three anonymous referees, and seminar participants at the University of Pennsylvania, the University of California at San Diego, the University of California at Berkeley, and the Australian Graduate School of Management for their comments, as well as Connie Lun, Grace Chun Yu, and Nick Wong for assistance in data collection and coding, and Bor-Shiuan Cheng for providing economic data on Taiwan.
The authors adopt and develop an institutional perspective to advance understanding of how host country environments influence subsidiary staffing strategies. They propose and find that (a) firms rely more on expatriates in institutionally distant environments for reasons related to the efficient transfer of management practices and firm-specific capabilities and (b) the positive influence of expatriate staffing levels on subsidiary performance is dependent on the institutional distance between the host and home country, and subsidiary experience. The authors' findings are based on their analysis of expatriate employment levels and performance in 12,997 foreign subsidiaries of 2,952 Japanese firms in 48 countries.
In a study of a sample of 2,705 international plant location decisions by listed Japanese multinational corporations across a possible set of 155 countries in the 1990-1996 period, we use neoinstitutional theory and research on political institutions to explain organizational entry into new geographic markets. We extend neoinstitutional theory's proposition that prior decisions and actions by other organizations provide legitimization and information to a decision marked by uncertainty, showing that this effect holds when the uncertainty comes from a firm's lack of experience in a market but not when the uncertainty derives from the structure of a market's policymaking apparatus.
Abstract:This paper combines neoinstitutional theory and research on political institutions to explain the process of organizational entry into new geographic markets. We extend neoinstitutional theory's proposition that prior decisions and actions by other organizations provide legitimization and information to a decision marked by uncertainty. We show this effect holds in the presence of uncertainty about market characteristics derived from a firm's lack of experience in a market, but not in the presence of policy uncertainty regarding the future shape of those market characteristics, where policy uncertainty derives from the structure of a market's policymaking apparatus. In investigating the sensitivity of frequency-based and trait-based imitation to firmspecific uncertainty, we examine the relative weight of social versus technical criteria across these imitative strategies. Our empirical tests also introduce a new time-varying measure of policy uncertainty in a country. This measure is derived from observable inter-temporal and cross-national differences in the structure of a country's political institutions. Our empirical setting is a sample of 2,705 international plant location decisions for the population of listed Japanese multinational corporations, across a possible set of 155 countries in the 1990-1996 period.
We find support for the role of experiential learning in the international expansion process by extending the stages model of internationalization to incorporate a sophisticated consideration of temporal and crossnational variation in the credibility of the policy environment. Using a sample of 3857 international expansions of 665 Japanese manufacturing firms, we build on the concepts of uncertainty and experiential learning, to show that firms that had gathered relevant types of international experience were less sensitive to the deterring effect of uncertain policy environments on investment. One implication of our results is that research on international strategy should emphasize understanding the political institutions that constrain or enable political actors, just as entry mode research has done. A second implication is that research in the stages model of internationalization should give the same weight to the policy environment as a source of uncertainty to a firm, as it has given to cultural, social and market institutions.
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