Antecedents and Performance Consequences of Subsidiaries' Political Activities in Emerging Markets: An Institutional Approach

This paper analyzes antecedents of political activities deployed by MNC subsidiaries in emerging markets and subsequently examines their effect on subsidiary performance. Following institutional theory reasoning, we point towards institutional duality subsidiaries are confronted with, entailing isomorphic pressures stemming from their internal as well as their external environment. Our hypotheses are tested using a three-stage least squares method with data from 156 subsidiaries in emerging markets. Results contribute to theory by providing evidence on the effects stemming from internal vs. external isomorphic pressures on political activities, and delivering a deeper-level understanding of the latter relationship by differentiating the higher-level concept of external isomorphic pressures into pressures from national public and national private stakeholders. Finally, we find significant support for a positive effect of political activities on subsidiary performance, revealing strong implications for practitioners.