Purpose
This paper aims to investigate the extent to which locating primary industry subsidiaries in politically unstable countries impacts their survival. The authors argue that foreign multinational enterprises in less stable political environments can shape policies that are impactful on the costs of operating in primary industries and avoid compliance with more stringent policies at home.
Design/methodology/approach
Using a sample of 753 primary sector investments of Japanese multinational enterprises during the period 1986 to 2013, the authors conduct a parametric survival analysis of the relationship between political stability and subsidiary survival.
Findings
Political instability has a slight, curvilinear relationship with subsidiary survival, such that both high and low stability are associated with lower exit hazard, while moderate levels of stability increased exit hazard. This nonlinear relationship is stronger for efficiency-seeking subsidiaries, and weaker for market-seeking subsidiaries.
Originality/value
This research contributes to the debate around the pros and cons of globalization by examining the extent to which firms benefit by offshoring primary sector investments to avoid more costly legal requirements at home. The results suggest that this non-market strategy should be mitigated through appropriate policy measures and provides evidence that those policies already implemented are effective.
Abstract. Based on responses from 158 reward managers located at the headquarters or subsidiaries of multinational enterprises, the present study examines the relationship between the centralization of reward management decision making and its perceived effectiveness in multinational enterprises. Our results show that headquarters managers perceive a centralized approach as being more effective, while for subsidiary managers this relationship is moderated by the manager’s role identity. Referring to social identity theory, the present study enriches the standardization versus localization debate through a new perspective focusing on psychological processes, thereby indicating the importance of in-group favoritism in headquarters and the influence of subsidiary managers’ role identities on reward management decision making.
The identification of foreign firms and South African multinational enterprises (MNEs) in the CIT-IRP5 panel has proved to be a challenge for many researchers. The CIT-IRP5 panel contains variables indicating different thresholds that determine foreign ownership. The dataset also has variables that researchers can use to identify South African MNEs. Using the approaches employed by researchers who have attempted to identify foreign firms and South African MNEs in the data, four foreign firms and MNE indicators have been added to the CIT-IRP5 panel v4.0. This technical note documents the approach followed in the creation of each indicator. This note also highlights the possible company classifications in the data and fields on the ITR14 form that can be used to identify these classifications.
Taking advantage of institutional weakness? Political stability and foreign subsidiary survival in primary industries
