Does ownership structure of emerging-market firms affect their outward FDI? The case of the Indian automotive and pharmaceutical sectors

Journal of International Business Studies - Tập 41 - Trang 437-450 - 2009
Sumon Kumar Bhaumik1, Nigel Driffield2, Sarmistha Pal1
1School of Social Sciences, Brunel University, UK
2Aston Business School, Aston University, UK

Tóm tắt

This paper examines the impact of ownership structures of emerging-market firms, which are shaped by local institutions, on the decision of these firms to undertake outward FDI. Our results suggest that family firms and firms with concentrated ownerships (both ubiquitous in emerging markets) are less likely to invest overseas, and that strategic equity holding by foreign investors facilitates outward FDI. We conclude that organisational forms such as family firms, which are optimal outcomes of institutions prevailing in emerging markets, may be suboptimal in a changing business environment in which outward FDI is necessary for access to resources and markets.

Tài liệu tham khảo

Amihud, Y., & Lev, B. 1981. Risk reduction as a managerial motive for conglomerate mergers. Bell Journal of Economics, 12 (2): 605–617. Andres, C. 2008. Large shareholders and firm performance: An empirical examination of founding-family ownership. Journal of Corporate Finance, 14 (4): 431–445. Athreye, S., & Godley, A. 2009. Internationalization and technological leapfrogging in the pharmaceutical industry. Industrial and Corporate Change, 18 (2): 295–323. Athreye, S., & Kapur, S. 2009. Introduction: The internationalization of Chinese and Indian firms: Trends, motivation and strategy. Industrial and Corporate Change, 18 (2): 209–221. Athukorala, P., Jayasuriya, S., & Oczkowski, E. 1995. Multinational firms and export performance in developing countries: Some analytical issues and new empirical evidence. Journal of Development Economics, 46 (1): 109–122. Baek, J.-S., Kang, J. K., & Lee, I. 2006. Business groups and tunnelling: Evidence from private securities offerings by Korean Chaebols. Journal of Finance, 61 (5): 2415–2449. Bajaj, M., Chan, Y.-S., & Dasgupta, S. 1998. The relationship between ownership, financing decisions and firm performance: A signalling model. International Economic Review, 39 (3): 723–744. Banga, R. 2007. The export-diversifying impact of Japanese and US foreign direct investments in the Indian manufacturing sector. Journal of International Business Studies, 37 (4): 558–568. Barney, J. 1986. Organizational culture: Can it be a source of sustained competitive advantage? Academy of Management Review, 11 (3): 656–665. Barney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17 (1): 99–120. Barney, J., Wright, M., & Ketchen, D. J. 2001. The resource-based view of the firm: Ten years after 1991. Journal of Management, 27 (6): 625–641. Bertrand, M., Mehta, P., & Mullainathan, S. 2002. Ferreting out tunneling: An application to Indian business groups. Quarterly Journal of Economics, 117 (1): 121–148. Buckley, P. J., & Casson, M. C. 1976. The future of the multinational enterprise. London: Macmillan. Cho, M. H. 1998. Ownership structure, investment, and the corporate value: An empirical analysis. Journal of Financial Economics, 47 (1): 103–121. Claessens, S., Djankov, S., Fan, J. P. H., & Lang, L. H. P. 2002. Disentangling the incentive and entrenchment effects of large shareholdings. Journal of Finance, 57 (6): 2471–2741. Daily, C. M., & Dollinger, M. J. 1992. An empirical examination of ownership structure in family and professionally managed firms. Family Business Review, 5 (2): 117–136. Dewatripont, M., & Tirole, J. 1994. A theory of debt and equity: Diversity of securities and manager-shareholder congruence. Quarterly Journal of Economics, 109 (4): 1027–1054. Dixit, A. K., & Pindyck, R. S. 1994. Investment under