Host country experience and subsidiary performance: the interaction effects of institutional factors

• Main Authors: Ching-YiLin, 林靜儀
• Other Authors: Wann-Yih Wu
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/01286764091555936631

博士 === 國立成功大學 === 企業管理學系碩博士班 === 98 === Drawing from organizational learning, internationalization process theories and institutional theories, this study investigated an inverted U-shaped relationship between host country experience and subsidiary performance, and further explored the contingent relationship of host country experience and subsidiary performance under institutional factors, including environmental difficulties (country-level), cultural distance (culture-level), industry similarity (industry-level), and collaboration with local partners (interfirm-level). Few studies on the curvilinear relationship between experience and subsidiary performance considered the interaction effect, especially two interaction components, the linear by linear component plus curvilinear by linear component. This study went beyond the singular focus on the linear moderating effect on the experience-performance relationship, proposed a conceptual framework that explains the curvilinear relationship between host country experience and subsidiary performance are contingent on institutional factors, and empirically examined the differential effects of interaction by considering the adaptive process and experiential inertia of learning. This study conducted empirical analysis by using two sample sets, including subsidiaries of small- and medium-sized manufacturers and of large-sized manufacturers, both of which were adopted from The Report on Foreign Investment Strategies of the Manufacturers, implemented by Department of Statistics, Ministry of Economic Affairs in Taiwan. The results showed that host country experience presents an inverted U-shaped effect on subsidiary profitability of SMEs and large sized firms. This study further investigated the interaction effects between institutional factors and host country experience on subsidiary performance. Although this study found no significant interaction effect between environmental difficulties and host country experience at lower levels of host country experience; however, environmental difficulties decrease the downward curvilinearity of host country experience to profitability. Furthermore, an inverted U-shaped relationship of host country experience to subsidiary performance could be weakened by cultural distance. This result also showed that industry similarity acts as a significant (higher order) interaction effect on the relationship between host country experience and subsidiary performance of small and medium enterprises while large firms appear to be insensitive to the interaction effect of industry similarity. Finally, this result gave partial support that collaboration with local partners negatively impact the positive effect of host country experience on subsidiary performance initially; however, host country experience benefits the collaboration with local partners on subsidiary performance as host country experience increases. The findings of the interaction between institutional factors and host country experience provided several implications for theory development and managerial practice, and future research directions.