In this article, we provide a synthesizing framework that we call the “ dynamic trajectories ” framework to study the evolution of multinational enterprises (MNEs) in host countries over time. We argue that a change in the policy environment in a host country presents an MNE with two sets of interrelated decisions. First, the MNE has to decide whether to enter, exit, or stay in the host country at the onset of each policy epoch; second, conditional on the fi rst choice, it has to decide on its local responsiveness strategy at the onset of each policy epoch. India, which experienced two policy shocks — shutting down to MNEs in 1970 and then opening up again in 1991 — offers an interesting laboratory to explore the “ dynamic trajec- tories ” perspective. We collect and analyze a unique dataset of all entry and exit events for Fortune 50 and FTSE 50 fi rms (as of 1991) in India in the period from 1858 to 2013 and, addition- ally, we document detailed case studies of four MNEs (that arguably represent outliers in our sample)
In this paper, we build on the standard resource dependence theory (RDT) and its departure suggested by Vernon to offer a novel explanation for why state-owned entities (SOEs) might seek a global footprint and global cash flows: to achieve resource independence from other state actors. In the context of SOEs, the power use hypothesis of standard RDT can be used to analyze the dependence of SOEs on other state actors, such as government ministries and government agencies that have ownership and control rights in the SOE. Building on Vernon, we argue that the SOE can break free from this power imbalance and establish resource independence from other state actors by becoming a multinational firm and/or by generating global cash flows. We leverage a natural experiment in India and outline both quantitative and qualitative evidence from 42 Indian state-owned laboratories to support this argument.
One of the most rigorous methodologies in the corporate governance literature uses firms' reactions to industry shocks to characterize the quality of governance. This methodology can produce the wrong answer unless one considers the ways firms compete. Because macro-level shocks reverberate differently at the firm level depending on whether a firm has a cost structure that requires significant adjustment, the quality of governance can only be elucidated accurately analyzing a firm's business strategy and their corporate governance. These differences can help one determine whether the fruits of a positive macro-level shock have been expropriated by insiders. Using the example of Indian firms, we show that an influential finding is reversed when these differences are considered. We further argue that the conventional wisdom about tunneling and business groups will need to be reformulated in light of the data, methodology, and findings presented here.