Jordan Siegel

REPRESENTATIVE PAPERS & ARTICLES

• Jeong, Yujin, Jordan I. Siegel, Sophie Yu-Pu Chen, and Whitney Newey. “A Recentering Approach for Interpreting Interaction Effects From Logit, Probit, and Other Nonlinear Models.” Strategic Management Journal 41 (2020): 2072-2091.

Strategic management has seen numerous studies analyzing interaction terms in nonlinear models since Hoetker's (Strat Mgmt J., 2007, 28(4), 331–343) best-practice recommendations and Zelner's (Strat Mgmt J., 2009, 30(12), 1335–1348) simulation-based approach. We suggest an alternative recentering approach to assess the statistical and economic importance of interaction terms in nonlinear models. Our approach does not rely on making assump tions about the values of the control variables; it takes the existing model and data as is and requires fewer computational steps. The recentering approach not only provides a consistent answer about statistical meaningfulness of the interaction term at a given point of interest, but also helps to assess the effect size using the template that we offer in this study. We demonstrate how to implement our approach and discuss the implications for strategy researchers.

• Jeong, Yujin, and Jordan I. Siegel. “How Important is Regional vs. Global Scope? An Examination of U.S. Multinationals.” Strategic Management Journal 51 (2020): 1142-1160.

Beginning with Rugman and Verbeke (J Int Bus Stud 35(1):3–18, 2004), several international business (IB) scholars have proposed that most large multinationals are not global but regional. This argument has recently been challenged for both its conceptualization and its implementation. We aim to contribute to this debate by revisiting the definitions of regional and global, by leveraging data from the U.S. Bureau of Economic Analysis that is new to this literature, and by analyzing multinationals’ scope in terms of both sales and production. We find that U.S. multinationals are significantly more global than has previously been acknowledged in the IB literature.

• Siegel, Jordan I., Lynn Pyun and B.Y. Cheon. “Multinational Firms, Labor Market Discrimination, and the Capture of Outsider’s Advantage by Exploiting the Social Divide.” Administrative Science Quarterly 64 (2019): 370-397.

The organizational theory of the multinational firm holds that foreignness is a liability, and specifically that lack of embeddedness in host-country social networks is a source of competitive disadvantage. The literature on labor-market discrimination, by contrast, suggests that exploiting others’ bigotry can produce a competitive advantage. We seek to challenge the organizational-theory literature by building on insights from the labor-market literature. We theorize that multinationals wield a particularly significant competitive weapon: as outsiders, they can pinpoint social schisms in host labor markets and exploit them for competitive advantage. Using two data sets from South Korea, we show that multinationals have improved profitability by aggressively hiring an excluded group, women, in the local managerial labor market. Our results are economically meaningful, realistic in size, and robust to the inclusion of firm fixed effects. Many multinationals, even those whose home markets discriminate against women, appear to have recognized the strategic opportunity of what we call outsider’s network advantage. Though the host market was moving toward a new equilibrium freer of discrimination, its movement was gradual, presenting multinationals a multi-year competitive opportunity for outsider’s advantage.

• Wolfolds, Sarah, and Jordan I. Siegel. “Mis-Accounting for Endogeneity: Heckman’s Two-Step Method Without An Instrument.” Strategic Management Journal 40 (2019): 432-462.

Strategy research addresses endogeneity by incorporating econometric techniques, including Heckman's two-step method. The economics literature theorizes regarding optimal usage of Heckman's method, emphasizing the valid exclusion condition necessary in the first stage. However, our meta-analysis reveals that only 54 of 165 relevant papers published in the top strategy and organizational theory journals during 1995–2016 claim a valid exclusion restriction. Without this condition being met, our simulation shows that results using the Heckman method are often less reliable than OLS results. Even where Heckman is not possible, we recommend that other rigorous identification approaches be used. We illustrate our recommendation to use a triangulation of identification approaches by revisiting the classic global strategy question of the performance implications of cross-border market entry through greenfield or acquisition.

