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Legal system contingencies as determinants of political tie intensity by wholly owned foreign subsidiaries: Insights from the Philippines

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  • White, George O.
  • Boddewyn, Jean J.
  • Galang, Roberto Martin N.

Abstract

How will managerial perceptions concerning specific dimensions of legal system uncertainty affect wholly owned foreign subsidiary (WOFS) political tie intensity? This study employs the institution-based view of international business strategy to explore how managerial perceptions of specific dimensions of legal system uncertainty – ex-ante commercial law inadequacy and ex-post judicial arbitrariness – will act as determinants of WOFS political tie intensity. Our analysis of 181 WOFSs in the Philippines suggests that managerial perceptions of ex-ante commercial law inadequacy and ex-post judicial arbitrariness, being two distinct dimensions of legal system uncertainty, are determinants of political tie intensity. We also find that the positive association between managerial perceptions of ex-ante commercial law inadequacy and the intensification of political ties grows stronger when a WOFS is committed to organizational adaptation of capabilities to the local context, while the positive association between managerial perceptions of ex-post judicial arbitrariness and the intensification of political ties grows stronger when a WOFS is engaged in strategically positioning operations in an emerging market environment.

Suggested Citation

  • White, George O. & Boddewyn, Jean J. & Galang, Roberto Martin N., 2015. "Legal system contingencies as determinants of political tie intensity by wholly owned foreign subsidiaries: Insights from the Philippines," Journal of World Business, Elsevier, vol. 50(2), pages 342-356.
    • Handle: RePEc:eee:worbus:v:50:y:2015:i:2:p:342-356
    DOI: 10.1016/j.jwb.2014.10.010
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