Impact of host country institutional context on subsidiary performance

Abstract

2015),"Ownership participation of cross-border mergers and acquisitions by emerging market firms: Antecedents and performance", Management Decision, Vol. 53 Iss 1 pp. 221-246 http:// dx.(2015),"Effects of intellectual capital on innovative performance: The role of knowledge-based dynamic capability", Management Decision, Vol. 53 Iss 1 pp. 40-56 http://dx.If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to examine the impact of quality of market supporting institutions (institutional quality) in host country and the similarities and differences of institutional quality between the home and host country (institutional distance) on subsidiary performance. Design/methodology/approach -Based on the conceptualization of new institutional economics, the authors divide quality of host country institutions into factor markets; product, capital, labor market and sociopolitical dimensions. The authors examine the impact of the quality these institutional dimensions in host countries and their difference between home and host country on the performance of 318 subsidiaries of 146 Korean listed manufacturing firms operating in 28 host countries from 2001 to 2006. Findings -The empirical results based on 1,129 observations show that institutional distance explains a significant variance in the subsidiary performance. In particular, the difference in quality of institutions in product, capital and labor market has negative impact on subsidiary performance. However, except for quality of regulation in labor market, host country institutional qualities do not significantly explain the variation in subsidiary performance. Originality/value -The evidence suggests that host country institutions matter substantially when considered with their relative similarity and difference with home country institutions. The impact of individual dimensions of institutions varies on subsidiary performance.

The influence of competences and institutions on the international market orientation in foreign-owned subsidiaries

“…Our study aimed at contributing theoretically to the combined use of the competence based view of the firm and institutional theory (Oliver, 1997;Martin, 2014;Pattnaik et al, 2015). Our results suggest that multilevel MNE competences have a differing impact on international market orientation, we also add to the literature by indicating that those relationships can be moderated by institutional differences between home and host country.…”

“…Differences in the formal institutional development between home-and host-country create additional costs for MNEs for instance through dissimilarities in export procedures and taxes, health and safety regulations, sudden policy changes, or product adaptations for regulatory compliance (Papanastassiou and Pearce, 1999;Luo 2003;Pattnaik et al, 2015). The increased costs incurred by the MNE will be likely reduced through an extension of subsidiary market responsibility, in order to achieve economies of scope and scale.…”

“…In other words, the faster-than-expected diminishing returns which result on transferred competences are likely to affect the international market orientation in those subsidiaries. Hence, we combine institutional theory with a competence-based view of the firm (Brouthers et al, 2008;Peng et al, 2008;Pattnaik et al, 2015) to investigate the determinants of international market orientation, and subsequently the performance of foreign-owned subsidiaries located in a given emerging economy. In particular, to take a first step, we investigate how competences and institutional differences directly affect international market orientation, which in turn subsequently determines subsidiary performance.…”

“…Therefore, the implications of this research for the current literature are as follows. On a theoretical level, we aim to combine institutional theory and the competence-based view of the firm (Brouthers et al, 2008;Pattnaik et al, 2015). This is particularly important in the context of FDI and more specifically in the light of increasing competence transfer over to emerging economies (Peng et al, 2008;Martin, 2014;Verbeke et al, 2016).…”

Strategic Asset Seeking and Innovation Performance: The Role of Innovation Capabilities and Host Country Institutions

“…Unlike market-seeking and natural resource-seeking motives that induce firms to go to countries with large markets and abundant natural resources regardless of the development level of the country, SAS firms are more likely to go to industrialized countries that are endowed with more knowledge assets and strong national innovation systems (De Beule and Duanmu 2012;Elia and Santangelo 2017;Zheng et al 2016). However, in these countries, EMNEs encounter daunting challenges such as the reluctance of the host firms to sell core competencies (Rugman 2010), and the differences in institutional frameworks and cultures between home and host countries, which result in the liability of foreignness (Pattnaik et al 2015;Zheng et al 2016). With a SAS intent, the investing EMNE aims to strengthen its competitiveness by building up its firm-specific capability through FDI.…”