The relative influence of country conditions, industry structure, and business strategy on multinational corporation subsidiary performance
Two competing theories of firm performance have been proposed in the business strategy literature, the industry structure view and the resource-based view of the firm. Empirical studies have estimated the relative contribution of industry structure, corporate, and business unit effects to business unit performance. These studies, however, have been restricted to using only single-country data. Missing from this debate is an international dimension that includes the relative importance of country conditions as a determinant of firm performance. The objective of this article is to fill this void by adding country characteristics to the analysis. Using cross-country data of four large multinationals in a single industry, we estimate the relative importance of country characteristics in addition to industry structure, corporate characteristics, and subsidiary strategy as determinants of subsidiary performance by using multiple regression analysis. This analysis also will contribute to the discussion on environmental determinism versus strategic choice. Country and industry characteristics are mainly outside the control of management, whereas corporate characteristics and subsidiary strategy are under management's control. Results show that country characteristics are by far the most important determinant of subsidiary performance, followed by industry structure, subsidiary strategy, and corporate characteristics. Thus, country conditions are a very important determinant of firm performance that so far has been overlooked in previous studies. These results indicate that subsidiary performance is determined mainly by conditions outside the control of subsidiary management. In terms of competing theories, these results support the environmental determinism view more than the strategic choice view and the resource-based view of the firm more than the industry structure view. These results also have important implications for multinational corporations' selection of countries for entry and investment and for performance evaluation of subsidiary management.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 5 (1999)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/journaldescription.cws_home/601266/bibliographic|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(3), pages 411-432, September.
- Caves, Richard E & Porter, Michael E, 1978. "Market Structure, Oligopoly, and Stability of Market Shares," Journal of Industrial Economics, Wiley Blackwell, vol. 26(4), pages 289-313, June.
- David W Loree & Stephen E Guisinger, 1995. "Policy and Non-Policy Determinants of U.S. Equity Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 26(2), pages 281-299, June.
- Stephen J Kobrin, 1976. "The Environmental Determinants of Foreign Direct Manufacturing Investment: An Ex Post Empirical Analysis," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 7(2), pages 29-42, June.
- Donald J Lecraw, 1983. "Performance of Transnational Corporations in Less Developed Countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 14(1), pages 15-33, March.
- Teece, David J., 1982. "Towards an economic theory of the multiproduct firm," Journal of Economic Behavior & Organization, Elsevier, vol. 3(1), pages 39-63, March.
- Sanjeev Agarwal & Sridhar N Ramaswami, 1992. "Choice of Foreign Market Entry Mode: Impact of Ownership, Location and Internationalization Factors," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(1), pages 1-27, March.
- John H Dunning, 1980. "Towards an Eclectic Theory of International Production: Some Empirical Tests," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 11(1), pages 9-31, March.
- W Chan Kim & Peter Hwang, 1992. "Global Strategy and Multinationals' Entry Mode Choice," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(1), pages 29-53, March.
- Vern Terpstra & Chwo-Ming Yu, 1988. "Determinants of Foreign Investment of U.S. Advertising Agencies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(1), pages 33-46, March.
- Susan P Douglas & C Samuel Craig, 1983. "Examining Performance of U.S. Multinationals in Foreign Markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 14(3), pages 51-62, September.
- Caves, Richard E., 1989. "International differences in industrial organization," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 21, pages 1225-1250 Elsevier.
- Schmalensee, Richard, 1985.
"Do Markets Differ Much?,"
American Economic Review,
American Economic Association, vol. 75(3), pages 341-51, June.
- Wernerfelt, Birger & Montgomery, Cynthia A, 1988. "Tobin's q and the Importance of Focus in Firm Performance," American Economic Review, American Economic Association, vol. 78(1), pages 246-50, March.
- Veugelers, Reinhilde, 1991. "Locational Determinants and Ranking of Host Countries: An Empirical Assessment," Kyklos, Wiley Blackwell, vol. 44(3), pages 363-82.
When requesting a correction, please mention this item's handle: RePEc:eee:intman:v:5:y:1999:i:4:p:241-265. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.