Date of Award
2008
Degree Type
Thesis
Degree Name
Doctor of Philosophy
Program
Business
Supervisor
Paul Beamish
Second Advisor
Peter Buckley
Third Advisor
Shih-Fen Chen
Abstract
Despite suggestions that the importance of geographic distance between interacting organizations is decreasing due to better communications technologies, this thesis shows that such separation remains important. Measures of geographic distance are commonly used as proxies for the impact of physical separation. Separation has been shown to have impact at each of the individual, organization, and market levels. However, the existing measures are only proxies, typically poor ones, for the true underlying measure. This thesis develops a new construct, dyad travel time, which specifically measures the depletion of manager time that is caused by traveling between non-collocated sites. Manager time is a scarce and valuable resource and, ceteris paribus, its use without added productive output, by definition, is an efficiency drain. This thesis defines this construct, demonstrates its validity and superiority to existing measures, and shows how it impacts firm decisions and outcomes. Using a dataset of international foreign direct investments, several firm-level decisions and outcomes are shown to be impacted by dyad travel time. Dyad travel time is argued to directly measure the monitoring costs associated with a location choice. It is shown that high dyad travel time location choices are associated with the use of shared governance entry modes to overcome the burdens of monitoring. Because of the simultaneous nature of the location and entry mode decisions, it is shown that firms can substitute dyad travel time and shared entry mode choice in order to lower their overall monitoring costs. With experience, firms have the capabilities to manage and monitor less proximate locations, but also realize the burdens involved. As such, while firms choose locations that follow a pattern of geographic expansion, they also choose locations that are easier to access, given the geographic distance. That is, they choose monitoring efficient locations. Next, despite the costs of relocating, high travel time subsidiaries are sometimes relocated. When they are relocated, the new locations are significantly easier to access. Further, it is shown that parent firms use fewer expatriates and are less likely to use an expatriate general manager when the subsidiary is located non-proximately. Perhaps paradoxically, it is shown that subsidiaries in high dyad travel time locations survive longer than proximate subsidiaries. This occurs because of the increased information processing complexities and because these subsidiaries are more likely to change general managers, possibly as a mechanism to address deteriorating performance. Finally, it is shown that there is an interaction between financial performance and dyad travel time in their effects on survival. When proximate, lossmaking subsidiaries face far higher closure rates than profitable subsidiaries, although when non-proximate, there are similar closure rates regardless of performance. This interaction further evidences the difficulty of managing from afar. This thesis makes an empirical contribution to academic research by developing a new measure and establishing its validity. Because of the importance of geographic separation, this new measure contributes to international business research that intends to study the effects of non-collocation. However, these findings may also apply outside of international business to any non-collocated business interaction, such as those located in different regions of a single country. This thesis contributes to theory in several ways. First, to transaction cost economics theory it contributes a specifically measured transaction cost and shows how this transaction cost affects business decisions and performance. Second, it provides a specific example of the monitoring cost of behavioral uncertainty and shows how firm decisions and performance are affected by this cost. Finally, it operationalizes and empirically tests several theoretical relationships posited in the international business literature. Namely, it addresses part of what Dunning (1998) calls a neglected factor in international business research: the spatial nature of a firm’s operations, and its impacts on the firm. The contribution of dyad travel time extends beyond academic research as well. Managers armed with a greater understanding of the impacts of non-collocation will be able to make more informed decisions about the location of the organizations with which they interact and transact, as well as their entry mode choices. Managers will be more aware of the need to make compensatory adjustments, such as staffing choices and investment in communications mechanisms that alleviate or counter the effects of noncollocation. Finally, the results will have impacts in the political realm. It is not uncommon for out-of-the-way locales to offer economic incentives to attract businesses to locate facilities. Because of the effects of being in locations that have greater travel times, such incentives to attract businesses to inaccessible locations may need to be rethought.
Recommended Citation
Boeh, Kevin K., "TRAVEL TIME AND THE LIABILITY OF DISTANCE" (2008). Digitized Theses. 4426.
https://ir.lib.uwo.ca/digitizedtheses/4426