Establishment modes and network relationships of foreign subsidiaries

Valentino, Alfredo; Caroli, Matteo Giuliano; Mayrhofer, Ulrike

doi:10.1016/j.ibusrev.2018.05.006

Cited by 17 publications

(6 citation statements)

References 48 publications

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“…Beyond economic calculations, sociological perspectives stress social and relational context as a driver of LOF. The social capital/network perspective emphasizes the lack of embeddedness of foreign subsidiaries in local networks (Mezias, 2002a(Mezias, , 2002bJohanson & Vahlne, 2009;Kim, 2019) and the need to develop ties with host-country stakeholders to alleviate the relational hazards of LOF (Rangan & Drummond, 2004;Li et al, 2008;Guo et al, 2018;Valentino et al, 2018). Since Zaheer's (1995) original empirical study, other ones have found that LOF is likely to have a negative impact on MNE performance.…”

Section: Foreignness Assetsmentioning

confidence: 99%

“…Becoming embedded locally and gaining acceptance within the local business network are extremely challenging. An MNE might work towards legitimization by recruiting locally (Mezias, 2002b;Goodall & Roberts, 2003); by finding a way to tap into host-country entrepreneurial and managerial networks (Li et al, 2016;Kulchina, 2017;Guo et al, 2018;Mata & Alves, 2018;Valentino et al, 2018); by leveraging pre-existing geographic, colonial, linguistic, or institutional ties between the home and host country (Rangan & Drummond, 2004); or by taking on local investors (Chittoor et al, 2015;Jiménez et al, 2017).…”

Section: Imitationmentioning

confidence: 99%

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Foreignness research in international business: Major streams and future directions

Xie

2021

J Int Bus Stud

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Foreignness has long been a central construct in international business research, with research streams examining its conceptualizations, manifestations, and consequences. Researchers started by taking foreignness to be a liability, then later considered the possibility of its being an asset. A still more recent view is that foreignness is an organizational identity that a firm can purposefully manage. Broadly conceived, foreignness is an umbrella construct that directly or tangentially covers research on country of origin, institutional distance, firm-specific advantages, and the ownership–location–internalization eclectic paradigm. We review the body of research on foreignness and track the evolution of its four streams, liability of foreignness, asset of foreignness, drivers of foreignness, and firm responses to foreignness. We call for a clearer conceptualization and a sounder theoretical grounding of the foreignness construct, more integration of the liability of foreignness and the asset of foreignness research streams, greater attention to the multiple strategies firms use to manage foreignness, and the extension of the field to less-explored contexts such as emerging economies, digitalization, and de-globalization.

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Section: Foreignness Assetsmentioning

confidence: 99%

Section: Imitationmentioning

confidence: 99%

Foreignness research in international business: Major streams and future directions

Xie

2021

J Int Bus Stud

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“…Greenfield subsidiaries are less likely to lose connectivity with their external network compared to acquired subsidiaries, and so seek to maintain a balance between the external and the internal contexts (Anand, 2011). Supporting the greenfield subsidiary entrepreneurial initiatives and providing guidance are critical issues for the MNE and the subsidiary (Valentino et al, 2018). Empirical evidence suggests that entrepreneurship, autonomy and external embeddedness are features of network organizations (Birkinshaw, 2014; Schmid et al, 2014), and this is where greenfield mode and network structure converge (see Figure 1).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Being new to the host environment, MNEs encourage such subsidiaries to explore the local market and develop relationships early on. For example, Valentino et al (2018) argue that greenfield subsidiaries seek to develop social relationships with the host market first, before converting these social relationships to business relationships. Research suggests that when seeking to explore the market and develop relationships, subsidiaries need more heterarchical than hierarchical types of relationships with the MNE (Wolf & Egelhoff, 2012).…”

Section: Moderating Role Of Establishment Modementioning

confidence: 99%

Multinational Enterprise Organizational Structures and Subsidiary Role and Capability Development: The Moderating Role of Establishment Mode

Raziq

Benito

Kang

2021

Group & Organization Management

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Multinational enterprises (MNEs) develop structural configurations for managing their geographically dispersed and disaggregated activities. These structures can be classified as (a) simple headquarters configurations (involves corporate, regional, divisional headquarters and mandated units) involving few direct reporting relationships; (b) network organizations involving no direct reporting relationships; and (c) matrix configurations involving multiple reporting relationships. While these structures are built for handling various complexities and purposes, it is unclear how they influence subsidiary role and capability development. We hypothesize how these structures influence subsidiary development and propose a moderating role of MNE establishment mode on the direct structure-subsidiary development relationship. Based on data from 429 foreign subsidiaries in New Zealand, our results show that subsidiary development varies across the structures such that simple headquarters configurations experience the least opportunities to develop. While the matrix and network structures as complex configurations offer distinct paths to subsidiary development, subsidiaries managed under the former are more likely to follow the developmental path of networking and interunit learning, and the subsidiaries managed under the latter are more likely to follow the path of autonomy and innovation. Furthermore, the positive association of network structure with subsidiary initiatives and autonomy is stronger for greenfield subsidiaries, whereas the positive association of matrix structure with subsidiary mandates is stronger for acquired subsidiaries.

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“…There are two main types of investment in PPI projects: greenfield investment and acquisition. The complexities and transaction costs of these two types of investment are not the same, so the impact of governance distance on these two types of projects may also be different (Meyer et al, 2009;Valentino et al, 2018).…”

Section: 3mentioning

confidence: 99%

Governance distance and the performance of cross-border private participation infrastructure projects

Zhao

Ouyang

2021

IJMPB

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PurposeThe privatization of infrastructure promotes efficiency and service standards. While cross-border private participation infrastructure (PPI) projects hosted in emerging markets have become more prevalent in recent years, there have also been more failures. The purpose of this paper is to investigate how governance distance affects the survival of cross-border PPI projects.Design/methodology/approachThe authors provide theoretical justification and empirical evidence to verify our views. The authors test the hypotheses on a sample of 4,678 cross-border PPI project investments made in emerging market countries between 1990 and 2016. Estimation techniques consist of a binary logistic regression model and a rare events logistic model.FindingsThe findings suggest that increased governance distance can lead to project failure. The study results show that governance distance is negatively correlated with the probability of project survival. Greenfield investment intensifies the negative effect of governance distance while competitive contracts mitigate the negative effect of governance distance.Practical implicationsThe results reveal that transnational investment in infrastructure projects is susceptible to institutional differences between home and host countries. Therefore, both private enterprises and host government should pay attention to the impact of inter-country differences on negotiations and project operation. Competitive contracts mitigate this negative effect, but entering in the form of greenfield investment amplifies the negative effect of distance.Originality/valueTransnational industrial engineering projects are easily affected by the differences in governance levels between the two countries. This study introduces governance distance into the field of infrastructure projects, focusing on the impact of differences between home and host countries on transnational projects. The findings on infrastructure projects that are closely related to host government contribute to the literature by broadening the research of institution and distance.

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Establishment modes and network relationships of foreign subsidiaries

Cited by 17 publications

References 48 publications

Foreignness research in international business: Major streams and future directions

Foreignness research in international business: Major streams and future directions

Multinational Enterprise Organizational Structures and Subsidiary Role and Capability Development: The Moderating Role of Establishment Mode

Governance distance and the performance of cross-border private participation infrastructure projects

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