The Determinants of Foreign Subsidiary CEO Selection: Effects of Internal and External Network Embeddedness of Foreign Subsidiaries and Market Characteristics of Host Country

2021 ◽  
Vol 25 (2) ◽  
pp. 134-151
Author(s):  
Jae-Eun Lee ◽  
Young-Soo Yang
Keyword(s):  
Host Country ◽  
Foreign Subsidiary ◽  
Selection Effects ◽  
Foreign Subsidiaries ◽  
Network Embeddedness ◽  
Ceo Selection

Determinants of the level of foreign subsidiaries’ localization of Korean MNCs and performance in China

2017 ◽  
Vol 21 (1) ◽  
pp. 2-21
Author(s):  
Byoung-Goo Kim ◽  
Gyu-Bae Kim
Keyword(s):  
Survey Data ◽  
Empirical Analysis ◽  
Corporate Culture ◽  
Business Strategy ◽  
Local Network ◽  
Foreign Subsidiary ◽  
Foreign Subsidiaries ◽  
Content Type ◽  
Network Embeddedness ◽  
The Relationship

Purpose The purpose of this paper is to empirically analyze what effects the headquarters’ (HQ) business strategy and corporate culture, the local network embeddedness of the foreign subsidiary, and HQ-subsidiary communication have on the staff localization of foreign subsidiaries. The authors carry out empirical analysis on how localization of foreign subsidiaries ultimately affects the performance of foreign subsidiaries. Design/methodology/approach This study is an empirical analysis on the determinants of staff localization and the relationship between staff localization and corporate performance. In this study, the five hypotheses were proposed and tested using survey data. The authors randomly selected a total of 800 companies as subjects and conducted a survey. The final 222 survey data including HQs and subsidiaries were used for empirical analysis. The statistical analyses such as reliability test, factor analysis and regression were used. Findings This study shows that there was a higher level of staff localization by the foreign subsidiary when the investment goal was market-oriented investment, the Korean foreign subsidiary had stronger local network embeddedness and there was better HQ-subsidiary communication. In addition, the relationship between localization and subsidiary performance shows an inverted U-shape. Such results will give various implications to companies. Originality/value The research that takes a multilayered consideration on factors of the HQ, subsidiaries, and the HQ-subsidiary relationship is rare. To overcome such limitations, this study carried out a survey in order to find more in-depth decision factors. Specifically, this study analyzed the effects of three large aspects of investment goals and corporate culture from the aspect of the HQ, local network embeddedness from the aspect of foreign subsidiaries, and the level of HQ-subsidiary communication from the aspect of HQ-subsidiary relations, and how they affect staff localization.

Subsidiary Networks and Foreign Subsidiary Performance: A Coopetition Perspective

2019 ◽  
Vol 15 (1) ◽  
pp. 111-143 ◽  
Author(s):  
Yang Liu ◽  
Jie Jiao ◽  
Jun Xia
Keyword(s):  
Host Country ◽  
Economic Advantage ◽  
Foreign Subsidiary ◽  
Intangible Asset ◽  
Foreign Subsidiaries ◽  
Subsidiary Performance ◽  
And Performance ◽  
The Relationship ◽  
Positive Effect ◽  
Subsidiary Network

ABSTRACTFrom a coopetition perspective, we differentiate between a multinational enterprise's product-similar subsidiary network and product-different subsidiary network in a host country. We argue that the product-similar network will have a curvilinear (inverted U-shaped) effect on foreign subsidiary performance, whereas the product-different network will produce a monotonic (positive) effect. Moreover, we introduce host-country economic advantage and intangible resource of the subsidiary as moderators into the relationship between subsidiary network and performance. Using longitudinal panel data of foreign subsidiaries, we find evidence that when host-country economic advantage is large, and the level of intangible asset intensity is high, the inverted U-shaped effect of product-similar subsidiary network is less pronounced. Moreover, host-country economic advantage and intangible asset intensity both enhance the positive effect of product-different subsidiary network. However, the moderating effect of intangible asset intensity is opposite to our prediction.

Does context really matter? The influence of deficient legal services on the intensity of political ties in the regulatory and legal arenas

2020 ◽  
Vol 28 (3) ◽  
pp. 277-305 ◽  
Author(s):  
George O. White III ◽  
Thomas A. Hemphill ◽  
Tazeeb Rajwani ◽  
Jean J. Boddewyn
Keyword(s):  
Service Sector ◽  
The Philippines ◽  
Foreign Subsidiary ◽  
Legal Services ◽  
Legal Service ◽  
Foreign Subsidiaries ◽  
Institutional Voids ◽  
Content Type ◽  
Political Ties ◽  
Managerial Perceptions

