Resource Relatedness and Its Effect on the Performance of Parent Firm and Foreign Subsidiary

Abstract

The parent-subsidiary relation is attracting increasing academic interest. However, prior studies on the parent-subsidiary relatedness did not clearly demonstrate the effect of resource relatedness between the parent firm and its subsidiaries on the performance of parent and foreign subsidiaries. Building on resource-based and knowledge-based views, we investigated the effect of resource relatedness on the performance of parent firm and foreign subsidiary. We discussed the theoretical foundations and main accomplishments of prior studies. We developed a conceptual framework and hypothesis in order to close the existing research gap in the topic of interest. We claimed that resource relatedness has a positive impact on the performance of foreign subsidiary, while its effect on the performance of the parent firm can be both positive and negative.