Abstract
We build upon the theoretical framework of firm-specific advantages (FSAs) and country-specific advantages (CSAs) to examine the determinants of the local responsiveness strategy of foreign subsidiaries of Chinese multinational enterprises (MNEs). Specifically, we focus on relational assets (R-assets is seen as a unique type of Chinese MNEs’ FSA), the market-seeking foreign direct investment (FDI) and host country institutional environments as drivers of the local responsiveness strategy. We empirically test our hypotheses using a survey data of the foreign subsidiaries of Chinese firms together with other secondary data sources. We find that both Chinese MNEs’ R-assets and the market-seeking oriented FDI are positively related to subsidiaries’ local responsiveness strategy in accommodating local customer needs, government policies, market conditions, and competitive intensity. Moreover, the impact of R-assets in motivating the local responsiveness strategy is stronger in a host country with a weak and underdeveloped institutional environment. While the evidence confirms the existence of the R-assets in influencing subsidiary level strategy, it also casts doubt on such relations-based firm resources in advanced host countries with highly developed institutions.
Highlights
We build upon the theoretical framework of firm-specific advantages (FSAs) and country-specific advantages (CSAs) to examine the determinants of the local responsiveness strategy of foreign subsidiaries of Chinese multinational enterprises (MNEs)
Given that local responsiveness strategy enables the development of FSAs by foreign subsidiaries (Brock & Birkinshaw, 2004; Rugman & Verbeke, 1992, 2001), our study provides new insights into subsidiary strategies which help foreign subsidiaries of Chinese MNEs to overcome post-entry disadvantages associated with the liabilities of origin
Based on a sample of the foreign subsidiaries of Chinese MNEs, we examine the impacts of R-assets and host CSAs of marketseeking foreign direct investment (FDI) and host county institutional development on subsidiary-level local responsiveness strategy
Summary
We build upon the theoretical framework of firm-specific advantages (FSAs) and country-specific advantages (CSAs) to examine the determinants of the local responsiveness strategy of foreign subsidiaries of Chinese multinational enterprises (MNEs). A number of scholars argue that the degree of global integration and local responsiveness is constrained by organizational resources and capabilities (Bartlett & Ghosbal, 1989; Luo, 2001, 2002; Rugman & Verbeke, 1992, 2001; Tallman & Yip, 2009) Both dimensions of I/R strategy are found to have a positive impact on firm performance (Hult, Ketchen, & Slater, 2005; Johansson & Yip, 1994; Meyer & Su, 2015; Morrison & Roth, 1992; Roth & Morrison, 1990; Roth, David, & Morrisson, 1991; Williams et al, 2017). Even the largest MNEs need to make a choice between global integration and local responsiveness (Brock & Hydle, 2018; Meyer & Su, 2015; Peng, 2014; Verbeke, 2013; Williams et al, 2017)
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