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1. Signaling Legitimacy to Foreign Investors: Evidence from Chinese IPOs on U.S. Markets.

Author:
Xu Jin, Donald Patton, and Martin Kenney
Publication Date:
05-2015
Content Type:
Working Paper
Abstract:
From 1999-2010 120 Chinese emerging growth firms undertook initial public stock offerings on U.S. markets. This provided a remarkable natural experiment for exploring how this class of organizations from a radically different political economy established their legitimacy and how, once established, this legitimacy permitted organizational and personnel flexibility for later firms. The increased legitimacy allowed changes in the backgrounds of the members of the IPO top management team (TMT) and independent members of the board of directors (BoD). We find that overall composition of both the TMT and BoD in terms of experience in the U.S. decreased and “Chineseness” increased, but at different rates. For the operational TMT members, U.S. experience decreased dramatically over time, except for the CFO who is the representative of investors within the TMT. Similarly, on the BoD, the venture capitalists continued to have high levels of US experience, while the other independent members tracked the TMT in having less US experience. In this increased legitimacy allows the acceptance of “foreign” operational management, but investors are less lenient in terms of ensuring that their “monitors,” the CFO and venture capitalists, should show evidence, i.e., U.S. experience and background, that they adhere to the investor’s values.
Topic:
Economics, International Trade and Finance, Markets, and Political Economy
Political Geography:
China

2. Responding to Uncertainty: Syndication Partner Choice by Foreign Venture Capital Firms in China.

Author:
Xiao Huang, Martin Kenney, and Donald Patton
Publication Date:
03-2015
Content Type:
Working Paper
Abstract:
Cross-border venture capital investment has grown dramatically. Drawing upon observations about the liability of foreignness, previous research has shown that foreign venture capitalists (VCs) tend to partner with local VCs in order to offset information asymmetry and the liabilities of foreignness. Much of the literature has suggested that local VCs should help reduce operational uncertainty. This paper examines syndication partner choice in China, which today is likely the most uncertain environment in which foreign VCs operate on a large scale. This provides an ideal environment for understanding partner selection under uncertainty. Our results show that foreign investors are more likely to choose Chinese investors in later rounds and in more mature portfolio firms. While foreign firms with more Chinese experience are more likely to co-invest with Chinese VCs, the older foreign VC firms are less likely to do so. Remarkably, having a Chinese office made foreign VCs less likely to coinvest. In seed-stage investments, when uncertainty is the greatest, foreign firms are least likely to co-invest with Chinese VCs, and this was not affected by the maturation of the market, while at the later stage, when uncertainty is lowest, they are most likely to co-invest.
Topic:
Economics, International Trade and Finance, Markets, and Political Economy
Political Geography:
China

3. Where Will Work Come from in the Era of the Cloud and Big Data?

Author:
John Zysman and Martin Kenney
Publication Date:
01-2015
Content Type:
Working Paper
Abstract:
Will the digital revolution, and its current manifestation in Cloud computing and platform-based work, inexorably lead to the elimination of jobs and work due to automation. Are new opportunities for work opening? Should we be thinking in terms of conventional work or is value creation the key? Certainly, nearly all firms are experiencing intense competition leading to commoditization based principally upon price. In the first section of this paper, we explore the pathways opened as cloud computing, transforms the way both goods and services are innovated, produced, and distributed. Production now has two aspects; classically understood manufacturing and ICT-enabled services, activities and virtual goods, both of which can be transformed to escape a commodity trap. As firms in advanced countries seek to sustain advantage in global markets, their efforts alter not only the terms of competition, but the character of work. The second section speculates upon the ways in which the cloud, as a platform, is transforming the nature of work, jobs, and employment. The emergence of cloud-based platforms such as, Airbnb, the Apple app store, Github, Google, LinkedIn, and Uber is redefining the forms and nature of value creation. Paradoxically, given that Google monetizes peoples’ searches, Facebook and LinkedIn monetize posts, Github monetizes open source software creation, and App stores monetize software creations, it is also possible to argue that more value than ever is being created, even while traditional notions of employment are being challenged. This suggests that as a consequence of the implementation of cloud-based strategies; an entirely new category of work organization, which we term, the “Platform Economy” is emerging.
Topic:
Science and Technology, Communications, Labor Issues, and Global Markets
Political Geography:
Global Focus