Institutional distance and foreign subsidiary survival: the moderating perspective of enterprise ownership and internationalization experience

YI Changjun1,2 LIU Xiaodan3 WANG Yuming4 HUANG Jian4

(1.Research Center of International Firms of Business School of Huaqiao University)
(2.Private Economic Development Institute of New Types of Think Tanks with Chinese Characteristics in Fujian Universities)
(3.School of Economics, Nankai University)
(4.Business School of Huaqiao University)

【Abstract】Whether the overseas survival duration of multinational enterprises can be extended or not is an important symbol of the success of enterprises’ OFDI in a country. Drawing on the institutional theory, this paper used the panel data of the 1798 foreign subsidiaries of 348 Chinese enterprises which were listed on Shanghai Stock Exchange and Shenzhen Stock Exchange from 2005 to 2016, and applied survival analysis—K-M estimator and Cox proportional-hazards model—to analyze the influence mechanism of institutional distance on the foreign subsidiary survival based on the main effect and the moderating effect. The results show that formal institutional distance and informal institutional distance both negatively affect the foreign subsidiary survival, and the informal institutional distance has a larger impact; and enterprise ownership and internationalization experience have significant moderating effects on the relationship between institutional distance and the foreign subsidiary survival. In other words, under a certain institutional distance, enterprises with more internationalization experience and state-owned enterprises have higher success rates in foreign investment. The empirical study indicates that in the process of “going out,” OFDI enterprises should pay attention to the institutional differences and develop targeted strategies based on their heterogeneity to reduce the risks of multinational operations and extend the duration of Chinese foreign subsidiaries in the international market.

【Keywords】 foreign subsidiary survival; institutional distance; enterprise ownership; internationalization experience; survival analysis;

【DOI】

【Funds】 The National Social Science Fund of China (18AGL004)

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(Translated by CHEN Wen)

    Footnote

    [1]. ① The probability of risks refers to the probability of an event or a change of status occurring to an individual in time t but not before time t. [^Back]

    [2]. ① Due to the presence of missing data and data removal, namely that the subsidiaries abroad still exist after the period of observation, the time of survival calculated here refers to the minimum estimate of the actual survival duration. [^Back]

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This Article

ISSN:1002-4670

CN: 11-1692/F

Vol , No. 09, Pages 115-132

September 2019

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Article Outline

Abstract

  • Introduction
  • 1 Literature review and hypothesis
  • 2 Variable selection and data source
  • 3 Preliminary analysis on the survival of foreign subsidiaries of TNCs
  • 4 Analysis on influencing factors of the duration of enterprises’ OFDI
  • 5 Conclusion and recommendation
  • Footnote

    References