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The Regional Dimension of MNE's Foreign Subsidiary Localization

Author

Listed:
  • Jean-Luc Arregle

    (EDHEC - EDHEC Business School - UCL - Université catholique de Lille)

  • Paul Beamish

    (UWO - University of Western Ontario)

  • Louis Hébert

    (HEC Montréal - HEC Montréal)

Abstract

This paper examines the regional effect of MNEs' foreign subsidiary localization. We hypothesize that the number of subsequent foreign subsidiaries in a country is in part determined by a firm's prior foreign subsidiary activity at the regional level. We test our hypotheses using data on 1076 Japanese MNEs that created 3466 foreign subsidiaries (1837 wholly owned FDIs and 1629 joint ventures) over the period 1996–2001. We use a multilevel negative binomial approach with three levels of analysis: localization decisions in a country (49 countries), in a region (six regions) and at the headquarters level. In this way, we test the regional effects controlling for country and corporate dimensions. We also run separate models to differentiate wholly owned and joint venture localization decisions. Our results strongly support the semi-globalization perspective in that the regional-level effects are significant and different from the country-level effects for all foreign subsidiaries, for wholly owned subsidiaries and for jointly owned subsidiaries. Japanese MNEs adopt a regional perspective that complements their decisions at the country and firm levels. They seek regional agglomeration benefits and make arbitrage decisions between countries in the same region.

Suggested Citation

  • Jean-Luc Arregle & Paul Beamish & Louis Hébert, 2009. "The Regional Dimension of MNE's Foreign Subsidiary Localization," Post-Print hal-02312684, HAL.
    • Handle: RePEc:hal:journl:hal-02312684
    DOI: 10.1057/jibs.2008.67
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    Cited by:

    1. Farah, Bassam & Chakravarty, Dwarka & Dau, Luis & Beamish, Paul W., 2022. "Multinational enterprise parent-subsidiary governance and survival," Journal of World Business, Elsevier, vol. 57(2).
    2. Galang, Roberto Martin N., 2014. "Divergent diffusion: Understanding the interaction between institutions, firms, networks and knowledge in the international adoption of technology," Journal of World Business, Elsevier, vol. 49(4), pages 512-521.
    3. Trąpczyński, Piotr & Halaszovich, Tilo F. & Piaskowska, Dorota, 2020. "The role of perceived institutional distance in foreign ownership level decisions of new MNEs," Journal of Business Research, Elsevier, vol. 108(C), pages 435-449.
    4. Oh, Chang Hoon & Sohl, Timo & Rugman, Alan M., 2015. "Regional and product diversification and the performance of retail multinationals," Journal of International Management, Elsevier, vol. 21(3), pages 220-234.
    5. Lee, Jong Min, 2019. "Intra- and inter-regional diversification, subsidiary value chain activities and expatriate utilization," Journal of International Management, Elsevier, vol. 25(3), pages 1-1.
    6. Youngok Kim & Sidney J Gray, 2017. "Internationalization strategy and the home-regionalization hypothesis: The case of Australian multinational enterprises," Australian Journal of Management, Australian School of Business, vol. 42(4), pages 673-691, November.
    7. Jiang, Guoliang Frank & Holburn, Guy L.F., 2018. "Organizational performance feedback effects and international expansion," Journal of Business Research, Elsevier, vol. 90(C), pages 48-58.
    8. Nielsen, Bo Bernhard & Asmussen, Christian Geisler & Weatherall, Cecilie Dohlmann, 2017. "The location choice of foreign direct investments: Empirical evidence and methodological challenges," Journal of World Business, Elsevier, vol. 52(1), pages 62-82.
    9. Thomas Hutzschenreuter & Tanja Matt, 2017. "MNE internationalization patterns, the roles of knowledge stocks, and the portfolio of MNE subsidiaries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 48(9), pages 1131-1150, December.
    10. Bowman, Gary & Foulser-Piggott, Roxane & Beamish, Paul W, 2023. "Natural disasters and MNE internalization: Reoptimizing subsidiary governance," Journal of World Business, Elsevier, vol. 58(2).
    11. Roxana Wright, 2022. "Subsidiary Activities: Parent Company and Local Predictors of Business Resilience ," GATR Journals jber226, Global Academy of Training and Research (GATR) Enterprise.
    12. Meng Ye & Weisheng Lu & Roger Flanagan & Kwong Wing Chau, 2020. "Corporate social responsibility “glocalisation”: Evidence from the international construction business," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(2), pages 655-669, March.
    13. Soliman, Salma & Papanastassiou, Marina & Saka-Helmhout, Ayse, 2023. "The role of subsidiaries in Global Value Chains (GVCs): An institutional voids perspective on LVC upgrading and integration," Journal of International Management, Elsevier, vol. 29(2).

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