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This edited collection brings into focus the meanings, interpretations and the process of value creation in international business. Exploring value creation in the context of emerging and developed economies, Volume 1 takes the perspective of multinational firms and examines various modes of foreign market servicing varying from exporting to joint venture, mergers and acquisition and strategic alliances. Providing theoretical and practical insights, the authors open an intellectual debate into what value is, and how it is created through the internationalization activities of firms. Value Creation in International Business is a pioneering two volume work intended to provoke theoretical and empirical development in International Business research. Moreover, it is intended as a bridge between concepts derived from general business firm-level research agendas such as value creation and business model, and internationalization approaches and activities of firms.



1. Meanings and Interpretations of Value and Value Creation

When discussing the role of value creation in international business, the meanings and interpretations of “value” are essential in understanding its contextual manifestations. Somehow, it seems we know what “value” means, but if we try to use it in different processes and contexts, in relation to diverse actors, we might be surprised by the various interpretations given to it. Some equate value with the monetary equivalence of what people do or buy; others interpret it in a much broader sense as merit or worth, which can be either tangible or intangible, yet hard to define. Often, authors assume that either the reader knows what value is and discuss what affects it or how it is created, or simply explore it in a specific setting. Economics, accounting, strategic management, marketing, sociology, and various other academic disciplines have developed their specific interpretations and models of value that are embedded in the perceptions of the worth of the subject matter (for a review of conceptualizations of value in relevant disciplines see Ahen 2015: 83–86).
Svetla Marinova, Jorma Larimo, Niina Nummela

2. Value Creation in International Joint Ventures: Impact of Inter-Partner Factors and Location

One key goal when establishing international joint ventures (IJVs) is to create value in different ways for the partnering firms. The value creation can be via new innovations, more effective production processes, taking benefit of the synergy effects in various functions, and so on (see e.g. Deeds and Hill 1996; Barringer and Harrison 2000). The literature on IJV research shows that internal partner factors (Brouthers and Bamossy 2006) and the interaction between partners often significantly influence the cooperation. In addition, the effect of location factors on the operations of firms has been emphasized in international business research (Miller and Eden 2006). However, the current literature related to value creation in strategic alliances and IJVs provides relatively limited empirical results about these influences. Lee et al. (2013) found that value creation differs between alliances located in developing and developed countries. Furthermore, prior research suggests that resource complementarity between partners enhances the value creation potential in IJVs (Kumar 2008). Previous studies (e.g. Pothukuchi et al. 2002) suggest that both national and organizational cultural differences also play a crucial role in the operation and effectiveness of IJVs. Some studies (e.g. Hennart and Zheng 2002; Pothukuchi et al. 2002) have found that cultural differences have a negative impact on IJV operations, and some others (e.g. Li et al. 2001) have found a positive influence. Besides, interactions between partners, such as inter-partner flexibility, communication, trust, and control mechanisms, seem to be important factors that impact upon IJV operations (Vaidya 2000). On the one hand, several IJVs do not reach the value creation goals set for them and the units are therefore subsequently terminated (Christoffersen 2013); on the other hand, the earlier results of the value creation effects of several variables are mixed. Therefore it is important to investigate more fully the impact of various inter-partner and location related variables on value creation in IJVs.
Tahir Ali, Jorma Larimo, Huu Le Nguyen

3. Joint Venture Longevity in Southern and Eastern Mediterranean Countries

Companies from mature economies have considerably developed their investments in emerging markets during the recent period (Hadjikhani et al. 2012; Mayrhofer 2013; UNCTAD 2014). These investments frequently take the form of international joint ventures (IJVs) signed with local partners. IJVs are defined as organizational entities managed jointly by two or more independent parents from different countries, who invest in a company’s capital to obtain strategic objectives (Shenkar and Zeira 1987). They can be created from scratch (greenfield IJVs) or through a partial acquisition of equity in an existing firm (Hennart et al. 1998; Hennart 2009). According to Meschi (2009), four main reasons explain the proliferation of international joint ventures: (1) achieving economies of scale and critical size; (2) learning and transferring competence and knowledge; (3) refocusing and restructuring a business portfolio; and (4) entering new risky markets. Despite their numerous advantages, joint ventures are often characterized by a high degree of instability (Park and Ungson 2001) and poor performance (Killing 1983; Geringer 1986). Empirical studies on IJV survival in emerging countries show that between 30% and 50% are sold off, bought out, or dissolved by the partners during the first five years of existence (Meschi 2005; Meschi and Riccio 2008; Prange and Mayrhofer 2014). Recent studies have been conducted in Hungary (Steensma et al. 2008), Brazil (Meschi and Riccio 2008), China (Duan and Juma 2007; Puck et al. 2009; Ott et al. 2014), and Russia (Prévot and Guallino 2012).
Dora Triki, Emna Moalla, Ulrike Mayrhofer

