The AIB Executive Board approved a proposal to publish a special issue of JIBS in honor of its first 50 years. The Fiftieth Anniversary Issue was to be forward-looking in content, and would address as much as possible important, real-world challenges encountered by internationally operating firms. It is through studying such challenges that IB scholarship can make (or has already made) a true difference. Each paper in this Anniversary Issue has particular relevance to management and policy, and introduces new insight for better and bolder IB research in the years to come.
The Anniversary Issue includes: three Perspectives, four regular articles, two research notes, and a Point–Counterpoint initiative. The lead Perspective, authored by Li, Chen, Yi, Mao and Liao (2019), addresses the importance of a novel concept in international business (IB) theorizing: ecosystem-specific advantages. This concept is a critical addition to those already established. The concepts of firm-specific advantage (FSA) and country-specific advantage (CSA) have represented a cornerstone of modern multinational enterprise (MNE) theorizing for many decades. Scholars often deploy these concepts in their research and teaching through using some version of the FSA-CSA matrix (Rugman, 1981; Collinson & Rugman, 2011; Verbeke, 2013; Hillemann & Gestrin, 2016; Cuervo-Cazurra, Mudambi & Pedersen, 2019). Li and his colleagues compellingly argue that in an era of digital commerce, co-specialized ecosystem partners with complementary resources, structures, and governance will increasingly drive value creation in international business.
The Perspective by Nambisan, Zahra, Luo, and Yat-Sen (2019) was conceptualized and reviewed independently of the first Perspective. Nevertheless, it is closely aligned with the first paper in terms of subject matter treated: the impact of digital platforms and ecosystems on the IB landscape. Nambisan and colleagues outline a new research agenda based on what such platforms and ecosystems mean for future IB theorizing. The article’s great strength is that it discusses implications for eight influential IB research streams: work building on the OLI paradigm, internationalization process theory, internalization theory, the knowledge-based view of MNEs, dynamic capabilities thinking, the integration – national responsiveness view, the international entrepreneurship perspective, and the global alliance perspective.
Petricevic and Teece’s (2019) Perspective, though somewhat speculative and certainly controversial as to its implications for management and policy, boldly predicts a bifurcated world fraught with hazards, within which MNEs will need to operate. Here, ‘rule-of-law’ and ‘rule-of-rulers’ countries are predicted to clash, especially because of new types of technology-related protectionism. Cascading effects arising from macro-level conflicts will influence MNEs. These firms will revert from being focused on international knowledge dissemination to prioritizing knowledge protection. This Perspective highlights critical boundaries within which ecosystem-specific advantages must be developed. It also implicitly suggests limits to the usefulness of global platforms and ecosystems: MNEs might need to prioritize deploying a broad array of instruments of intellectual property protection. They should carefully distribute external access to their knowledge reservoirs and craft defensive locational configurations of their subsidiary and alliance networks.
The first regular article, by Mees-Buss, Welch and Westney (2019), uses qualitative research methods to study organizational change in a large MNE, Unilever. It proposes a new organizational model, the neo-global form or ‘horizontal relay-race’ structure, thereby extending the classic work by Bartlett and Ghoshal (1989) on the ‘transnational solution’, and focusing on the value creation process in its entirety (Verbeke & Kenworthy, 2008). This article convincingly demonstrates the importance of two counterintuitive notions: distributed centralization (i.e., that centralization need not operate out of one country only) and remote delivery of national responsiveness (i.e., that it is not necessarily national or regional teams that must deliver on such responsiveness). This narrative on complex organizational change in the MNE is consistent with the international business history literature initiated by Wilkins and Hill (1964).
By studying the relationship between internationalization and the cost of equity capital, Mihov and Naranjo (2019) address subject matter that has been analyzed in a rich IB research literature for several decades (see Agmon & Lessard, 1977). Their measuring of international diversification is superior to that performed in a variety of past studies (e.g., Denis, Denis & Yost, 2002). MNEs still perform an important role benefiting investors in a world of highly imperfect financial markets. Consequently, they can reduce their cost of capital, especially when diversifying into countries with low cultural distance, good governance, and properly functioning financial markets. In accordance with Verbeke, Coeurderoy and Matt (2018), the authors argue in favor of improving the reporting standards for MNE foreign operating segments, since such standards will provide highly valuable information to investors and also permit better IB studies to be conducted.
Fang, Hasan, Sau Leung and Wang (2019) demonstrate that foreign ownership in banks can function as a transmission channel for the diffusion of good managerial practices, especially if the foreign owners come from countries with well-developed financial markets and efficient governance. Here, bank opacity, one of the main causes of financial crises, can be reduced significantly. Improved transparency has a variety of positive efficiency-related effects. Most importantly, the authors conclude (with requisite qualifications) that public policy makers should embrace foreign ownership as a vehicle for ‘importing’ and ‘exporting’ good governance.
Pedersen and Foss (2019) provide a systematic literature review on the use of micro-foundations in IB research and find that this topic merits much more attention than it has been given in extant studies. Heterogeneity among individuals is important in a variety of IB research streams such as analysis of international knowledge sharing, headquarters–subsidiary relationships, and the impact of cultural distance on firm-level outcomes. IB scholars recognizing the importance of individual choices and actions in larger-scale research projects, as is already done in most IB-related case studies, should improve the relevance of IB as a field of scholarly inquiry.
