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The Role of Duration in Multinational Investment Strategies

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  • Ram Mudambi

    (University of Reading)

Abstract

The location of investment by multinational enterprises has been investigated from many perspectives. It has been suggested that investment may be motivated by experience of a particular location represented by tenure of operations. In contrast, portfolio considerations suggest that increased investment in a given location increases risk exposure. In this paper, the question of whether a multinational with a longer duration of operations at a particular location is more likely to invest further is addressed after taking portfolio risk into account. A conceptual model of multinational investment strategy is developed and empirically tested using data from a survey of multinational enterprises operating in the West Midlands region of the United Kingdom. Two innovative non-parametric tests for duration dependence are applied. After normalising for portfolio considerations, it is found that multinational investment is significantly duration dependent, i.e., firms with a longer tenure of operations are significantly more likely to invest in any given period. This finding has important implications for the strategy of inward investment agencies. In particular, an investment agency is short-sighted if it seeks to attract new investors if that is at the expense of neglecting multinationals with current operations in its jurisdiction.© 1998 JIBS. Journal of International Business Studies (1998) 29, 239–261

Suggested Citation

  • Ram Mudambi, 1998. "The Role of Duration in Multinational Investment Strategies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(2), pages 239-261, June.
    • Handle: RePEc:pal:jintbs:v:29:y:1998:i:2:p:239-261
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    Citations

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    Cited by:

    1. Robert Pearce, 2001. "Multinationals and Industrialisation: The Bases of 'Inward Investment' Policy," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 8(1), pages 51-73.
    2. Buckley, Peter J. & Craig, Thomas D. & Mudambi, Ram, 2019. "Time to learn? Assignment duration in global value chain organization," Journal of Business Research, Elsevier, vol. 103(C), pages 508-518.
    3. Kappen, Philip, 2011. "Competence-creating overlaps and subsidiary technological evolution in the multinational corporation," Research Policy, Elsevier, vol. 40(5), pages 673-686, June.
    4. Paeleman, Ine & Fuss, Catherine & Vanacker, Tom, 2017. "Untangling the multiple effects of slack resources on firms’ exporting behavior," Journal of World Business, Elsevier, vol. 52(6), pages 769-781.
    5. McWilliam, Sarah E. & Kim, Jung Kwan & Mudambi, Ram & Nielsen, Bo Bernhard, 2020. "Global value chain governance: Intersections with international business," Journal of World Business, Elsevier, vol. 55(4).
    6. Albertoni, Filippo & Elia, Stefano & Piscitello, Lucia, 2019. "Inertial vs. mindful repetition of previous entry mode choices: Do firms always learn from experience?," Journal of Business Research, Elsevier, vol. 103(C), pages 530-546.
    7. Nicolai J Foss & Ram Mudambi & Samuele Murtinu, 2019. "Taxing the multinational enterprise: On the forced redesign of global value chains and other inefficiencies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(9), pages 1644-1655, December.
    8. Claver-Cortés, Enrique & Marco-Lajara, Bartolome & Manresa-Marhuenda, Encarnación & García-Lillo, F. & Seva-Larrosa, Pedro, 2017. "Location Decisions and Agglomeration Economies: Domestic and Foreign Companies," INVESTIGACIONES REGIONALES - Journal of REGIONAL RESEARCH, Asociación Española de Ciencia Regional, issue 39, pages 99-135.
    9. Rodriguez-Pose, Andres & Gill, Nicholas, 2006. "How does trade affect regional disparities?," World Development, Elsevier, vol. 34(7), pages 1201-1222, July.
    10. Colm Kearney & Frank Barry, 2005. "MNEs and Industrial Structure in Host Countries:A Mean Variance Analysis of Ireland’s Manufacturing Sector," The Institute for International Integration Studies Discussion Paper Series iiisdp023, IIIS.
    11. Rabbiosi, Larissa & Santangelo, Grazia D., 2013. "Parent company benefits from reverse knowledge transfer: The role of the liability of newness in MNEs," Journal of World Business, Elsevier, vol. 48(1), pages 160-170.
    12. Maximilian Stallkamp & Brian C Pinkham & Andreas P J Schotter & Olha Buchel, 2018. "Core or periphery? The effects of country-of-origin agglomerations on the within-country expansion of MNEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(8), pages 942-966, October.
    13. Zander, Ivo, 1999. "Whereto the multinational? The evolution of technological capabilities in the multinational network," International Business Review, Elsevier, vol. 8(3), pages 261-291, August.
    14. Johanson, Martin & Martín Martín, Oscar, 2015. "The incremental expansion of Born Internationals: A comparison of new and old Born Internationals," International Business Review, Elsevier, vol. 24(3), pages 476-496.
    15. Indro, Daniel C. & Richards, Malika, 2007. "The determinants of foreign partner's equity ownership in Southeast Asian joint ventures," International Business Review, Elsevier, vol. 16(2), pages 177-206, April.
    16. Graf, Michael & Mudambi, Susan M., 2005. "The outsourcing of IT-enabled business processes: A conceptual model of the location decision," Journal of International Management, Elsevier, vol. 11(2), pages 253-268, June.
    17. Coombs, Joseph E. & Mudambi, Ram & Deeds, David L., 2006. "An examination of the investments in U.S. biotechnology firms by foreign and domestic corporate partners," Journal of Business Venturing, Elsevier, vol. 21(4), pages 405-428, July.
    18. Garg, Miti & Delios, Andrew, 2007. "Survival of the foreign subsidiaries of TMNCs: The influence of business group affiliation," Journal of International Management, Elsevier, vol. 13(3), pages 278-295, September.
    19. Dellestrand, Henrik & Kappen, Philip, 2011. "Headquarters Allocation of Resources to Innovation Transfer Projects within the Multinational Enterprise," Journal of International Management, Elsevier, vol. 17(4), pages 263-277.
    20. Hohenthal, Jukka & Johanson, Jan & Johanson, Martin, 2014. "Network knowledge and business-relationship value in the foreign market," International Business Review, Elsevier, vol. 23(1), pages 4-19.
    21. Mehmet Demirbag & Ekrem Tatoglu & Keith W. Glaister, 2008. "Factors affecting perceptions of the choice between acquisition and greenfield entry: The case of Western FDI in an emerging market," Management International Review, Springer, vol. 48(1), pages 5-38, February.
    22. Antonios Georgopoulos & Felicitas Nowak-Lehmann D. & Vasilios Sogiakas, 2013. "Survival Characteristics and Adjustment of MNE Affiliates in the European Integrated Market," Ibero America Institute for Econ. Research (IAI) Discussion Papers 225, Ibero-America Institute for Economic Research.
    23. Jong Min Lee, 2022. "MNCs as dispersed structures of power: Performance and management implications of power distribution in the subsidiary portfolio," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(1), pages 126-155, February.
    24. Demirbag, Mehmet & McGuinnness, Martina & Wood, Geoffrey & Bayyurt, Nizamettin, 2015. "Context, law and reinvestment decisions: Why the transitional periphery differs from other post-state socialist economies," International Business Review, Elsevier, vol. 24(6), pages 955-965.

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