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8/3/2019 Role of Top Management on International Diversification
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A
PROJECT REPORT
ON
ROLE OF TOP MANAGEMENT
ON INTERNATIONAL DIVERSIFICATION
Submitted to: Submitted by:
ArpitaAgnihotri Aditi Sharma
BhavpreetSinghal
GauriIndurkar
KunalGupte
SulabhTekriwal
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TABLE OF CONTENT
TOPIC
PAGE NO.
1. INTRODUCTION 3
2. LITERATURE REVIEW
5
3. METHODOLOGY22
4. PANEL REGRESSION OUTPUT SHEET
22
5. REGRESSION EQUATION
26
6. CONCLUSION26
7. APPENDIX-I
27
8. REFERENCES
34
9. BIBLIOGRAPHY36
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INTRODUCTION
Top management plays an important role in deciding the growth of any organization. Top
management team (TMT) decide where to invest, when to invest, how to invest, how much to
invest.
The highest rankingexecutives (with titles such as chairman/chairwoman, chief executive
officer, managing director, president, executive directors, executive vice-presidents, etc.) are the
top management responsible for the entire enterprise. Top management translates thepolicy of
the firm into goals,objectives, and strategies, andprojects a shared-vision of the future. It makes
decisions that affect everyone in the organization, and are help entirely responsible for
the success orfailure of the enterprise.
The key to successful international expansion and long-term growth are decisions made at the
top management level. The ideal combination of speed, dispersion and regularity in the
internationalization process is determined by the information-processing capabilities at corporate
headquarters. As the central decision-making unit at corporate headquarters, the top management
team is faced with increasingly complex decisions as the company expands its presence abroad
through its foreign subsidiaries. This complexity requires a corresponding degree of information
processing capacity at the top management team level, requiring the top management team to
possess certain traits and capabilities in order to effectively manage the expansion of foreign
operations.
There is increasing research effort in management literature dedicated to better understanding the
role and impact of demographics of top management teams on firm strategies.
International diversification is an attempt to reduce risk by investing in more than one
nation. By diversifying across nations whose economic cycles are not perfectly correlated,investors can typically reduce the variability of their returns. The issue of the value impact of
corporate diversification has been the focus of significant research attention over the past decade.
The vast majority of this research has focused on the issue of cross-industry investments. Given
this attention, one might believe that industrial diversification is quite common among US firms.
This turns out not to be the case, as the more common corporate diversification investment
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http://www.investorwords.com/4031/ranking.htmlhttp://www.businessdictionary.com/definition/executive.htmlhttp://www.businessdictionary.com/definition/title.htmlhttp://www.businessdictionary.com/definition/chief-executive-officer-CEO.htmlhttp://www.businessdictionary.com/definition/chief-executive-officer-CEO.htmlhttp://www.businessdictionary.com/definition/managing-director.htmlhttp://www.investorwords.com/3802/President.htmlhttp://www.businessdictionary.com/definition/executive-director.htmlhttp://www.businessdictionary.com/definition/Vice-President.htmlhttp://www.businessdictionary.com/definition/enterprise.htmlhttp://www.businessdictionary.com/definition/management.htmlhttp://www.businessdictionary.com/definition/policy.htmlhttp://www.businessdictionary.com/definition/goal.htmlhttp://www.businessdictionary.com/definition/objective.htmlhttp://www.businessdictionary.com/definition/strategy.htmlhttp://www.businessdictionary.com/definition/project.htmlhttp://www.investorwords.com/9809/future.htmlhttp://www.investorwords.com/10256/make.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.investorwords.com/8782/affect.htmlhttp://www.businessdictionary.com/definition/organization.htmlhttp://www.businessdictionary.com/definition/success.htmlhttp://www.businessdictionary.com/definition/failure.htmlhttp://www.investorwords.com/4031/ranking.htmlhttp://www.businessdictionary.com/definition/executive.htmlhttp://www.businessdictionary.com/definition/title.htmlhttp://www.businessdictionary.com/definition/chief-executive-officer-CEO.htmlhttp://www.businessdictionary.com/definition/chief-executive-officer-CEO.htmlhttp://www.businessdictionary.com/definition/managing-director.htmlhttp://www.investorwords.com/3802/President.htmlhttp://www.businessdictionary.com/definition/executive-director.htmlhttp://www.businessdictionary.com/definition/Vice-President.htmlhttp://www.businessdictionary.com/definition/enterprise.htmlhttp://www.businessdictionary.com/definition/management.htmlhttp://www.businessdictionary.com/definition/policy.htmlhttp://www.businessdictionary.com/definition/goal.htmlhttp://www.businessdictionary.com/definition/objective.htmlhttp://www.businessdictionary.com/definition/strategy.htmlhttp://www.businessdictionary.com/definition/project.htmlhttp://www.investorwords.com/9809/future.htmlhttp://www.investorwords.com/10256/make.htmlhttp://www.businessdictionary.com/definition/decision.htmlhttp://www.investorwords.com/8782/affect.htmlhttp://www.businessdictionary.com/definition/organization.htmlhttp://www.businessdictionary.com/definition/success.htmlhttp://www.businessdictionary.com/definition/failure.html8/3/2019 Role of Top Management on International Diversification
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strategy of US firms is to invest internationally, outside of the domestic market. In the late
1990s, the percentage of US firms with cross-border investments was nearly three times the
percentage of firms with cross-industry investments. While there is a wealth of well developed
economic arguments suggesting that internationally diversifying investments can have important
value impacts on firms, the measurement of such impacts has received little attention. In
contrast to the long list of studies on the value impact of industrial diversification, there is
limited work and mixed results on the value implications of international diversification.