• Jeong, Yujin, and Jordan I. Siegel. “Falling High Status and Corporate Bribery: Evidence from the Revealed Accounting Records of Two South Korean Presidents.” Strategic Management Journal 39 (2018): 1083-1111.

Social status and its dynamics may be an important predictor of which firms will engage in large-scale bribery. Prior theory is incomplete, however, and prior studies have lacked comprehensive and reliable data on firm-level bribery decisions. We offer a new theoretical prediction and a novel data set on high-level corruption in South Korea, where the accounting records of two presidents in the 1987–1992 era were exposed to after-the-fact legal and public scrutiny. We find that, controlling for a range of alternative explanations, the threat of falling high status—that is, the combination of longstanding high social status with current-period mediocre economic performance relative to that of industry peers— is a statistically and economically meaningful predictor of increases in the amount of large-scale corporate bribery.

• Licht, Amir, Christopher Poliquin, Jordan I. Siegel, and Xi Li. “What Makes the Bonding Stick? A Natural Experiment Involving the U.S. Supreme Court and Cross-Listed Firms.” Journal of Financial Economics 129 (2018): 329-356.

We use a US Supreme Court case, Morrison v. National Australia Bank (2010), as a natural experiment to test the legal bonding hypothesis. By decreasing the potential liability of US-listed foreign firms, particularly due to class action lawsuits, Morrison arguably eroded their legal bonding to compliance with disclosure duties. Nevertheless, we find evidence of an increase or insignificant change in share values. Tests of longer-run effects of the legal event indicate that foreign firms’ disclosure quality and likelihood of facing enforcement actions remained stable, as did investors’ revealed preferences for trading on US markets. These results go against the legal bonding hypothesis but are consistent with reputational bonding and with market-based accounts of US cross-listing. Our results may contribute to ongoing debate about civil enforcement of securities laws through class actions

• Siegel, Jordan I., Amir N. Licht, and Shalom H. Schwartz. “Egalitarianism, Cultural Distance, and Foreign Direct Investment: A New Approach.” Organization Science 24 (2013): 1174-1194.

This study addresses an apparent impasse in the research on organizations' responses to cultural distance. Using historically motivated instrumental variables, we observe that egalitarianism distance has a negative causal impact on FDI flows. This effect is robust to a broad set of competing accounts, including the effects of other cultural dimensions, various features of the prevailing legal and regulatory regimes, other features of the institutional environment, economic development, and time-invariant unobserved characteristics of origin and host countries. We further show that egalitarianism correlates in a conceptually compatible way with an array of organizational practices pertinent to firms' interactions with non-financial stakeholders, such that national differences in these egalitarianism-related features may affect firms' international expansion decisions.

• Siegel, Jordan I., and Prithwiraj Choudhury. “A Reexamination of Tunneling and Business Groups: New Data and New Methods.” Review of Financial Studies 25 (2012): 1763-1798.

One of the most rigorous methodologies in the corporate governance literature uses firms' reactions to industry shocks to characterize the quality of governance. This methodology can produce the wrong answer unless one considers the ways firms compete. Because macro-level shocks reverberate differently at the firm level depending on whether a firm has a cost structure that requires significant adjustment, the quality of governance can only be elucidated accurately analyzing a firm's business strategy and their corporate governance. These differences can help one determine whether the fruits of a positive macro-level shock have been expropriated by insiders. Using the example of Indian firms, we show that an influential finding is reversed when these differences are considered. We further argue that the conventional wisdom about tunneling and business groups will need to be reformulated in light of the data, methodology, and findings presented here.

• Siegel, Jordan I., Amir N. Licht, and Shalom H. Schwartz. “Egalitarianism and International Investment.” Journal of Financial Economics 102 (2011): 621-642.

This study identifies the effect of a key cultural dimension—egalitarianism—on a set of international investment outcomes. Egalitarianism expresses a society's cultural orientation with respect to intolerance for abuses of market and political power. We show egalitarianism to be based on exogenous factors including social fractionalization, religion, and war experience. Controlling for a large set of competing explanations, we find a robust influence of egalitarianism distance on cross-border investment flows of equity, debt, and mergers and acquisitions. An informal cultural institution largely determined a century or more ago, egalitarianism influences international investment via an associated set of consistent policy choices made in recent years. But even after controlling for these associated policy choices, egalitarianism continues to exercise a direct effect on cross-border investment flows, likely through its direct influence on managers' daily business conduct.

