Experience in Different Institutional Environments and Foreign Subsidiary Ownership Structure

Abstract

Research has offered that one of the key advantages of multinational enterprises (MNEs) is the ability to learn from a diverse collection of environments. However the internationalization process model literature linking organizational experience to foreign subsidiary ownership structure has emphasized the role of related or market-specific experience, without fully considering the role of experience across a heterogeneous collection of markets. The current study seeks to bridge this gap and improve our understanding of the generalizability and influencing factors of the internationalization process model by considering how prior focal-market experience and heterogeneity in host-market experience across an MNE’s operations influence subsequent decisions on foreign subsidiary ownership structures. In the empirical context of Japanese automotive firms, the results suggest that when MNEs (a) have greater levels of experience in a focal host country or (b) have experienced a greater variety of regulatory differences across their multinational operations, they are more likely to pursue majority-owned structures in the face of less transparent regulatory environments. Our results also suggest that MNEs with greater levels of both focal host-country experience and variance in environments experienced across their operations, have less confidence in their experience in a focal host country, and are even less likely to pursue majority-ownership structures in the face of less transparent regulatory environments.

Private Sector Corruption, Public Sector Corruption and the Organizational Structure of Foreign Subsidiaries

“…The need for local knowledge is particularly salient in countries that exhibit lower levels of institutional transparency (Xu and Meyer 2013). Scholars have theorized that when a firm wants to enhance its knowledge base in foreign markets, it can develop the knowledge organically over time through experience because a firm's prior experience is an important source of learning and it has been found to influence organizational structure (Powell and Rhee 2016). Alternatively, it can access the local market knowledge that is embedded in prospective collaborators (Madhok 1997).…”

Internationalization Speed of Online Retailers: A Resource-Based Perspective on the Influence Factors

“…Although time is an important determinant in the internationalization process and increasingly viewed as an important factor and scarce resource for internationalizing firms to manage, it has rarely been considered a primary conceptual dimension (Chetty et al 2014;Jones and Coviello 2005;Sharma and Blomstermo 2003a). However, since Oviatt and McDougall (1994) placed time on the agenda in entrepreneurship theory, time is a central issue in the internationalization process of firms and frequently used as a predictor of knowledge accumulation (Acedo and Jones 2007;Morgan-Thomas and Jones 2009;Prashantham and Young 2011;Sharma and Blomstermo 2003a). Speed is a time-based indicator of ''how many foreign expansions a firm undertakes in a certain period of time'' (Vermeulen and Barkema 2002, p. 643).…”

“…Experience is a prime source of learning in organizations (Penrose 1959), and learning is fostered by diversity in experience (Barkema and Vermeulen 1998;Powell 2014a;Zellmer-Bruhn and Gibson 2006). The ability to learn from experience obtained in diverse countries may be the most important advantage of multinationality (Powell and Rhee 2013). Learning and gaining experience in different markets may assist online retailers in recognizing trends or acquiring customer insights (Auh and Menguc 2005;March 1991;Raisch and Birkinshaw 2008).…”

Home‐institutional Imprinting and Lobbying Expenditure of Foreign Firms: Moderating Effects of Experience and Technological Intensity

“…A first theoretical explanation for this slightly unexpected finding could be that, due to MNEs’ embeddedness in various institutional contexts, their general experience plays a greater role in reducing the imprinting effect of home institutions than their experience in the host country. Recent studies suggest that the lack of host‐country experience can be mitigated by MNEs’ experience of operating in other similar institutional settings (Perkins, ; Powell and Rhee, ). Thus, in our case, MNEs’ lack of US experience could have been mitigated by their experience in other institutional settings similar to the USA.…”