Nationality diversity and international experience constitute two distinct sources of competence
among upper echelons. While both TMT international experience and nationality diversity
increases the likelihood of firms expanding outside their home region, our results show that
TMTs with international experience are more likely to expand abroad via Greenfield
investments, whereas nationally diverse TMTs are more likely to engage in international
acquisitions and joint ventures. This highlights the need to treat TMT nationality diversity and
international experience as two different characteristics influencing foreign entry mode decision.
Linking international diversification to company performance suggests that prior performance
may be an important driver to diversifying internationally. In order to establish this link, the
international diversification-performance relationship has been tested in this study, controlling
for other factors such as company age, market performance, organisational life cycle, level of
organisational slack, and industry of participation. These factors are a mix of push and pull
factors for international diversification.The results show that in general, international
diversification has a positive relationship with performance, except in the case of regional
international diversification. One would expect that companies that diversify internationally can
reap economies of scale and scope as well as ownership advantages by operating in another
location. However, expanding regionally does
not necessarily lead to better performance. While ownership advantages and the proximity ofregional markets may generate greater profitability, it is possible that the smaller markets in
Australasia allow limited economies of scale and scope and thus in fact limit profit potential.
The prior performance of a company is a key determinant of international diversification, except
in the case of regional international diversification. Specifically, in the case of nonregional
diversification, prior performance has an invertedU relationship with international
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diversification. That is, the extent of international diversification increases as prior performance
increases. However, beyond a threshold level of prior performance, the extent of international
diversification actuallydecreases or tapers off. This result is similar to the effect on the difference
between nonregional and regional international diversification.
LITERATURE REVIEW
FOREIGN EXPERIENCE OF TOP MANAGEMENT TEAMS AND INTERNATIONAL
DIVERSIFICATIONSTRATEGIES OF U.S. MULTINATIONAL CORPORATIONS
-RAKESH B.
SAMBHARYA
School of Business, Rutgers University-Camden, Camden, New Jersey, U.S.A. FOREIGN
Introduction:
Top management plays an important entity in deciding the growth of any organization. Top
management team (TMT)decide where to invest, when to invest, how to invest, how much to
invest. Here Mr. Rakesh B. Sambharya want to identify that whether international exposure of
TMT of US multinational corporation is associated with their international diversificationstrategies or not. It an quantitative analysis showing which all independent factors affect more.
Literature Review usedby Rakesh B. Sambharya is:
He identified three studies showing a relationship between the TMT and international
diversification of an organization. Norburn (1987) compared TMT of U.S.A with UK and found
a drastic difference among the two. British top management teams in terms of corporate
experiences, education, and self concept with regards to aspiration and executive traits.
Sambharya identified traits of 53 American MNCs and found that diversity, age, tenure of plays
an important role in determining international diversification capacity of the firm.
Here they consider demographic variables such as age, tenure of work, functional background,
and education. Not every executive have international exposure.
Hypothesis 1a: the mean number of years of international experience of the top management
team will be positively related to the amount of international diversification in an MNC.
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Hypothesis 1b: a higher portion of managers with international experience in the top
management team will be positively related to the amount of international diversification in an
MNC.
Hypothesis 1c: the heterogeneity of international experience of the top management team in an
MNC will be positively related to the amount of international diversification.
Methodology
Research is based on two assumptions:
At least 10% oftotal sales are from foreign operations
A company is considered to be MNCs and taken into consideration only when it have
operations in more than six countries.
Sample size: 54
Variables
Study focuses only on MNCs, whichhave tangible foreign assets and foreign sales. International
diversification is measured in term of percentage of foreign sales to total sales (%FORSALES)
and percentage of foreign assets to total assets (%FORASSETS).
Independent Variables are INTEXPMdenotesthe mean number of years of internationalexperience, INTHOMO refers to homogeneity of international experience, PINT# refers to
the percentage of top managers having international exposure, and Sales served as a control for
size of the company in this study and was normalized by taking logarithmic value (LOGSIZE).
Results
All the three models (INTEXPM, INTHOMO, PINT#) are significant and accounted for 21, 28,
and 18 percentage of the variability in %FORSALES. The result of regression on%FORASSETS on INTEXPM, INTHOMO, PINT# indicated that they are marginally significant
and accounted for a variance of 13 and 12 percentage respectively. Thus hypothesis 1a and
1cwere upheld but Hypothesis 1b received only partial support. The top management teamof MNCs influences so foreign markets to some extent foreign direct investment.
Source:
Strategic Management Journal, vol. 17, 739-746 (1996)
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Literature Review 2
Top management Team International Dominant Logic: A New Linkage in the
International Diversification- Performance Link
-Douglas E. Thomas
Introduction
Top management is akey part of any organization. They thought that the firm itself is to a large
degree a reflection of the top management team. Some researcher found that their is an inverted
U relationship between the international diversification and performance
Objective:
To propose anew construct to the strategic management literature that affects the
relationship between the international diversification and TMT.
To explore the antecedent of the TMTs international dominant logic
To argue that the TMTs international dominant logic is a crucial link in the relationship
between a firms international diversification strategy and its performance.
