Breaches of corporate social responsibility (CSR) in global value chains (GVCs) pose a managerial challenge for multinational enterprises (MNEs) and threaten both their reputations and global sustainability. While an MNE-centric perspective on these issues has dominated existing international business research, we show that a dynamic view of bargaining among actors in the GVC can yield novel insights. We draw on coalitional game theory and develop a model where an MNE collaborates, monitors, and negotiates prices with a supplier whose CSR breaches may be revealed by the MNE, external agents, or remain hidden. Our model illustrates how MNEs may face a hold-up problem when irresponsible actions by suppliers are made public, and the suppliers have the power to engage in opportunistic renegotiation. Interestingly, we show that greater monitoring by MNEs, if not combined with specific strategies, can have negative consequences by weakening the MNE’s bargaining position and, in some cases, even prompting more irresponsible actions by the suppliers. Our model advances international business research on GVC sustainability and has important implications for managers and researchers alike.
Larsen, Marcus Møller; Birkinshaw, Julian, Zhou, Yue Maggie & Benito, Gabriel R G (2023)
The multinational corporation (MNC) is a typical example of a complex organization. In this essay, we employ an established body of literature on complexity in organizations to explore and discuss the nature and consequences of complexity for global strategy and MNCs. On that basis, we develop a simple organizing framework for complexity in global strategies emphasizing the source (external and internal complexity) and type (process and structural complexity) of complexity. We use this framework to structure and discuss the six research contributions in this Special Issue. We conclude by suggesting additional avenues of research on the interface between global strategy and complexity.
Larsen, Marcus Møller; Mkalama, Ben & Mol, Michael J. (2023)
Outsourcing in Africa: How do the interactions between providers, multinationals, and the state lead to the evolution of the BPO industry?
We explore the evolution of Africa’s business process outsourcing (BPO) industry. In so doing, we seek to derive policy and managerial implications on how African suppliers can grow and become more attractive to foreign multinational corporations (MNCs). We discuss insights from the literature on (BPO) clusters and how these evolve. Our conceptual arguments are supported by a case study of the evolution of the Kenyan BPO cluster through three broad stages: embryonic, early, and developmental. We argue that this evolution has been hampered by factors including the small and sometimes informal nature of local suppliers, the reluctance of foreign multinationals to make long-term commitments, and the intermittent devotion by the Kenyan government to supporting BPO clusters. Accordingly, we suggest direct and indirect policy initiatives to grow the industry toward a more mature stage, increase knowledge spillovers and formalization levels, and improve working conditions.
Teyi, Shelter Selorm; Larsen, Marcus Møller & Namatovu, Rebecca (2023)
Entrepreneurial identity and response strategies in the informal economy
While entrepreneurs generally confront many challenges in running their businesses, those in the informal economy must do so in a state of constant environmental change outside the boundaries and support of formal institutions. We explore how the identity of such underdog entrepreneurs shapes their response strategies to situations of adversity that characterize the informal economy. Through an exploratory study of informal entrepreneurs in Ghana, we uncover four entrepreneurial identities (guardians, survival entrepreneurs, canvassers, and growth-oriented entrepreneurs) and discuss how these are closely related to three key response strategies (succumb, improvise, and push new boundaries). These findings show how resource scarcity and uncertainty shape underdog entrepreneurial behavior. We discuss the theoretical and practical implications of these findings.
Larsen, Marcus Møller & Witte, Caroline (2022)
Informal Legacy and Exporting Among Sub-Saharan African Firms
A robust academic field must set and revisit boundary conditions that define where, when, and to whom its insights apply. This is particularly true for a field such as global strategy where the ubiquity of the key terms invites indiscriminate use of the phrase. This essay argues that it is useful to define the field of global strategy as the subset of questions that meet the criteria for both “global” and “strategic” decisions. We offer an a priori approach to identifying and formulating problems that are unique to the global strategy field, suggest how our approach may help scholars better understand the “strategicness” of global decisions, and ultimately, offer a way for individuals with varied disciplinary or topical interests to connect with the field's core.
Elia, Stefano; Larsen, Marcus Møller & Piscitello, Lucia (2022)
Choosing misaligned governance modes when offshoring business functions: A prospect theory perspective
Transaction cost economics (TCE) holds that multinational corporations (MNCs) should select governance modes based on associated transactional hazards. However, MNCs often adopt theoretically misaligned governance modes. Applying a prospect theory (PT) perspective, we use the context of business-process offshoring to explore why firms choose misaligned governance modes. We argue that theoretically misaligned governance modes are regarded as riskier than aligned governance modes, and we suggest that prior experiences of failure in an international context—especially in business functions that are relevant for the internationalization of a firm—prompt decision-makers to choose theoretically misaligned governance modes. We enhance discussions on governance-mode decisions with important behavioral perspectives on how such decisions materialize.
