The impact of within-country and within-firm factors on Japanese foreign subsidiary performance during economic crisis

Abstract

Purpose The purpose of this paper is to analyze the relevant aspects that influence foreign subsidiary’s performance and remain how they retain competitiveness in international markets during economic crisis. To investigate this effect, this research analyzes the behavior of Japanese subsidiaries located in European countries during the pre- and post-crisis periods that started in the USA in 2008 and spread all over the world. Design/methodology/approach This is a quantitative study with an analysis based on longitudinal data of foreign subsidiaries of Japanese multinational firms during the period 2006-2013. It applies a multiple linear regression with panel data using fixed effects models. Findings The findings show that within-firm factors related to local experiential knowledge, market entry through joint ventures with partners from the same nationality, and subsidiary management with a team of expatriates all have a positive impact on subsidiary performance during times of economic crisis. Moreover, within-country factors involving macroeconomic aspects related to inflation rate and population income indicators show a negative impact on performance. Finally, the results confirm that subsidiary performance is higher in the pre-crisis period, showing the importance of considering economic crisis aspects in longitudinal studies. Practical implications The result has implications for managers of multinational firms to understand which factors most impact the success of their foreign subsidiaries during times of economic crisis. In this way, managers can, with greater confidence, decide to reach the most important performance indicator in subsidiary management. Originality/value The majority of studies on economic crisis is based on an economic perspective and mostly investigates Asian and Argentinean crises. When considering a firm-level perspective, most research studies conducted on a subsidiary level are cross-sectional or use survival as a measure of performance. This paper applies a longitudinal study using subsidiary-level data and analyzes performance by sales and productivity measurement. In addition, it investigates whether or not within-country and within-firm factors impacted subsidiary performance during the 2008 economic crisis.

Growth and maintenance: how a subsidiary's environmental relationships with technological innovation affect its initiatives

“…, 2015; Williams and Nones, 2009). Under the display of initiative, subsidiaries can adjust their original positioning and grasp opportunities for growth through the accumulation of capability and performance (Cordeiro et al. , 2017).…”

“…Due to the trend toward globalization, multinational enterprises (MNEs) extend many activities to host country markets (Cordeiro et al. , 2017).…”

Survival of full versus partial acquisitions: The moderating role of firm’s internationalization experience, cultural distance, and host country context characteristics

“…Second, an increase in the level of country risk after initial entry is likely to have a negative impact on post-acquisition activities and hinder the buying firms' efforts to enforce cooperative agreements with local partners of the acquired firms (Tao et al, 2017). Third, Cordeiro et al (2017) argued that firms with full ownership, such as full acquisitions, are more likely to achieve better performance in an uncertain environment because they are more flexible in terms of business arrangements and can make decisions faster. Based on above theoretical discussions, full acquisitions as a complete ownership structure are more likely to survive than partial acquisitions when the level of country risk within a host market has increased after initial entry.…”

Japanese expatriates' management in global assignments: A review and research agenda

“…These three themes started attracted academic interest when the first studies on Japanese expatriates were conducted and have still had some interest in recent years (Bassino et al, 2015;Bebenroth & Froese, 2020). However, the themes such as roles of expatriates, expatriate work outcomes, and work-related consequences are comparatively more recent (Cordeiro et al, 2017;Furusawa & Brewster, 2016;Hong et al, 2016), even though these themes were also initiated long time ago (Fukuda & Chu, 1994;Smetanka & Murray, 1985). This is understandable because, at any time, the roles and performance of expatriates are always of the highest importance to firms.…”

“…Managerial styles of expatriate managers Everett, Stening, and Longton (1982), Negandhi, Eshghi, and Yuen (1985), Rao, Hashimoto, and Rao (1997) 3. Roles of expatriates Smetanka and Murray (1985), Delios and Bjorkman (2000), Paik and Sohn (2004), Hébert, Very, and Beamish (2005), Dutta and Beamish (2013), Pudelko and Tenzer (2013), Hong, Snell, and Mak (2016), Cordeiro, Ogasavara, and Masiero (2017) 4. Expatriation/repatriation/adjustment/ adaptation Black (1990), Stening and Hammer (1992), Nicholson and Imaizumi (1993), Black (1994), Schneider and Asakawa (1995), Kanno (2000), Simeon and Fujiu (2000), Miyamoto and Kuhlman (2001), Takeuchi, Yun, and Russell (2002), Takeuchi, Yun, and Tesluk (2002), Takeuchi, Lepak, Marinova, and Yun (2007), Zhou and Qin (2009), Yamazaki (2010) 5.…”