The Interplay of Mahalanobis Distance and Firm Capabilities on MNC Subsidiary Exits from Host Countries

Kang, Jingoo; Lee, Jeoung Yul; Ghauri, Pervez N.

doi:10.1007/s11575-016-0287-6

Cited by 35 publications

(41 citation statements)

References 94 publications

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“…At the same time, to stay truer to the configurational approach, they depart from traditional methods of multidimensional operationalizations (e.g., Euclidean distance), proposing instead the Mahalanobis method, which accounts for the interdependence between the different institutional dimensions (Berry et al, 2010). Overall, Berry et al's (2010) work has been well received, especially for the proposed Mahalanobis methodology (e.g., Kang, Lee, & Ghauri, 2017;. However, the key comparative institutional theoretical ideas behind Berry et al's (2010) work have not been sufficiently developed and employed in subsequent IB research.…”

Section: Three Schools Of Thoughtmentioning

confidence: 99%

“…There are a few studies that draw on Berry et al (2010) and apply the Mahalanobis methodology for calculating institutional distance. They vary widely, with the type and number of institutional dimensions considered ranging from the full set of nine (Kang, Lee, & Ghauri, 2017) to a subset of a selected few or even a single dimension (e.g., . Lindner, Muellner, and Puck's (2016) study, which uses four of the nine dimensions related to the regulatory and normative domains, exemplifies the typical application.…”

Section: Use Of the Three Perspectivesmentioning

confidence: 99%

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The construct of institutional distance through the lens of different institutional perspectives: Review, analysis, and recommendations

et al. 2019

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This paper presents a review and critique of the 20-year-old literature on institutional distance, which has greatly proliferated. We start with a discussion of the three institutional perspectives that have served as a theoretical foundation for this construct: organizational institutionalism, institutional economics, and comparative institutionalism. We use this as an organizing framework to describe the different ways in which institutional distance has been conceptualized and measured, and to analyze the most common organizational outcomes that have been linked to institutional distance, as well as the proposed explanatory mechanisms of those effects. We substantiate our qualitative review with a meta-analysis, which synthesizes the main findings in this area of research. Building on our review and previous critical work, we note key ambiguities in the institutional distance literature related to underlying theoretical perspectives and associated mechanisms, distance versus profile effects, and measurement. We conclude with actionable recommendations for improving institutional distance research.

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Section: Three Schools Of Thoughtmentioning

confidence: 99%

Section: Use Of the Three Perspectivesmentioning

confidence: 99%

The construct of institutional distance through the lens of different institutional perspectives: Review, analysis, and recommendations

et al. 2019

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“…First, it is one of the few, if not the first, research to provide detailed empirical evidence on the relationship between cross-national distances and sustainability of tax policies with a sample of Japanese listed firms. This study extends the book-tax difference studies [1][2][3][4][5][6][7]20,22,25,26] and cross-national distance studies [11,12,27,28] by providing evidence that multidimensional cross-national distance dimensions may lead to a negative effect on the sustainability of tax policies. Second, the dimensions of cross-national distance of FDI (i.e., perspectives from economic, political, administrative, cultural, demographic, knowledge, and geographical distance) and the indicator variable of sustainable tax policies provide a methodological contribution on enriching both international business and environmental studies of country characteristics and business sustainability.…”

Section: Conclusion and Discussionmentioning

confidence: 52%

“…Besides geographical distance, we use multiple dimensions to represent other types of cross-national distances. For the international business studies, many researchers shed light on the value of Mahalanobis distance calculation method for calculating the cross-national distance [11,12,27,28]. Considering the advantages of Mahalanobis method, we use it to calculate each type of cross-national distance between Japan and host countries.…”

Section: Regression Modelmentioning

confidence: 99%

“…In addition, we use Mahalanobis distance to calculate cross-national distances between Japan and host countries. Based on the international business literature [11,12], this study discusses cross-national distance with seven multidimensional measures. We estimate that the greater the cross-national distances between host countries and home country, the less likely it has a sustainable tax policy.…”

Section: Introductionmentioning

confidence: 99%

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A Potential Risk of Increasing Cross-National Distance: Evidence from Less Sustainable Tax Policies

2019

Sustainability

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This study explores a possible risk of overseas investment in long cross-national distance host countries using the foreign direct investment (FDI) data in Japan. We expect that increasing cross-national distance would relate to the less sustainable tax policies by increasing the differences in economic, political, administrative, cultural, demographic, knowledge, and geographic perspectives, which enhance the motivation of tax aggressiveness and the likelihood of earnings management. Consistent with our expectations, we find that firms with longer cross-national distance are less likely to adopt sustainable tax policies. After some robust tests, our main findings remain unchanged. In additional analysis, we find the above relation is weakened when firms invest in a tax-haven country or have a high proportion of foreign ownership, while it is strengthened when firms meet an earnings benchmark. Overall, our results suggest the one risk of increasing cross-national distance between host country and home country is less sustainable tax policies.

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Political risk, internal versus global value chain knowledge, and subsidiary operational integration

Lee

Jiménez

Yang

et al. 2020

Global Strategy Journal

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Research summaryThis study combines transaction cost economics and network learning literature to examine the moderating effect of knowledge from internal versus external local supplier on subsidiary‐level intrafirm trade within multinational enterprises' (MNEs) global value chain networks. We conceptualize knowledge in a multidimensional way, disentangling it into institutional knowledge in high‐risk countries and internationalization knowledge in all countries. Empirical results from 5,660 observations of 487 Korean MNEs (1995–2013) show that MNEs' institutional knowledge with external local suppliers in high‐risk countries has a stronger negative effect on the relationship between political risk and subsidiaries' intrafirm trade integration than with internal suppliers. Internationalization knowledge from external local suppliers in all countries also has a stronger negative effect on the relationship between political risk and subsidiaries' intrafirm trade integration than with internal suppliers.Managerial summaryA host country's political risk is a critical consideration for multinational enterprises (MNEs) when entering institutionally hazardous countries. This study shows how MNEs' strategies for operational integration of subsidiaries within global value chain (GVC) networks respond to challenges of political risk in host countries. We studied 5,660 observations of 487 Korean MNEs (1995–2013) and found that MNE capabilities to manage under institutionally hazardous conditions can be developed through various types of knowledge from internal versus external local suppliers, and, consequently, operational integration in the MNE GVC in high‐risk countries is less needed. MNEs need to acquire and expand new business opportunities in host countries by accepting heterogeneity through varying institutional and internationalization knowledge and active partnership development based on their GVC networks.

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The Interplay of Mahalanobis Distance and Firm Capabilities on MNC Subsidiary Exits from Host Countries

Cited by 35 publications

References 94 publications

The construct of institutional distance through the lens of different institutional perspectives: Review, analysis, and recommendations

The construct of institutional distance through the lens of different institutional perspectives: Review, analysis, and recommendations

A Potential Risk of Increasing Cross-National Distance: Evidence from Less Sustainable Tax Policies

Political risk, internal versus global value chain knowledge, and subsidiary operational integration

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