Governments as Owners: Globalizing State Owned Enterprises

One of the major trends characterizing the beginning of the 21st century is the globalization of state owned enterprises (SOEs) and the role of the state as a cross-border investor. Of immediate relevance to international business (IB) scholars is the globalization of large SOEs from countries as diverse as France, Norway, China, Russia, India, Brazil, Kuwait, Saudi Arabia, Malaysia, and South Korea. While some of these SOEs focus on natural resource-based sectors such as metals, oil, and gas, others specialize in technology-based segments such as nuclear power generation, automobile manufacturing, and telecommunication equipment or in services such as banking, transportation, or construction as part of their globalization programs. A relatively recent variation, the Sovereign Wealth Fund (SWF) has emerged as a key state-directed entity in the global financial and economic landscape, supporting the globalization of SOEs. While some of the SWFs have taken a more activist role in managing their portfolios, others have been far more passive, using their investments to build diplomatic bridges across countries and to secure goodwill for other projects that might be construed as national priorities.

Despite the rise of SOEs as a dominant force in the global economic landscape, IB scholars’ understanding of these firms remains sparse. Until recently, most SOEs conducted business within state borders and tended to be domestically focused and thus outside the domain of traditional IB research.
Much of the extant literature in IB has tended to characterize governments and business as antagonists, bargaining over shares of rents in host country contexts, as illustrated by Vernon (1971). Some leading political economists even accentuate the negative effects of foreign direct investment (FDI), encouraging governments to view MNCs with suspicion. These historical viewpoints are ripe for change since many progressive governments have adopted multiple ways of attracting FDI to their own countries while systematically exploring opportunities to invest abroad.

This special issue offers a unique opportunity to consider the role of governments as promoters of international business activity and to challenge and extend existing theories of the multinational along interdisciplinary lines. Since SOEs sit at the important crossroads between international business and political economy, IB research can significantly benefit from insightful examinations of the intersection of these two fields. In particular, the linkage between home country policies that promote the globalization of domestic SOEs in support of national objectives (e.g., securing access to natural resource supplies for other domestic firms) and the development of state-to-state relationships with countries that are host to critical resources is likely to be a crucial one that can further our understanding of this cross-disciplinary domain.

The successful internationalization of some SOEs creates a challenge to existing theoretical approaches and assumptions about the competitiveness and behavior of state-owned firms, the drivers and behavior of multinational companies, and the relationships between multinationals and governments. The special issue aims to improve our understanding of this phenomenon as well as to promote extension of current theories to account for this new phenomenon. Moreover, analyzing the internationalization of SOEs can serve as a good incubator for interdisciplinary ideas from a range of fields that straddle the periphery of the traditional IB domain such as the study of business and government, developmental economics, financial management, industrial policy, and public sector management. By building a common platform drawing on eclectic contemporary work, IB scholars can help address the core issues that dominate debates on the global role of SOEs, SWFs, and state sponsored FDI sourcing agencies that are collectively reshaping the impact of the state in global economic activity.

Topics for the Special Issue
While state ownership opens many questions and potential research avenues, we particularly welcome papers that span theoretical boundaries to create new frameworks and ideas that enhance our understanding of the complexities associated with state directed global investments. We favor papers that make quantum jumps in theoretical understanding over those that make incremental contributions. We will lean toward papers that embrace multiple theoretical traditions versus those that are more parochial in nature. Although some areas of inquiry, such as the well-established work on privatization, transitional economies, and emerging market multinationals, are all critical areas of work, this special issue will exclusively focus on the global relevance of SOEs and their impact on the global strategy landscape. We offer below a few possible questions to provide a flavor of what the special issue seeks to address. These questions are illustrative at best and are not intended to set boundaries in terms of the key themes of interest.

• Traditional IB research has tended to view cross-border businesses and governments as antagonists seeking to maintain their own spheres of control and focused on maximizing their own share of the benefits that accrue from economic activity. However, recent changes demonstrate that governments, through SOEs, can play the role of enablers of cross-border activity. How do home governments foster state-to-state relationships that help SOEs to access vital resources? How do such ventures share the risks and rewards?What mechanisms can be used to promote the stability of such ventures and shield them from changes in political climate? How do SOE-SOE partnerships perform? How do SOE-SOE partnerships effectively mitigate the risk of expropriation?

• Government ownership imposes unique demands on organizations as they strive to meet the different, often conflicting objectives of economic performance and national mission. How do prevailing theories of international strategic expansion account for the uniqueness of governments as owners? Since many of the original theories in IB research tend to revolve around privately owned organizations, how might a focus on government ownership enhance and extend prevailing theories of international growth and firm conduct in the global landscape?

