To highlight our faculty research, we’re introducing a new Q&A column today on Opus Magnum. Dobrina Georgieva, Ph.D., assistant professor in the finance department recently presented her research on the impact of laws, regulations, and culture on cross-border joint ventures. Here then are five questions with Prof. Georgieva.
Q. How would you summarize your research on cross-border joint ventures?
A. My research is focused on factors that impact cross-border co-operations between firms in the form of joint ventures. I discovered that there are two types of factors that have a significant impact. On one hand, the laws and regulations around the world impact the likelihood that firms will be involved in cross-border transactions. On the other hand, and equally important, the cultural norms, religions, ethnicity and openness of the country impact the way managers make decisions. These factors impact investors’ confidence in the financial markets and overall stock returns and risk.
Q. Why is this topic of interest to you?
A. I grew up in Eastern Europe and watched the transition in my country from planned economy to capitalism and democracy which has evolved over the last two decades. Ultimately I saw that not only the laws and anti-corruption measures of the government helped improve the economy and create a functioning financial market, but the informal agreements and cultural understanding among people influenced the progress towards free market systems and helped the country establish new entrepreneurship mechanisms. In my research I study these effects on a sample of firms from 105 countries between 1990 and now, based on 12,089 completed joint ventures and find empirical evidence of these hypotheses.
Q. What are you hoping to accomplish with this research, influencing companies or governments?
A. Ultimately, we live in a globalized world where international contracts and transactions are key drivers towards progress. I anticipate both academic and practitioner impact of my research. The issues of the benefits of international cooperation and creation of cross-border firm entities are very timely, considering recent trends towards globalization. They have attracted considerable attention by finance researchers, as well by policy-makers, and regulators (especially by the SEC).
Q. Will this research impact your teaching at St. Thomas?
A. I actively integrate my findings and current research in my teaching. I strongly believe that the role of educators today in not only to teach student how business “was,” but to prepare them for where business will be in the future years and decades. That’s why studying/researching new issues and cutting-edge methods is important, especially in the area of international transactions and co-operation. When we teach investments or corporate finance today, we are, in fact, teaching global finance. World markets are becoming increasingly more integrated and ultimately, cross-border transaction are crucial for the success of any business. Often my students in the evening MBA program report that they work with a foreign partner or client. Therefore I believe that it is important for future managers and financial analysts to understand the factors that drive the cross-border integration of corporate activities. My study will provide insights on the impact of cultural dimensions such as mentality, religion and group identity on cross-border joint ventures.
Q. What was the most surprising finding from this project?
A. Initially we thought that differences in culture, religion and language would be an obstacle for cross-border integration. Our empirical results, using the sample of 105 countries’ annual data observed over the last 20 years indicated the opposite. In face, firms from countries with distinctively different cultures, language and legal traditions are more likely to form cross-border joint ventures. The finance literature shows similar results for cross-border mergers and acquisitions (M&A) which is consistent with the general notion that cross-border integration is even more beneficial when country differences complement and enrich each other. Thus, corporations derive greater synergies from the joint contractual enterprise.