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A case study of the issues surrounding the multinational corporation johnson johnson

In the case of Hypothesis 1, concerning the Regulatory Quality, the factor that showed significant results was Quality of Government Institutions, suggesting that in countries whose regulatory environment shows a high quality of public administration companies are more likely to choose wholly-owned subsidiaries.

With respect to Hypothesis 2 Normative Distancethe factor that showed a statistically significant result was Beliefs. Note, however, that the results indicate that larger differences in beliefs would increase the probability of creating wholly-owned subsidiaries, contradicting our original hypothesis, but supporting the results previously reported by Arslan and Larimo 2010.

One possible explanation for this result is that very different beliefs can make it difficult to identify a suitable partner. Values and Relationships did not show significant results. Regarding Hypothesis 3 Cognitive Distanceboth factors were significant.

The results for the factor Management Practices indicate that the greater the perceived differences between the management practices of the host country and those of Brazil, the more likely it is that the firm uses a joint venture.

  • Modes of foreign entry;
  • State support tends to be available more often to larger firms or firms that advanced further in their internationalization process;
  • Brazilian multinationals do take into account the stability and transparency of government policies, the protection of property rights, and the efficiency and independence of the judiciary system, and such aspects influence their decision of ownership mode, in the same way they influence their counterparts from other countries.

These results are particularly relevant when considering the small number of joint ventures in the sample, given the preference of Brazilian multinationals for wholly-owned subsidiaries. Thus, they also offer empirical support to the dominant hypothesis in the literature on ownership mode for EMNEs. Strong differences in business practices make an association with local partners interesting in order to take advantage of their local market knowledge, instead of the firm itself seeking to acquire this knowledge which would require more time and money, and could increase risks.

The Cultural Identity factor was also significant, giving support to the importance of indicators of cultural distance and psychic distance used in the literature on ownership modes. Hypothesis 4 and 6 were not supported empirically. Hypotheses 5 and 7 showed empirical support in the hypothesized direction.

The Exp B of the variable State Support was 12. These findings suggest relevant differences in relation to multinationals from other countries, and confirm the results obtained by Dias 2012.

  • One possible explanation for this result is that very different beliefs can make it difficult to identify a suitable partner;
  • Finally, in spite of the small number of Brazilian multinationals in the service sector, a reasonable number of them are in high-tech industries, which could explain the preference for joint ventures of service firms as a way to attain legitimacy in foreign markets, since Brazil has no reputation for producing technology;
  • One possible explanation for this result is that very different beliefs can make it difficult to identify a suitable partner;
  • State support has not been previously researched since traditional MNEs from developed countries do not show this characteristic, which is more typical of EMNEs.

Rocha 2003 and Silva, Rocha and Carneiro 2009 contend that Brazilian firms prefer to take full control of their businesses, a cultural preference that also appears in the high percentage of preferred shares without voting rights, but with preference in receiving dividends of Brazilian companies that go public.

These authors suggest that such behavior would be more common when firms internationalize their businesses to neighboring countries. However, a question open for discussion is whether such behavior can also be found in the initial steps of internationalization of traditional multinationals.

Unfortunately that are no studies based on large samples that can help understand whether these preferences were also present in their initial choices. Two of the three hypotheses concerning the institutional environment of the host country have received only partial empirical support, suggesting that some institutional factors studied were not statistically significant in explaining the ownership mode of Brazilian multinationals.

There are several possible explanations for these results. In the case of the construct Regulatory Quality, two factors were identified but only one Quality of Government Institutions was significantly associated with the selection of wholly-owned a case study of the issues surrounding the multinational corporation johnson johnson, as generally predicted in the a case study of the issues surrounding the multinational corporation johnson johnson e.

This result also supports our contention that, in the case of EMNEs, researchers should not consider the regulative distance, but rather the absolute quality of the regulatory environment of the host country.

Brazilian multinationals do take into account the stability and transparency of government policies, the protection of property rights, and the efficiency and independence of the judiciary system, and such aspects influence their decision of ownership mode, in the same way they influence their counterparts from other countries. The non-significant results can be explained by the Brazilian institutional environment in which these aspects are also present.

Being used to dealing with them, decision makers at Brazilian multinationals do not consider such factors important when deciding ownership mode.

We contend, therefore, that because EMNEs originate from countries with poor institutional environments, researchers should be careful when evaluating the influence of regulative distance in their internationalization decision processes. In this study, although decision makers did perceive institutional weaknesses and risks in the countries where they chose to establish their subsidiaries, part of these aspects do not seem to impact the ownership mode decision, probably because they are used to operating in an environment with similar characteristics.

Again, they do not show preference, but rather less concern, for this type of environment when choosing the ownership mode. Thus, our proposal of using the absolute quality of the regulatory environment in the case of EMNEs, rather than the regulative distance, is consistent with this study's result.

The factor Beliefs, however, was significant, although in a direction contrary to hypothesized. In our study, the larger the perceived differences in beliefs, the more the firm would tend to choose a wholly-owned subsidiary. An explanation for why beliefs would significantly impact the ownership-mode decision, and values would not, may rest in the nature of these constructs. Beliefs are not as deeply rooted and stable in time as values; they relate more to "practices", which belong to more superficial "layers of culture" cf.

Therefore, differences in beliefs may actually impact foreign operations more than differences in values. The fact that the direction of the relationship was contrary to hypothesized is not totally surprising; in fact the literature shows ambivalent results in the relationship between ownership mode and cultural distance, a construct similar to normative distance, also including values and beliefs.

Of the 13 studies on the relationship between ownership mode and cultural distance reviewed by Harzing 2004six found a negative relationship, four a positive relationship, and the other three did not show significant results. As to Cognitive Distance, the factors Cultural Identity and Management Practices were significantly related to ownership-mode decision as hypothesized.

