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The impact of host country economic policy uncertainty on the performance of overseas subsidiaries - Evidence of Taiwanese MNEs in China

Author

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  • Hsiao, Yi-Chi
  • Yeh, Chun-Ping
  • Lin, Shih-Min

Abstract

This study examines how host-country economic policy uncertainty affects the performance of multinational enterprises' (MNEs') overseas subsidiaries. Using the economic policy uncertainty (EPU) index, we examine this relationship through the lenses of local embeddedness and absorptive capacity. Analyzing data from 1235 Taiwanese MNEs' investments in China (2007–2012), we find that China's economic policy uncertainty negatively influences Taiwanese MNE subsidiaries' performance. This adverse effect intensifies with the subsidiaries' local embeddedness in China; however, it is mitigated for subsidiaries with high absorptive capacity, which acts as a strategic buffer against institutional volatility. The findings underline the significance of host country economic policy uncertainty for MNEs' overseas operations and suggest ways for MNEs to navigate such uncertainty.

Suggested Citation

  • Hsiao, Yi-Chi & Yeh, Chun-Ping & Lin, Shih-Min, 2026. "The impact of host country economic policy uncertainty on the performance of overseas subsidiaries - Evidence of Taiwanese MNEs in China," Journal of International Management, Elsevier, vol. 32(2).
    • Handle: RePEc:eee:intman:v:32:y:2026:i:2:s1075425326000153
    DOI: 10.1016/j.intman.2026.101341
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