Disentangling the corporate effect on subsidiary performance

Institutional distance has been known to be an important driver of Multinational Enterprises’ strategies and performance in host countries. Based on a large panel dataset of 10,562 firms operating in 17 emerging markets and spanning 80 home countries, we re-examine the relationship described by Gaur and Lu (J Manage 33(1):84–110, 2007) between regulatory institutional distance and subsidiary performance. We extend this research by (1) examining this relationship in the context of emerging markets, (2) examining the moderating effects of ownership strategy and host-country experience within the context of emerging markets and (3) accounting for a greater variety of institutions by including a large number of home and host countries. We find that institutional distance negatively affects subsidiary performance in emerging markets. Our findings also show that the negative effects of institutional distance on subsidiary performance are lesser for subsidiaries with partial ownership (than for subsidiaries with full ownership) and for subsidiaries with greater host-country experience. We discuss our findings with respect to Gaur and Lu’s model, which explores the relationships between these variables in a general context.

Purpose This study aims to investigate the impact of host country’s institutional environment on the performance of Japanese subsidiaries. The first objective of the study is to investigate the impact of institutional quality on the performance of Japanese subsidiaries. Institutional quality is represented by the host country’s economic freedom. Economic freedom encompasses various aspects of a country’s business environment, including regulatory efficiency, property rights, fiscal health and market openness, which shape the operational landscape for foreign subsidiaries. This study also contributes to the existing literature by investigating the impact of regulatory institutional distance (economic freedom distance) on the performance of Japanese subsidiaries operating across different countries. In addition, this study investigates whether subsidiary experience in the host country moderates the relationship between the host country’s institutional quality and Japanese subsidiary performance. Design/methodology/approach This study uses the Toyo Keizai data set of Japanese subsidiaries operating across 24 countries from 2009 to 2023. In addition, it uses composite Economic Freedom Index scores published by the Heritage Foundation. Regression analysis has been used to investigate the proposed relationships. The proposed hypothesized relationships are tested using a consolidated sample and an emerging country sample. Findings The results of the study support that host country’s institutional quality (economic freedom score) has a positive impact on the performance of Japanese subsidiaries. The results also demonstrate that the impact of institutional quality and institutional distance is more profound in the emerging country sample. Moreover, subsidiary experience positively moderates the relationship between institutional quality and subsidiary performance. Originality/value This study contributes to the existing literature by examining the interplay between the host country’s institutional environment and subsidiary characteristics in influencing the performance of Japanese multinational enterprises. Using a consolidated sample and an emerging market sample, this study provides specific insights on how the institutional quality, institutional distance and subsidiary characteristics have varied impacts on the performance of Japanese subsidiaries.

Regulatory Institutional Distance and MNCs' Subsidiary Performance: Climbing up Vs. Climbing Down the Institutional Ladder

Abstract: Drawing on parenting advantage and institutional theories, this article investigates how emerging multinational enterprise (EMNE) headquarters’ ability to manage institutional voids influences subsidiary performance and how this relationship is moderated by host-country experience and institutional distance. Findings from an analysis of panel data on 353 Chinese EMNEs and their 3,394 foreign subsidiaries from 2012 to 2020 show that headquarters’ ability to manage institutional voids improves subsidiary performance. This positive effect becomes stronger with greater host-country experience. Formal institutional distance weakens the positive effect of the capability to manage institutional voids, whereas informal institutional distance shows no significant moderating effect.

Institutional Environments, Staffing Strategies, and Subsidiary Performance

This study unbundled institutional environment into two distinct aspects: institutional distance (the degree of dissimilarity between the institutional environment of a firm’s home country and an economy into which it expands) and institutional diversity (the variety of all the institutional environments to which a firm is exposed), and related them to product innovation performance of emerging market firms. Data on 917 Chinese manufacturing firms in multiple industries over 3 years was analyzed. The results show a positive relationship between institutional distance and product innovation success. An inverted U-shaped relationship was found between the institutional diversity of a firm’s foreign markets and its product innovation success.

PurposeThis paper aims to report on the findings of a qualitative study that explored the views and experiences of young people leaving care during the first phase of the Covid-19 pandemic in Northern Ireland.Design/methodology/approachA qualitative approach was adopted involving semi-structured interviews with 24 care leavers 18–25 years old from across the region. Interviews were conducted remotely online or by telephone and explored young people’s lived experiences during the pandemic including their views on the formal support services and how best to provide ongoing for support care leavers during the pandemic.FindingsStudy findings highlight how known adversities for care leavers are exacerbated during the pandemic, having a detrimental impact, particularly on their emotional well-being. The response of the state as a corporate parent in mitigating the impact of the pandemic was found to be inadequate; with a need for much clearer communication, transparent and prompt decision-making and targeted specialist mental health services. The account given by the young people also highlighted the importance of participation and relationship-based practice to build on the young people’s resilience in the context of high levels of social isolation and limited access to informal support systems.Originality/valueThis research, based on the views of care experienced young people themselves, is the first study in Northern Ireland to report on the impact of the Covid 19 pandemic on care leaving. As such it makes a contribution to this emerging international field of study and, given the persistence of the pandemic, provides empirical findings and a social justice perspective of ongoing relevance to policy and practice with young people leaving care.

In 2013, the Companies Act in India mandated that foreign subsidiaries with specified profitability and size spend at least 2% of their net income on corporate social responsibility (CSR). The study uses this natural experiment to isolate the impact of CSR spending on multinational enterprise (MNE) subsidiary performance. Using a triple difference estimation method on 175 foreign subsidiaries from 2005 to 2020, this study finds a positive impact of the compulsory CSR regulation on the CSR spender subsidiaries. We also find that higher institutional distance and greater subsidiary age benefit affected subsidiaries, positively impacting their performance because of mandatory CSR spending. The findings offer suitable recommendations for managers and policymakers in emerging markets as navigating regulatory CSR policies in the host country requires considering both resource-based and institutional environment factors.

