Vulnerability in Shaping the MNC-Host Government Relations in Different Institution-Distant Contexts

Abstract

Prior research has extensively studied the determinants of multinational corporations (MNCs)-host government relations (MGRs) that are found to be helpful for MNCs to perform better in host countries. However, the efficacy of those determinants in different institutional contexts is rarely known. This study adopts the resource dependence theory and the legitimacy-based view to investigate the vulnerability of MNCs¡¦ conducts in shaping MGRs in institutionlly distant host ocuntries. Analying the data consisted of 98 MNCs operating in 21 host countries via 183 subsidiaries, this study found MNCs¡¦ economic-fit conducts in shaping MGRs are more vuluerable in face of large economic and political distances between the home and host countries while the social-fit conducts are more vulnerable to larger regulative and normative distances. In addition, the effect of MGRs on enhancing MNCs¡¦ performances is not so resistant to the uncertainties and risks brought by large institutional distances. These findings shed lights in the fields of international business and strategy management to more complete understanding on the MNCs¡¦s conducts and their vulnerability in shaping MGRs, and provided managerical implications to MNCs about the behavioral adaptation to shape MGRs in institution-distant host countries.