4. Role, Motivation, and Performance of International Joint Ventures in Slovakia

A joint venture is “a contractual arrangement that creates a separate legal entity in which the parent firms hold ownership interests under conditions and provisions that are specified by a legal document” (Murray and Siehl 1989). According to Harrigan (1985), joint venture is formed by “separate entities with two or more active businesses as partners.” Gomes-Caseres (1987) understands a joint venture as “a subsidiary in which the multinational enterprise owns 5 percent to 95 percent of equity.” The equity can act as a governance mechanism (Brouthers and Hennart 2007). A joint venture is “an agreement by two or more parties to form a single entity to undertake a certain project. Each of the businesses has an equity stake in the individual business and share revenues, expenses and profits” (Išoraité 2009). A joint venture is also “a fast and effective way to acquire the missing knowledge that partners require to innovate” (Anderson et al. 2011). A joint venture is not expected to have indefinite existence. Its instability might be measured by unexpected termination via dissolution, sell-off, or acquisition (Park and Ungson 1997). Contractor and Lorange (2002) point out that a joint venture is a separate entity providing risks and rewards for the partners.
Sonia Ferencikova, Tatiana Hluskova

5. Cross-Border Mergers and Acquisitions from India: Motives and Integration Strategies of Indian Acquirers

India is an important player regarding mergers and acquisitions (M&As) from emerging economy (EE) countries, both in terms of inward and outward foreign direct investment (FDI). After two consecutive years of decline, the gross value of cross-border M&A deals increased in 2014 by 34%, reaching US$900 billion. One key characteristic was the increasing amount of M&A deals with values larger than US$1 billion (World Investment Report 2015). Cross-border M&As from EEs, especially from China and India, have increased dramatically during the past decade (Bhagat et al. 2011; Sun et al. 2012; Nicholson and Salaber 2013). In 2014, multinational enterprises (MNEs) from developing economies alone invested US$468 billion abroad, which is a 23% increase on the previous year. According to the World Investment Report (2015), for the first time MNEs from developing Asia became the world’s largest investing group. The largest home economies for FDI in developing or transition economies were, among others, China, Hong Kong (China), Singapore, Brazil, India, Chile, Indonesia, and the Russian Federation. In India the FDI outflow increased fivefold to US$10 billion in 2014 (World Investment Report 2015).
Melanie Hassett, Zsuzsanna Vincze, Uma Urs, Duncan Angwin, Niina Nummela, Peter Zettinig

6. The Value Creation of Mergers and Acquisitions in Mature and Emerging Markets: A Study of French Multinationals

Foreign direct investment (FDI) in emerging markets has considerably increased during the recent period. These investments often take the form of mergers and acquisitions (M&As) signed with local partners (Hadjikhani et al. 2012; Mayrhofer 2013). In 2013, 26% of registered operations took place in emerging economies, whereas M&As in these countries only accounted for 6% in 1990 (UNCTAD 2014). The increasing interest of multinationals in M&As in emerging markets raises numerous questions (Malhotra and Gaur 2014). Which companies are particularly active in establishing M&As? Which are the preferred destinations chosen for these external growth strategies? How do financial markets react to these trends? Do M&As in emerging countries create similar value to operations in mature countries?
Ludivine Chalençon, Ulrike Mayrhofer