Purpose The purpose of this study is to apply the institution-based view and resource dependence theory in arguing that perceived deficiencies in a legal service sector where a foreign subsidiary operates will influence the intensity of its political ties with actors in both the regulatory and legal arenas. The authors further theorized that these relationships will vary across governance environments. Design/methodology/approach The research context for this study was multinational enterprises (MNE) wholly owned foreign subsidiaries and international joint ventures (IJVs) operating in the Philippines and Thailand. Data for most variables in this study came from primary survey data collected in 2018 from senior managers of MNE WOSs and IJVs operating in the Philippines and Thailand. Findings The authors’ analysis of 352 foreign subsidiaries operating in the Philippines and Thailand show that, in a flawed democracy, perceived deficient legal services enhance the intensity of foreign subsidiary political ties with government actors in both the regulatory and legal arena. However, in a hybrid regime, perceived deficient legal services enhance only the intensity of foreign subsidiary political ties with government actors in the regulatory arena. The authors’ findings also suggest that the relationship between perceived deficiencies in legal service sector and the intensity of political ties is stronger for foreign subsidiaries that operate in heavily regulated industries across both a flawed democracy and hybrid regime. Conversely, the authors do not find the market orientation of these foreign subsidiaries to play a role in this process. Research limitations/implications The authors’ study was unable to control for whether managerial perceptions of deficient legal services were well informed at the local or federal level. This issue raises the question of will the presence of an in-house legal department influence managerial perceptions with regard to deficiencies within a legal service sector? Based on these limitations, the authors suggest that future research can further extend political ties research by using a fine-grained analysis in investigating the antecedents of managerial perceptions of legal services within different legal jurisdictions. Originality/value The political ties literature has largely argued that political ties are more prevalent in environmental contexts comprising institutional voids as MNEs attempt to mitigate volatility associated with the lack of developed institutional infrastructure (e.g. Blumentritt & Nigh, 2002; Bucheli et al., 2018). However, the concept of institutional voids is very broad and still rather abstract in nature. Hence, scholars have yet to fully understand what types of institutional voids may drive MNE foreign subsidiary political tie intensity in varying governance contextsThe authors’ study attempts to contribute to this important line of research by investigating how one type of institutional void, namely, perceived deficiencies in the legal service sector, can influence the intensity of political ties in varying governance environments.

scholarly journals Gray Markets and Multinational Transfer Pricing

2011 ◽  
Vol 87 (2) ◽  
pp. 393-421 ◽  
Author(s):  
Romana L. Autrey ◽  
Francesco Bova
Keyword(s):  
Social Welfare ◽  
Marginal Cost ◽  
Transfer Pricing ◽  
Foreign Market ◽  
Multinational Firm ◽  
Foreign Subsidiary ◽  
Foreign Subsidiaries ◽  
Gray Market ◽  
Pricing Rules ◽  
Transfer Prices

ABSTRACT Gray markets arise when a manufacturer's products are sold outside of its authorized channels, for instance when goods designated by a multinational firm for sale in a foreign market are resold domestically. One method multinationals use to combat gray markets is to increase transfer prices to foreign subsidiaries in order to increase the gray market's cost base. We illustrate that, when a gray market competitor exists, the optimal transfer price to a foreign subsidiary exceeds marginal cost and is decreasing in the competitiveness of the domestic market. However, a multinational's discretion in setting transfer prices may be limited by mandatory arm's length transfer pricing rules. Provided gray markets exist, we characterize when mandating arm's length transfer pricing lowers domestic social welfare relative to unrestricted transfer pricing. We also demonstrate that gray markets can lead to higher domestic tax revenues, even when gray market firms do not pay taxes domestically.

Effects of two staffing decisions on the performance of MNC subsidiaries

2014 ◽  
Vol 2 (1) ◽  
pp. 85-101 ◽  
Author(s):  
Naoki Ando ◽  
Yongsun Paik
Keyword(s):  
Multinational Corporations ◽  
Foreign Subsidiary ◽  
Foreign Subsidiaries ◽  
Data Set ◽  
Subsidiary Performance ◽  
Content Type ◽  
Host Country Nationals ◽  
Negative Effect ◽  
Curvilinear Relationships ◽  
The Relationship

Purpose – The purpose of this paper is to examine the relationship between foreign subsidiary staffing and subsidiary performance by focussing on two staffing practices: first, the ratio of parent country nationals (PCNs) to foreign subsidiary employees and second, the number of PCNs assigned to the foreign subsidiary. Design/methodology/approach – Hypotheses predicting curvilinear relationships between the assignment of PCNs and subsidiary performance are tested using a panel data set consisting of 4,858 foreign subsidiaries of Japanese multinational corporations (MNCs). Findings – The results demonstrate that the two staffing practices have different effects on subsidiary performance. The ratio of PCNs to foreign subsidiary employees has an inverted U-shaped relationship with subsidiary performance, while the number of PCNs assigned to the subsidiary has a linear and negative effect on subsidiary performance. Research limitations/implications – The results of this study are subject to limitations. First, the sample used in this study consists solely of the foreign subsidiaries of Japanese firms. This research design limits the generalizability of the findings of this study. Second, other decisions related to subsidiary staffing such as the ratio of PCNs in the subsidiary's top management team need to be examined to advance understandings of the relationship between subsidiary staffing and subsidiary performance. Practical implications – MNCs need to identify the appropriate number of PCNs at which they can achieve the optimal trade-off with the PCN ratio to enhance the competitiveness and the performance of a foreign subsidiary. In doing so, they need to take into consideration that an increase in the number of PCNs has an immediate negative effect on the workplace morale of host country nationals. Originality/value – This study incorporates two staffing practices into its analyses and shows that they have different implications for subsidiary performance. The results suggest that focussing on one staffing practice alone limits understanding of the complex relationship between foreign subsidiary staffing and subsidiary performance.

