Economic crisis, intra-MNC production shifts and MNC performance from a network perspective

Abstract

Our study examines how a multinational corporation (MNC) shifts production across its international subsidiary network in response to an economic crisis and how attributes of intra-MNC production shifts (IPSs) affect MNC performance. We argue that when an MNC faces an economic crisis, the magnified cross-national differences in economic conditions give it clear direction for production shifts, thereby reducing the incidence of its IPSs. However, this negative relationship weakens if an MNC has a wider subsidiary network that enables it to exploit more cross-national differences in economic conditions. We also argue that IPSs in which more host countries are involved will have larger positive effects on MNC performance. This is because the number of host countries involved in the production shifts reflects the cross-national differences actually exploited in economic conditions by the MNC. The analysis of panel data for Korean manufacturing MNCs that experienced the 1998 and 2008 economic crises provides empirical support for our arguments.