Methodology:
Its a qualitative research, wherein Mr. Douglas E. Thomas come to a conclusion based on their
subjectivity. Some of the used by Mr. are they used paper are Norburn (1987), Rakesh B
Sambharya, etc.
Results
More diverse top management team provides more information as well as better information to
the firms decision making processes. Diversity can be based in much aspect of individuals such
as education, experience, tenure in the firm, gender, and ethnicity. Conversely, firms that have
higher levels of international diversification but lower levels of TMT diversity experience lower
levels of performance. Further, the results of the other recent research indicate that firms that
invest overseas often experience initially higher performance and then face challenges which
lead to lower performance.
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Literature Review 3
Composition of the Top Management Team and Firm International Diversification
Source: Journal of Management
Objective: The purpose of this study is to understand the Impact of the Composition of the Top
management teams on Firm International Diversificiation.
This study is inspired by the increasing research effort in management literature dedicated to
better understanding the role and impact of demographics of top management teams on firm
strategies.
Variables taken:
Dependent variable: Multidimensional measure of international diversification: Foreign sales
divided by total sales (FSTS). FSTS data was taken from Electronics Business 200 annual
survey.
Independent variables: Demographic variables like Age, tenure, education, functional
background, international experience and heterogeneity of top management teams in one
industry
Control Variables: Prior experience of firm (ROA over time span 1983-1985), firm size
(number of organizational employees in 1985) and top management team size.
Hypotheses:
HI: Higher average age of top management negatively related to degree of firms international
diversification
H2: Higher average tenure of top management positively related to the degree of the firms
international diversification
H3: Positive association between average level of elite education of top management and degree
of the firms international diversification
H4: Positive association between average level of international experience of top management
and degree of the firms international diversification
H5a: Positive association between age heterogeneity of top management and degree of the firms
international diversification
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H5b: Positive association between tenure heterogeneity of top management and degree of the
firms international diversification
H5c: Positive association between educational heterogeneity of top management and degree of
the firms international diversification
H5d: Positive association between functional heterogeneity of top management and degree of the
firms international diversification
Methodology:
Sample consists of 126 firms from US Electronics industry.
Heterogeneity of age and tenure taken by dividing the standard deviation by mean of each
Heterogeneity of education and functional het: calculated based on Blaus heterogeneity measure
1- (p) , where is the proportion of the team in the ith educational or functional category.
Tool used: Two-step Hierarchical multiple regression analysis.
Before running analysis, all the variables were tested for possible problems related to
distribution. Because a significant level of skewness was found in firm size and top management
team size, logarithmic transformation was used for these variables. Other variables were
normally distributed with an acceptable range of skewness, therefore no additional
transformations were made.
1-step: Control variables were entered in the fist step. This illustrates that the control variables
have no significant relationship with degree of international diversification.
2-step: The Independent variables were entered.
Results:
R was 26% at p < 0.01 (significance level) and F= 4.03. Thus, it is found that the composition oftop management adds to the prediction of degree of internationalization of firm.
The standard coefficients of the Independent variables is significant, thus supporting the
Hypotheses 1, 2, 3, and 4. Also, there is significant relationship between team heterogeneity and
international diversification. Thus, supporting H5b. However, other heterogeneities are not found
to have significant relationship with firm diversification.
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Hence, it is found that characteristics like lower average age, higher average tenure, higher
average elite education, higher average international experience and higher tenure heterogeneity
are associated with firm international diversification. The study reinforces the importance of top
management team composition in internationalization decisions.
Literature Review-4
The Influence of the Management Team's International Experience on theInternationalization Behaviors of SMEs
Objective:
The purpose of this paper is to explore the relationship between management's International
experience and the internationalization of SMEs. The empirical findings are based on a sample
of Canadian software product firms.
It has been argued that compared with large firms, SMEs are disadvantaged in entering and
expanding sales in international markets because they lack the necessary skills and resources.Moreover, young firms are seen as being disadvantaged further because they lack the experience
and credibility that a domestic track record provides.
Variables used:
Dependent variable:
The dependent variable taken is Degree of Internationalization (DOI-sme)
There are three components of DOI (sme).
The first component is FSTS, foreign sales as a percentage of total sales, which is a standardsingle-item measure of degree of internationalization. The second component is the percentage
of the firm's employees that spends over 50% of their time on international activities. The third
component measures the geographic scope of sales by asking which of three regions, the
company made sales to: Canada only, North America only, outside North America. The threeitems are converted into a ratio measure and standardized (z). Then the three z-values are
summed to create a single score, DOI (sme).
Independent variables:
1) Partners (foreign)- the number of strategic partners of the firm with headquarters outsideCanada
2) International experience- Founders exposure to international markets
Control Variables: Firm size and firm age
Hypothesis:
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H1a: The international experience of the top management team in Canadian software product
SMEs is related to the use of foreign strategic partnerships by the firm
H1b: The use of foreign strategic partnerships by Canadian software product SMEs mediates the
relationship between the team's international experience and the firm's degree of
internationalization.
Methodology:
Data relevant to the hypotheses were collected from Canadian software product firms. A
questionnaire was developed on the basis of previous research and interviews. The
questionnaires were given to the firm's founder or to a member of the firm's top managementteam by trained research assistants.
The sample size was 49 firms.
