Foreign subsidiaries’ relational strategic emphasis and performance implications amid environmental turbulence

Abstract

PurposeGrounded in strategic choice and resource-based views, this study aims to investigate the antecedents and consequences of relational strategic emphasis of foreign subsidiaries operating in Thailand. Four types of relational strategies were identified with associated differential performance outcomes.Design/methodology/approachData collected via self-administered surveys from a diverse sample of 168 foreign subsidiaries were analyzed in two stages. First, multinomial logistic regression was used to test whether resource-bridging capability, nonmarket-based assets and market-based assets were significant predictors of relational strategy type. Then, multivariate analysis of variance was used to determine whether the four relational strategy types differed in their strategic performance and financial performance.FindingsThe three resource-based motives are significant predictors of relational strategy. Firms adopting the “dual-relational” strategy tend to have the highest level of resource-bridging capability and nonmarket-based assets while firms pursuing the “business-oriented” strategy are likely to possess a higher level of market-based assets. Extensive reliance on relational ties enables foreign subsidiaries to achieve a much higher level of strategic and financial performance than those that chose to only rely on transactional or contractual relations.Practical implicationsForeign subsidiaries operating in emerging markets characterized by an unstable market environment have to establish good relationships with buyers, suppliers and distributors, as well as government agents.Originality/valueUsing a juxtaposition of political and business ties, a typology of the relational strategy was conceptualized. This study extends non-market strategy research by investigating the relationship between resource and capability in the choice of relational strategy. Diverse degrees of political and business ties show different impacts on strategic and financial performances.