Internal mimetic behavior of MNCs with respect to foreign subsidiary staffing

2015 ◽  
Vol 3 (1) ◽  
pp. 46-61 ◽  
Author(s):  
Naoki Ando
Keyword(s):  
Multinational Corporations ◽  
Institutional Distance ◽  
Foreign Subsidiary ◽  
Foreign Subsidiaries ◽  
Research Gaps ◽  
Data Set ◽  
Content Type ◽  
Economic Rationale ◽  
Mimetic Behavior ◽  
Practical Implications

Purpose – The purpose of this paper is to fill the following research gaps. First, few studies have examined isomorphic behavior of multinational corporations (MNCs) with respect to foreign subsidiary staffing. Second, the adoption by an MNC of its internally preferable practices, which is referred to as internal mimetic behavior, has been less extensively investigated when compared with the imitation of practices adopted by a large number of peer firms. Lastly, factors that facilitate internal mimetic behavior have not been extensively explored. Design/methodology/approach – This study hypothesizes that internal mimetic behavior is affected by both formal and informal institutional distance. The hypotheses are tested using the panel data set that consists of 3,981 foreign subsidiaries of Japanese MNCs. Findings – This study finds that as the formal institutional distance between the host country and the home country increases, MNCs are more likely to adopt internal mimetic behavior. Furthermore, it demonstrates that as the informal institutional distance increases, the likelihood that MNCs adopt internal mimetic behavior decreases. Practical implications – This study suggests that MNCs need to consider the consequences of internal mimetic behavior when they adopt it without having economic rationale. It also suggests that when uncertainty can be mitigated, MNCs should avoid internal mimetic behavior. Originality/value – This study fills the aforementioned research gaps by examining what factors facilitate internal mimetic behavior. It suggests that both economic rationale and isomorphic behavior need to be considered to advance an understanding of foreign subsidiary staffing.

scholarly journals Determinants of Staff Localization in Headquarters-Subsidiary-Subsidiary Relationships

2021 ◽  
Vol 14 (1) ◽  
pp. 249
Author(s):  
Chan Bok Kim ◽  
Seong-Jin Choi ◽  
Luyao Zhang
Keyword(s):  
Multinational Corporations ◽  
Host Country ◽  
Cultural Distance ◽  
Foreign Subsidiary ◽  
Host Countries ◽  
Local Competition ◽  
Theoretical Contribution ◽  
Local Experience ◽  
Relationship Structure ◽  
The Impact

This paper investigates how cultural distance, the local experience of a foreign subsidiary, and the intensity of local competition jointly affect the staff localization of MNEs’ subsidiaries. While previous studies on the effects of cultural distance have mainly focused on the gap between home and host countries, we extend the existing “home-host” country perspective to the home-intermediary-host country relationship. This study regards Korea as an intermediary country and utilizes 520 observations from a unique survey conducted by the Export-Import Bank of Korea from 2006 to 2013. The results suggest that the impact of cultural distance on staff localization is a function of local experience and competitive environment in the home-intermediate-host relationship structure. This paper makes a theoretical contribution to our understanding of the behavior of multinational corporations by expanding the cultural distance perspective between the home and host countries explored in previous research to the home-subsidiary-subsidiary structure.

scholarly journals Long-term evolution of the subsidiary’s role: a qualitative perspective on a subsidiary located in Poland

2020 ◽  
Vol 56 (1) ◽  
pp. 79-95
Author(s):  
Marlena Dzikowska ◽  
Marian Gorynia
Keyword(s):  
Literature Review ◽  
Automotive Industry ◽  
Long Term Evolution ◽  
Foreign Subsidiary ◽  
Foreign Subsidiaries ◽  
Empirical Justification ◽  
Term Evolution ◽  
Functional Areas

Abstract So far, very little attention has been paid to the roles of foreign subsidiaries located in Poland and if or how these roles have evolved. Simultaneously, there exists strong empirical justification for assuming these roles have been evolving over the years. Through a literature review and empirical case study of a foreign subsidiary located in Poland, this study analyzes the evolution of the subsidiary role and indicates its relations with groups of external and internal determinants. The case study examines a 10-year period of operations of a foreign subsidiary active in the automotive industry. The results indicate that the evolution of the subsidiary role encompasses factors such as markets served, functional areas of operations, and complexity of operations. The presented case study describes the complex relations among factors related to the subsidiary, HQ, and environment concerning the evolution of the subsidiary role.

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