Abstract
We investigate the possibility of regulatory institutional distance exerting an asymmetric effect on multinational corporations' (MNCs') subsidiary performance depending on the direction of institutional distance. We use the term ‘institutional ladder’ to differentiate between upward distance, referred to as when the subsidiary is operating in a relatively stronger institutional environment than its parent-firm's home country, and downward distance for vice versa. Combining institutional theory with organisational imprinting and learning perspectives, we argue that the implications of regulatory institutional distance on subsidiary performance are relatively more positive (or less negative) when MNCs are climbing down the institutional ladder as compared to when MNCs are climbing up the institutional ladder. We also argue that subsidiary ownership strategy – i.e. the choice of a wholly owned subsidiary (WOS) versus joint venture (JV) – moderates the above-mentioned implications of institutional distance on subsidiary performance. We test these hypotheses based on a panel data-set of 1936 foreign subsidiaries representing 70 host countries and 66 home countries and spanning the 12-year period: 2002–2013.
DOI
10.1016/j.intman.2018.04.004
Publication Date
2018-12-01
Publication Title
Journal of International Management
Volume
24
Issue
4
Publisher
Elsevier BV
Embargo Period
2024-11-19
First Page
333
Last Page
347
Recommended Citation
Konara, P., & Shirodkar, V. (2018) 'Regulatory institutional distance and MNCs’ subsidiary performance: climbing up vs. climbing down the institutional ladder', Journal of International Management, 24(4), pp. 333-347. Elsevier BV: Available at: https://doi.org/10.1016/j.intman.2018.04.004
