The Background to This Volume
This volume is derived from the 44th Annual Conference of the Academy of International Business (UK and Ireland Chapter) organised jointly with the 6th Reading Conference, held at the Henley Business School, the University of Reading from 6 April 2017 to 8 April 2017. The conference was composed of engaging panel discussions as well as more thematically designed parallel sessions of conference papers. We have sought to compile a selection of papers from the conference.
The theme for the conference was Contemporary Issues in International Business: Are we seeing the tail-end of globalisation? The panel discussions looked to examine substantive issues relating to this critical question. During the last few years, we have been faced with growing economic uncertainty and socio-economic challenges that suggest we may be seeing the tail end of globalisation . Societies have become intolerant to immigration. Populist movements that emphasise nationalism are gaining influence, which pushes back against global cooperation. By way of examples, we have Brexit and the rise of Donald Trump, with the UK seeking to withdraw from the EU, and the USA looking to renegotiate NAFTA by reversing 23 years of supply chain integration. Our panellists emphasised that the rise of economic nationalism is part of a broader process of polarisation of societal values, which are negatively associated with socio-economic outcomes. Furthermore, it was highlighted that the current trend is partially the result of the breakdown of the so-called Embedded Liberalism Bargain, which (especially in Europe) over the last few decades is compensating the “losers” from globalisation . Paralleled by a reduction in public resources, these trends have led to an increasing demand for protectionism and contributed to the rise of economic nationalism.
Many commentators have asked: How far will this backlash go? Will we return to the days when sovereignty and nationalism ruled the day? Or is this a brief hiccup? We (the editors of this volume) believe that globalisation is an unstoppable force, but it can be slowed down by this need to look inwards and backwards, towards what are often referred to as “the good old days”. Our society has collectively underestimated the costs of rapid change and the fact that there are social, political and economic costs of maintaining the momentum of globalisation. Further, we appear to be more and more inertial in accepting the new realities that come with globalisation : less control over the “domestic” economy, widespread use of international transfer pricing, the free(r) movement of people, growing inequality. These issues are related to and span other fields such as sociology, anthropology, economic s and politics.
Mankind has a deep-seated fear of change, and this is exacerbated by rapidly changing societal inequalities. Politicians and civil society wrest with their consciences, and contemplate how to make sense of the new dispensation, yet are sufficiently aware that, to paraphrase T. S. Eliot, we are also “no longer at ease in the old dispensation”.1
As the focus of the conference was on the international business aspect, we asked ourselves: To what extent is the MNE complicit? Indeed, we sell the myth that MNEs promote development. But is this true? Does promoting MNE activity really help reduce poverty and sustain development? Does more internationalisation make for more happiness?
On the one hand, our panellists argued that multinational enterprises invariably contribute to wage and wealth inequality. Rising tides do not raise all ships, and it was for governments to consider regulation as the only practical means to minimise the downside. However, developing country governments are often too weak to regulate. Left to their own devices, MNEs end up increasing the level of inequality, and their efforts in the form of corporate social responsibility programmes are insufficient. On the other hand, it was said that countries such as India were certainly worse off prior to globalisation , and thus, inequality was a small price to pay for sustainable development . The growth of the Indian IT sector, in particular, was directly linked to these large multinational firms. Furthermore, the new world order with the new geographies of production and consumption mainly due to the growth of South–South trade and Southern markets would, on balance, also be the contributing factors towards reducing inequality. The discussion that followed suggested that for poor countries, inequality was a natural and expected outcome, but a growing middle class also signalled that inequality was better than the alternative, which for such countries would mean massive unemployment.
Ultimately, the tensions caused by growing inequalities within and between countries, coupled with a rapidly changing global business environment , beg important questions regarding the role of institutions in affecting international business strategies, particularly in terms of how firms can effectively operate their internal structures while being cognisant of how best to position themselves in different institutional contexts . In a world where globalisation is under fire, and consequently where MNE’s margins are potentially under pressure , firms will need to be smarter in the decisions they make, and in how they engage with varied national entities. Beyond the broader context of the panel discussions, this volume seeks to provide a series of important contributions to some of the most current debates in IB. In doing so, the volume aims to provide a richer understanding of MNE activities and how they are being impacted by the complex institutional settings in which they operate. Questions about how MNEs use (and abuse) the concept of CSR across national boundaries; their ability to manage the complexity of remote decision-making to achieve sustainable success between headquarters and subsidiaries; how they are able to absorb, analyse and respond to institutional shifts and pressures, and the extent to which MNEs are able to exploit their location decisions to optimise performance are all put under the spotlight.
Contributions to This Volume
The chapters in this volume are a selection of 14 out of 197 papers presented in 35 parallel sessions at the 44th Annual Conference of the Academy of International Business (UK and Ireland Chapter) organised jointly with the 6th Reading Conference. They are broad in their coverage, yet collectively demonstrate a certain intellectual continuity, and are organised into relatively homogeneous sections around the themes emerging in the discussion above. In particular, the papers included in this volume address the role of institutions in international business strategy and their links with the performance of firms and countries. Part I delves into the issues of how institutions and business strategies are intertwined, with special emphasis on socially (ir)responsible activities and corporate wrongdoing . Part II instead looks at the links between institutions and the economic performance of both firms and countries, especially in emerging market contexts. Part III investigates MNE subsidiary strategies and their role in host country economic development . Finally, the group of contributions that make up Part IV concentrates on aspects such as the degree and direction of multinationality and its subsequent effects on firm performance .
Institutions and International Business Strategy
Part I begins with a conceptual framework developed by Jöran Wrana and Javier Revilla Diez, on how MNEs may become institutional entrepreneurs in host regions...