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Evolving FDI Legitimacy and Strategic Choice of Japanese Subsidiaries in China

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  • Peng, George Z.
  • Beamish, Paul W.

Abstract

We examine how evolving FDI legitimacy in China influences two strategic choices (entry mode and expatriate staffing) of Japanese subsidiaries there over the period 1993–2000, based on data aggregated from Toyo Keizai and the National Bureau of Statistics of China (various years). As FDI legitimacy improves over time, we find that smaller subsidiaries tend to choose the wholly owned subsidiary mode and deploy a higher percentage of expatriates, whereas larger subsidiaries tend to choose the joint venture mode and use a lower percentage of expatriates; and that Japanese subsidiaries are more likely to have a local manager, and this tendency may be stronger for larger subsidiaries. The theoretical and practical implications of these findings are discussed from a density dependence theory perspective.

Suggested Citation

  • Peng, George Z. & Beamish, Paul W., 2007. "Evolving FDI Legitimacy and Strategic Choice of Japanese Subsidiaries in China," Management and Organization Review, Cambridge University Press, vol. 3(3), pages 373-396, November.
    • Handle: RePEc:cup:maorev:v:3:y:2007:i:03:p:373-396_00
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    Cited by:

    1. George Peng & Paul Beamish, 2014. "The effect of host country long term orientation on subsidiary ownership and survival," Asia Pacific Journal of Management, Springer, vol. 31(2), pages 423-453, June.
    2. Jing Yang & Frank Tipton & Jiatao Li, 2011. "A review of foreign business management in China," Asia Pacific Journal of Management, Springer, vol. 28(3), pages 627-659, September.
    3. Wilkinson, Timothy J. & Peng, George Z. & Brouthers, Lance Eliot & Beamish, Paul W., 2008. "The diminishing effect of cultural distance on subsidiary control," Journal of International Management, Elsevier, vol. 14(2), pages 93-107, June.
    4. Peng, George Z. & Beamish, Paul W., 2019. "Subnational FDI Legitimacy and Foreign Subsidiary Survival," Journal of International Management, Elsevier, vol. 25(3), pages 1-1.
    5. Peng, George Z. & Beamish, Paul W., 2014. "MNC subsidiary size and expatriate control: Resource-dependence and learning perspectives," Journal of World Business, Elsevier, vol. 49(1), pages 51-62.
    6. 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.
    7. Zhang, Jianhong & Jiang, Jiangang & Noorderhaven, Niels, 2019. "Is certification an effective legitimacy strategy for foreign firms in emerging markets?," International Business Review, Elsevier, vol. 28(2), pages 252-267.

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