Tool used: Test for Mediation using Regression equations
Coefficients of the variables are found by doing mediation for Partners
3 Regression Eqns:
1) PARTNERS = a + INTEREXP + FIRMSIZE + FIRMAGE + e
2) DOI (sme) = a + INTEREXP + FIRMSIZE + FIRMAGE + e3) DOI (sme) =a +INTEREXP + FIRMSIZE + FIRMAGE + PARTNERS + e
According the mediation test, following four conditions must hold:
- The independent variable (International Experience) must affect the mediator (Partners)in the first equation
- The independent variable must affect the dependent variable (DOI-sme) in the secondequation
- The mediator must affect the dependent variable in the third equation
- The effect of the independent variable on the dependent variable must be less in the third
equation than in the second
Results:
- The coefficient of International Experience is shown as significant for Partners
(mediator) and not significant by the other two variables in the mediation table. This
satisfies first condition.
- International experience is a significant predictor of DOI (sme) while coefficients forFIRMAGE and FIRMSIZE are not significant. This result satisfies second condition
- The coefficient for PARTNERS is positive in third equation. Also, the coefficients and
significance levels for INTEREXP in equation 3 is less than in equation 2. These resultssatisfy the third and fourth conditions for mediation.
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Hence, from the results we can see that experienced management teams have a greater
propensity to develop foreign strategic partners. This leads to a higher degree of
internationalization.Thus, supporting hypothesis H1b which says, the use of foreign partners by Canadian software
product SMEs mediates the relationship between the teams international experience and the
firms degree of internationalization.
Literature Review-5
TITLE: The Impact of Top Management Team Nationality Diversity and International
Experience on Foreign Entry Mode
Bo Bernhard Nielsen
Sabina Nielsen
Objective of the research paper:
The geographic diversity and uneven concentration of resources (human resource) has given a
boost for firms to operate in international markets .This has created a dependency of nations in
terms of resources and this is the threshold of rich international experience of top notch people inthe organization which is bolstering organizations to expose and grow more internationally.
Methodology:
Data was collected for 165 firms over a seven year period (2001-2007). Information on the
characteristics of the TMT was obtained from company annual reports and websites. Foreign
expansion outside the home region was coded as 1 if an investment was made outside Europe
and 0 otherwise. Acquisitions and Greenfield investments were coded as 1, and joint ventures as
0) and establishment mode (Greenfield equals to 1 and acquisition equals to 0). international
diversification was controlled using the entropy measure of firm diversification (Palepu, 1985),
calculated with theformula Pi ln(1/Pi)2 where P was the percentage of segment sales of the
total firm sales. TheBlau index captured the dispersion of team members across all possible
categories of a certain dimension using the formula B = [1- (pi)2], where p was the percentage
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of members in the group . The higher the value of B, the greater was the heterogeneity on a
particular variable.
Variables Considered:
Firm size, Firm internationalization, Industry dynamism, CEO international experience, TMT
size TMT industry size, TMT Educational diversity, TMT functional diversity, TMT
international experience TMT international diversity, Number of Ijv ,TMT national diversity,
Number of international acquisitions ,Number of Greenfields etc..
Logistic HLM analysis and Poisson HLM analysis was used to procure the results
Hypothesis:
H1: the higher the TMT nationality diversity, the more likely the firm will expand outside the
home region.
H2: TMT international experience increases the propensity to form Greenfield investments
abroad.
H3: TMT nationality diversity increases the propensity to engage in international joint ventures
H4: TMT nationality diversity increases the propensity to engage in international acquisitions
Results:
TMT nationality diversity was positively related to the likelihood of expanding outside the home
region (b = .88, p
< .05).
TMT international experience was positively associated with the propensity to establish
Greenfield subsidiaries (b = .85, p < .05)
TMTs were more likely to form international joint ventures, was also supported (b = 2.66,p < .
01)
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TMT nationality diversity was positively associated with the propensity to undertake
international acquisitions (b = .82, p < .05).
Literature Review-6
TITLE: TOP MANAGEMENT TEAM DEMOGRAPHY AND CORPORATE
STRATEGIC CHANGE
MARGARETHE F. WIERSEMA University of California, Irvine KAREN A. BANTEL
Objective of the paper:This study examined the relationship between the demography of top
management teams and corporate strategic change, measured as absolute change
Methodology:
Sample A random sample of 100 firms was selected from Fortune 500 companies in year
1980Variables Considered:
Age, Education Level Educational qualification, Organizational Tenure, Top management and
team tenure, Control variables were Top management team size, Organizational structure, Prior
organization performance
Hypothesis:
Hypothesis 1a: The average age of top management team will be negatively related to a change
in corporate strategy
Hypothesis 1b: Age heterogeneity within a top manage-ment team will be positively related to
change in corporate strategy, but the association will decrease more the number of teams.
Hypothesis 2a: Low average organizational tenure of a top management team will be positively
related to a change in corporate strategy
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Hypothesis 2b: Organizational tenure heterogeneity within a top management team will be
positively related to change in corporate strategy, but the association will decrease more
heterogeneous the team.
Hypothesis 3a: Average tenure of a top management team will be negatively related to the
change in corporate strategy.
Hypothesis 3b: Tenure heterogeneity within a top management team will be positively related to
change in corporate strategy, but the association will decrease more heterogenous the team.
. Hypothesis 4: Average educational level of a top management team will be positively related to
change in corporate strategy
Hypothesis 5a: Academic specialization in science and engineering within a top management
team will be positively related to change in corporate strategy
Hypothesis 5b: Educational specialization heterogeneity within a top management team will be
positively related to change in corporate strategy
Multiple regressions on 5 models is used.
