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Investment mode strategy and expatriate strategy during times of economic crisis

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  • Chung, Chris Changwha
  • Beamish, Paul W.

Abstract

This study examines the main and interaction effects of investment mode strategy and expatriate strategy on subsidiary survival during times of economic crisis. We propose that the capitalization of multinational flexibility across multi-country networks enhances the survival of subsidiaries when the local markets collapse. Based on a longitudinal analysis that encompasses the characteristics and survival of Japanese subsidiaries in Asian countries, we find that greenfield wholly-owned subsidiaries are more likely to survive than greenfield joint ventures and acquired wholly-owned subsidiaries during times of economic crisis. The interaction effect between expatriate strategy and investment mode strategy suggests that the further distant the operational structures of subsidiaries are configured from the multinational networks, the more benefit the subsidiaries can extract from the greater utilization of expatriates. Consistently, we find that in an environment of economic crisis, the greater utilization of expatriates is more likely to enhance the survival likelihood of greenfield joint ventures and acquired wholly-owned subsidiaries than greenfield wholly-owned subsidiaries. While this positive interaction effect is significant in an economic crisis environment, it is not in an economically stable environment. The competing explanations of the dynamic capability logic of multinational flexibility and the real option logic of sunk cost are considered in this study.

Suggested Citation

  • Chung, Chris Changwha & Beamish, Paul W., 2005. "Investment mode strategy and expatriate strategy during times of economic crisis," Journal of International Management, Elsevier, vol. 11(3), pages 331-355, September.
  • Handle: RePEc:eee:intman:v:11:y:2005:i:3:p:331-355
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    2. Abdellatif, Mahamat & Amann, Bruno & Jaussaud, Jacques, 2010. "Family versus nonfamily business: A comparison of international strategies," Journal of Family Business Strategy, Elsevier, vol. 1(2), pages 108-116, June.
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    4. Demirbag, Mehmet & Apaydin, Marina & Tatoglu, Ekrem, 2011. "Survival of Japanese subsidiaries in the Middle East and North Africa," Journal of World Business, Elsevier, vol. 46(4), pages 411-425, October.
    5. Riaz, Suhaib & Glenn Rowe, W. & Beamish, Paul W., 2014. "Expatriate-deployment levels and subsidiary growth: A temporal analysis," Journal of World Business, Elsevier, vol. 49(1), pages 1-11.
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    8. Mahamat Abdellatif & Bruno Amann & Jacques Jaussaud, 2010. "International Firm Strategies: Is Cultural Distance a Main Determinant?," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 17(4), pages 611-623, December.
    9. Asli Colpan, 2008. "Are strategy-performance relationships contingent on macroeconomic environments? Evidence from Japan’s textile industry," Asia Pacific Journal of Management, Springer, vol. 25(4), pages 635-665, December.
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    11. Pogrebnyakov, Nicolai & Maitland, Carleen F., 2011. "Institutional distance and the internationalization process: The case of mobile operators," Journal of International Management, Elsevier, vol. 17(1), pages 68-82, March.
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    13. Chris Changwha Chung & Simon Shufeng Xiao & Jeoung Yul Lee & Jingoo Kang, 2016. "The Interplay of Top-down Institutional Pressures and Bottom-up Responses of Transition Economy Firms on FDI Entry Mode Choices," Management International Review, Springer, vol. 56(5), pages 699-732, October.
    14. Sangcheol Song, 2014. "Entry mode irreversibility, host market uncertainty, and foreign subsidiary exits," Asia Pacific Journal of Management, Springer, vol. 31(2), pages 455-471, June.
    15. Demirbag, Mehmet & McGuinnness, Martina & Wood, Geoffrey & Bayyurt, Nizamettin, 2015. "Context, law and reinvestment decisions: Why the transitional periphery differs from other post-state socialist economies," International Business Review, Elsevier, vol. 24(6), pages 955-965.
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    17. Desislava Dikova & Keith Brouthers, 2016. "International Establishment Mode Choice: Past, Present and Future," Management International Review, Springer, vol. 56(4), pages 489-530, August.
    18. Håkanson, Lars & Kappen, Philip, 2016. "Live and let die: A survival analysis of foreign R&D units in Swedish MNEs," International Business Review, Elsevier, vol. 25(6), pages 1185-1196.

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