Why Is MNC Subsidiary Performance Better in Challenging Business Environments?

Michael W. Hansen*, Henrik Gundelach, Michael Hedegaard

*Corresponding author for this work

Research output: Contribution to conferencePaperResearchpeer-review

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Abstract

IB has long known of a puzzle of international business (IB), namely that the performance of MNC subsidiaries is not necessarily adversely affected by institutional voids and distance. This puzzle is particularly evident in relation to investment by western MNCs in the challenging business environments of emerging markets and developing countries (EMDCs). Here, data on the country, industry and firm level suggests that, on average, subsidiaries perform better than those in advanced economies. This interactive paper straddles IB and finance theory to discuss various explanations for this puzzle, and a number of plausible propositions for the relatively high performance of subsidiaries in EMDCs are developed. These propositions can form the point of departure for future empirical research on subsidiary performance in EDMCs. Overall, the paper demonstrates the utility of combining the IB literature’s focus on strategies and capabilities to explain subsidiary performance with financial literature’s focus on foreign direct investment (FDI) as a capital flow subject to financial risk assessment.
Original languageEnglish
Publication date2022
Number of pages25
Publication statusPublished - 2022
Event48th EIBA Annual Conference 2022: Walking the Talk? Transitioning Towards a Sustainable World - BI Norwegian Business School, Oslo, Norway
Duration: 8 Dec 202210 Dec 2022
Conference number: 48
https://eiba2022.eiba.org/ 

Conference

Conference48th EIBA Annual Conference 2022
Number48
LocationBI Norwegian Business School
Country/TerritoryNorway
CityOslo
Period08/12/202210/12/2022
Internet address

Keywords

  • Subsidiary performance
  • Emerging markets and developing countries
  • Strategy
  • Capabilities
  • Finance
  • Foreign direct investment

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