Results:
For firms with teams with relatively short organizational tenures (
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Literature Review-7
THE INTERNATIONALIZATION OF SMALL AND MEDIUM-SIZED ENTERPRISES:
THE EFFECT OF FAMILY MANAGEMENT, HUMAN CAPITAL AND FOREIGN
OWNERSHIP
Objective
This paper aims an empirical investigation of the internationalization of SMEs, with particular
attention to analysis of the influence that the family management, human capital, and foreign
ownership have on international development.
The focus is mainly on the nature of management in family own business and non-family own
business. Owner ship of business is not considered except when ownership structure has foreign
shareholder.
They have studied different paper related to family own business, internationalization of SMEs,
internationalization process, international new ventures, and demographic characteristic of
management, internationalization of family business etc.
Hypothesis 1: The family nature of management is negatively related to the internationalization
of SMEs.
Hypothesis 2: Human capital is positively related to the internationalization of SMEs.
Hypothesis 3: The presence of foreign shareholders is positively related to the
internationalization of SMEs.
Methodology:
Data source:
Empirical analysis was carried out on a representative sample of 1,324 small and medium-sized
Italian manufacturing firms, with a number of employees between 11 and 250.
Variables
Dependent variable: Export propensity and Export intensity
Export propensity is a dummy variable with value 0 if the firm only serves the Italian market, 1
if the firm has some sales abroad.
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Independent variables: Family management, Human capital, Foreign ownership
Control variables:Age , Size and Industry
Panel Regression was performed on the data source to found out the results.
INT = 0 + 1FamilyMan. + 2HumanCap. + 3ForeignOwn. + 4Age + 5Size+SectoralDummies + Where, INT is export propensity and export intensity
Result:
The results partially support hypothesis 1: involvement of family members in management of the
business negatively influences the export propensity (p < 0.05). In other words, the presence of
managers from outside the family is positively associated with the firms choice to enter
international markets. Family involvement can turn into a constraint to internationalization.
Hypothesis 2 about the influence of human capital is confirmed: the number of graduates, in
relation to the total number of employees, positively and significantly influences both export
propensity (p < 0.10) and export intensity (p < 0.05). These results support the view according to
which not only financial or technical resources, but also human resources play a fundamental
role in the internationalization strategies of a firm
The analysis also confirms the third hypothesis: the presence of foreign shareholders positively
influences internationalization. Export intensity is greater in businesses that are internationalized
financially (p < 0.05).
Literature Review-8
MATCHING MANAGERS TO STRATEGIES: DO MULTINATIONAL COMPANIES
NEED MULTICULTURAL TOP MANAGEMENT TEAMS?
In this article they developed, empirically test of a theoretical framework that links TMT cultural
heterogeneity with team processes and performance, and a contingency model for the impact on
performance of a fit between the degree of MNC internationalization and the degree of TMTcultural heterogeneity.
H1:By increasing TMT intra-group cognitive capacity, cultural heterogeneity positively impacts
decision quality.
H2: By increasing TMT intra-group emotional conflict, cultural heterogeneity negatively
impacts decision timeliness and decision commitment.
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H3: By detracting from TMT intra-group communication fluency, cultural heterogeneity
negatively impacts TMT decision timeliness.
H4:By improving TMT inter-group direct interaction capability, cultural heterogeneity positively
impacts global stakeholder satisfaction.
H5: By increasing TMT inter-group symbolic power, cultural heterogeneity positively impacts
global stakeholder satisfaction
H6: Members of culturally heterogeneous TMTs perceive the costs to outweigh the benefits.
TMT cultural heterogeneity is therefore believed to be detrimental to MNC performance.
H7: MNCs pursuing low DOIs will be led by TMTs characterized by a low degree of cultural
heterogeneity. MNCs pursuing high DOIs will be led by TMTs characterized by a high degree of
cultural heterogeneity.
H8: MNCs that match their TMT degree of cultural heterogeneity with their DOI significantlyoutperform companies that fail to do so.
Methodologies:
Data source:Secondary data for 94 MNC were taken.
Regression and multiple regression analysis was used to test the hypothesis.
Variables:
Independent variable: cognitive capacity, emotional conflict, and communication fluencydecision quality, decision timeliness, decision commitment, global stakeholder satisfaction, and
cultural heterogeneity
Dependent variable: Inter-team performance and company performance.Cluster analysis was used to find different clusters depending upon internationalization. The
ideal TMT profile was found and its performance was evaluated using Euclidean
distance from the respective ideal TMT profile.
Results:
Hypothesis 1, 2, 3 and 5 was conformed and accepted. Hypothesis 4 was rejected. Hypothesis 6
was not conformed. Hypothesis 7 and 8 was also accepted.
Literature Review 9CORPORATE ELITE CHARACTERISTICS AND FIRMS
INTERNATIONALIZATION: CEO-LEVEL AND TMT-LEVEL ROLES
Objectives: This research paper highlights the certain haziness of the corporate elite Chief
Executive Officer (CEO) and Top Management Team (TMT) and its effect on corporateinternationalization strategy.
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This work concludes that there exists a curved relationship between CEO position tenure, TMT
size, and TMT tenure heterogeneity and a firms internationalization, by combining preceding
upper level premise and processing international business school perspective.
