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This paper aims to study whether the adoption of an entry mode that fits the social trust level contributes to the improvement of foreign subsidiary performance.

The authors used the Probit model, linear regression, strategic fit approach and instrumental variable regression. The sample was made up of 11,095 observations of Chinese multinational enterprises' foreign subsidiaries in 54 countries from 2005 to 2020.

The results suggest that a host country with a high level of social trust results in fewer difficulties for enterprises in gaining legitimacy, thus foreign subsidiaries are more likely to select the wholly owned entry mode. The results also show that the effect is contingent on the formal institutions of host countries. The results of the mechanism test suggest that social trust influences subsidiaries' entry mode choice by reducing information asymmetry, costs and uncertainty risks. This study further finds that selecting a fit entry mode based on social trust level substantially increases foreign subsidiary performance and this effect is more significant when multinational enterprises (MNEs) are state-owned enterprises (SOEs).

The main limitation of this paper is its only focus on foreign subsidiaries of Chinese MNEs, which may limit the generalizability of research findings.

This paper responds to the call for conducting more research on informal institutions. Findings highlight the critical role of informal institutions in helping foreign subsidiaries in gaining legitimacy in host countries and the essentialness of selecting a fit entry mode based on the informal institutions of host countries for the development of foreign subsidiaries.

Recent international business research finds that state-owned multinational enterprises (SOMNEs) invest relatively more in politically risky host countries than do privately-owned multinational enterprises (MNEs). This study aims to investigate theoretically and empirically whether state ownership mitigates the impact of host-country political risk on subsidiary economic risk.

The authors link theoretical arguments on state ownership to arguments from non-market strategy literature to outline mechanisms whereby state ownership can buffer subsidiaries from political risk, weakening the link between host-country political risk and earnings volatility in subsidiaries. Using a data set on Norwegian MNEs’ foreign subsidiaries across almost two decades, the authors test this prediction using both matching methods and panel regressions.

While standard panel regressions provide empirical support only for the infrastructure sector and for the highest political risk contexts, nearest-neighbour matching models – comparing only otherwise similar private- and SOMNE subsidiaries using the full sample – reveal more general support for the political risk mitigation hypothesis.

The study presents the first comprehensive analysis of whether state ownership can mitigate the effect of political risk on subsidiary economic risk.

This study examines how the characteristics of innovation knowledge exchanged among affiliate firms affect the ownership strategies adopted for their foreign subsidiaries.

This study employs a cross-classified multilevel model to examine a sample of 185 Korean manufacturing affiliates derived from 49 Chaebols engaged in international diversification, along with their 1,110 foreign manufacturing subsidiaries.

While exploratory innovation knowledge exchange lowers the affiliate's level of ownership in its foreign subsidiary, exploitative innovation knowledge exchange rather increases the affiliate's level of ownership in its foreign subsidiary.

This study advances the literature on intrafirm knowledge exchange by highlighting it as a determinant of ownership strategies. The study further shows that the characteristics of knowledge exchanged at the affiliate level not only determine the ownership structure but also have the potential to shape the direction in which the subsidiary develops its competencies.

This study has practical implications for the managers of business group affiliates. The results suggest that managers should adapt their ownership strategies according to the type of knowledge exchanged at the affiliate level to achieve a balanced and synergistic effect on intraorganizational knowledge exchange.

Previous studies have extensively explored the performance implications related to knowledge exchange. However, there is a notable gap in understanding the mechanisms through which the value of knowledge transferred within an affiliate is realized. To address this gap, this study focuses on ownership strategy as a crucial factor and empirically examines how the characteristics of innovation knowledge exchanged among affiliate firms influence the ownership strategies adopted for their foreign subsidiaries. By investigating this relationship, this study provides valuable insights into the complex dynamics of knowledge exchange and its effect on ownership decisions within business group affiliates.

This study aimed to identify a specific taxonomy of entry modes for international construction contractors and to develop a decision-making mechanism based on case-based reasoning (CBR) to facilitate the selection of the most suitable entry modes.

According to the experience orientation of the construction industry, a CBR entry mode decision model was established, and based on successful historical cases, a two-step refinement process was carried out to identify similar situations. Then the validity of the model is proved by case analysis.

This study identified an entry mode taxonomy for international construction contractors (ICCs) and explored their decision-making mechanisms. First, a two-dimension model of entry mode for ICCs was constructed from ownership and value chain dimensions; seven common ICC entry modes were identified and ranked according to market commitment. Secondly, this study reveals the impact mechanism of the ICC entry mode from two aspects: the external environment and enterprise characteristics. Accordingly, an entry mode decision model is established.

