Corporate compliance capability of EMNEs: a prerequisite for overcoming the liability of emergingness in advanced economies

Abstract

PurposeThe literature on how emerging market multinational enterprises (EMNEs) overcome the liability of emergingness/origin has sidestepped a prerequisite for any efforts to overcome liability, namely, corporate compliance. The authors argue that EMNEs build corporate compliance capability as a knowledge-based firm-specific advantage (FSA) to adapt to institutional norms in advanced economies. In this study, the authors empirically examine the intricate relationships between corporate compliance capability and performance in the US subsidiaries of Chinese firms.Design/methodology/approachIn this study, the authors use survey data to empirically examine the intricate relationships between corporate compliance capability and performance in the US subsidiaries of Chinese firms.FindingsThe findings reveal a positive relationship between corporate compliance capability and subsidiary performance, as mediated by local financing.Originality/valueThe study suggests that corporate compliance capability helps a subsidiary gain legitimacy, which leads to local resource acquisition and utilization. Corporate compliance capability thus serves as a source of a knowledge-based FSA for EMNEs in developed economies.