Cultural Identity refers to some of the most basic differences between the domestic and the host country, those related to language, cultural roots, and education. In addition, management practices are extremely relevant to foreign operations; large differences in management practices increase the need to adapt the firm's internal routines, and make communication between subsidiaries and the parent company more difficult.

When management practices differ substantially between managers in a joint venture, the risk of conflict is increased. Firm characteristics showed interesting results; state support and belonging to the service sector positively and significantly impacted the choice of joint ventures, while size and international experience did not significantly relate to ownership mode.

Therefore, the very way to operationalize the construct International Experience may produce different results. The strong role played by state support in the choice of joint ventures is also an important finding. State support tends to be available more often to larger firms or firms that advanced further in their internationalization process.

Firms with a global scope of operations tend to be operating in countries with greater institutional distance, or in countries with greater institutional constraints to the installation of wholly-owned subsidiaries, thus potentially preferring or being forced to use joint ventures.

Therefore, these firms are more prone to get state support than smaller firms with a limited scope of internationalization. In these situations, having the state as a shareholder or a major source of financing might act as a protection against those risks for the EMNE Knutsen et al. Finally, in spite of the small number of Brazilian multinationals in the service sector, a reasonable number of them are in high-tech industries, which could explain the preference for joint ventures of service firms as a way to attain legitimacy in foreign markets, since Brazil has no reputation for producing technology.

Strategic Management and Multinational Corporations: A Case Study of Bacardi Limited

Moreover, due to the intangibility of services and the need for tacit knowledge to serve new markets, service multinationals may be seeking access to market knowledge and know-how held by local partners. These results are consistent with theoretical propositions and empirical findings in the literature e.

Conclusions This study aimed to contribute to the understanding of the choice of ownership mode by EMNEs. Its theoretical contribution relies in examining the phenomenon under the perspective of institutionalism in an emerging country, Brazil. The institutional quality of a country's environment is a complex and still poorly explored research area, particularly regarding the use of perceptual measures, since most studies have employed existing indicators from secondary sources.

The selection of variables to measure each institutional pillar, after a broad review of the extant literature on entry modes, may contribute to future studies, particularly to those focused on other emerging countries. The findings suggest that Brazilian MNE choice of ownership mode agrees in general with the theoretical arguments and previous studies in the extant literature. There are, however, specific aspects that can be of interest to researchers that look specifically at EMNEs.

Alternative Law Journal

First, the assumption that regulative distance, and not the regulatory environment in absolute terms, affects the choice of ownership mode seems not to stand for EMNEs that come from less stable institutional environments. Second, state support showed a strong relationship with the choice of ownership mode in this study. State support has not been previously researched since traditional MNEs from developed countries do not show this characteristic, which is more typical of EMNEs.

Therefore, we suggest that future studies on EMNEs should take this variable into consideration. The disposition of Brazilian multinationals to establish subsidiaries in countries with fragile institutional environments suggests that their experience in the home country makes it easier for them to operate in similar environments.

The limitations of this research are related to its scope, the methodology used and the data available. The use of perceptual measures collected directly from respondents has its advantages and disadvantages.

On the positive side, the relevant variables to measure are the decision makers' perceptions of the institutional environment, and not objective measures of the institutional quality of the environment, since the former, not the latter, guide firms' investment decisions. Moreover, the perceptions of decision makers from EMNEs may be substantially different from those of executives from developed countries.

On the negative side, this type of research suffers of an ex post facto bias. Finally, sample size did not permit the use of a holdout sample; therefore our results may suffer from an upward bias in terms of the percentage of cases correctly classified.

Socio-cultural distance and the choice of joint ventures: Journal of International Marketing, 2 263-80. Choice of foreign market entry mode: Journal of International Business Studies, 23 11-28.

Modes of foreign entry: Journal of International Business Studies, 17 21-26. Journal of East West Business, 16 3179-200. International expansion through start-up or acquisition: Academy of Management Journal, 41 17-26. Journal of International Business Studies, 44 114-22. Why service and manufacturing entry mode choices differ: Journal of Management Studies, 40 51179-1204. SME Entry mode choice and performance: Theory and Practice, 28 3229-247. The determinants of Chinese outward foreign direct investment.

Journal of International Business Studies, 38 4499-518. Institutional development and foreign affiliate performance. Strategic Management Journal, 29 111179-1205. An analysis of entry mode and its impact on performance. International Business Review, 11 2193-210. Modal choice in a world of alliances: Journal of International Business Studies, 29 2325-358. Extending theory by analyzing developing country multinational companies: Global Strategy Journal, 2 3153-167.

State ownership effect on firms' FDI ownership decisions under institutional pressure: Journal of International Business Studies, 43 4264-284.

  1. Emerald Group Publishing Limited.
  2. However, it is uncertain the extent to which ATCA might protect against breaches of rights which are less universally recognised, such as rights to a clean environment, or rights to join trade unions. Business and Politics, 13 1 , 1-31.
  3. There are, however, specific aspects that can be of interest to researchers that look specifically at EMNEs.
  4. A second conundrum arises regarding situations where human rights abuse is actually compelled by the laws of a host state as, for example, when a state forbids the employment of people on the grounds of gender or religion, or prohibits trade unions. Specific positive duties concerning respect for rights to adequate standards of health care could possibly arise in the pharmaceutical sector due to the peculiar characteristics of some of its commodities.
  5. FDI from an emerging country.

Ownership strategy of Japanese firms: Strategic Management Journal, 20 10915-933. Political hazards, experience, and sequential entry strategies: Strategic Management Journal, 24 111153-1164. Perceptions of institutional environment and entry mode: