Knowledge that Transforms

Grand Challenges are complex problems that transcend national borders and affect future generations and, as a result, have traditionally been viewed as the responsibility of governments. Building on economic theories of market imperfections, we introduce a three-pronged framework to explain how multinationals contribute solutions to Grand Challenges. First, we clarify multinationals’ solutions by classifying them by their sustainability dimensions and associated market imperfections: solutions to environmental Grand Challenges arising from negative externalities and the overexploitation of common goods; solutions to social Grand Challenges resulting from unrealized positive externalities and underinvestment in public goods; and solutions to governance Grand Challenges stemming from information imperfections and abuses of market power. Second, we contextualize the global implementation of these solutions within the two drivers of globalization (technological and institutional changes) and explain their supporting and constraining effects: technological advances enable cross-border development and coordination, but technological inertia and lock-in produce suboptimal outcomes; pro-market reforms facilitate cross-border diffusion, but pro-market reversals limit global knowledge transfer. Third, we explain how intersectoral collaboration and financing are supplementary drivers enabling the scaling of multinationals’ solutions across countries. Overall, our framework resolves the paradox that multinationals can help solve, rather than exploit, market failures.

Abstract Climate change poses significant global challenges to multinational enterprises (MNEs). One crucial solution hinges on the development of new technologies to mitigate climate change or adapt to its adverse effects. However, it remains unclear what factors can effectively motivate MNEs’ development of climate innovation. Integrating the resource dependence theory and the natural resource-based view, we argue that MNEs’ strategies are shaped by their dependence on the global ecological environment for natural resources—coined here as global ecological dependence . When exposed to elevated climate risks, MNEs tend to engage in climate innovation to assuage the uncertainty associated with their global ecological dependence. This tendency is moderated by climate-related formal and informal institutions that alter the perceived benefits and costs of climate innovation: stringent regulatory demand for climate action weakens this tendency as it increases firm costs and can divert resources, whereas heightened societal demand enhances this tendency as it can increase MNEs’ perception of the benefits of climate innovation. We find evidence for our hypotheses in a panel of MNEs listed in the United States from 1995 to 2017. Our study contributes to resource dependence theory and extends our understanding of climate innovation as a viable solution to climate change.

Abstract While geopolitical conflicts, including trade wars, have garnered substantial scholarly attention in recent years, the impact on the outsider firms not directly involved in such conflicts remains underexplored. Engaging in real-options informed analysis, we examine how MNEs from third countries may respond to trade wars by capitalizing on the potential for competitive opportunities: where trade wars prompt the scaling up of third-country subsidiary operations in the involved countries. We further explore how the strategic responses of third-country MNEs to the opportunities presented by a trade war can be enhanced by the strategic flexibility manifest in parent-MNE multinationality, the resources and networks embedded in local partners, and the presence of bilateral economic agreements. Employing the 2018 US–China trade war as an empirical context, our panel data encompass 3601 Chinese subsidiary operations for outsider MNEs hailing from 51 countries, which yields 14,404 annual subsidiary-level observations to conduct difference-in-differences analysis. The empirical results indicate that third-country MNEs disproportionately expanded their Chinese operations in response to the US–China tariff conflict, and that these strategic responses were pronounced for subsidiaries with highly multinational parents, local partnerships in the involved country, and a home–host country bilateral agreement.

Abstract Despite the increasing recognition of digital globalization in international business (IB) literature, there is a more pressing need for a comprehensive understanding of the unprecedented power generated by big-tech multinational enterprises (MNEs). This paper suggests that harnessing data ubiquity globally, instantaneously, and continuously represents a defining feature and a revolutionary power source for big-tech MNEs. By leveraging global data value chains through a mutually reinforcing data-AI feedback loop of data access, analysis, and application, big-tech MNEs can reshape IB practices and challenge global regulatory frameworks. Drawing on power-dependence theory, our research framework highlights a logic of power mutuality characterized by the interplay between power generation and power counterbalance. These two forces provide a holistic lens for examining how big-tech MNEs create data-based power, but are simultaneously countered by the economic and sociopolitical stakeholders of big-tech MNEs. We propose promising avenues for future research on MNEs’ data strategies, global data value chains, foreignness and liabilities of data, and global data governance.

Abstract Gender wage discrimination is a grand challenge that constrains economic growth worldwide and denies women fair opportunities. Yet, we know surprisingly little about how women’s own experiences of wage discrimination steer their career decisions. We adopt the perspective of job-seeking women and argue that prior exposure to wage discrimination reshapes their employer preferences. Specifically, it can flip the liability of foreignness typically faced by foreign MNCs into a perceived employer advantage because foreign MNCs can deviate from the host country’s gender-biased norms. We study this mechanism for 165,624 female professionals and managers who changed jobs in Denmark between 2002 and 2015, using a pay transparency law from 2006 for identifying the underlying mechanism. We find that women who have suffered larger wage discrimination in domestic employment are more likely to start working for foreign MNC subsidiaries. This effect is weaker in labor markets in which high-performing domestic employers can offer other benefits, such as reputation or job security. The effect is stronger when foreign MNC subsidiaries signal gender fairness through a higher share of women in management. Overall, our findings show how wage discrimination redirects female career paths, transforming a grand challenge into a strategic advantage for foreign MNCs.

Abstract In this retrospective, we expand on theorizing about institutions and social entrepreneurship (SE) as presented in our Decade Award-winning 2015 article. Our 2015 paper developed the institutional configuration perspective, which considers joint and interaction effects of formal and informal institutions. It organized disagreement about how formal institutions shape SE, contrasting the institutional voids and institutional support perspectives. In this retrospective, we introduce a revised hierarchy of institutions as a ‘middle-ground’ approach to advance research on institutions in international business and entrepreneurship. This hierarchy integrates insights from different disciplines (institutional economics, sociology, political science, and cultural theory). It explicates the macro-level economic and microfoundational psychological effects of four layers of formal (government activism and constitutional institutions/rule of law) and informal institutions (cultural values and norms). The hierarchy progresses research on institutional voids by distinguishing four types of formal and informal institutional voids. It advances research on institutional configurations by highlighting new synergistic and compensatory configurations. It also offers new insights into institutional change. Finally, we advance research on institutions and SE by theorizing a new institutional paradox for SE that reconciles the institutional void versus support debate and by charting opportunities for how institutions shape the SE process from entry to exit.

Abstract Recent years have seen a rise in global trade of “green products”—those designed to minimize environmental harm compared to traditional alternatives. In this study, we examine the relevance of pollution haven effects—i.e., shifts of production toward countries with less stringent environmental standards—in firms’ global sourcing strategies for green products. Given the importance of credible and sustainable manufacturing practices in firms’ global value chains for green products, we expect that country environmental standards shape global sourcing decisions for green versus non-green products differently. Our findings using data on global imports and exports for more than 5000 distinct products over the 2002–2019 period show that green products are more likely to be sourced from countries with higher environmental stringency, whereas non-green product sourcing patterns align with prior research, which emphasizes the appeal of lower environmental standards and cost-efficiency. This green sourcing effect is stronger for consumer-facing products and for sourcing into countries where consumer engagement in environmentalism is higher and non-governmental organizations are more active. Unlike prior research that implies that higher environmental standards hurt exporters, our results suggest that such standards can benefit green product exporters.

Abstract Our study, grounded in the multimarket competition, knowledge management, and technological change literature, investigates how multimarket contacts among multinational enterprises—i.e., the extent to which rival multinational enterprises meet simultaneously in multiple countries—shape their innovation and patent litigation decisions in host countries. We propose that the degree of multimarket contacts a multinational enterprise has with its competitors in a host country may restrain it from aggressively launching product and technological innovations in that country due to a fear of cross-country retaliation. However, increased multimarket contacts also facilitate knowledge diffusion, heightening the risk of imitation, and consequently enhance the multinational enterprise’s patent litigation intensity—a means to protect knowledge-based resources—in that country. Moreover, we examine how two features of the host-country technological environment—technological ferment (an era of intense technical variation following a technological discontinuity until a dominant design emerges) and home–host country differences in intellectual property protection—moderate these relationships. We test our hypotheses using a dataset of 85 mobile phone vendors, which includes data on their products and technological innovations and litigation cases in 46 countries between 2003 and 2015. This study sheds light on the interplay among multinational enterprises’ multimarket contacts, innovation, and patent litigation.

Abstract Managers’ identities in large matrixed MNE structures are complex and pliable. While research has examined the identities of individual actors located in headquarters (HQ) or local subsidiaries, the unique identity challenges faced by those operating outside these conventional units are less predictable. Our study explores how managers experience and manage a ‘liminal identity’—feeling ‘betwixt and between’ multiple identity positions. Focusing on US MNEs in the life sciences sector, we interviewed managers who assumed global responsibilities from corporate HQ while remaining situated in their local (Irish) subsidiary. We find that operating between corporate HQ, a global network, and the local subsidiary forged a liminal identity. Straddling this local–corporate–global nexus was a profoundly ambiguous, precarious, and destabilizing experience. Yet, individuals also sought to leverage their liminal identity by adopting multiple identities, depending on the audience. This involved ‘switching’ between renouncing a local identity, assimilating a corporate identity and co-constructing a global identity. However, this produced an intense identity struggle, eroding a clear sense of self and belonging. Our study cautions firms to be attentive when supporting managers in these ‘in-between’ spaces to avoid the trap of ‘identity limbo’, where individuals risk becoming disconnected and isolated.