Search results

This chapter examines whether the geographic distance between subsidiaries of multinational banks and their headquarters is an important factor in determining the performance of the subsidiaries. Using various performance indicators of 340 subsidiaries in 54 emerging and developing economies from 69 global banks during the years 1994–2008, we find evidence that first, the distance constraint adversely affects loan growth, profitability, and performance of foreign bank subsidiaries, and second, the unfavorable information asymmetry faced by foreign banks, due to the distance constraint, in financing foreign clients cannot be fully overcome by establishing their presence abroad such as setting up their foreign subsidiaries. We further examine if the effect of distance is symmetric across different banks and countries and find the following various economic, financial, and institutional factors to affect the strength of distance constraints in the multinational banking activities: the entry mode of foreign banks, the history of presence in local markets, the existence of credit information institutions, the cultural similarity between the home and host markets, financial depth, financial crisis periods, the stock market development, the banking market structure in host markets, and the hierarchy of the subsidiary in the multinational banking conglomerate.

This study examines the determinants of performance of foreign manufacturing subsidiaries in Japan. The study finds that a foreign parent’s size, the subsidiary’s age, and a complicated distribution system influence a subsidiary’s performance. There was little significant change in these determinants over a 20-year period. However, for subsidiaries that survived over the observation period of this study, some determinants changed. We also found that by forming joint ventures with Japanese firms, foreign firms can overcome the obstacle of distribution and circumvent the disadvantage of inexperience. Moreover, the mitigating effects of joint ventures vary, depending on the type of Japanese partner.

In this chapter we study the intra-group transactions between the parent bank and its foreign subsidiaries in European Union (EU) countries during the crisis. We use hand-collected data from annual statements on related party transaction and find that they may create a serious problem for the stability of the foreign banks’ subsidiaries. Moreover, as some of those subsidiary banks were large by assets in some of the member states the related party transactions with the parent bank created a serious threat to the host countries’ financial system stability. We attribute this transaction to the weak governance in foreign subsidiaries. We suggest improvements in governance as well as greater disclosure of related party transactions in bank holding companies in Europe.

In this study, we analyze the general effect of acquirers’ ownership strategy on the survival in foreign acquisitions. Furthermore, we attempt to address five potential moderating effects: international, regional, target country experience, cultural distance, as well as host country development. The developed hypotheses are tested on a sample of 1,345 acquisitions made by 174 Finnish firms in 59 countries during 1980–2005. The results indicate that in general WOS increases the probability of survival of foreign acquired units. We further find that the impact of WOS on the survival of foreign acquired units is contingent upon cultural distance and host country development but not on the experience of buying firms.

This chapter aims to investigate the relationship between levels of subsidiary autonomy and the performance of a subsidiary’s subunit (factory) in Japanese manufacturing subsidiaries in Thailand. We conducted ordinary least squares regression analysis based on a questionnaire survey of 50 Japanese manufacturing subsidiaries in Thailand and multiple case studies to investigate the causal relationship between subsidiary autonomy and factory performance. We have three main findings. First, the autonomy level of Japanese manufacturing subsidiaries is linked to the subsidiaries’ factories’ performance compared to factories in Japan, but not in other foreign countries. Second, high levels of subsidiary autonomy are negatively associated with factory performance. Third, there are two causal relationships: high factory performance leading to low subsidiary autonomy and high/low subsidiary autonomy leading to low/high factory performance. From this, we discussed whether the degree of resource centralization in the home country influences the relationship between the level of subsidiary autonomy and a subunit’s performance in the foreign subsidiary. Moreover, we discussed the possibility that the causal relationships between them are not necessarily direct causal relationships. We identified a new factor determining subsidiary autonomy and investigated the relationship between the subsidiary autonomy and performance of a subunit in the foreign subsidiary compared to the home country. Because this has not been discussed in previous studies, this chapter contributes to the study of headquarters–subsidiary relationships and gives guidelines to practitioners on managing subsidiary autonomy.