uncertainty. Princeton, NJ: Princeton University Press. Donckels, R., & Fröhlich, E. 1991. Are family businesses really different? European experiences from STRATOS. Family Business Review, 4 (2): 149–160. Doukas, J. A., & Lang, L. H. P. 2003. Foreign direct investment, diversification and firm performance. Journal of International Business Studies, 34 (2): 153–172. Douma, S., George, R., & Kabir, R. 2006. Foreign and domestic ownership, business groups, and firm performance: Evidence from a large emerging market. Strategic Management Journal, 27 (7): 637–657. Dreux, D. R. 1990. Financing family business: Alternatives to selling out or going public. Family Business Review, 3 (3): 225–243. Driffield, N., & Munday, M. 2000. Industrial performance, agglomeration, and foreign manufacturing investment in the UK. Journal of International Business Studies, 31 (1): 21–37. Driffield, N., Mahambare, V., & Pal, S. 2007. How does ownership structure affect capital structure and firm value? Recent evidence from East Asia. Economics of Transition, 15 (3): 535–573. Dunning, J. H. 1986. The investment cycle revisited. Weltwirtschaftliches Archiv, 122 (4): 667–676. Dunning, J. H. 1992. Multinational enterprises and the global economy. London: Prentice Hall. Dunning, J. H., & Lundan, S. M. 2008. Institutions and the OLI paradigm of the multinational enterprise. Asia Pacific Journal of Management, 25 (4): 373–393. Elango, B., & Pattnaik, P. 2007. Building capabilities for international operations through networks: A study of Indian firms. Journal of International Business Studies, 38 (4): 541–555. Gallo, M. A., & Sveen, J. 1991. Internationalizing the family business: Facilitating and restraining factors. Family Business Review, 4 (2): 181–190. Garcia-Marco, T., & Robles-Fernandez, M. D. 2008. Risk taking behavior and ownership in the banking industry: The Spanish evidence. Journal of Economics and Business, 60 (4): 332–354. Ge, G. L., & Ding, D. Z. 2008. A strategic analysis of surging Chinese manufacturers: The case of Galanz. Asia Pacific Journal of Management, 25 (4): 667–683. Goffee, R., & Scase, R. 1985. Proprietorial control in family firms: Some functions of “quasi-organic” management systems. Journal of Management Studies, 22 (1): 53–68. Government of India. 2006. Draft automotive mission plan. New Delhi: Ministry of Heavy Industries and Public Enterprises, Government of India. Grant, R. M. 1991. The resource-based theory of competitive advantage: Implications for strategy formulation. California Management Review, 33 (3): 114–135. Greene, W. 2007. The emergence of India's pharmaceutical industry and implications for the US generic drugs market, Working paper no. 2007-05-A, Office of Economics, US International Trade Commission, Washington, DC. Habbershon, T. J., & Williams, M. L. 1999. A resource-based framework for assessing the strategic advantages of family firms. Family Business Review, 12 (1): 1–22. Hennart, J.-F. 1982. A theory of multinational enterprise. Ann Arbor: University of Michigan Press. Heugens, P. P., van Essen, M., & van Oosterhout, J. H. 2009. Meta-analyzing ownership concentration and firm performance in Asia: Towards a more fine-grained understanding. Asia Pacific Journal of Management, 26(3): 481–512. Hill, C. W., & Snell, S. A. 1988. External control, corporate strategy, and firm performance in research-intensive industries. Strategic Management Journal, 9 (6): 577–590. Johanson, J., & Vahlne, J. E. 1977. The internationalization process of the firm: A model of knowledge development and increasing market commitments. Journal of International Business Studies, 8 (1): 23–32. Khanna, T., & Palepu, K. 1997. Why focused strategies might be wrong for emerging markets. Harvard Business Review, 75 (4): 41–51. KPMG. 2006. The Indian pharmaceutical industry: Collaboration for growth. London: KPMG. Lien, Y.