Taking a prospector local-market focus and foreign subsidiary performance: evidence from China

Abstract

Purpose

The purpose of this paper is to examine the relationships among taking a prospector local-market focus, managerial ties (business ties and political ties) and performance in the Chinese market.

Design/methodology/approach

This study, using a sample of 371 Taiwanese subsidiaries of multinational corporations (MNCs) in China, applies regression analyses to investigate the following questions: does taking a prospector local-market focus negatively impact performance? Do managerial ties (business ties and political ties) positively impact performance? Do these managerial ties positively moderate the effect of the taking a prospector local-market focus on performance?

Findings

Taking a prospector local-market focus negatively impacts the performance of MNC subsidiaries. Business ties positively impact the performance of MNC subsidiaries, as do political ties. Finally, the impact of a prospector local-market focus on performance is positively moderated by business ties.

Practical implications

The Chinese market is still a guanxi exchange business system and political connections usually require significant investment in exchange for advantageous market conditions. Thus, political ties must be carefully considered by MNC subsidiaries when they employ a prospector local-market focus in the Chinese business environment.

Originality/value

First, this study clarifies the key relationship between the strategic choice of taking a prospector local-market focus and performance of MNC subsidiaries in the Chinese market. Second, it identifies the moderating role of managerial ties (political and business ties) in influencing the relationship between a prospector local-market focus and subsidiary.

Citation

Lee, P.-Y. (2019), "Taking a prospector local-market focus and foreign subsidiary performance: evidence from China", Management Decision, Vol. 57 No. 3, pp. 569-582. https://doi.org/10.1108/MD-09-2017-0902