7. Africa: An Emerging Context for Value Creation with Cross-Border Mergers and Acquisitions

Merger and acquisition (M&A) transactions have been well researched for their value creation potential (Haleblian et al. 2009; King et al. 2004; Seth 1990b) and their great practical importance in strategic, monetary, and social terms (Aklamanu et al. 2015; Gomes et al. 2013), particularly in developed countries over the last half-century. Yet, there is limited understanding of the overall relevance and sources of value creation associated with M&As in developing or emerging economies (Narayan and Thenmozhi 2014), though firms are steadily expanding into these markets as a vital element of their internationalization strategy. For instance, despite the fragile and slow economic recovery in many developed nations, the value of global M&A transactions in 2013 alone exceeded US$2.3 trillion (Bloomberg 2013). The strong growth in continents comprised of emerging market economies such as South America and Africa have positively shaped this upward trend. In recent years, M&As have increasingly become common as a relevant medium for foreign direct investment (FDI) in Africa for both international and regional market players. This strong growth has been supported by greater diversification, increased economic stability among the continent’s nations, an abundance of natural resources throughout Africa, and the existence of sizable consumer markets in many African countries (Mergermarket 2012; Triki and Chun 2011). Figure 7.1 presents an overview of the trends in African M&A in terms of the number and value of deals from 2009 to 2013.
William Y. Degbey, Kimberly M. Ellis

8. The Role of Trust in Value Creation: The Case of a Cross-Border Acquisition in Russia

During the past few decades, the amount of mergers and acquisitions (M&As) has increased dramatically in the global marketplace. At the same time, the share of cross-border acquisitions in the total value of global M&As has also grown significantly (Bertrand and Betschinger 2012; Stahl et al. 2012), indicating that they have been gaining ground as a preferred mode of internationalization (UNCTAD 2007). Simultaneously, there has been a clear shift of foreign direct investment (FDI) flows to developing and transition economies, and especially to the so-called BRIC countries (i.e. Brazil, Russia, India, and China), which have attracted the attention of multinational corporations (UNCTAD 2010, 2014). Indeed, in 2010 approximately one-third of global M&As (both in value and number of deals) took place in emerging markets (Bertrand and Betschinger 2012). However, M&As in the context of the BRIC countries have received relatively little interest in academic research (Bertrand and Betschinger 2012). Furthermore, in comparison with other major emerging markets (such as China and India), Russia has seldom been presented in international business research, even though the country has emerged as an important international business location during the past two decades (Tretyak 2013). This can also be seen in the large share of foreign participation in Russian M&A deals (Radygin 2010).
Elina Pelto

9. Antecedents of Cross-Border Acquisition Performance: Implementation Issues

Numerous waves of mergers and acquisitions (M&As) have led to substantial industrial restructuring in different parts of the world (DePamphilis 2012:18). Since the beginning of the 1990s, an increasing share of M&As has taken the form of cross-border acquisitions (CBAs) (Bertrand and Betschinger 2012). Paralleling with their popularity and practical importance, in both monetary and strategic terms, however, a majority of research findings show that the performance of M&A deals has not significantly improved over these decades (King et al. 2004; Martynova and Renneboog 2008). Other studies (Larimo and Pynnönen 2008; Kallunki et al. 2001), on the other hand, have concluded that, on average, foreign direct investment has significant value creating effects for investing firm shareholders. The researchers continue to be bewildered by the unpredictable nature of M&As, concluding their studies with: “a huge portion of variance remains unexplained” (Stahl and Voight 2004). According to Meglio and Risberg (2010), “one has not learnt very much about how the M&A process unfolds over time, how to measure M&A performance, and what makes an acquisition succeed.” Based on their experience with 70 M&As, Marks and Mirvis (2001) argue that the process through which the deal is conceived and executed is at the core of many failed combinations. Hence, an important question is not simply what to acquire, but also how to acquire. In order to develop a deeper understanding of the consequences of acquisitions, greater attention must be paid to the process that acquirers use to seize value from acquisitions (Hapeslagh and Jemison 1991; Haleblian et al. 2009).
Daojuan Wang, Hamid Moini, John Kuada

10. Russian Oil and Gas MNEs Investing in China: The Role of Government in Value Creation

The People’s Republic of China (PRC) and the Russian Federation (RF) are the two fastest-growing economies in the world. Gazprom has internationalized into China as it has been developing very fast. Russian companies also consider the Chinese market to be very attractive for international expansion, especially in natural resource-based industries, such as oil and gas or metallurgy.
Andrei Panibratov