• Roe, Mark J., and Jordan I. Siegel. “Political Instability: Effects on Financial Development, Roots in the Severity of Economic Inequality.” Journal of Comparative Economics 39 (2011): 279-309.

We here bring forward strong evidence that political instability impedes financial development, with its variation a primary determinant of differences in financial development around the world. As such, it needs to be added to the short list of major determinants of financial development. First, structural conditions first postulated by Engerman and Sokoloff (2002) as generating long-term inequality are shown here empirically to be exogenous determinants of political instability. Second, that exogenously-determined political instability in turn holds back financial development, even when we control for factors prominent in the last decade's cross-country studies of financial development. The findings indicate that inequality-perpetuating conditions that result in political instability are fundamental roadblocks for international organizations like the World Bank that seek to promote financial development. The evidence here includes country fixed effect regressions and an instrumental model inspired by Engerman and Sokoloff's (2002) work, which to our knowledge has not yet been used in finance and which is consistent with current tests as valid instruments. Four conventional measures of national political instability — Alesina and Perotti's (1996) well-known index of instability, a subsequent index derived from Banks' (2005) work, and two indices of managerial perceptions of nation-by-nation political instability — persistently predict a wide range of national financial development outcomes for recent decades. Political instability's significance is time consistent in cross-sectional regressions back to the 1960's, the period when the key data becomes available, robust in both country fixed-effects and instrumental variable regressions, and consistent across multiple measures of instability and of financial development. Overall, the results indicate the existence of an important channel running from structural inequality to political instability, principally in nondemocratic settings, and then to financial backwardness. The robust significance of that channel extends existing work demonstrating the importance of political economy explanations for financial development and financial backwardness. It should help to better understand which policies will work for financial development, because political instability has causes, cures, and effects quite distinct from those of many of the key institutions most studied in the past decade as explaining financial backwardness.

• Siegel, Jordan I., and Barbara Zepp Larson. “Labor Market Institutions and Global Strategic Adaptation: Evidence from Lincoln Electric.” Management Science 55 (2009): 1527-1546.

Although one of the central questions in the global strategy field is how multinational firms successfully navigate multiple and often conflicting institutional environments, we know relatively little about the effect of conflicting labor market institutions on multinational firms' strategic choice and operating performance. With its decision to invest in manufacturing operations in nearly every one of the world's largest welding markets, Lincoln Electric offers us a quasi-experiment. We leverage a unique data set covering 1996–2006 that combines data on each host country's labor market institutions with data on each subsidiary's strategic choices and historical operating performance. We find that Lincoln Electric performed significantly better in countries with labor laws and regulations supporting manufacturers' interests and in countries that allowed the free use of both piecework and a discretionary bonus. Furthermore, we find that in countries with labor market institutions unfriendly to manufacturers, Lincoln Electric was still able to overcome most (although not all) of the institutional distance by what we term flexible intermediate adaptation.

• Roe, Mark J., and Jordan I. Siegel. “Finance and Politics: A Review Essay Based on Kenneth Dam's Analysis of Legal Traditions in The Law-Growth Nexus.” Journal of Economic Literature 47 (2009): 781-800.

Strong financial markets are widely thought to propel economic development, with many in finance seeing legal tradition as fundamental to protecting investors sufficiently for finance to flourish. Kenneth Dam finds that the legal tradition view inaccurately portrays how legal systems work, how laws developed historically, and how government power is allocated in the various legal traditions. Yet, after probing the legal origins' literature for inaccuracies, Dam does not deeply develop an alternative hypothesis to explain the world's differences in financial development. Nor does he challenge the origins core data, which could be origins' trump card. Hence, his analysis will not convince many economists, despite that his legal learning suggests conceptual and factual difficulties for the legal origins explanations. Yet, a dense political economy explanation is already out there and the origins-based data has unexplored weaknesses consistent with Dam's contentions. Knowing if the origins view is truly fundamental, flawed, or secondary is vital for financial development policy making because policymakers who believe it will pick policies that imitate what they think to be the core institutions of the preferred legal tradition. But if they have mistaken views, as Dam indicates they might, as to what the legal traditions' institutions really are and which types of laws are effective, or what is really most important to financial development, they will make policy mistakes—potentially serious ones.

