International Subsidiary Closure in the Software Services Sector: The Experience of Indian Software Services Multinationals

Abstract

ABSTRACT Physical presence through establishment of subsidiary is one of the salient features of internationalization of Indian multinationals in the software services sector. However, closure of such subsidiaries has received limited limelight than the success stories. The paper examines the less explored event of international subsidiary closure using a representative sample of Indian software services multinationals and the associated subsidiaries closed during 2007–2017. Cox proportional hazard function is estimated using host-country, parent-firm and subsidiary-specific factors. Results show that the three levels of factors have significant impact on subsidiary closure. While economic growth in host country reduced probability of closure, the smaller subsidiaries and less profitable ones had higher probability of closure. Business group affiliation was found to have direct and independent impact on reducing probability of subsidiary closure. However, the liability of inter-regional foreignness due to higher geographical breadth of internationalization was not supported in the case of Indian software multinationals.