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Problems of foreign subsidiaries of SMEs compared with large companies

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  • Vachani, Sushil

Abstract

This paper draws on institutional theory, supplemented with foreign direct investment (FDI) theory, to explain the level of problems encountered by foreign subsidiaries of Japanese small- and medium-sized enterprises (SMEs) and compares them with large companies. The study confirms the importance of institutional factors such as institutional distance, legitimacy, and the state's coercive influence, as well as factors that FDI theory suggests are associated with multinationals, such as high technology and industry concentration. SMEs differ from large companies in some of the operational areas in which their foreign subsidiaries face high levels of problems, but both seem challenged by problems with labor and low-price foreign competition.

Suggested Citation

  • Vachani, Sushil, 2005. "Problems of foreign subsidiaries of SMEs compared with large companies," International Business Review, Elsevier, vol. 14(4), pages 415-439, August.
  • Handle: RePEc:eee:iburev:v:14:y:2005:i:4:p:415-439
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    2. Maximilian Palmié & Marco Zeschky & Stephan Winterhalter & Philipp Walter Sauter & Naomi Haefner & Oliver Gassmann, 2016. "Coordination mechanisms for international innovation in SMEs: effects on time-to-market and R&D task complexity as a moderator," Small Business Economics, Springer, vol. 46(2), pages 273-294, February.
    3. Hsiang-Lin Cheng & C.-M. J. Yu, 2012. "Adoption of Practices by Subsidiaries and Institutional Interaction within Internationalised Small- and Medium-Sized Enterprises," Management International Review, Springer, vol. 52(1), pages 81-105, February.
    4. Stoian, Carmen & Filippaios, Fragkiskos, 2008. "Dunning's eclectic paradigm: A holistic, yet context specific framework for analysing the determinants of outward FDI: Evidence from international Greek investments," International Business Review, Elsevier, vol. 17(3), pages 349-367, June.
    5. Vachani, Sushil & Doh, Jonathan P. & Teegen, Hildy, 2009. "NGOs' influence on MNEs' social development strategies in varying institutional contexts: A transaction cost perspective," International Business Review, Elsevier, vol. 18(5), pages 446-456, October.
    6. Ojala, Arto, 2015. "Geographic, cultural, and psychic distance to foreign markets in the context of small and new ventures," International Business Review, Elsevier, vol. 24(5), pages 825-835.
    7. Yifei Sun & Ke Wen, 2007. "Country Relational Distance, Organizational Power and R&D Managers: Understanding Environmental Challenges for Foreign R&D in China," Asia Pacific Business Review, Taylor & Francis Journals, vol. 13(3), pages 425-449, July.
    8. Matolcsy, Zoltan & Wakefield, James, 2017. "Multinational headquarter control of wholly owned foreign subsidiaries," The British Accounting Review, Elsevier, vol. 49(3), pages 275-293.
    9. Dominguez, Noémie & Mayrhofer, Ulrike, 2017. "Internationalization stages of traditional SMEs: Increasing, decreasing and re-increasing commitment to foreign markets," International Business Review, Elsevier, vol. 26(6), pages 1051-1063.

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