The detailed experimental findings indicate that CEO and TMT characteristics show a nonlinear
relationship. As a sample, they have taken 165 Taiwanese firms operating in a technologicallyconcentrated industry.
An reversed U-shaped relationship exists amid CEO position tenure and TMT size as regards afirms internationalization. These relations are an inverted U-shape, when internationalization
level facing TMT term heterogeneity is accounted for.
Variables:
Dependant Variable- The purpose of this research was to capture the breath and depth of the
internationalization the firm was going through. So they used the Carpenter and Sanders three
internationalization dimensions that were Foreign sales (reflects the foreign sale to total sale ratio)
Foreign Production (shows the ratio of foreign assets as a percent of total assets)
Geographic dispersion (the number of countries the firm has a subsidiary in)
The first two attributes show the depth of the MNC involvement abroad and last attributecaptures the breadth
Independent Variables- They were the following
CEO Tenure was calculated by counting the number of years the executive had been withthe firm in that position. It was taken as the number of calendar years he worked in that
firm or in that industry. A square of the tenure was also calculated. The number of the executives in the Top Management Team was also included. This
number was calculated by counting the number of executives who were above the vice-
president level as they would be the major ones involved in the decision making of the
firm. Hence the TMT size was an independent variable.
The TMT tenure heterogeneity was another independent variable. The deviation of the
tenure of the TMT was divided by the number mean tenure of the TMT. This gave the
tenure value and the higher the value, higher was the homogeneity.
Control Variables- They were
Firm Size that measured the assets of the firm
Firms dependence on international operations. Hence control for diversification. Prior performance was controlled in order to know any poor performance and lack of
resources in the past for the firm
Board sizeHypotheses: The following were the 3 hypotheses of the research paper
H1- An inverted U curvilinear relationship between CEO position tenure and the firmsinternationalization.
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H2 - An inverted U curvilinear relationship between TMT size and the firms
internationalization.
H3 - An inverted U curvilinear relationship between TMT tenure heterogeneity and the firms
internationalization.
Methodology: Thesample mainly consisted of High-Technology listed corporations. Since there
was rapid change in the global trends with regard to technological field in the year 2003, thesample period selected was 2003. The sampling frame was the Taiwan Economic Journal
Database that provided financial information on publically traded firms in Taiwan.
This database consisted of 305 firms but after the data was collected, data from only 165 firmswas usable data and hence the sample size for this research paper was 165 firms. Annual reports
of these companies were collected in order to collect the required data for the research.
Since the relationships are recursive and the dependent variables are continuous, multipleregression was a technique used to analyse the data and obtain the required results.
Results: The average level of internationalization degree for the taken sample was 0.980 and
there is positive correlation between CEO tenure, TMT Size and TMT tenure heterogeneity. The
regression model has an adjusted R2 of 0.027. The curvilinear relationship between CEO Tenure
and the internationalization of the firm was supported which proves H1. H2 was also verysignificant but H3 was marginally significant.
Literature Review -10
INTERNATIONALIZATION AND FIRM PERFORMANCE: THE S-CURVEHYPOTHESIS UNDER THE EUROZONE CONTEXT
Objectives:In this research paper, analysis is done on the gains in performance of internationaldiversified firms in the Eurozone, taking into consideration the impact of the interactive outcome
of both product and international diversification on this performance.
They have tested all the conflicting relations explored in the literature of internationaldiversification (linear, quadratic and cubic), and come to the conclusion that the S-curve is a
more holistic approach, since it considers different stages of different firms, regarding the
international diversification-performance relation.
Other important contributions of this article are:
i) The fact that not only account based measures of performance are taken intoconsideration, but also market based measuresare
ii) It is unlike previous studies as they have taken a sample that is multi country and
European;
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iii) They take into account not only manufacturing or service firms exclusively, but both
together.
Variables: The following were the variable selected in the study
International Diversification Measure- To measure geographic diversification. They usedEntropy Index. It captured the relation between corporative diversification and growing.
Product Diversification Variable- They measured sales based on the Herfindahl index whichwas applied to the firms industrial activity distribution.
Performance Variables- They used Return on Sales (ROS), Return on Assets (ROA) and Return
on Equity (ROE) for this criteria as an accounting measure.
Control Variables- The following were the control variable used in the study
Firm size, measured as the natural logarithm of total sales
Leverage, measured as the ratio of long-term debt to total assets
R&D intensity, measured as the ratio of R&D expenses to net sales
Gross Domestic Product
Growth, measured as the annual growth rate of total assets
Industry, measured by 2-digit industry sic group.
Hypotheses: The following are the hypotheses of the research
H1: The relationship between international diversification and firm performance is sigmoid, withthe slope negative at low stages of geographic diversification, positive at moderate levels and
negative at high levels of geographic diversification.
H2: Product diversification will positively moderate the relationship between internationaldiversification and firm performance in a way that the effect of international diversification on
performance will be more favourable under the presence of product diversification.
Methodology: They took several European Firms as their sample applying data from several
Eurozone countries. It initially chose companies from 12 countries but later due to lack of data
they cut down to 8 countries. Their period of data was from 2001 to 2003.
In their regression, they included companies that had either product or international
diversification or both. They adopted an average strategy of averaging 3 years to ensure that the
account strategy decision does not affect the final results of the research. They finally selected291 firms from the 8 countries to carry forward their research from the sectors of manufacturing,
service and others.