-C., Piesse, J., Strange, R., & Filatotchev, I. 2005. The role of corporate governance in FDI decisions: Evidence from Taiwan. International Business Review, 14 (6): 739–763. Lippman, S. A., & Rumelt, R. P. 1982. Uncertain imitability: An analysis of interfirm differences in efficiency under competition. Bell Journal of Economics, 13 (2): 418–438. Mathews, J. A. 2006. Dragon multinationals: New players in 21st century globalisation. Asia Pacific Journal of Management, 23 (1): 5–27. Meyer, K. M., Estrin, S., Bhaumik, S. K., & Peng, M. 2009. Institutions, resources, and entry strategies in emerging economies. Strategic Management Journal, 30 (1): 61–80. Myers, S. C. 1984. The capital structure puzzle. Journal of Finance, 39 (3): 575–592. Nayyar, D. 2008. The internationalization of firms from India: Investment, mergers and acquisitions. Oxford Development Studies, 36 (1): 111–131. North, D. C. 2005. Understanding the process of economic change. Princeton, NJ: Princeton University Press. Peng, M. W., Wang, D. Y. L., & Jiang, Y. 2008. An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39 (5): 920–936. Poza, E. J., Alfred, T., & Maheshwari, A. 1997. Stakeholder perceptions of culture and management practices in family and family firms: A preliminary report. Family Business Review, 10 (2): 135–155. Pradhan, J. P. P., & Singh, N. 2008. Outward FDI and knowledge flows: A study of the Indian automotive sector, MPRA paper no. 12325, University of Munich. Ramamurti, R. 2009. What have we learned about EMNEs? In R. Ramamurti & J. V. Singh (Eds), Emerging multinationals from emerging markets. Cambridge: Cambridge University Press. Ramamurti, R., & Singh, J. V. 2009. Indian multinationals: Generic internationalization strategies. In R. Ramamurti & J. V. Singh (Eds), Emerging multinationals from emerging markets. Cambridge: Cambridge University Press. Ramaswamy, K., Li, M., & Veliyath, R. 2002. Variations in ownership behaviour and propensity to diversify: A study of the Indian corporate context. Strategic Management Journal, 23 (4): 345–358. Rugman, A. M. 1981. Inside the multinationals: The economics of internal markets. New York: Columbia University Press. Sarkar, J., & Sarkar, S. 2000. Large shareholder activism in corporate governance in developing countries: Evidence from India. International Review of Finance, 1 (3): 161–194. Smith, R. J., & Blundell, R. W. 1986. An exogeneity test for a simultaneous equation Tobit model with an application to labor supply. Econometrica, 54 (3): 679–685. Tsang, E. W. K. 2001. Internationalizing the family firm: A case study of a Chinese family business. Journal of Small Business Management, 39 (1): 88–94. Villalonga, B., & Amit, R. 2006. How do family ownership, control and management affect firm value? Journal of Financial Economics, 80 (2): 385–417. Yamakawa, Y., Peng, M. W., & Deeds, D. L. 2008. What drives new ventures to internationalize from emerging to developed economies? Entrepreneurship Theory and Practice, 32 (1): 59–82. Yang, X., Jiang, Y., Kang, R., & Ke, Y. 2009. A comparative analysis of the internationalization of Chinese and Japanese firms. Asia Pacific Journal of Management, 26 (1): 141–162. Yoshikawa, T., & McGuire, J. 2008. Change and continuity in Japanese corporate governance. Asia Pacific Journal of Management, 25 (1): 5–24. Young, M. N., Peng, M. W., Ahlstrom, D., Bruton, G. D., & Jiang, Y. 2008. Corporate governance in emerging economies: A review of the principal-principal perspective. Journal of Management Studies, 45 (1): 196–220. Zahra, S. A. 2003. Entrepreneurial risk taking in family firms. Family Business Review, 18 (1): 23–40. Zhang, J., & Ma, H. 2009. Adoption of professional management in Chinese family business: A multilevel analysis of impetuses and impediments. Asia Pacific Journal of Management, 26 (1): 119–139.