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Determinants of international subsidiaries’ performances: A multi-level perspective of the subsidiary and parent company

Fang-Yi Lo (Department of International Business, Feng Chia University, Taichung, Taiwan)
Ricky Tan (Department of International Trade, Feng Chia University, Taichung, Taiwan)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 16 December 2019

Issue publication date: 24 April 2020

766

Abstract

Purpose

One important strategy Multinational Enterprises (MNEs) employ to compete in the global market is to engage in foreign investment, but firms must know how they can perform better in the host country market. International subsidiaries’ performances play a chief role for MNEs’ globalization strategy. The purpose of this paper is to construct multi-level research with parent-level data at the higher level and subsidiary-level data at the lower level.

Design/methodology/approach

This study helps capture the rapid growing trend in emerging markets and uses a sample of Taiwanese enterprises and their subsidiaries in China. The data come from the Taiwan Economic Journal database. Precisely, the authors obtain 711 Taiwanese MNEs and 4,458 of their subsidiaries in China.

Findings

This study finds among the parent company’s attributes that firm size, firm total performance, depth of internationalization and foreign shareholding have significant impacts on subsidiary performance, while within the subsidiary’s attributes, subsidiary size, subsidiary-owned capital and total investment fund significantly affect subsidiary performance.

Originality/value

In order to capture subsidiary performance, this study uses a multi-level analysis approach with the Hierarchical Linear Model statistic method to separate parent company attributes and subsidiary-owned attributes as two distinct levels. This method fills the gap in the literature by analyzing subsidiary performance and clarifying that foreign direct investment is a multi-level phenomenon that cannot be analyzed using a one-level analysis method.

Keywords

Acknowledgements

An earlier version of the paper was presented at the INEKA 2019 Conference. The authors thank anonymous reviewers for their helpful comments and suggestions on the early draft of the paper.

Citation

Lo, F.-Y. and Tan, R. (2020), "Determinants of international subsidiaries’ performances: A multi-level perspective of the subsidiary and parent company", International Journal of Emerging Markets, Vol. 15 No. 4, pp. 746-766. https://doi.org/10.1108/IJOEM-06-2019-0445

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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