Firstly, sorting out the categories of entry mode in the construction field, which provide an entry mode list for ICCs to select. Secondly, revealing the impact mechanism of ICC entry mode, which proposes a systematic decision-making system for the selection of ICC entry mode. Thirdly, constructing a CBR entry mode decision-making model from an empirical perspective, which offers tool support and reduces transaction costs in the decision-making process.

The study on entry modes for ICCs is still in the preliminary exploratory stage. The authors investigate the entry mode categories and decision-making mechanisms for ICCs based on Uppsala internationalization process theory. It widens the applied scope of Uppsala and promotes cross-disciplinary integration. In addition, the authors creatively propose a two-stage retrieval mechanism in the CBR model, which considers the order of decision variables. It refines the influence path of the decision variables on ICCs' entry mode.

The rise of emerging economies in the innovation landscape has often been attributed to the positive spillovers of innovation capabilities from multinational corporations (MNCs). However, it is less certain that their innovative capabilities imported from the home country function effectively in the host country from the outset. This study examines the performance of the innovation capabilities of MNC subsidiaries in emerging economies over time by considering the gradual process of their learning about host countries.

We employed stochastic frontier analysis to measure innovation capabilities, our focal construct. For regression analysis, we applied the Mundlak estimator, a variant of the fixed-effects panel estimator, to a sample comprising subsidiaries of MNCs from technologically advanced nations operating in Korea between 2006 and 2016.

Our results indicate that the innovation capabilities of MNC subsidiaries initially underperform those of local firms but improve over time, eventually surpassing the capabilities of their local counterparts. Furthermore, our findings reveal that institutional distance amplifies the underperformance of the innovation capabilities of MNC subsidiaries.

This study contributes to the literature by extending both theoretical development and empirical measurement of innovation capabilities in cross-national settings. Additionally, it deepens our understanding of whether and how MNC subsidiaries adapt their innovation capabilities to the local market environment.

This study aims to investigate the impact of exchange rate volatility and the risk of expropriation on the decision to repatriate foreign earnings.

The current study uses secondary data for foreign subsidiaries of US multinational corporations (MNCs) in 40 countries from 2004 to 2016. We use the dynamic panel difference generalised method of moments (GMM) to estimate the dynamic earnings repatriation model.

The findings show that foreign subsidiaries of US MNCs in countries with volatile exchange rates tend to repatriate more earnings to the parent company. The findings also reveal that a greater risk of expropriation in the host country leads to the higher repatriation of foreign earnings to the parent company. The findings support the notion that MNCs use the earnings repatriation policy as a means of mitigating risks arising in the host country.

Practical implications for modern managers include shedding light on how financial managers can use earnings repatriation policy to mitigate exchange rate risk and the risk of expropriation in the host country. The findings also contain policy implications at the host country level that how exchange rate volatility and risk of expropriation can reduce foreign investment in the host country.

This study adds to the earnings repatriation literature by analysing the direct effect of exchange rate volatility on earnings repatriation decisions, as opposed to the impact of the exchange rate itself, as suggested by previous research. Hence, the findings broaden our understanding of the direct influence of exchange rate volatility on the decision to repatriate foreign earnings. The present study also examines the role of the risk of expropriation in determining earnings repatriation policy, which has received little attention in prior empirical studies.

This study reviews the literature on institutional theory in international business and examines the institutional factors behind the success or failure of multinational corporations (MNCs) in emerging markets.

This systematic literature review analysed 116 peer-reviewed articles published in leading journals between 2005 and 2022. The R package Bibliometrix and VOSviewer visualization software were used for analysis. A hybrid methodology combining bibliometric and content analyses was utilized to obtain a descriptive evaluation of the publication impact along with a keyword co-occurrence map, context-specific institutional effects and subsidiary strategies.

The Journal of International Business Studies, along with influential authors such as Mike W. Peng, Klaus Meyer, and Mehmet Demirbag, have taken the lead in advancing institutional theories for MNC internationalization in emerging markets. The clusters from the co-word analysis revealed dominant MNC entry modes, institutional distances and MNC localization strategies. The content analysis highlights how the institutional environment is operationalized across the macro-, micro- and meso-institutional contexts and how the MNC subsidiary responds in emerging markets. Meso-level interactions emphasize the relational aspects of business strategies in emerging markets.

