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Regulatory institutional distance and MNCs' subsidiary performance: climbing up Vs. climbing down the institutional ladder

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journal contribution
posted on 2023-06-09, 13:15 authored by Palitha Konara, Vikrant ShirodkarVikrant Shirodkar
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.

History

Publication status

  • Published

File Version

  • Accepted version

Journal

Journal of International Management

ISSN

1075-4253

Publisher

Elsevier

Issue

4

Volume

24

Page range

333-347

Department affiliated with

  • Strategy and Marketing Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2018-05-15

First Open Access (FOA) Date

2020-05-09

First Compliant Deposit (FCD) Date

2018-05-10

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