Challenges in the Era of Globalization - iaabd

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Proceedings of the 12th Annual Conference © 2011 IAABD categories; natural resource seeking, market seeking, efficiency seeking, and strategic asset or capability seeking (ibid). He also notes that firms may engage in FDI for more than one of the above motives (ibid). Other researchers such as Buckley and Casson (1976), and Teece (1986) based their explanation on transaction cost theory. This theory purports that the existence of MNEs is as a result of transaction costs. Companies tend to internalize their transactions when the transaction cost in a specific market is high therefore they undertake FDI in order to reduce the transaction costs. In explaining the internationalization process of the firms, Johanson and Wiedersheim-Paul (1975) argue in their Uppsala model that engaging in international operations is the result of a sequence of incremental decisions and that the lack of knowledge about foreign countries and the tendency to avoid uncertainty are the factors that push firms to choose the least risky way to engage in international operations. Thus, firms begin to export to neighboring countries in order to have the same business practices. Once they gain enough experience, they move forward and undertake FDI in this country taking into account the size of its market (ibid). From an industrial perspective, Vernon (1966) argues that when a firm introduces a new product in a market, the firm’s home country will be the base for producing this product and exporting it to other developed countries. Once the market for the product increases in a developed country, producers will start to set up a local production facility in order to engage in the production of that product. Later, when the product becomes fully standardized, developing countries will become a location for producing the product because of their competitive advantages (ibid). For instance, seeking low-cost labor may be the primary motive for investors to undertake FDI in developing countries. Consequently, the production of this product shifts finally into developing countries (ibid). Another line of thinking is introduced by Knickerbocker (1973) in the theory of oligopolistic competition which explains the behavior of US manufacturing firms. Knickerbocker (1973) argues that when a member of an oligopolistically structured industry undertakes FDI in any important foreign market, other risk-aversion members in this industry will follow this member and undertake FDI as well since these firms will not want to lose market share. In addition, there are some empirical studies that have provided an evidence of what are the most important location factors for a specific location. Cleeve (2006) investigated the institutional impediments to FDI inflows in Sub-Saharan Africa. He found that location factors such as large market size, the growth rate of the economy, good infrastructural development, high skills level, the openness of the economy, and institutional and political risk variables (such as democratic system, socioeconomic conditions and investment profile) are important determinants of FDI inflows, whereas, corruption, government and political instability have no effect on the inflow of FDI. Lately, there has been a debate concerning the location of FDI after the recent global financial crisis. According to UNCTAD (2010), the global financial crisis has affected both developed and developing countries, and their share of FDI inflows. However, developing countries in general and China, India, and Brazil in particular, were less affected and managed to recover faster than developed countries (ibid). Consequently, this fact may affect the global business strategy in relation to developing countries as a destination for FDI inflows. However, in general, the empirical evidence on the location of FDI post the financial crisis is scarce. The next section presents the research methods and data sources. Research methods and data sources The data for this study were collected directly from subsidiaries of international firms in Syria and Jordan in order to enhance this research area because of the lack of good, firm-level data on FDI and location decision regarding those two countries. International companies identified for inclusion in this study were drawn from the database of the Federation of Chambers of Commerce in Syria and Jordan. The companies were selected according to the following criteria: (1) companies that are fully foreign-owned subsidiaries, (2) companies that are as a result of Joint Venture between a foreign company and a local one (partly foreign-owned subsidiaries), and (3) companies that are merged or acquired by a foreign company. This study targeted around 1442 multinational companies’ subsidiaries in both countries. After removing those, which were branches of foreign companies, distributors, franchisees, the survey was then applied to the 418 resulting firms, which have undertaken FDI. For the purpose of this study, a 248
Challenges in the Era of Globalization Edited by Emmanuel Obuah questionnaire method was considered the most appropriate way for collecting the data. The questionnaire was administered after a thorough analysis of the literature. It consists of the most relevant factors that proved to influence the investment decisions of MNCs when undertaking FDI. It asked each of the participated companies to evaluate the significance of each factor using a five-point Likert Scale from 1 to 5 where 1 is the least important and 5 is the most important. The questionnaire was developed to ascertain the opinion of the key decision-makers in the targeted companies (the respondents) on a number of factors proved to influence the decision of MNCs to undertake FDI in a specific location. Employees who participated in the completion of the questionnaire includes, top management officers such as Chief Executive Officers (CEO), Managing Directors, General Managers, Country Presidents, Partners, or any other equivalent designation of each company. The questionnaire was thoroughly revised by and discussed with several academics in the UK, Syria and Jordan before it was distributed to the respondents. It was also pre-tested through personal interviews with top executives of four companies who were not later asked to take part in the study. Subsequently, it was used for a pilot study. This process enhanced the quality of the questionnaire and improved its design, content, wording and most importantly clarity and ease of understanding, so making it much easier and more attractive to answer. The questionnaire was administered through different ways. The first way was through email and online survey but unfortunately, the response rate was below 3%. The second way was through the postal system where the response rate was also below 5%. The third way was through personal interviews with interviewees in the firms who participated in the survey. The interviewees completed the questionnaire themselves in the presence of the principal interviewer, offering complete guidance and confidentiality to them. The sample size obtained was 268 usable questionnaires with a response rate for the last method of round 64%. The data were analyzed using the Statistical Package for Social Science (SPSS). The statistical inferences are presented in the data analysis section below. DATA ANALYSIS Before presenting the analysis of the location factors in Syria and Jordan, it is worth introducing some descriptive statistics in order to establish the main characteristics of the sample. Entry Mode Based on the sample of this study, 66.8% of MNCs operating in Syria and Jordan have established wholly-owned subsidiaries as evidenced in Table 1 below, whereas, 26.9% of them engaged in joint ventures with selected partners, and only 6.3% established their FDIs in a form of mergers and acquisitions with existing firms operating in Syria and Jordan. Table 1: Entry Mode Entry Modes Frequency Percent Greenfield (Wholly-owned subsidiary) 179 66.8 Joint Venture 72 26.9 Merger & Acquisition 17 6.3 Total 268 100.0 249
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Table of Contents Challenges in the
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Lennart Bangens, Goteborg, Sweden C
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Local Steering Committee Jacob Musi
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Abstract Challenges in the Era of G
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Abstract Determinants of Bank Lendi
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Empirical Results Challenges in the
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Table 3 Determinants of Competitive
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Abstract Challenges of Oil Revenue
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Figure 1.1: Spread of directorships
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Theoretical Framework Challenges in
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Single 18.1 Masters and above 35.3
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Source: Field survey, 2010 Table 3:
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Defining the Organisational Culture
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Table 1: A Summary of Operating Ban
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Discussion and Conclusion Challenge
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Abstract What does Globalization me
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Banks in Ghana Challenges in the Er
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References: Challenges in the Era o
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The study seeks to: • examine typ
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Relationship Commitment Total 1264.
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Football Spectatorship Challenges i
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