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PurposeStrategic literature has focused on how economies of scale in a firm offering outsourcing may generate incentives for clients to increase the outsourced services, but there has been limited research on how the clients’ features may influence the scope of services that they hire with an outsourcing provider. This study analyzes whether a client’s efficiency motivates it to increase ties with a specific provider of knowledge-intensive services in the context of business process outsourcing (BPO). We further explore whether industry conditions moderate the relationship.Design/methodology/approachA research framework is developed consisting of three main hypotheses. We combine industry data and proprietary and financial data from a longitudinal sample of 107 client firms of a multinational outsourcing service provider to test our hypotheses.FindingsWe find that more efficient firms hire more services from an outsourcing provider and that the munificence of the client firm’s industry positively moderates this relationship. Our results suggest that efficient clients can better keep transaction costs under control when accessing, assimilating, and exploiting the knowledge embedded in an expanded set of services provided by an outsourcing supplier.Originality/valueThis study extends the absorptive capacity perspective by showing that a client’s efficiency reinforces its opportunities to absorb knowledge-intensive services from a supplier when expanding the range of operations in the context of BPO.

Many institutional investors claim to be leaders in their commitment to sustainability, yet their real impact is undetermined. We look at the relationship between the presence of foreign institutional owners and the firm’s environmental outcomes in terms of performance and innovation. We argue that foreign institutional owners seek to mitigate their exposure to reputational risks by encouraging their investee firms to move towards better environmental performance. However, these owners are less likely to engage in long-term investments derived from environmental innovations. We examine these paradoxical motivations in the context of multinational enterprises (MNEs) in the chemical industry across 33 countries in emerging and developed markets and further explore how these investee firms’ international diversification affects these relationships. Our findings contribute to international corporate governance and sustainability research by uncovering that, contrary to institutional owners’ popular claims, foreign institutional owners have a positive effect on their investees’ environmental performance, but their influence is not statistically significant on environmental innovation. Specifically, the influence of foreign institutional owners on environmental performance is strong for MNEs with a low level of international diversification and marginal for those with a higher level of internationalization; meanwhile, domestic institutional owners are committed to advancing both environmental performance and innovation in their MNE investees. In sum, we show that environmental concerns are still quite localized.

This empirical article examines how the institutional development of the home country and host countries in which multinational enterprises (MNEs) are embedded can drive MNEs’ research and development (R&D) intensity. In doing so, this study analyzes 967 firm-year observations of 234 pharmaceutical firms from 30 developed and less developed countries in the period from 2010 to 2017. We find empirical support for internationalization toward developed countries as a driver of R&D intensity at the firm level. Furthermore, we find that this positive effect is stronger for MNEs from less institutionally developed home countries. The results can help managers, researchers, and policymakers to better understand the innovation process in R&D-intensive industries. JEL CLASSIFICATION: M16, O32