Contextualizing subsidiary strategies and institutional forms can help managers align their strategic responses to the dynamic relationship between subsidiaries and the institutional environment. The review findings will enable policymakers to simplify regulatory policies and encourage MNC subsidiary networks with local stakeholders in emerging markets.

Legitimacy strategies such as corporate community involvement in emerging markets are crucial for enhancing societal support and removing stakeholders' scepticism for MNC business operations in emerging markets. Moral legitimacy should be implemented by managers, such as lending support to disaster management efforts and humanitarian crises, as they expand to new business environments of emerging markets.

This study is the first to explore institutional diversity and subsidiary strategic responses in a three-layered institutional context. The findings highlight the relevance of contextualizing institutional perspectives for international business scholars and practitioners as they help build context-specific theoretical frameworks and business strategies. Future research recommendations are suggested in the macro-, micro- and meso-institutional contexts.

This paper aims to examine the effect of R&D laboratories on the perceived performance of MNE subsidiaries during recession.

Employing resource-based view and knowledge-based theory, the authors investigate a unique sample of 171 technologically heterogenous foreign MNE subsidiaries located in Greece over the period of recession 2009–2016. The sample subsidiaries operate different types of R&D laboratories.

The authors find that MNE subsidiaries with advanced R&D laboratories such as locally integrated laboratories (LILs) and internationally interdependent laboratories (IILs) perform better in recession than subsidiaries with support laboratories (SLs) or subsidiaries without R&D laboratories. Overall, the authors find an asymmetric performance contribution of R&D laboratories at subsidiary level.

The study provides useful insights into the environmentally derived “knowledge-based - performance” context, so filling an important research gap, since little is known about the performance impact of the input-side of technological activity at MNE subsidiary level, especially as regards R&D facilities/infrastructure. Based on the findings the authors identify important managerial implications.

Chinese multinational enterprises’ (MNEs) unprecedented, aggressive cross-border mergers and acquisitions (CBMAs) have led to several studies examining Chinese CBMAs, which importantly has also led to some degree of “theorising”. This study aims to undertake a “non-theoretical” fact-finding exercise before any theorising and empirical “causal” examination for a better understanding of the phenomenon (the rise of Chinese CBMAs).

This study uses a “stylised facts” approach which documents “empirical regularities” concerning Chinese CBMAs and thus guides new research questions.

Several facts are documented. Firstly, both the value and frequency of Chinese CBMAs are catching up to greenfield investments, with CBMA deals being larger in scale but lower in frequency. Secondly, Chinese CBMAs show a global reach away from the regional orientation of their early years. Thirdly, Chinese MNEs are possibly transforming their value chain with industrial upgrading as an aim. Fourthly, Chinese “full” acquisitions of targets have surged, especially in OECD countries, suggestive of Chinese MNEs’ “radical” acquisition approaches.

The gathered facts lend support to the view of the need for such fact-finding exercises to explicate and shed “new” light on the phenomenon (beyond our “current” views/beliefs). An understanding of the underlying trends beyond bare facts can also identify new knowledge, which can in turn provide new directions for research.

The existing research on institutional distance implicitly posits the monotonic effect of contextual differences on the multinational enterprise (MNE) behaviors (e.g. entry mode, research and development (R&D) investment and subsidiary reverse knowledge transfer). Namely, MNEs from the same home to the same host countries are thought to have homogenous perceptions on the institutional influences and thus behave similarly. However, the authors argue that MNEs, due to their different performance aspirations in host countries, will have heterogenous perceptions on such contextual influences and thereafter behave differently.

Drawing on the behavioral theory of the firm and employing a unique sample comprised of 140 Chinese MNEs' foreign direct investments (FDIs) in Taiwan in 2017, the authors developed and tested the hypotheses.

The authors found that the emerging-market MNEs' (EMNEs’) perceptions of higher local institutional difficulties will be strengthened when their local performances are below their aspiration levels, making them more risk-taking. Nevertheless, EMNEs' local experiences and local equity-based partnerships will mitigate such negative perceptions, mitigating their risk-taking orientation.

The empirical findings make contributes to the international business (IB) literature by extending knowledge on the determinants and conditions of the heterogeneity in EMNEs' behavioral orientations when in face of the same institutional distance. The authors also provide managerial implications by showing that EMNEs' firm-specific resources (i.e. local experience and local equity-based partnership) will alter their perceptions of local institutional difficulties, leading to different behavioral orientations.