Results: There was a correlation analysis that had problems of multicollinearity. This shows that
variables are unstable and low on efficient parameters. Variance Inflation Factor was done to
evaluate the major problems of multicollinearity. All the hypotheses were proven right by theregression.
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Investments on R&D are also negatively related to performance. Firm size (measured as log of
net sales) was significantly related to performance. Firm leverage was negatively related toperformance and firm growth presented a positive impact on firm results.
METHODOLOGY
The project deals with the impact of top management on international diversification to pursue
the results our group members collected data on 5 industries i.e. banking sector, IT sector,
manufacturing sector, chemical sector, and textile sector. 15 companies from each sector were
considered.
Progressing ahead we considered export intensity as our dependent variable which depended
upon various independent variables like, number of directors, average age of the firm,
international exposure of the directors, educational qualification and average age of directors to
determine the impact of directors/top management for which data was collected respectively.
Data was coded wherever necessary.
The final impact was obtained by running Panel regressions on SATA to get the relevant output.
Since we took the data of the relevant companies for 3 years we received 15 outputs against them
(5 industries were considered).
Why Panel Data?
Panel data, also called cross-sectional time series data, are data where multiple cases(people,firms, countries etc) were observed at two or more time periods. Cross-sectional data contains
information about variance between subjects. Panel data comprises of two kinds of information
between and within subject.
PANEL REGRESSION OUTPUT SHEET
The output sheet shows the total number of points which is 170 in this case and the group are 59
which is nothing dividing 170 into 3 parts as we have taken three years time series data.
andom-effects GLS regression Number of obs = 170
Group variable: compid Number of groups = 59
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To check whether the model is right (fixed or random effects) or not we useHausman Test.
Hausmans specification test, orm-statistic, can be used to test hypotheses in terms of bias or
inconsistency of an estimator.
Null hypothesis:Coefficients estimated by the efficient random effects estimator aresame as
those estimated by the consistent fixed effects estimator.
o If same (insignificant P-value, Prob>chi2 larger than .05) then it is safe to use
random effects.
o If significant P-value then, fixed effects
Here in our case Prob>Chi2 =0 so its safe to use random effects.
Random effects u_i ~ Gaussian Wald chi2(10) = 200.12
corr(u_i, X) = 0 (assumed) Prob > chi2 = 0
exportinte~y Coef. Std. Err. z P>z
[95%
Conf. Interval]
industry -0.6269799
0.072403
1 -8.66 0
-
0.768887
3
-
0.4850726
Ind -0.5230805
0.072735
6 -7.19 0
-
0.665639
6
-
0.3805214
Indd -0.648463
0.078974
5 -8.21 0
-
0.803250
3
-
0.4936758
lnasset 0.0377054 0.014931 2.53 0.012 0.008440 0.0669702
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3 6
lnage -0.3736346 0.195299 -1.91 0.056
-
0.756413
6 0.0091443
lnpat -0.0078902
0.003715
1 -2.12 0.034
-
0.015171
5
-
0.0006088
boardmembers -0.0087051
0.004696
1 -1.85 0.064
-
0.017909
3 0.0004991
lntenureof~k 0.0263709
0.011545
1 2.28 0.022
0.003742
9 0.0489988
intlexp 0.021158
0.015347
1 1.38 0.168
-
0.008921
8 0.0512377
educationa~n 0.0413045 0.016283 2.54 0.011
0.009390
5 0.0732186
_cons 2.046855
0.733647
4 2.79 0.005
0.608932
7 3.484778
Here this table shows the P value of each parameter on the basis of export intensity. We look at
the P value of each to identify which variable is significant. P value is equivalent to goodness of
fit.
Industry, ind, indd are the dummy variable assign for each year. Industry for first year, ind for
2nd year, indd for third year. So their Prob value is equal to zero
Lnasset: log of asset as the there is a huge difference in the range of assets owned by each
company so by taking log value range of assets got shorter. Here prob value lnasset is .012,
which mean it is significant at 5 % level of significance.
Ho: assets owned by a company does not impact international diversification of the
company
H1: assets owned by a company does impact international diversification of the company
Here we will reject the null hypothesis and accept the alternate hypothesis.
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lnage: log of age. Here its P value is coming out to be 0.056, means that it is significant at 10%
level of significance
Ho: age of a company does not impact international diversification of the company
H1: age of a company do impact international diversification of the company
Here we will reject the null hypothesis and accept the alternate hypothesis.
Lnpat: Their is a skewness in PAT value to over skewness we use log of pat. Here the value of
pat is coming out to be .034, which means that it is significant at 5% level of significance.
Ho: Pat of a company does not impact international diversification of the company
H1: Pat of a company do impact international diversification of the company
Here we will reject the null hypothesis and accept the alternate hypothesis.
Boardmember: P value of board member is coming out to be .064 so we can say that it is
significant at 10% level of significance.
Ho: Number of board member in a company does not impact international diversification
of the company
H1: Number of board member in a company do impact international diversification of thecompany
Here we will reject the null hypothesis and accept the alternate hypothesis.
Intenureof k: P value of tenure of work is coming out to be P0.022, which shows that it is
significant at 5% level of significance.
Ho: Tenure of work of a board member in a company does not impact international
diversification of the company
H1: Tenure of work of aboard member in a company does impact international
diversification of the company
Here we will reject the null hypothesis and accept the alternate hypothesis.