Narula’s (2019) research note on the role of foreign MNEs in Bangladesh’s apparel industry is a fascinating and erudite exposé on the unintended consequences of MNEs catering to external stakeholder demands for more corporate social responsibility. This paper is a ‘must-read’ for all IB teachers, managers, and policymakers interested in making MNE outcomes better for society at large. Narula’s analysis has major implications for the design of global value chains (GVCs). Stakeholder demands for more accountability towards society, through improved labor conditions in developing countries, sometimes appear to backfire. ‘Full-chain compliance’, consistent with the neo-global organizational form described above but applied to GVCs, can mean excluding the most vulnerable economic actors from these GVCs. Paradoxically, these are the very actors – often operating in an economy’s informal sector – who were supposed to be protected by expanding the MNE’s ‘responsibility boundaries’. MNEs are thus put in a difficult position in developing countries, and might need to reconsider their ownership, control, and responsibility boundaries. As Narula suggests, a legitimacy-driven, reduced use of informality in GVCs can have detrimental effects on those who live in poverty. Imposed higher formality in GVCs also raises ethical issues as to the feasibility of inclusive capitalism. Who should be included in – and therefore who can be excluded from – the MNE-led GVCs and broad ecosystems discussed in the first two Perspectives of this Anniversary Issue.
IB scholarship – including most work published in JIBS – has always been close to the practice of management, but the actual impact of this scholarship has seldom been documented. This is exactly what Bapuji and Beamish (2019) accomplish in a useful reflection on the impact of their own past research on toy recalls in the United States. These toy recalls resulted from high lead levels and other dangerous features. The toys were manufactured mainly in China. The authors’ past research had shown that an MNE can sometimes be a bad actor: it fails to take responsibility for its own mistakes, and instead blames foreign partners in its supply chain for the societal problems it has created – that is, until serious IB research highlights the detrimental role of the MNE in societal outcomes. In this case, and in contrast to the situation described by Narula, the majority of recalls did not result from characteristics of the manufacturing process at the level of foreign suppliers in the host country (in this instance China). Most recalls arose from design flaws attributable to the MNE involved, in this instance Mattel. Bapuji and Beamish’s research was likely instrumental to Mattel’s public apology to its customers, and to the Chinese people for the damage it did to China’s reputation. Their past work can be viewed as an exemplar of what impact-oriented IB scholarship can accomplish, and it is a reminder that IB scholars can make a genuine difference to the practice of management. In this realm, the past IB literature has highlighted many similar case studies of MNE redemption through learning: MNEs engaging in misguided behavior and viewed as pariahs by activist stakeholders, such as Nike and Starbucks, subsequently transform into role models that other firms in industry try to emulate.
Finally, the Point–Counterpoint debate included in this Anniversary Issue addresses the great contemporary challenge of MNE taxation, a topic that has been studied for a long time in IB research (Eden, 1998). Foss, Mudambi and Murtinu (2019) argue in their Point that fine-slicing MNE value chains across geographic space contributes to a more efficient global economy, but at the same time makes corporate profits much more mobile and difficult to tax. In addition, tax competition among jurisdictions leads to sub-optimal location choices. Rather than trying to tax corporate profits, the authors argue that governments should tax the dividends accruing to MNE shareholders and impose value-added taxes on MNE sales. They claim that governments should also engage in more international coordination of corporate taxation systems, to avoid dysfunctional tax competition.
In a first Counterpoint, Ting and Gray (2019) express strong concerns about the Point’s proposed shift towards taxing shareholders and consumers. They argue instead that efforts to redesign tax laws should first focus on how to treat intra-MNE transactions so as to prevent tax avoidance. They use the case studies of Apple and Caterpillar to show that MNEs are presently able to achieve a very low effective tax rate. The digital organization models discussed in the first two Perspectives will further exacerbate the problem at hand: internal MNE systems are now being designed to achieve profit-shifting to low-tax jurisdictions, without even having to move any GVC operations to these jurisdictions. The authors instead favor a taxation system based on consolidated, worldwide MNE income, rather than the reported income of its constituent companies. Taxes could then be levied on the basis of the proportion of sales achieved in different jurisdictions. The authors do recognize the political difficulties of implementing such a multilateral tax system. They therefore propose an ‘alternative minimum tax’, which could be imposed unilaterally by any government: if the tax payable under the prevailing national taxation system is lower than that calculated according to the sales-based allocation approach, then the MNE would pay the higher amount in that country. This system would prevent, inter alia, American and EU-based MNEs paying negligible corporate taxes in those jurisdictions where they achieve most of their actual sales.
McGaughey and Raimondos (2019) build upon similar thinking. However, in their Counterpoint, they recommend adopting a broader-based system that was in operation more than a century ago, namely ‘Formula Apportionment’. In this system, the share of an MNE’s ‘activities’ in terms of fixed assets, payroll, and sales in a particular jurisdiction, will determine the proportion of worldwide profits that will be taxed there. It is likely that this type of system will be implemented again in the near future, given the interest in it, expressed by jurisdictions as diverse as the European Union and China.