The Impact of Subsidiary Entrepreneurial Initiative in MNEs on Export Performance in China: The Mediating Effect of Environmental Flexibility and Cultural Sensitivity

Abstract

Purpose - Subsidiary entrepreneurial initiatives (SEI) to overcome the challenges where the emerging market is rapidly changing is urgent. Thus, the purpose of this study is to analyze the relationship between SEI together with environmental flexibility in coping with the host countries’ environment, and also cultural sensitivity as these are vital factors for multinational subsidiaries which entered China in increasing their export performance. Design/methodology/approach - This study examines the mediating effects of environmental flexibility and cultural sensitivity on the relationship between SEI and export performance. After obtaining data samples from KOTRA of Korean multinational subsidiaries entered China, we verified this study’s research model using PLS-SEM and came up with 167 valid samples. Findings - First, SEI of multinational enterprises (MNEs) had a positive impact on export performance. Second, SEI of MNEs had a positive impact on environmental flexibility while environmental flexibility did not have a positive impact on export performance. Third, SEI of MNEs had a positive influence on cultural sensitivity and cultural sensitivity in turn had a positive effect on export performance. Research implications or Originality - Our findings suggested that Korean companies should recognize cultural sensitivity as a key factor in the Chinese market as well as SEI in order to increase export performance. By examining the mediating effects of environmental flexibility and cultural sensitivity, this study expanded the relationship between SEI and export performance compared to existing literature by focusing on the segmented market.