MNC Subsidiaries and Country Risk: Internalization as a Safeguard Against Weak External Institutions

Feinberg, Susan; Gupta, Anil K.

doi:10.5465/amj.2009.37315470

Cited by 182 publications

(125 citation statements)

References 51 publications

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“…Since specialized and co-specialized complementary assets are critical to the commercialization of an innovation (Teece 1986), firms can minimize their losses from knowledge outflow to competitors by strategically increasing the interdependence among their global network of subsidiaries (Feinberg and Gupta 2009). Local imitators without a similar integration mechanism would be unable to make use of any knowledge gained.…”

Section: Introductionmentioning

confidence: 99%

Local R&D Strategies and Multilocation Firms: The Role of Internal Linkages

2012

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T his study looks at the role of internal linkages in highly competitive clusters. We argue that, in addition to serving as a mechanism for sourcing knowledge, strong internal linkages help firms increase internalization and create higher levels of technological interdependence across firm locations. Firms with strong networks of internal linkages are able to maintain tighter control over local innovation and reduce the risk that knowledge outflows will advantage competitors in clusters. Our empirical analysis of the global semiconductor industry shows that industry leaders intensify internal linkages across locations when they collocate with direct market competitors, but not when they collocate with innovators in the same technological field. We also find that internal linkages are associated with more knowledge flow within firms and less knowledge expropriation by collocated competitors. Our results suggest that future research in cluster innovation should consider the critical role of multilocation firms, their internal organization across clusters, and their responses to technological and market competition in clusters.

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Section: Introductionmentioning

confidence: 99%

Local R&D Strategies and Multilocation Firms: The Role of Internal Linkages

2012

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“…This study therefore also adds to the on-going discussion of seeing formal institutions only as hazards and friction. Feinberg and Gupta (2009) and Slangen and Beugelsdijk (2010) found in their large sample studies direct effects of formal institutional risk factors. In this context, by using primary…”

Section: Discussionmentioning

confidence: 99%

“…Birkinshaw et al, 1998;Forsgren et al, 2005). The institutional friction literature neglects such external relationships since they are seen as threats to the MNE, for example because of a lack of property rights protection or inefficient contract enforcement mechanisms in countries at a greater formal institutional distance (Henisz & Williamson, 1999;Feinberg & Gupta, 2009;Slangen & Beugelsdijk, 2010).…”

Section: Formal Institutional Distance and Inter-organisational Relatmentioning

confidence: 99%

The Effects of Institutional Distance on Foreign-Owned Subsidiary Development: The Case of the Northwest of England

Dahms¹

2014

IJBM

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The purpose of this paper is to analyse the effects of institutional distance on foreign-owned subsidiary development. In particular, a distinction between direct and indirect effects of formal and informal institutional distance is proposed and empirically tested. Based on a bespoke census database of all known foreign-owned subsidiaries in the Northwest of England a postal survey has been conducted. The results indicate that informal institutional distance does have a pronounced negative effect on the level of intra-and inter-organisational relationships and decision-making autonomy in foreign-owned subsidiaries. The direct effect of formal institutional distance seems to be less relevant, however, it is becoming significant when the interaction between formal and informal institutional distance is considered. The specific contribution of this study lies in the systematic and comprehensive investigation of the formal and informal institutional distance between home and host country and their effects on subsidiary development. It is one of the first studies to provide a theoretically sound investigation, based on new institutional economics and internalisation theory, of the interaction between formal and informal institutional distance in the context of foreign-owned subsidiaries.

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“…EEMNEs operating within such an environment are subject to increasing external uncertainty and decreasing credibility (Agarwal & Ramaswami, 1992;Akhter & Lusch, 1998;Delios & Beamish, 1999;Delios & Henisz, 2000;Henisz, 2000). According to RDT, a subsidiary relies more on the internal resources and knowledge transferred from MNE headquarters in order to replace inter-organizational resource exchanges (Feinberg & Gupta, 2009). Expatriates can be used as an internal resource to reduce the external dependence when facing uncertainty stemming from the unstable external environment.…”

Section: The Moderating Role Of Host-country Institutional Qualitymentioning

confidence: 99%

“…The findings from existing studies have enhanced our understanding of the importance of expatriates in MNEs' overseas operations. However, these studies have paid little attention to the impact of expatriates on subsidiary autonomy (Aharoni, Tihanyi, & Connelly, 2011) and how EEMNEs respond to external uncertainty by adjusting their internal management strategies (Davis & Cobb, 2010), such as the levels of localisation (Liu, et al, 2016;Lu, et al, 2014;Yildiz & Fey, 2012) and parental support (Feinberg & Gupta, 2009;Luo, 2003). The resource dependence theory (RDT) has been increasingly influential as a theoretical basis for international business research.…”

Section: Theoretical Backgroundmentioning

confidence: 99%