• The pressures of responding to the numerous challenges of implementing a successful global strategy call for radically new ways of managing SOEs. It demands a departure from the typical unipolar, home-country centric view to a multipolar, global view of deploying assets, managing a global workforce, and pursuing strategies that build economic value outside the domain of the home country. How have SOEs transformed themselves as a result of the global exposure? How has this exposure altered the nature of the relationship between an SOE and its home country? What are the key determinants that drive the level of involvement of the State as the owner in major strategic decisions of a globalized SOE? Does the degree of involvement change with the success of the globalization efforts?

• Many resource-rich governments in the last decade launched SWFs to channel their excess revenues from booming commodity markets. However, relatively little is known about their behavior as investors. Are they are just another form of state-run pension funds, making international investments in a relatively passive and apolitical way? Or, are they multinationals with complex strategic and political agendas? What are the conditions under which these entities are able to use the power of capital to secure access to global assets, influence favorable policy treatment in the host country, or leverage reciprocal benefits?

Submission Process
All manuscripts will be reviewed as a cohort for this special issue.
Manuscripts must be submitted in the window between September 17, 2012, and October 5, 2012, at http://mc.manuscriptcentral.com/jibs. All submissions will go through the same double-blind review process that JIBS uses for regular manuscripts and follow the same norms and processes that have been established by the journal; see www.jibs.net.

For more information about this call for papers, please contact the Special Issue Editors.

About the Guest Editors
Kannan Ramaswamy (kannan.ramaswamy@thunderbird.edu) holds the William D. Hacker Chair of Management at the Thunderbird School of Global Management. Much of his recent work is set in emerging markets and explores the determinants of success in these settings and the creation of core competences by local firms that emerge as multinational enterprises from these countries.  He is also extensively involved in working with business leaders from a wide range of Fortune 100 companies across the world. He has authored over 50 refereed papers and 20 case studies.  His research has appeared in distinguished journals such as the Strategic Management Journal, Journal of International Business Studies, Academy of Management Journal, Management International Review, Journal of Management, and Journal of Business Research. Oxford University Press published his book Global Strategy: Creating and Sustaining Advantage Across Borders co-authored with Professor Andrew Inkpen.

Andrew Inkpen (andrew.inkpen@thunderbird.edu) holds the Seward Chair of Global Strategy at the Thunderbird School of Global Management.  His research has involved areas such as the management of joint ventures and strategic alliances, cross border and inter-firm knowledge management and transfer.  He is on the editorial boards of various journals, including Journal of International Business Studies, Strategic Management Journal, Organization Science, and Journal of Management Studies. He has extensive experience working with executives from a variety of industries and firms.  He has written more than 50 refereed research articles, more than 40 teaching cases, and numerous book chapters. He is the co-author of several textbooks and co-author of Global Strategy (Oxford: 2006; with Kannan Ramaswamy) and the Global Oil and Gas Industry: Management, Strategy and Finance (Pennwell: 2011).

Aldo Musacchio (amusacchio@hbs.edu) is an associate professor in the Business, Government, and International Economy Unit (BGIE) at the Harvard Business School and a Faculty Research Fellow at the National Bureau of Economic Research (NBER). He has a Ph. D. in Economic History from Stanford University.  His book, Experiments in Financial Democracy (Cambridge University Press, 2009) focused on how companies can adopt corporate governance practices that protect investors in relatively adverse legal and institutional environments. His current research project looks at the current state of state capitalism around the world, at turnarounds in state-owned enterprises, and at what works and does not work when government banks finance private companies (with a special focus on the case of Brazil). In addition to his scholarly work, he has also written several case studies on companies with a strong state owned heritage in emerging market settings. He advises nonprofits focused on education in Latin America and consults for state-owned enterprises in Latin America.

Alvaro Cuervo-Cazurra (A.CuervoCazurra@neu.edu) is an Associate Professor of International Business and Strategy at Northeastern University. He has a Ph.D. from the Massachusetts Institute of Technology and another from the University of Salamanca. He analyzes how firms internationalize and is currently studying the emergence of developing-country multinational firms. His geographical area of expertise is Latin America. His research appears in leading academic journals such as Academy of Management Journal, Journal of International Business Studies, Research Policy, and Strategic Management Journal, among others, and in several edited books. He is the reviewing editor of Journal of International Business Studies, and an editorial board member of Global Strategy Journal, Journal of World Business, Organization Studies, and Strategic Management Journal, among other journals. His research has received numerous awards, including best paper awards from the Academy of Management and European International Business Academy, and best dissertation in strategy from the Academy of Management.