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Institutional Environment and Subsidiary Survival

Author

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  • Charles Dhanaraj

    (The University of Western Ontario)

  • Paul W. Beamish

    (The University of Western Ontario)

Abstract

We examine the effect of the institutional environment (IE) on the mortality of overseas subsidiaries. We develop hypotheses to study the impact of political openness and social openness, two dimensions of the institutional environment and how joint venture status moderates these relationships. We test our hypotheses using a sample of 12,000+ Japanese overseas investments from 1986–1997 in 25 countries, using Cox hazard models. Our results suggest that the sociopolitical context has a strong influence on the mortality of overseas subsidiaries. We theorized a negative main effect for political and social openness and positive interaction effects with openness when the FDI is through a JV. The results are consistent with the hypotheses. However, political and social openness show significantly different influences on subsidiary mortality.

Suggested Citation

  • Charles Dhanaraj & Paul W. Beamish, 2009. "Institutional Environment and Subsidiary Survival," Management International Review, Springer, vol. 49(3), pages 291-312, June.
    • Handle: RePEc:spr:manint:v:49:y:2009:i:3:d:10.1007_s11575-009-0144-y
    DOI: 10.1007/s11575-009-0144-y
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