Quantitative Methods for International Business

Question 1.
In recent years, Multinational Enterprises' (MNEs) strategies have been increasingly impacted by an accelerating rate of change in the external environment. A research project is carried out to investigate subsidiary performance amidst turbulence in China. Subsidiary performance is expected to be dependent on choices that the MNE makes when responding to environmental turbulence at the subsidiary level.
The researchers collected data from a questionnaire mail survey of senior managers in MNE subsidiaries in China in 2015. They selected 400 foreign subsidiaries from a list of clients or members provided by Shanghai Foreign Service Co., Ltd (SFSC), China International Intellectech Corporation (CIIC), and the European Union Chamber of Commerce in China. SFSC and CIIC are leading human resources service providers in China with clients that were MNE subsidiaries including enterprises listed in the Fortune 500. The geographical focus was foreign subsidiaries that have investments in the Yangtze River Delta (Shanghai, Jiangsu and Zhejiang). This was chosen because it represented the fastest growing and the most prosperous region during China's transition to a market economy, and one with potentially high variance in terms of environmental turbulence.
The questionnaire was in English and sent to the senior managers of the 400 foreign subsidiaries during the year 2015. 152 responses were received, yielding a response rate of 38%. There are a diverse range of industries in the sample, including petroleum, consumer goods, IT, industrial machinery, consulting, pharmaceuticals and healthcare.
Define the population of the research project. Evaluate the applied sampling strategy and the representativeness of the sample. Propose an alternative sampling strategy and justify its effectiveness.
[20 marks]
The study involved a population of 400 companies under the MNE subsidiaries. The list of companies was provided by Shanghai Foreign Service Co., Ltd (SFSC), China International Intellectech Corporation (CIIC), and the European Union Chamber of Commerce in China; thus, the source of data is reliable. Thus the study population was foreign companies located in the Yangtze River Delta (Shanghai, Jiangsu, and Zhejiang) region. However, 152 of the 400 companies' questionnaires were received. The study pursued a stratified sampling approach. Under this approach, companies were selected based on their industries (Skimkus, 2022). As a result, the following industries were selected as part of the study; petroleum, consumer goods, IT, industrial machinery, consulting, pharmaceuticals and healthcare. Stratified sampling groups together the constituents of a population into homogenous groups and then randomly make a selection from these groups (Skimkus, 2022). Therefore, companies were selected based on the industries to that they belong. The samples selected are representative of the population since the samples were drawn from the Chinese region that had the most prosperity and growth during the country's transition to a market economy. Besides, a 38 percent response rate is a good representation of the population. Moreover, the sample was drawn from across all the major industries in the region.
An alternative sampling strategy for this study would be purposive sampling. According to Etikan, Musa, and Alkassim (2016), the definition of purposive sampling entails the researcher employing their experience to pick a sample that is most relevant to the research goals. It is frequently employed in qualitative research, especially when the researcher seeks to learn more about a particular occurrence rather than draw statistical conclusions or when the population being studied is small and distinct ("Quantitative Methods for International Business," 2022).
Question 2.
A firm is seeking to form an international joint venture (IJV) to achieve its international expansion. The firm carefully selects four potential partners (A, B, C, and D) that have complementary resources and assets. To further assess their suitability, the top management team (TMT) collects quarterly financial information on the four potential partners in the last 10 years. The boxplot is reported in Figure 2.1.
Figure 2.1 Boxplot of Return on Assets (ROA) of the potential partners
In addition, by analysing the data on IJVs within the industry, the TMT finds that the longevity of the IJV (defined as the length of months an IJV survives) can be influenced by the perceived trustworthiness of the partner, cultural distance, and the host-country legal protection level. They visualise the industry data in Figures 2.2 to 2.4. Accordingly, the TMT collects the information on those three factors for each of the four potential partners and reports it in Table 2.1.
Figure 2.2 Scatter plot between Perceived trustworthiness and IJV longevity
Figure 2.3 Scatter plot between Cultural distance and IJV longevity
Figure 2.4 Scatter plot between Legal protection level and IJV longevity
Table 2.1 The perceived trustworthiness, cultural distance, and legal protection level

Partner A

Partner B

Partner C

Partner D

Perceived trustworthiness

40

30

55

50

Cultural distance

10

10

15

5

Legal protection level

2.0

1.5

2.5

3.0

Referring to the information provided, advise the firm which IJV partner to choose and explain your answer.
[20 marks]
The perceived trustworthiness of the partner, the cultural distance between the two countries, and the level of legal protection offered by the host country can all have an effect on the longevity of an international joint venture, which is defined as the number of months that an IJV (international joint venture) continues to exist. According to figure 2.2, perceived trustworthiness is positively correlated with IJV longevity. While figure 2.3 reveals that the IJV longevity is negatively correlated with the cultural distance. Additionally, the scatter plot in figure 2.4 indicates that the Legal protection level and IJV longevity are positively correlated. Therefore, the more a partner is perceived to be trustworthy and enjoys a high legal protection level, the more likely the partnership will enjoy IJV longevity.
In contrast, the lesser the cultural distance, the more possibility of an extended IJV longevity. According to table 2.1, Partner D meets that profile. Partner D has less cultural distance but a high legal protection level and is perceived to be more trustworthy. Even though partner D has the average Return on investment of the four partners, the variance is marginal.
Question 3.
A project examines the quality of institutions and their impact on firms' strategies. The study distinguishes two dimensions of institutional inefficiencies in a host country – generalised and arbitrary – and explores their impact on the acquirers' ownership decisions in cross-border acquisitions (CBAs).
The institutional inefficiencies are defined as the problems in an institutional environment that make it less effective. Generalised institutional inefficiencies are the explicit problems in the rules of the game, which make the environment more difficult for all firms to operate. And arbitrary institutional inefficiencies are the problems in the application of the rules of the game, arbitrarily privileging or hindering firms.
Six hypotheses are developed:
Hypothesis 1. The higher the degree of generalised institutional inefficiencies in a host country, the smaller the ownership acquired in CBAs.
Hypothesis 2. The higher the degree of arbitrary institutional inefficiencies in a host country, the higher the ownership acquired in CBAs.
Hypothesis 3a. The acquirer MNEs' CBA experience in the host region weakens the negative relationship between generalised institutional inefficiencies in a host country and the ownership acquired in CBAs.
Hypothesis 3b. The acquirer MNEs' CBA experience in the host region strengthens the positive relationship between arbitrary institutional inefficiencies in a host country and the ownership acquired in CBAs.
Hypothesis 4a. For high-tech MNEs (in comparison to low-tech MNEs), the negative relationship between generalised institutional inefficiencies in a host country and the ownership acquired in CBAs is weakened.
Hypothesis 4b. For high-tech MNEs (in comparison to low-tech MNEs), the positive relationship between arbitrary institutional inefficiencies in a host country and the ownership acquired in CBAs is strengthened.
The hypotheses were tested using a sample of 5522 CBAs by firms entering emerging economies. The results are reported in Table 3.1.
The variables involved in the analysis include:
* Ownership acquired in CBAs, measured by the percentage – ranging from 10% to 100% - of the equity acquired in the target firm;
* Generalised institutional inefficiencies, measured by the mean value of the firms' perceived institutional inefficiencies, including tax administration, corruption, political instability, business licensing and permit, and access to finance, in that country and in that year;
Table 3.1 Regression results

Model 1


Model 2


Model 3