• Siegel, Jordan I. “Is There a Better Commitment Mechanism than Cross-Listings for Emerging Economy Firms? Evidence from Mexico.” Journal of International Business Studies 40 (2009): 1171-1191.

The last decade of work in corporate governance has shown that weak legal institutions at the country level hinder firms in emerging economies from accessing finance and technology affordably. To attract outside resources, these firms must often use external commitments for repayment. Research suggests that a common commitment mechanism is to borrow US securities laws, which involves listing the emerging economy firm's shares on a US exchange. This paper uses a quasi-natural experiment from Mexico to examine the conditions under which forming a strategic alliance with a foreign multinational firm is actually a superior mechanism for ensuring good corporate governance.

• Siegel, Jordan I. “Contingent Political Capital and International Alliances: Evidence from South Korea.” Administrative Science Quarterly 52 (2007): 621-666.

Though prior research has suggested that a company's ties to political networks have only a positive value or no value, this study examines whether political network ties can also be a significant liability for companies. Analyzing South Korea as a representative emerging economy, I find that being tied through elite sociopolitical networks to the regime in power significantly increased the rate at which South Korean companies formed cross-border strategic alliances, but also that being tied through elite sociopolitical networks to the political enemies of the regime in power significantly decreased that rate. Results show that an unexpected change in political regime could quickly change a political liability into an asset and that network ties continued to be important determinants of cross-border alliance activity as South Korea proceeded with liberalization. The present study sheds further light on the so-called dark side of embeddedness by focusing on who is negatively targeted by having the "wrong friends" at the wrong time. Just as positive ties can lead to favor exchange and other benefits for companies, negative ties can lead companies to be the victims of discrimination, resource exclusion, and even occasional expropriation and sabotage between rival sociopolitical networks.

• Siegel, Jordan I. “Can Foreign Firms Bond Themselves Effectively by Renting U.S. Securities Laws?” Journal of Financial Economics 75 (2005): 319-359.

The study tests the functional convergence hypothesis, which states that foreign firms can leapfrog their countries' weak legal institutions by listing equities in New York and agreeing to follow U.S. securities law. Evidence shows that the SEC and minority shareholders have not effectively enforced the law against cross-listed foreign firms. Detailed evidence from Mexico further shows that while some insiders exploited this weak legal enforcement with impunity, others that issued a cross-listing and passed through an economic downturn with a clean reputation went on to receive privileged long-term access to outside finance. As compared with legal bonding, reputational bonding better explains the success of cross-listings.

CASEBOOK

• Ghemawat, Pankaj, and Jordan I. Siegel. Cases About Redefining Global Strategy. Boston: Harvard Business Publishing, 2011.

In "Cases about Redefining Global Strategy," Pankaj Ghemawat and Jordan Siegel have assembled 26 full-length case studies as a resource for active learning about the nature of cross-border differences and strategies. As technology innovation globalizes markets and firms, management education must adopt a truly modern perspective on globalization-one that illuminates differences across borders rather than emphasizing similarities and imposing local models onto far-flung cultures. A new generation of managers and innovators who must compete in a "flat" world cannot succeed while following a one-size-fits-all approach to global strategy. Pankaj Ghemawat, Professor of Strategy at Spain's IESE Business School and author of "World 3.0" and "Redefining Global Strategy," and Harvard Business School Professor Jordan Siegel represent a new era of thinking in global strategy. This carefully chosen selection of classics and new material from Harvard Business Publishing also includes an introduction and six introductory module notes that identify key themes and strategic concepts explored in the cases. Though attuned to the format of an MBA course, the cases and text may also be used individually or in programs outside the strategy curriculum.