical Implications: Code development, adoption, and compliance are directly related to issues surrounding the governance of the firm, and in particular to all the interactions that a director has inside and outside the firm. Codes are regulations that emerge from policy-making negotiations between multiple stakeholders, such as the state (via the stock market regulators) and the investors.

Abstract:
We analyze the impact of structural reform on firm exports. We argue that structural reform generates new opportunities and reduces transaction costs, inducing firms to improve their efficiency and competitiveness to international levels and, therefore, helps them to export. However, we propose that not all companies benefit equally, because firms differ in how structural reform affects their competitiveness. Thus, we argue that subsidiaries of foreign firms are the main beneficiaries of structural reform, followed by domestic private firms, and finally by domestic state-owned firms. We test these arguments on a sample of the largest companies in Latin America for the period 1990-2005. We find that structural reform induces firms in general to export. Furthermore, it has the highest positive impact on the exports of subsidiaries of foreign firms, followed by domestic private firms. Surprisingly, we find that structural reform has a negative impact on the exports of domestic state-owned firms.

The paper contributes to a better understanding of how changes in institutions affect firm behavior by explaining the mechanisms that link structural reform to firm exports and how these vary across firms. Moreover, it counters the arguments of numerous detractors of globalization who claim that foreign firms are the sole beneficiaries of structural reform by indicating that not only foreign but also domestic private firms benefit from structural reform. The paper also highlights the need to discuss who benefits from structural reform rather than whether structural reform is beneficial or detrimental.

Structural reform, firm exports, subsidiaries of foreign firms, domestic private firms, domestic