Cross-national distance and insidership within networks: Japanese MNCs' ownership strategies in their overseas subsidiaries

Abstract

This study investigates the controversial question about how cross-national distance influences MNCs' equity ownership in their overseas subsidiaries. Prior studies adopted aggregated constructs and time-invariant measures of cross-national distance, failing to capture the complexity of the phenomenon. Moreover, although 'insidership' within business networks may moderate the foreignness that MNCs confront in overseas markets, prior studies have not incorporated it into analysis. The present study confirms the explanatory power of multiple dimensions of cross-national distance and MNCs' insidership within networks. It also shows that cross-national distance and insidership within relevant works strengthen or weaken each other's influences on Japanese ownership strategies.

Cross-national distance impact on FDI strategic decisions into Portugal: Evidence from Eurozone and Ibero-America

“…On the distance dimensions, it can be seen that administrative distance had a negative and statistically significant effect (p=0.0543) on Portuguese inward FDI. This result is in line with previous research (Bailey & Li, 2015;Duarte & Carvalho, 2018;Zhang, 2015), as well as with finding by reports on Portugal's attractiveness to FDI (e.g. EY, 2017,2018), where legal constraints are highlighted as factors deterring FDI into the country.…”

“…Lastly, political distance revealed a positive and significant impact (p=0.0342). Although previous research found negative and non-significant effects of political distance on FDI outflows (Bailey & Li, 2015;Zhang, 2015), we believe that an internalization perspective could explain our results. To the extent a MNE perceive the political environment in the host country to be increasingly uncertain, the more likely it internalizes its foreign operations in order to exert greater control rather than depending on foreign agents (Buckley & Casson, 1998;Rugman, 1980).…”

“…Economic distance revealed a positive and significant effect below the 5% level (p=0.0196). Previous studies also found a positive relationship between economic distance and FDI flow (Duarte & Carvalho, 2018;Mingo, Morales, & Dau, 2018;Zhang, 2015). Financial distance showed a significant, negative effect on Portuguese inward FDI (p=0.0578).…”

Determinants of Equity Ownership Stake in Foreign Entry Decisions: A Systematic Review and Research Agenda

“…Similarly, the impact of cultural distance on equity ownership decisions is also found to be ambiguous. Some studies argued that firms facing greater cultural distance try to reduce their level of ownership in an unfamiliar environment (Piaskowska & Trojanowski 2014; Rajan & Pangarkar 2000; Yamin & Golesorkhi 2010; Zhang 2015), while others suggested that firms prefer a higher degree of ownership to enter a culturally distant country because higher cultural differences create communication barriers in sharing the routines of the firm's headquarters and its competencies with the foreign venture, which may restrict synergistic gains from IJV (Padmanabhan & Cho 1996). In a meta‐analysis conducted by Tihanyi et al.…”

Cross-national distance impact on FDI strategic decisions into Portugal: Evidence from Eurozone and Ibero-America

“…In fact, Malhotra et al (2009), using a CAGE framework, found positive relationships of administrative and economic distances with the number of crossborder acquisitions by developing countries' multinational firms. On another study, Zhang (2015) found that several dimensions of crossnational distance were positively related to Japanese firms' levels of ownership in foreign affiliates.…”