خواسته های پردازش اطلاعات و شرکت های چند ملیتی: مقایسه برآورد درآمد داخلی و خارجی
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Business Research, Volume 58, Issue 3, March 2005, Pages 285–292
We examine the information-processing demands top managers of the multinational enterprise (MNE) deal with in their portfolio of international operations by comparing the accuracy of foreign and domestic earnings estimates. Results indicate that the increase in information-processing demands is due to the complexity of managing foreign operations of the MNE. We also find greater information processing demands in foreign operations for managers of smaller multinational firms, firms with relatively low performance, and firms with lower levels of intangible assets. We use these results to develop implications for information-processing theory and practice.
When economic activities are internalized in the international environment, one of the most important costs multinational enterprises (MNEs) face is their increased communication cost (Buckley and Casson, 1976). The much greater communication cost in the internalized market is due to an increased flow of accounting and control information, the requirements of confidentiality of firm specific information, and the importance of checking information through expensive on-the-spot visits. However, obtaining accurate information about business activities may lead to enhanced firm value through better managerial decisions and thus researchers from different theoretical perspectives have considered information processing as an underlying factor in their theoretical models (e.g., Egelhoff, 1991, Henderson and Fredrickson, 1996 and Madhavan and Prescott, 1995). Prior studies have noted that information-processing demands for managers, the requirement to gather and transform data into information, and the communication and storage of information (Galbraith, 1973) may increase in the international environment for several reasons (e.g., Ghoshal et al., 1994, Hansen, 2002 and Schulz, 2001). For one, dissimilarities in language and the business environment contribute significantly to the increased demand of information processing. Distance between regions and discrimination by local governments against MNEs also raise the importance of information processing. In addition to external factors, the ability of the MNE's management to manage multiplant corporate accounting is central from the information-processing perspective Birkinshaw et al., 2001 and Buckley and Casson, 1976. A body of prior research emphasized the cognitive element of information processing in the international context and studied a wide range of factors that may be relevant for MNE management. Information-processing demands are presented in these studies in line with general cognitive abilities of managers to make strategic decisions when influenced by different environmental conditions or organizational contexts (Wood and Bandura, 1989). For example, research considered information-processing demands as central factors in the design of efficient MNE organizations (Wolf, 1997). Other recent studies (e.g., Birkinshaw et al., 2001 and Wolf and Egelhoff, 2002) offered organizational solutions to improve information processing in MNEs. However, prior research did not focus on where increased information-processing demands emerge in MNEs. Meanwhile, other studies in this area indicated the importance of this inquiry by showing the relevance of improved information processing for MNE strategies and performance. Along this line, the role of information processing has been demonstrated in knowledge acquisitions Hansen, 2002 and Schulz, 2001 and in strategic implementation (Kim and Mauborgne, 1995). Managers may enhance MNE strategies and performance by identifying the sources and conditions of increased information-processing needs. Past academic literature, however, provided limited assistance in these directions. Most prior studies linked high information-processing demands with overall organizational complexity and high costs of bureaucratic coordination in MNEs. Although increasing organizational complexity is a constant managerial challenge, we suggest that the sources of increased information processing within the MNE should be identified and thus the way top managers perceive the MNE's portfolio of operations is relevant for research. For instance, managers can mobilize resources (e.g., information technology, experts) to areas with high information-processing needs, such as foreign subsidiary operations. It is likely that international environments in particular represent uncertain business conditions that managers can find difficult to navigate through and in which they may make erroneous predictions about business operations. This study makes steps in these directions by examining which component of the MNE's operations (domestic or foreign) leads to greater information-processing demands for top managers. Beyond the source of increased information-processing demands in MNEs, we examine organizational contexts that may significantly affect managers' perception and thereby may alter strategic actions in the MNE. Limited empirical evidence in domestic settings indicates that certain environmental and organizational contexts influence information processing and, through managerial decisions, firms' strategies Madhavan and Prescott, 1995 and Haunschild and Miner, 1997. Organizational characteristics should be even more relevant for the information processing in MNEs. Managers of large multinationals, for instance, may have access to expertise on uncertain foreign markets. Therefore, we examine important organizational moderators, such as MNE size, performance, and the level of intangible assets from the perspective of information-processing theory. To investigate the information-processing demands for the MNE's management, we rely on the estimates of leading financial analysts obtained directly from top managers of the MNE. Prior studies used analysts' estimates as a proxy for the management's forecast of the firm's performance in the domestic context and thus suggested the validity of our approach (e.g., Puffer and Weintrop, 1991, Madhavan and Prescott, 1995 and Haunschild and Miner, 1997). Thus, by contrasting the forecast accuracy of earnings in the domestic and foreign businesses within the MNE, we extend prior research and provide a new perspective on information processing in the international context. We begin by developing hypotheses on the information-processing demands of domestic and foreign operations and the effects of organizational contexts. Next, methods and results are presented. We conclude by providing implications for theory and practice and recommendations for future research.
