Legitimacy and multi-level institutional environments: implications for foreign subsidiary ownership structure
AbstractIn this study, we examine from an institutional perspective the legitimacy rationale behind the choice of subsidiary ownership structure among multinational corporations (MNCs). We suggest that, when under a strong pressure to conform at the host country and local industry levels of their institutional environment, MNCs are likely to take a lower ownership stake in exchange for external legitimacy in the host country or local industry that their foreign subsidiaries are entering. We also suggest that MNCs are likely to take a higher ownership stake in response to strong internal pressure to sustain their internal legitimacy at the corporate level of their institutional environment. We also propose that MNCs are more likely to exchange ownership for legitimacy in local industries than in host countries, and in local markets with a high level of political instability than in those with a low level of political instability. These propositions are generally supported by our analysis of 4451 subsidiaries established by 898 Japanese MNCs that operated in 39 countries across 52 industries (two-digit SIC) between 1988 and 1999. Journal of International Business Studies (2007) 38, 621–638. doi:10.1057/palgrave.jibs.8400283
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Palgrave Macmillan in its journal Journal of International Business Studies.
Volume (Year): 38 (2007)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.palgrave-journals.com/
Postal: Palgrave Macmillan Journals, Subscription Department, Houndmills, Basingstoke, Hampshire RG21 6XS, UK
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Qunyong Xie, 2013. "RETRACTED ARTICLE: State ownership, firm size, and Chinese firms’ entry mode choices," Asia Pacific Journal of Management, Springer, vol. 30(1), pages 319-319, March.
- Klaus Meyer & Ornjira Thaijongrak, 2013. "The dynamics of emerging economy MNEs: How the internationalization process model can guide future research," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1125-1153, December.
- Andrei Panibratov & Alexander Abramkov, 2012. "Joint Venture Strategy For Emerging Economy: Evidence From Russian Energy Sector," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 3(2).
- Peng, George Z., 2012. "FDI legitimacy and MNC subsidiary control: From legitimation to competition," Journal of International Management, Elsevier, vol. 18(2), pages 115-131.
- Forstenlechner, Ingo & Mellahi, Kamel, 2011. "Gaining legitimacy through hiring local workforce at a premium: The case of MNEs in the United Arab Emirates," Journal of World Business, Elsevier, vol. 46(4), pages 455-461, October.
- Hou, Wanrong & Li, Sali & Priem, Richard L., 2013. "How do CEOs matter? The moderating effects of CEO compensation and tenure on equity ownership in international joint ventures," Journal of International Management, Elsevier, vol. 19(2), pages 138-151.
- Li, Peng-Yu & Meyer, Klaus E., 2009. "Contextualizing experience effects in international business: A study of ownership strategies," Journal of World Business, Elsevier, vol. 44(4), pages 370-382, October.
- Lin Cui & Fuming Jiang, 2010. "Behind ownership decision of Chinese outward FDI: Resources and institutions," Asia Pacific Journal of Management, Springer, vol. 27(4), pages 751-774, December.
- Tseng, Chiung-Hui & Lee, Ruby P., 2010. "Host environmental uncertainty and equity-based entry mode dilemma: The role of market linking capability," International Business Review, Elsevier, vol. 19(4), pages 407-418, August.
- Tsai-Ju Liao & Chwo-Ming Yu, 2013. "The impact of local linkages, international linkages, and absorptive capacity on innovation for foreign firms operating in an emerging economy," The Journal of Technology Transfer, Springer, vol. 38(6), pages 809-827, December.
- Cui, Lin & Jiang, Fuming, 2009. "FDI entry mode choice of Chinese firms: A strategic behavior perspective," Journal of World Business, Elsevier, vol. 44(4), pages 434-444, October.
- Cui, Lin & Li, Yi & Li, Zijie, 2013. "Experiential drivers of foreign direct investment by late-comer Asian firms: The Chinese evidence," Journal of Business Research, Elsevier, vol. 66(12), pages 2451-2459.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Elizabeth Gale).
If references are entirely missing, you can add them using this form.