11. When Is FDI Valuable to the Multinational Enterprise? The Role of Firm Capabilities and International Experience

While the relationship between the internationalization degree of multinational enterprises (MNEs) and their performance has long been an important issue in international business research, empirical research has only generated heterogeneous outcomes (Li 2007). This can be related to the fact that the internationalization degree in itself is not an explanatory, but an intermediate, variable (Verbeke and Brugman 2009). Hence, in order to benefit from the advantages of internationalization, firms need to leverage their resources in different foreign settings (Lu et al. 2010). Thus, added value in MNEs is generated from contributions originating in different parts of a network of subunits, exposed to divergent characteristics of host countries (Verbeke et al. 2009), and having different roles in the MNE portfolio (Luo 1999b). Despite the focus of academic attention on foreign expansion, divestment processes and withdrawals from foreign markets are commonplace (Benito and Welch 1997). Thus, the relationship between firm internationalization and its performance is clearly a non-obvious one.
Piotr Trapczynski

12. Mission Impossible: How to Create Value in Times of Crises

This chapter analyzes key changes in the structure and behavior of the banking sector in Slovakia over the last 20 years. To illustrate these, I use a case study in the Slovak banking sector during the time of the economic crisis, when value creation had to be revisited.
Sonia Ferencikova

13. Dragons with Horsepower: Learning about the Internationalization Process of Emerging Market Firms

While there are many examples of large multinational enterprises (MNEs) that have acquired local national firms in markets where they want to enter or further expand, there is less research focusing on how local and national firms choose to acquire large MNEs as a strategy for internationalization. To be able to compete in emerging markets and to internationalize out of these, firms make strategic choices that are different from those prescribed in traditional behavioral models of MNEs (Aulakh and Kotabe 2008; Lu et al. 2014; Meyer et al. 2009). Supposedly new categories of internationalized firms emerge in relation to traditional explanations and the current understanding of international business is challenged (Xu and Meyer 2005). For instance, through the acquisition strategy, where local firms from an emerging market acquire an existing internationalized firm, a new dimension to Johanson and Vahlne’s (2009) concept of “liability of foreignness” and “liability of outsidership” arises. This is especially so when the acquisition relates to an internationalized firm from a developed market.
Anna Jonsson

14. Talent Management and Global Value Creation: How Do Russian Companies Do This?

Firms from emerging markets are constantly looking for additional competitive advantages, a source of organizational growth, and possibilities for value creation in a global context. Scullion et al. (2010) and Scullion and Collings (2011) argue that talent management (TM) has become very important in firms’ global operations. There is a growing recognition that a firm’s success mainly depends on, among other factors, human resource management (HRM) (Tarique and Schuler 2010) and managerial and professional talent as key resources for companies in the internationalization process (Farndale et al. 2010). It is generally recognized that the complexity of TM in MNCs is higher than in domestic firms due to the more demanding skill sets required by MNCs to create value in supporting organizational growth. Beechler and Woodward (2009) identify four main factors that create an environment that promotes a war for talent and that impact on TM characteristics at the global and national level: global demographic and economic trends; an increase of mobility of people and organizations; transformation in the business environment; and the growing diversity in workforce skills and cultures. Creelman (2004) has defined TM as the process of attracting, recruiting, and retaining talented employees, whereas Chuai et al. (2008) associate TM with activities that include incorporating new knowledge and doing things more quickly and efficiently for organizational growth. For some authors, TM is a mindset to ensure that all employees perform to the best of their potential (Buckingham and Vosburgh 2001; Walker and Larocco 2002). At this point we see the importance of identifying a role for TM in both value creation and a firm’s performance results. We use the Russian context due to the fact that TM in Russian companies is not widespread, though firms have become important players in the global market due to an increased involvement in internationalization (Panibratov 2012). Based on this idea, I have formulated the following research questions that guided me in my empirical research:
What are the specific TM practices implemented in Russian companies?
Is the role of TM in Russian firms more strategic or more operational?
How does TM influence a firm’s performance in the Russian context?
Marina Latukha


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