International Business

Current research projects

We summarise below some of the research projects currently being undertaken by members of the IB research group. Further details may be obtained from the staff concerned.

Cross-Border Knowledge Transfer in MNCs

Research by Norifumi Kawai aims to explore and examine the relative importance of vertical and horizontal knowledge transfer by drawing upon the global integration-local responsiveness framework. Using the data collected from 118 European subsidiaries of major Japanese multinational corporations between 2014 and 2015, this projects investigates how and to what extent the usage of transferred knowledge from peer subsidiaries and headquarters varies according to corporate strategy. The methodological novelty of this study lies in a mix of qualitative and quantitative approaches.

Principal Investigator: Norifumi Kawai

The Antecedents & Consequences of Green Innovation

This project by Norifumi Kawai seeks provide a theoretical understanding of the mechanism connecting stakeholder pressures (regulatory, societal, market) to two types of green innovation through the adoption of environmental management systems (EMS) in overseas subsidiaries of multinational corporations (MNCs). The approach combines a synthesis of stakeholder theory and resource dependency theory. The empirical analysis is based on cross-sectional data collected in 2013 from 109 European manufacturing subsidiaries of Japanese multinational corporations. This work attempts to test the aforementioned model through using partial least squares multivariate analysis.

Funder: The Zengin Foundation for Studies on Economics and Finance

Principal Investigator: Norifumi Kawai
Collaborators: Professor Antonella Zucchella, Professor Roger Strange

The Governance of the Global Factory

Recent years have witnessed major changes in the global location of economic activity, with the emerging economies assuming greater shares relative to the advanced economies. The shifts in the global location of economic activity have been dramatic and have excited much interest both in policy circles and in the academic literature. These developments have led many authors to refer to the idea of the global factory, but in different ways (see, for example, Gereffi, 1989; Grunwald & Flamm, 1985; Buckley & Ghauri, 2004). Each of these three models of the global factory envisages a greater global dispersion of economic activity, but each makes different assumptions about who maintains control over these dispersed activities – or, to put it another way, each makes different assumptions about the governance of the global factory (Buckley & Strange, 2015). Have the changes in the global location of economic activity come about primarily through the growth of locally-owned firms in the emerging economies, or through increased FDI by MNEs from the advanced economies, or though the proliferation of outsourcing arrangements coordinated by lead firms in the advanced economies? These control/governance issues have profound implications for the capture of the profits/rents earned in global value chains (GVCs), and hence for the global distribution of income. These issues are addressed in the ongoing research of Roger Strange and Peter Buckley.

 Co-investigators: Roger Strange & Peter Buckley (Leeds)

The Dynamics of Outsourcing

Various theoretical explanations have been put forward in the extant literature for this growth in outsourcing activities. A common feature of these explanations is that outsourcing is the preferred organizational form for many lead firms because external suppliers are somehow able to provide the requisite goods and services at lower cost than the firm is able to do internally - i.e. it is more efficient to externalize than to internalize production. But such explanations neglect the power asymmetries between the lead firms and their independent suppliers in outsourcing relationships. Lead firms are able to control the interface with the final customers through a variety of isolating mechanisms (Rumelt, 1984; 1987) such as branding, product customization, and/or preferential access, but the efficacy of many isolating mechanisms will dissipate over time as competitors emerge to imitate successful strategies and products, and as resource and capability asymmetries erode. There is thus an inherent dynamic to the outsourcing relationship (Denicolai et al, 2015), and these dynamics are the subject of this research by Roger Strange and Norifumi Kawai at Sussex together with colleagues at the University of Pavia in Italy.

Principal investigators: Roger Strange  & Antonella Zucchella (Pavia)
Co-investigators: Stefano Denicolai (Pavia), Birgit Hagen (Pavia), Norifumi Kawai (Sussex), Giovanna Magnani (Pavia), Antonio Majocchi (Pavia)

MNE Subsidiary Location Choices

Many national, regional, and municipal governments are keen to attract inward foreign direct investment (FDI) for the perceived benefits in brings to their local economies. Foreign multinational enterprises (MNEs) typically weigh up the relative merits of alternative locations when making their FDI decisions, and various empirical studies have established that such MNEs take multiple factors into account including inter alia labour costs, infrastructure, and local market size. The majority of these studies, however, treat the alternative locations as distinct places isolated in space, yet the attractiveness of any location also depends upon its distance from, or its proximity to, other potential locations. Building on earlier work on FDI in China (see Blanc-Brude et al, 2014), this project by Roger Strange and colleagues focuses on how spatial dependence between alternative locations affect the FDI location decisions of firms within Central and Eastern Europe, and how this dependence may be modelled be reference to different specifications of geographic, cultural, administrative and economic distance.

Principal investigators: Roger Strange, Graham Cookson (Surrey) and Antonio Majocchi (Pavia)

The Foreign Direct Investment location decision: Distance and the effects of spatial dependence

Many national, regional, and municipal governments are keen to attract inward foreign direct investment (FDI) for the perceived benefits it brings to their local economies. Foreign multinational enterprises (MNEs) typically calculate the relative merits of different locations when making their FDI decisions, and various  studies have established that such MNEs take multiple factors into account including inter alia labour costs, infrastructure, and local market size.

The study
In this study by Prof Roger Strange et al, the authors consider the effects of different specifications of geographic, administrative and economic distance. The majority of previous studies have treated different locations as distinct places isolated in space, yet the attractiveness of any location also depends upon its distance from, or its proximity to, other potential locations. Distance may be conceptualized in many ways, and this study considers the impact of various conceptions of distance upon the FDI location decisions of MNEs.

Methodology
The data for the study came from China, a country that has been the recipient of substantial FDI inflows. FDI data were collected for 224 cities over the four-year period 2004-07, and the spatial distribution of the FDI within China was modelled using the well-established determinants (such as labour costs, infrastructure, and market size) but also incorporating various measures of the geographic, administrative and economic distances between the cities.

Key Findings
This study highlights the importance of the distance between alternative locations and provides rationales for how and why different concepts of distance should have an impact. The policy implications of the study are twofold:

  • The authors confirmed that foreign MNEs, when considering the sub-national location of their investments within a host country, are influenced by a range of factors. City governments intent on attracting inward FDI might therefore consider additional expenditure on measures to enhance these ‘attractors’ – whilst giving due consideration to whether or not the likely benefits of such policies outweigh the costs incurred.
  • The research emphasises that such expenditure is more likely to attract FDI if the city is economically (and administratively) close to alternative city locations. In contrast, expenditure on improving the ‘FDI attractors’ may fail to yield additional FDI inflows if the city is economically distant from other alternative city locations.

Access the paper
Blanc-Brude, F. ; Cookson, G. ; Piesse, J. ; Strange, R (2014) The FDI location decision: Distance and the effects of spatial dependence International Business Review, Volume 23, Issue 4, pp. 797–810