The Effect of Long Term Orientation on Subsidiary Ownership, Expatriate Staffing, and Subsidiary Survival

Abstract

This paper examines the link between the long term orientation (LTO) dimension of national culture to transaction cost economics and relational exchange theory. Hypotheses were developed on the impact of LTO on multinational corporations’ (MNCs’) subsidiary ownership and expatriate staffing strategies and on subsequent subsidiary survival. We used a sample of 10,244 overseas subsidiaries established by 1,292 Japanese MNCs in 30 host countries to test our hypotheses. Results showed that: i) LTO has a positive effect on ownership and expatriate staffing levels; ii) there is a positive interaction between LTO and cultural distance (CD) on ownership and expatriate staffing levels; iii) LTO has a positive effect on subsidiary survival; iv) the positive relationship between LTO and subsidiary survival is stronger when MNCs assume higher ownership and expatriate levels; and v) there is a positive interaction between LTO and CD on subsidiary survival. The theoretical and practical implications of these findings are discussed in terms of the vital role time orientation plays in theory and practice.