Subnational FDI Legitimacy and Foreign Subsidiary Survival

George Z. Peng*, Paul W. Beamish

*Corresponding author for this work

Research output: Contribution to journalArticleResearchpeer-review

12 Citations (Scopus)

Abstract

We examine how organizational ecology and the strategic choice perspective can be combined to provide more contextualized insights into how multinational corporations (MNCs) can better counter environmental pressures with evolving subnational FDI legitimacy and improve the survival likelihood of their subsidiaries. We consider three organizational identity-based strategic choices, i.e., country-of-origin (COO) agglomeration, expatriate staffing level and subsidiary ownership level. We hypothesize a U-shaped relationship between FDI legitimacy and subsidiary mortality, and that this relationship will be moderated by the level of COO agglomeration at a subnational level. We also hypothesize that with improving FDI legitimacy, the use of higher levels of expatriates and ownership will jeopardize the survival of larger subsidiaries. A longitudinal dataset (2001–2016) for 3025 subsidiaries formed by 1147 Japanese MNCs in China was used in hypothesis testing. Results largely supported our hypotheses. We discuss how an identity-centered approach can contribute to theory and practice.

Original languageEnglish
Article number100662
JournalJournal of International Management
Volume25
Issue number3
DOIs
Publication statusPublished - Sep 2019
Externally publishedYes

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