{"title":"Partially Segmented International Capital Markets and International Capital Budgeting","authors":"E. Kaplanis, Ian A Cooper","doi":"10.2139/ssrn.1411611","DOIUrl":"https://doi.org/10.2139/ssrn.1411611","url":null,"abstract":"Evidence suggests that international capital markets are neither fully integrated nor completely segmented. There is, however, currently no general method available for computing the required return on corporate investments with such capital markets. This paper uses a model of partially integrated international capital markets to derive optimal international capital budgeting rules. We show how capital budgeting rules depend on the level of costs to cross-border investment, both directly and also indirectly through the portfolio specialization they induce. We explain how required returns differ for different companies in such markets and how these 'costs of capital' may be estimated. We also explain how such differences in required returns can be consistent with general equilibrium and the effect they have on incentives for foreign direct investment.","PeriodicalId":229605,"journal":{"name":"ERPN: Market Structure (Microeconomic) (Sub-Topic)","volume":"38 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1996-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133408713","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Innovation Activities Abroad and the Effects of Liability of Foreignness: Where it Hurts","authors":"W. Sofka","doi":"10.2139/ssrn.901212","DOIUrl":"https://doi.org/10.2139/ssrn.901212","url":null,"abstract":"The innovation activities of foreign subsidiaries have been identified as an important source of competitive advantage for multinational corporations. The success of these engagements depends heavily on tapping host country pools of localized expertise. To achieve this foreign subsidiaries have to overcome cultural and social barriers (liability of foreignness). We derive potential stumbling blocks in the innovation process theoretically and argue that these materialize as neglected projects, cancellations or budget overruns. We test these hypotheses empirically for more than 1,000 firms with innovation activities in Germany from various sectors. We find that foreign-controlled firms are not challenged by liability of foreignness at the project mobilization stage. The lack of local embeddedness becomes more binding as projects have to be prioritized and managed which we identify as more frequent mistakes and delays. We argue that this is the result of shared practices within the multinational firm that do not readily fit into the local context. Finally, we derive management recommendations how foreign innovation engagements can achieve similar levels of effectiveness and efficiency as host country competitors.","PeriodicalId":229605,"journal":{"name":"ERPN: Market Structure (Microeconomic) (Sub-Topic)","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126532017","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}