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Tough times

  • Paul Beamish
  • |
  • Sep 1, 2017
Tough times

Multinational enterprises (MNEs) face the challenges of entering emerging markets or the dangers of war as they leave the relative safety of their own shores in search of new markets and sources of revenue.

Two papers, both published in 2017 and co-written by Professor Paul Beamish, HBA ’76, PhD ’84, focus on doing business in difficult markets – whether it is in the poorest countries in the world, or in places of war and conflict. Each scenario presents exceptional challenges for MNEs, but the research presents solutions to help organizations mitigate the risks.

These papers represent just a portion of the body of work in the field of international business during Beamish’s 35-year career in academia. His thesis work was done on developing countries (now sometimes called emerging markets). In recent years he has shifted some of his focus to Africa and the most complex places in the world to do business.

He was recently honoured with the PWC Strategy& Eminent Scholar in International Management Award on August 7, 2017, at the Academy of Management’s annual meeting in Atlanta, Ga. The award recognizes lifetime achievement in international management scholarship.

Out of Africa

As established markets become increasingly saturated, MNEs are increasingly turning to emerging markets for future growth potential.

The first paper, entitled “Foreign Subsidiary Exit from Africa: The Effects of Investment Purpose Diversity and Orientation” in Global Strategy Journal and co-authored with recent Ivey PhD graduate Yamlaksira Getachew, considers the exit likelihood of foreign subsidiaries operating in Africa and identifies strategies that can improve their chances of survival.

The study reveals that companies can increase the likelihood of survival if they keep creating value, such as helping the economy, creating jobs, or taking people out of poverty.

“Our study demonstrates that the strategy of entering the African market, on average, increases exit probability,” said Beamish. “However, subsidiaries with more diverse investment purposes and/or greater market-seeking orientation have a lower exit likelihood than their counterparts.”

The second paper examines the challenges of overseas operations in areas of war.

War-torn companies

Overseas operations of MNEs are increasingly exposed to war, and when it occurs, some stay on, while others flee.

“Caught in the Crossfire: Dimensions of Vulnerability and Foreign Multinationals' Exit from War-Afflicted Countries” in Strategic Management Journal, co-authored with Lorraine Eden from Mays Business School at Texas A&M University, and Li Dai, a former Ivey professor who is now at Department of Management, College of Business, Loyola Marymount University, helps explain why some foreign MNEs stay on while others leave when war breaks out in a host country.

Companies must have a response strategy in place in the event that a war occurs. However, a recent survey of MNE executives revealed that 30 per cent of the respondents believed that their firms were exposed to collateral damage from war. More than 90 per cent expected those risks to rise, yet 25 per cent of executives indicated their firms had no contingency plans.

“Sometimes there are solid reasons to enter into difficult markets. There may be a big opportunity or it’s a source of supply,” Beamish said. “The trick is to figure out, if things get worse, how do you handle it?”

Beamish is also the Director of the International Business Institute and holds the Canada Research Chair in International Management. He was also Executive Director of Ivey Publishing for 16 years where he increased the global reach of Ivey’s cases. In 2010, he founded the 39 Country Initiative, which offers free use of Ivey business cases to universities in the world’s 39 poorest countries. The Initiative also arranges container shipments of books and journals to those countries, and case teaching training.

 


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