Foreign subsidiaries' status: Distinctive determinants and implications for subsidiary performance

Abstract

The purpose of this article is to develop a theoretical framework for understanding what determines foreign subsidiaries' status, and how status affects their performance. The basic argument is that foreign subsidiaries have several unique characteristics that distinguish them from local firms in terms of the factors determining organizational status and the implications status has for subsidiaries' performance. This conceptual article first reviews the three existing determinants of organizational status as theorized by existing status research and makes the case for an extension of the three determinants to account for the special situation of foreign subsidiaries. Having examined the determinants of subsidiary status, this study explores the effect of organizational status on firm performance, and finds that it reduces the liability of foreignness (LoF) that foreign subsidiaries encounter. The study contributes to multiple research streams, including organizational status, LoF, country of origin (CoO), and the international business literature in general. Practically, this study highlights the importance of obtaining high organizational status and provides valuable suggestions for multinational managers in general and subsidiary managers in particular.

Corporate name change: Investigating South African multinational corporations' postacquisition performance

“…For instance, by collecting multiple stakeholders' perspectives, the researcher may further uncover whether the EMNC's performance suffers from the country‐of‐origin liability or other management issues related to postacquisition integration when changing the corporate name of the acquired firm. It is likely that when EMNCs acquire targets in a foreign market, the external stakeholders' concerns outweigh the internal legitimacy concern in improving its organizational status in the host market (Li, ).…”

Explaining autonomy variations across value‐chain activities in foreign‐owned subsidiaries

“…Decision‐making autonomy is the freedom; managing directors of foreign‐owned subsidiaries have, to make decisions without having to refer back to their headquarters (Cavanagh, Freeman, Kalfadellis, & Herbert, ; Paterson & Brock, ; Young & Tavares, ). It is seen as a crucial element for understanding subsidiary development and the balance of power within multinational enterprises (MNEs; Birkinshaw & Ridderstråle, ; Li, ; ul Haq, Drogendijk, & Holm, ). Autonomy is also of concern for policy makers because it is often assumed that subsidiaries with greater autonomy can make a more valuable economic contribution (Holm & Pedersen, ; Narula & Pineli, ).…”