Unbundling the effects of host-country institutions on foreign subsidiary survival: A case for subsidiary heterogeneity

This study seeks to advance a fine-grained understanding of the relationship between host-country institutions and foreign subsidiary survival by unbundling institutions into contracting and property rights institutions as well as engaging subsidiary-level heterogeneity. We argue that the adverse effects of weak contracting institutions are stronger for market-seeking subsidiaries. In contrast, we contend that weak property rights institutions are more detrimental to the survival of resource-seeking subsidiaries. Data from a longitudinal, paired-sample design of Japanese foreign subsidiaries operating across 46 countries provide support for these arguments. The results underscore the need to better understand institutional diversity as well as subsidiary heterogeneity.