Previous studies fail to show the difference between the impacts of upward and downward institutional distances on cross‐border acquisitions (CBAs) because they did not differentiate the directions of institutional distance. From a perspective of asymmetry, this study explores the different effects of upward and downward institutional distance on the completion of the CBAs of Chinese multinational enterprises (MNEs). Employing data of 1343 acquisition deals by Chinese listed multinational enterprises from 2001 to 2020, our empirical results show that upward institutional distance prompts the completion of CBAs; meanwhile, downward institutional distance has a negative but statistically insignificant effect. We also study the moderating effects of political ties and excess control. Political ties are found to positively moderate the effect of downward institutional distance on CBA completion, while excess control strengthens the effects of both upward and downward institutional distances on CBA completion.

This paper adds nuance to our understanding of institutional antecedents of foreign investment, in particular in global services sourcing. While prior research has stressed the various risks and effects associated with home- host country differences in national-level institutions, e.g. legal systems, we argue that industry-specific, yet often transnational field institutions, e.g. standards, have become critical factors in driving sourcing location decisions. Using data from the Offshoring Research Network, Kaufman institutional indicators, and data on ‘capability maturity model integration’ (CMMI) process standard adoption, we show that sourcing location choices are indeed negatively impacted by institutional differences between home and host country, i.e. ‘distance’ still matters, but they are positively impacted by CMMI standard adoption in host countries, and standard adoption negatively moderates the importance of distance. Findings promote a more contextual, multi-level understanding of institutional antecedents of foreign firm location choices, which also has important policy implications in particular for emerging economies.

Prior research has viewed institutional distance as a critical factor in decisions about ownership level in foreign affiliates. Research has also long highlighted the relevance of distance percepti...

The influence of CEO overconfidence on ownership choice in foreign market entry decisions

ABSTRACTAfrica is an increasingly important business context, yet we still know little about it. We review the challenges and opportunities that firms in Africa face and propose that these can serve as the basis for extending current theories and models of the firm. We do so by challenging some of the implicit assumptions and stereotypes on firms in Africa and by proposing three avenues for extending theories. One is taking the extreme conditions of some Africa countries and using them as a laboratory for modifying current theories and models of the firm, as we illustrate in the case of institutional theory and the resource-based view. A second one is identifying new themes that arise from analyzing firms in Africa and their contexts of operation, and we discuss four themes: migrating multinationals and the meaning of home country, diaspora networks within and across countries, a recasting of cultural and institutional distance, and new hybrid organizational forms. A third one is developing new theories based on alternative paradigms of social relationships that have emerged in Africa that differ from those underpinning existing theories of the firm, such askgotlaand its view of community-based relationships orubuntuand its humanizing view of relationships.

PurposeThe existing research on institutional distance implicitly posits the monotonic effect of contextual differences on the multinational enterprise (MNE) behaviors (e.g. entry mode, research and development (R&D) investment and subsidiary reverse knowledge transfer). Namely, MNEs from the same home to the same host countries are thought to have homogenous perceptions on the institutional influences and thus behave similarly. However, the authors argue that MNEs, due to their different performance aspirations in host countries, will have heterogenous perceptions on such contextual influences and thereafter behave differently.Design/methodology/approachDrawing on the behavioral theory of the firm and employing a unique sample comprised of 140 Chinese MNEs' foreign direct investments (FDIs) in Taiwan in 2017, the authors developed and tested the hypotheses.FindingsThe authors found that the emerging-market MNEs' (EMNEs’) perceptions of higher local institutional difficulties will be strengthened when their local performances are below their aspiration levels, making them more risk-taking. Nevertheless, EMNEs' local experiences and local equity-based partnerships will mitigate such negative perceptions, mitigating their risk-taking orientation.Originality/valueThe empirical findings make contributes to the international business (IB) literature by extending knowledge on the determinants and conditions of the heterogeneity in EMNEs' behavioral orientations when in face of the same institutional distance. The authors also provide managerial implications by showing that EMNEs' firm-specific resources (i.e. local experience and local equity-based partnership) will alter their perceptions of local institutional difficulties, leading to different behavioral orientations.

This paper addresses how corporate social responsibility of multinationals in China influences their Chinese subsidiaries’ performance. Using panel data regression, (1) we investigate the effects of corporate social moderating effects of institutional and geographic distances between their home countries and China. Our findings show, first, that subsidiaries’ corporate social performance is associated positively with their profit in China. Second, we find that the greater the cultural, economic, and geographic distances between the home country and China, the less likely it is that a subsidiary will benefit from corporate social responsibility. We enrich the theoretical understanding of the institutional conditions under which corporate social responsibility leads to specific outcomes by adding new institutional elements—the differences of culture and the economies between multinationals’ host and home countries. Our findings suggest that although corporate social responsibility is still new to China, being socially responsibility provides financial benefits to multinationals. Their global and local corporate social responsibility strategies have to adjust based on local cultures and economic levels, especially with respect to fundamental beliefs about spirituality and values. The paper fulfilled the research gap between multinationals’ social practices and their performance in host countries at the subsidiary level by providing empirical evidence concerning the responses to corporate social responsibility initiatives in emerging markets and clarifying the conditions under which foreign affiliates’ corporate social responsibility engagement in the host country can gain better returns in local markets.