Institutions, Market Entry Strategy and Performance: A Study of Japanese Multinationals
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In this study, we examine the moderating effect of market entry strategy on the relationship between the host country institutions and subsidiary performance. We test our hypotheses using a panel dataset that contains 9160 Japanese overseas investments from 1999-2007 in forty countries. Our results suggest that the better developed formal institutions in the host country are associated with higher performance of foreign subsidiaries, while the cultural distance between the host and home countries is negatively associated with subsidiary performance. The market entry strategy significantly strengthens the performance impact of formal institutions on foreign subsidiaries. We also found that the market entry strategy tends to mitigate the negative performance impact of cultural distance on foreign subsidiaries but not statistically significant. Implications for future research are discussed.
Proceedings of the 57th Annual Meeting of the Academy of International Business: Global Networks: Organizations and People
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