FALL 2004
VOLUME 5, NUMBER 1

MAKING INVESTMENT CHOICES: JAPANESE MNES INVESTING IN AUSTRALIA AND THE REGION

Elizabeth Maitland, Stephen Nicholas, Economics Research Centre, and William Purcell

Regions and countries compete for MNEs. Surprisingly, we know little about policy effectiveness and the relative importance of policy factors and non-policy factors in managerial location decisions. Drawing on internalisation-resource, trade and location theory, this paper develops a model of policy and non-policy location variables, testing the model against 137 Japanese managers’ decisions to invest in Australia and the ASEAN5 (Thailand, Singapore, Malaysia, Indonesia and the Philippines). Japanese managers treated Australia and ASEAN5 as different regions, but treated the ASEAN5 as the same region. A range of non-policy variables were ranked higher than policy variables as factors attracting Japanese MNEs to Australia or the ASEAN5, while policy variables were most important in shifting investment between ASEAN5 countries. In a study of incentive effectiveness, managers ranked the same incentive variables for Australia lower than for the ASEAN5. We also discovered that the transfer of parent competencies to subsidiaries in Australia was ranked significantly lower in importance than competencies transferred to ASEAN5 countries. Implications for policy-makers and economic development are drawn.


https://doi.org/10.51240/jibe.2004.1.1          PDF

FOREIGN CAPITAL FLOWS TO EMERGING MARKETS: A TEST OF POLICY ARBITRAGE

Anand Shetty and John Manley

Private capital that dominated the foreign capital inflows to emerging markets in the 1990s has been linked to recent financial crises in these markets. This linkage has raised questions about the market’s ability to discipline the flow of capital to emerging markets and the role of policy arbitrage. Policy-arbitrage hypothesis states that international capital flows will arbitrage across national economic policies in search of sound markets. This paper examines the pattern of changes in the foreign capital inflows to emerging markets in the 1990s and tests the policy-arbitrage hypothesis using 22 country-data for a period immediately following the Mexican peso crisis. The test results support the policy-arbitrage hypothesis.


https://doi.org/10.51240/jibe.2004.1.2          PDF

MNCS' PROPENSITIES TO REEVALUATE AND CHANGE FOREIGN MODES OF OPERATIONS DURING A FINANCIAL CRISIS

Talin S. Eshaghoff and Tao Gao

The major goal was to investigate multinational companies’ (MNCs) propensities to reevaluate and change their foreign operational modes during a financial crisis in a big emerging market. We grounded our study in the contingency perspective of foreign entry mode decisions, which implies that foreign entry/operating mode decisions should be dynamic in nature, and fine-tuning should take place whenever major changes occur to contingency factors. In a survey conducted during the current Argentine financial crisis, we found that the majority of multinational firms (64.4%) indeed regarded a reevaluation of the foreign mode of operations during the crisis as important, while about one third viewed it as either neutral or unimportant.

On whether to change their level of resource commitments during the crisis, most firms (57.7%) would remain the same, 35.6% prefer small changes, and 6.4% would consider major changes. MNCs using exporting, licensing, joint ventures, and sole ventures were found to be equally patient during the crisis. Exporters and licensors willing to change their foreign operational modes uniformly preferred increases in resource commitments, mostly in the form of FDI. Conversely, 4.2% of joint venture partners and 15.8% of sole venture owners chose to decrease resources during the crisis. The research, managerial, and policy-making implications were discussed.


https://doi.org/10.51240/jibe.2004.1.3          PDF

PERFORMANCE EVALUATION CRITERIA FOR INTERNATIONAL JOINT VENTURE

Kirti Jain and Sudhir K. Jain

Joint ventures are different from traditional organizations in terms of their life cycle and therefore their performance measures tend to be somewhat different. The traditional approaches to performance evaluation for an organization offer a diverse set of measures in financial management. However, they omit an aspect in case of IJVs – IJVs are a new form of entity with at least two partners with varied interests - which, both IJV managers and business theoreticians are now paying increasing attention to. Apart from traditional financial performance criteria, non-financial performance criteria show strong promise for measuring IJV performance. This research paper presents various IJV performance criteria and assesses them as perceived by the Indian automotive IJVs. It attempts to look for a holistic measure that can be used to quantify the performance of an IJV.


https://doi.org/10.51240/jibe.2004.1.4          PDF

THE STOCHASTIC CHARACTER OF JAPANESE EXCHANGE RATES

Nikiforos T. Laopodis

The paper explores the stochastic character of six yen exchange rates with respect to the Canadian dollar, French franc, Italian lira, German mark, British pound and the US dollar for the 1973-2002 periods. The methodological design is the multivariate Exponential GARCH model, which is capable of capturing asymmetries in the exchange rate volatility transmission mechanism. The results point to significant reciprocal and positive volatility spillovers after the Plaza Accord of 1985. Furthermore, the finding of absence of asymmetry in the same period implies that bad and/or good news in a particular market positively and equally affects volatility in the next market.


https://doi.org/10.51240/jibe.2004.1.5          PDF

AN EXPLORATORY EXAMINATION OF CASUAL MODELS FOR TELECOMMUNICATION TECHNOLOGIES, ORGANIZATIONAL STRUCTURAL ATTRIBUTES AND ORGANIZATIONAL  PERFORMANCE IN THE U.S. MANUFACTURING SECTOR

Choong C. Lee

Foreign direct investment (FDI) has two directions - downward and upward. Traditional FDI

theories explain downward FDI, but not upward FDI. This paper introduces a new model, the

imbalance theory, which explains both downward and upward FDI. The new theory deals with the balance of both ownership advantages and disadvantages, while the traditional theories mainly focus on ownership advantages in the decision of FDI. For a formal modeling of the imbalance theory, this paper explains the relationship between the optimal input and optimal output. The imbalance theory then explains and predicts FDI when there is a difference between a firm’s expected level of optimal output for the best factor-proportion and its actual level of output.


https://doi.org/10.51240/jibe.2004.1.7          PDF

U.S. BUSINESS AND GLOBAL TREATIES: LOBBYING AS IT EFFECTS MULTILATERAL AGREEMENT

Gerald F. Cavanagh

We examine negotiations for six international treaties and agreements to determine the influence that business had on the U.S. government’s position. The treaties: The Kyoto Treaty on Global Warming, North American Free Trade Agreement, OECD Anti-Bribery Agreement, Air Crash Liability Treaty, Law of the Sea Treaty and the Infant Formula Agreement. Business lobbying for these treaties had a strong influence on the U.S. position under all administrations, and that impact hasbeen greater with Republican presidents.


https://doi.org/10.51240/jibe.2004.1.8          PDF