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What makes MNCs succeed in developing countries? An empirical analysis of subsidiary performance

Michael W. Hansen (CBS, Frederiksberg, Denmark)
Wencke Gwozdz (CBS, Frederiksberg, Denmark)

Multinational Business Review

ISSN: 1525-383X

Article publication date: 21 September 2015

1609

Abstract

Purpose

The purpose of this paper is to examine the evolution in subsidiary performance and the factors influencing this performance based on a unique database of approximately 800 multi-national company (MNC) subsidiaries in developing countries. Developed-country multi-national companies (MNCs) are increasingly establishing subsidiaries in developing countries. The potential gains are high; however, so are the risks. While the issue of subsidiary performance should be at the heart of any international business (IB) enquiry into MNC activity in developing countries, surprisingly little research has examined this issue.

Design/methodology/approach

Based on a comprehensive literature review of the IB performance literature, it is hypothesized that subsidiary performance essentially is shaped by five clusters of factors: location, industry, MNC capabilities, subsidiary role and entry strategy. These factors’ ability to explain variance in subsidiary performance is tested through a multiple regression analysis.

Findings

MNC subsidiary performance in developing countries has improved enormously in recent decades. Especially, MNC capability and subsidiary role-related factors appear to explain variance in performance, while location factors appear to have less explanatory power. This suggests that strong MNC capabilities and organization can make MNCs succeed regardless of location.

Practical implications

The key preparatory work for MNCs contemplating entry into developing countries is to carefully scrutinize internal capabilities and organization.

Originality/value

The paper presents a model for explaining variation in subsidiary performance in developing countries specifically. The paper offers unique empirical insights into the state and drivers of subsidiary performance in developing countries.

Keywords

Citation

Hansen, M.W. and Gwozdz, W. (2015), "What makes MNCs succeed in developing countries? An empirical analysis of subsidiary performance", Multinational Business Review, Vol. 23 No. 3, pp. 224-247. https://doi.org/10.1108/MBR-06-2014-0020

Publisher

:

Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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