Haarman, Amanda; Larsen, Marcus Møller & Namatovu, Rebecca (2022)
Understanding the Firm in the Informal Economy: A Research Agenda
Informal firms prevail and preoccupy a dominant share of the economic activity in many developing countries. Yet, few attempts have been made to systematically integrate dominant theories of the firm with the empirical importance of informal enterprises. The purpose of this paper is to review established theories of the informal economy and the firm, and to explore potential for cross-fertilization to better understand the nature of the firm in the informal economy. We seek to convey two basic points: First, as informal economy firms vary in form, structure, and strategies, a systematic inquiry of their heterogeneous and idiosyncratic nature is warranted. Second, significant opportunities for future development research reside at the interface between existing theoretical explanations of the informal economy (dualistic, structuralist legal, and voluntarist theories) and dominant theories of the firm (contractual and competence theories). We discuss in detail three main themes for future development research seeking to understand informal economy firms: (i) Contract mechanisms and enforcement; (ii) Learning strategies; and (iii) Resource and capability development.
We explore how companies with a history of offshoring attract their future employees. We reason that offshoring decisions send unintended signals about job insecurity to companies’ onshore labor markets. This signaling effect implies that offshoring companies must pay higher salaries for new hires than non-offshoring companies. We tested our predictions on a sample of 7971 matched managers and professionals recently hired by offshoring and non-offshoring companies. Our results indicate a 3–7% wage penalty for offshoring companies. Thus, we conclude that not only is offshoring challenging to implement, but it can also entail a number of general ramifications for the domestic labor market.
Leiblein, Michael J.; Larsen, Marcus Møller & Pedersen, Torben (2021)
Are governance mode and foreign location choices independent?
This article explores the relationship between organizational governance and location choices. While the existing literature provides significant intuition regarding the factors that influence these choices, it often assumes that governance and location choice are independent from one another. This article tests the veracity of this assumption in the global semiconductor industry. We report evidence of significant correlations across choices regarding how to govern and where to locate production, evidence of a reciprocal relationship between governance and location choices, and evidence suggesting how interdependence between governance and location choices affects the stability of relationships highlighted by extant theories. We conclude with implications for future theoretical and empirical research based on the existence of these interdependent effects.
Peprah, Augustine Awuah; Giachetti, Claudio, Larsen, Marcus Møller & Rajwani, Tazeeb S. (2021)
How Business Models Evolve in Weak Institutional Environments: The Case of Jumia, the Amazon.Com of Africa
The severity of the COVID-19 pandemic is underscored by its systemic distortion of socioeconomic and political agendas around the world. It has disproportionately affected fragile states, and has exposed economies with inefficient safety nets. In this article, we contend that while the uncertainty occasioned by the COVID-19 pandemic has been devastating for many African firms, the situation has also given rise to new entrepreneurial opportunities. We draw on three cases from Africa (one multinational corporation, one start-up, and one informal firm) to outline how the COVID-19 pandemic can also be regarded as a source of entrepreneurship in uncertain times. We conclude by discussing implications for African management practice and research.
Pedersen, Torben; Larsen, Marcus Møller & Dasi, Ángels (2020)
Searching locally and globally: Applying Daniel Levinthal’s scholarship to international business
Daniel A. Levinthal has made several important contributions to the fields of strategy and management. His research has been pivotal in enhancing our understanding of interactions between the internal and external contexts that organizations face as well as the roles of experience, search, and learning processes. Despite substantial overlap between the core issues in international business (IB) and Levinthal’s work, the IB field has yet to fully embrace key tenets of his research. We aim to bridge this gap by providing a number of concrete suggestions for areas in which IB research may benefit from Levinthal’s work and vice versa.
Elia, Stefano; Larsen, Marcus Møller & Piscitello, Lucia (2019)
Entry mode deviation: A behavioral approach to internalization theory
Prior literature is ambivalent about whether organizational complexity has positive or negative effects on firm performance. Using rich data on global service providers, we explore this ambivalence by disentangling performance consequences of different types of organizational complexity. We show that complexity arising from the coordination of different services and operations negatively influences profit margins through increased coordination costs, whereas complexity coming from the sophistication of particular services may positively influence margins through informational advantages. We also investigate the moderating effects of process commoditization and client-specific investments. Our findings point to critical performance dilemmas facing global service providers in a highly competitive industry, and they help better differentiate performance effects of complexity at different organizational levels.
Larsen, Marcus Møller; Seppälä, Timo & Ali-Yrkkö, Jyrki (2018)
The changing geography and ownership of value creation: evidence from mobile telecommunications
Through an innovative trade-in-task case study, we explore how Nokia, which is historically one of the most important mobile phone manufacturers in the world, offshored the development and production of three distinct mobile phones at three different points in time. Adjacent to these processes, we find that the value creation in areas such as design and manufacturing knowledge has rapidly shifted away from advanced economies to emerging economies. Moreover, we find that the value added captured by Nokia decreased dramatically over the studied time period. Based on our results, we uss more generally the challenge of multinational corporations to preserve value and how the realisation of the benefits of offshoring must be assessed with respect to the altered requirements for controlling value-adding activities.
Larsen, Marcus Møller & Lyngsie, Jacob (2017)
Ambiguous adaptation: The effect of contract duration and investments in relational mechanisms on premature relationship termination