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Intlexp: P value is coming out to be 0.168, which shows that it is not significant at 10% level of
significance, as the level of acceptances as 1%, 55, and 10% so we can say that it is not
significant.
Ho: international experience of a board member in a company does not impact
international diversification of the company
H1: International experience of a board member in a company do impact international
diversification of the company.
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Here we will accept the null hypothesis and reject the alternate hypothesis.
Education~n: P value is equal to .011, which means that it is significant at 5% level of
significance.
Ho: Elite education of a board member in a company does not impact international
diversification of the company
H1: Elite education of a board member in a company does impact international diversification of
the company
Here we will reject the null hypothesis and accept the alternate hypothesis.
REGRESSION EQUATION
Exportintensity = 2.046855+(0.0377054) lnasset- (0.3736346) lnage- (0.0078902) lnpat-
(0.0087051) boardmembers + (0.0263709) intenureof k + (0.021158) intlexp +
(0.0413045) educationa n
CONCLUSION
From the analysis we come to know those different independent variables are significant at
different level of acceptance. If we look at 5% level of significant then assets, PAT, Tenure ofwork, and Elite Education are significant. Whereas it we look at 10% level of acceptance then we
can say that Asset, PAT, Elite Education, Tenure of work, Age of the company, Board member
all are significant, expect International Exposure of the board member.
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APPENDIX-I
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Page | 29Role of Top Management in International Diversification
Years
CompanyId
CompanyName
SalesProfitaftertax
Grossfixed
assets
Exportof
services
Export
Intensity
BoardMembers
Age
Tenureof
work
Internationa
lexposur
e
Education
alQualificati
on
Ageof
compan
y
Industry
2008
1GenpactIndia
1,806.24 537.07 939.83
1,977.78 1.09 3 56
26.67 1.00 2.33 12
2009
1GenpactIndia
2,122.04 633.16
1,057.15
2,064.96 0.97 3 57
27.67 1.00 2.33 13
2010
1GenpactIndia
2,579.23 804.30
1,085.40
2,471.63 0.96 3 58
28.67 1.00 2.33 14
2008
2H C LTechnologies Ltd.
3,770.70
1,101.76
1,545.53
3,726.05 0.99 4 55
32.67 0.50 1.67 33
2009
2H C LTechnologies Ltd.
4,617.76 780.64
2,018.64
4,545.86 0.98 4 56
33.67 0.50 1.67 34
2010
2H C LTechnologies Ltd.
4,675.09 997.16
2,375.42
4,572.53 0.98 4 57
34.67 0.50 1.67 35
2008
3
Hewlett-Packard(India)SoftwareOperationPvt. Ltd. 628.74 26.16 520.82 628.74 1.00 5 64
37.20 0.67 2.00 8
2009
3
Hewlett-Packard(India)Software
OperationPvt. Ltd. 682.35 23.54 581.00 682.35 1.00 6 65
38.20 0.67 2.00 9
2010
3
Hewlett-Packard(India)SoftwareOperationPvt. Ltd. 665.40 30.31 667.47 665.40 1.00 6 66
39.20 0.67 2.00 10
2008
4Infosys B PO Ltd. 649.57 152.86 123.74 608.88 0.94 3 46
23.67 0.67 1.33 9
2009
4Infosys B PO Ltd. 825.09 149.87 227.47 755.14 0.92 3 47
24.67 0.67 1.33 10
2010
4Infosys B PO Ltd.
1,081.53 178.42 364.76
1,047.05 0.97 3 48
25.67 0.67 1.33 11
2008
5InfotechEnterprises
Ltd. 344.61 65.05 232.35 337.88 0.98 8 53
27.8
0 0.90 2.00 18
2009
5InfotechEnterprisesLtd. 435.18 58.56 370.38 423.16 0.97 8 54
28.80 0.90 2.00 19
2010
5InfotechEnterprisesLtd. 566.57 70.86 454.24 551.02 0.97 9 55
29.80 0.90 2.00 20
2008
6
Larsen &ToubroInfotechLtd.
1,278.08 151.13 288.91
1,239.35 0.97 6 65
41.00 0.67 1.83 13
2009
6
Larsen &ToubroInfotechLtd.
1,649.46 211.13 345.42
1,523.27 0.92 6 66
42.00 0.67 1.83 14
2010
6
Larsen &
ToubroInfotechLtd.
1,950.85 264.82 389.13
1,870.11 0.96 6 67
43.00 0.67 1.83 15
2008
7MphasisLtd.
1,102.85 131.53 317.63
1,031.82 0.94 6 53
28.80 0.75 2.00 9
2009
7MphasisLtd.
1,451.55 264.51 591.21
1,339.84 0.92 6 54
29.80 0.75 2.00 10
2010
7MphasisLtd.
3,405.02 836.87 590.67
3,298.11 0.97 5 55
30.80 0.75 2.00 11
2008
8N I I T Ltd. 390.27 32.93 262.98 74.10 0.19 6 60
35.83 0.71 1.57 28
2009
8N I I T Ltd. 467.38 32.77 286.98 54.47 0.12 6 61
36.83 0.71 1.57 29
2010
8N I I T Ltd. 545.62 47.21 358.40 49.92 0.09 6 62
37.83 0.71 1.57 30
2008 9
Patni
ComputerSystemsLtd.
1,171.67 387.52
1,061.41
1,162.00 0.99 6 52
25.50 0.86 2.00 31
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