نتیجه گیری انگلیسی
The results of this study indicate that top managers of MNEs deal with increased information-processing demands during their expansion, supporting the findings of prior literature in the domestic (e.g., Henderson and Fredrickson, 1996 and Haunschild and Miner, 1997) as well as limited investigation in the international context (e.g., Wolf and Egelhoff, 2002). This study extends prior literature by separating information-processing demands of foreign and domestic operations within the same MNE, relying on the forecasts of domestic and foreign earnings. Although results confirm the expectations of prior literature by indicating the uncertainties associated with MNEs (e.g., Birkinshaw et al., 2001, Egelhoff, 1991 and Schulz, 2001), this study also suggests that the increase in information-processing demands is due to the uncertainties of foreign operations within the MNE. This result is important, as prior research only implies that the increased information-processing requirements are the results of overall complexity, size, and bureaucratic organizational structure of MNEs Ghoshal et al., 1994 and Duru and Reeb, 2002. There are several possible factors that may contribute to the increased information-processing demands, such as differences in cultures, governmental regulations, competition, labor relations, tax laws, business practices, and market conditions across nations. Even more importantly, the examination of moderating factors, such as firm size, performance, and level of intangible assets helps to better understand the conditions in which increased information-processing demands present a challenge for top managers in the international environment. The result of relatively higher information-processing demands of foreign operations for smaller MNEs suggests that these MNEs may lack the resources and skills to deal with the increased information-processing demands of the international environment. We also found that top managers of poorer performing MNEs in particular have difficulties in making accurate assessment of their international operations. This result is potentially interesting considering the belief of some practitioners that international expansion might be a remedy for performance problems. This study indicates a quite opposite scenario: managers of poorer performing MNEs may deal with increased uncertainties during continued international expansion and thus their erroneous forecasts may lead to a further deterioration in firm performance. The results indicate that when MNEs have lower levels of intangible assets, managers have difficulties in creating synergies between domestic and foreign operations and thereby the assessment of foreign operations becomes relatively difficult. This result underlines the important role of intangible assets, such as knowledge and managerial talent to deal with uncertainty in the international environment (e.g., Hansen, 2002 and Sambharya, 1996). These results may have several important implications. Prior research has focused almost exclusively on environmental and organizational characteristics as criteria for competitiveness in international markets. Managerial perception of the environment and business operations, however, may also affect strategic actions and should therefore be considered as an integral part of MNE success (Caves, 1996). Along this line, results of this study indicate that additional research should be dedicated to the sources of uncertainty in overseas operations. For example, empirical studies should be extended to foreign subsidiary operations. Researchers of MNEs should also consider information processing as an alternative theoretical explanation for international diversification. Since managers cope with increased information-processing demands in their foreign operations, they may consider international diversification as a particularly complex alternative to domestic strategies, such as acquisitions and alliances. The managerial evaluation of these strategic options and tradeoffs in the MNE has not been explored thoroughly in the literature. Another theoretical implication of this study is the importance of organizational contexts for increased information-processing demands. A growing number of studies focus on the international expansion of smaller or entrepreneurial firms. Researchers should uncover effective means of overcoming increased information-processing demands by managers of smaller firms. The importance of intangible assets in MNEs is another area for future research. Despite the little attention received by these resources, it appears that the presence of intangible assets modifies managerial information processing and thereby MNE success in overseas markets. The results have important implications for MNE managers as well. For one, the results indicate that managers need to allocate additional resources in the area of information technology to their subsidiaries to improve the flow of information from and to the headquarters. Managers should also pay extra attention to the staffing of foreign operations (e.g., Wolf, 1997). Although this area tends to be viewed as a peripheral area within the MNE, subsidiary managers who are knowledgeable about the local market environment might be critical in improving the effectiveness of information processing. Another means to reduce information-processing demands in foreign operations are rotation of subsidiary management from the MNE headquarters, use of country experts, improvements in communication systems and technology, and continuing international training of top management. Potential limitations of this study include the relative complexity of business decisions in the international context and the difficulties associated with the measurement of such decisions and their outcomes. Although our measure of increased information-processing demands for top managers is based on surrogates that have been used in prior literature in the domestic context, decision making in the international environment is a complex process that may require the assessment of different factors. Future research should consider additional characteristics of foreign operations, such as the fit with the local institutional environment and the contribution of this fit to the organization as a whole. Future studies should explore the multifaceted process of gathering and processing information by the top management of MNEs. Beyond managers' cognitive abilities, it is likely that information gets lost or distorted in the communication channels between headquarters and subsidiaries. Studies, therefore, should continue to focus on how MNE managers can deal effectively with increasing information-processing demands in the international context. Interviews with top managers and subsidiary personnel could reveal the process of gathering, transmitting, and understanding information about subsidiary performance. In summary, the results of this study extend prior research from the information-processing perspective to the context of international management. The results highlight the complexity of international expansion for the MNE by showing that managers cope with increased information-processing demands on the foreign operations' side of the firm. Furthermore, these demands tend to be higher for smaller MNEs and for MNEs with relatively low performance and low levels of intangible assets. These results may help to refine thinking about the importance of foreign operations for the management of MNEs.