Abstract
There is significant regional variation in the performance of foreign affiliates in Europe. The aim of this paper is to examine whether differences in their performance can be explained by the characteristics of the corporate group to which they belong. To this end, we develop a novel procedure that allows us to control for the characteristics of the groups to which each subsidiary belongs. These characteristics include the geographical spread of the group, the total number of subsidiaries and complexity of internal hierarchies, and the degree of industry diversification within the group. We also control for the different institutional characteristics at the regional level. We find that subsidiaries belonging to geographically more widely spread but relatively less diversified TNC groups have superior performance. The results also suggest that regions with quality institutions attract affiliates of such high-performance groups.
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