Purpose – To show the properties of performance measurement and management systems (PMMS) used dialogically and the association between the dialogic use of PMMS and the characteristics of the organizational relationships between parent companies and foreign subsidiaries.

Design/Methodology/Approach – Data were collected through a questionnaire e-mailed to large foreign subsidiaries of multinational firms operating in various industries. Hypotheses regarding factors associated with the extent to which PMMS are used dialogically between parent companies and foreign subsidiaries were tested based on responses to 136 usable questionnaires (45% response rate).

Findings – PMMS are used more dialogically within relationships between parent companies and subsidiaries characterized by subsidiary strategic role and organizational interdependence. Measurement diversity and perceived comprehensiveness of PMMS are higher if PMMS are used more dialogically. Finally, the dialogic use of PMMS is positively associated with subsidiary size and the emphasis on collaboration in the parent company’s national culture.

Originality/Value – In contrast to prior management accounting research that is focused on the outcomes of different styles of use of PMMS, this study shows organizational characteristics and PMMS properties associated with the dialogic use of PMMS. Moreover, this study advances the traditional view of the international business literature that conceives PMMS as bureaucratic systems employed by parent companies to coercively control foreign subsidiaries.

We build on the resource-based view and extend entry mode research by focusing on firms’ intention to transfer different resources from the parent firm to its overseas subsidiary. In line with our hypotheses, we find that parent firms that plan to transfer high levels of intangible resources to their foreign subsidiaries tend to choose wholly owned subsidiaries, while firms that intend to transfer high levels of tangible resources tend to choose international joint ventures. Moreover, we find that these relationships are moderated by institutional distance. We test our hypotheses using unique primary data from a sample of 128 foreign subsidiaries in the People’s Republic of China. Our results have important theoretical implications for international business strategy research as they develop further existing entry-mode theories.

This chapter investigates whether traditional design-oriented coordination instruments or more modern management concepts have a stronger influence on the success of forward technology transfers within MNCs.

We conducted an empirical study analyzing the relative influence of (a) traditional coordination instruments (structural, technocratic, and person-oriented) and (b) modern management concepts (epistemic community and absorptive capacity) on the success of forward technology transfers within MNCs.

The study finds evidence that the traditional coordination instruments relate to specific aspects of the success of such transfers. Comparing the different types of coordination instruments, this chapter shows that not only the person-oriented, but also the structural and technocratic coordination instruments relate positively with the achievement of technology transfer goals. The study finds stronger relationships between the traditional coordination instruments and the technology transfer goals than between the modern management concepts and the technology transfer goals.

We believe that these results have important implications for the management of international technology transfers in particular and for the focus of future (international) management research in general. Future MNC research studies need to include traditional coordination instruments, since they continue to strongly influence organizational behavior and outcomes. This would help to make organizational research on MNCs more cumulative and complete.

This paper provides a primer on European multinational business groups (BGs) and their subsidiaries. Firms in these BGs appear to have higher sales performance than firms in domestic groups (15% higher). This leads us to investigate which elements increase the likelihood that a group will transition towards multinational status. BGs’ characteristics matter for foreign acquisition: groups becoming multinational are usually larger, have a more hierarchical structure with respect to the number of layers in a group, and are more diverse in terms of sectors. Groups tend to expand into bordering countries or countries providing particular advantages, such as a large internal market. The first acquisition is a corporate-level decision that appears to be made by the group’s controlling firm and is often a diversification into a different industry.

Few studies have explored how multinational firms (MNCs) use their experience when expanding abroad. According to the “knowledge projection” model of the MNC, appropriately disseminating industry experience, country experience and mode experience can a priori increase the chances of success of new subsidiaries. However, with inconsistent findings, prior research is of limited assistance in understanding this relationship. We argue that this situation can be explained by a focus on firm’s potential for experience accumulation, rather than on the actual transfer of experience. Deploying expatriate managers enable MNCs to apply organizational experience in foreign markets. It should also have an impact on foreign subsidiary’s chances of success and survival. Therefore, this paper examines how the use of expatriates to transfer experience can affect subsidiary survival.