Institutional distance and foreign subsidiary survival: the moderating perspective of enterprise ownership and internationalization experience
(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;
(Translated by CHEN Wen)
. 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]
. 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]
 Xiao, X., He, W. & Guo, X. Management World (管理世界), (2): 77–89 (2014).
 Nitsch, V. Die Another Day: Duration in German Import Trade. Review of World Economics, 2009, 145(1): 133–154.
 Esteve-Peresz, S., Requena-Silvente, F. and Vicente, J. The Duration of Firm-destination Export Relationships: Evidence from Spain, 1997–2006. Economic Inquiry, 2013, 51(1): 159–180.
 Chen, Y., Li, Y. & Zhou, S. Economic Research Journal (经济研究), (7): 48–61 (2012).
 Wei, Z. & Li, Z. Journal of Finance and Economics (财经研究), 39(8): 51–63 (2013).
 Qi, J. & Yang, L. World Economy Study (世界经济研究), (6): 55–61 (2014).
 Du, J. & Wang, L. Contemporary Economics (当代经济), (9): 83–85 (2017).
 Cheng, S. & Liu, D. Economic Survey (经济经纬), 35(4): 50–58 (2018).
 Yi, C., Li, S. & Zhang, J. Journal of Finance and Economics (财经研究), 41(8): 4–19 (2015).
 Ye, J. & Zhao, Y. Journal of International Trade (国际贸易问题), (1): 134–144(2016).
 Ferragine, A., Pittiglio, R. and Reganati, F. Multinational Status and Firm Exit in the Italian Manufacturing and Service Sectors. Structural Change & Economic Dynamics, 2012, 23(4): 363–372.
 Bai, T., Jiao, J., Jin. Z. et al. Journal of Tsinghua University Science and Technology (清华大学学报(自然科学版)), (2): 280–288(2013).
 Zheng, J. & Liu, X. International Business (国际商务-对外经贸大学学报), (5): 66–73(2014).
 Mao, Q. & Xu, J. Journal of World Economy (世界经济), 37(8): 98–125 (2014).
 Giarratana, M.S. and Torrisi, S. Foreign Entry and Survival in a Knowledge-intensive Market: Emerging Economy Countries’ International Linkages, Technology Competences, and Firm Experience. Strategic Entrepreneurship Journal, 2010, 4(1): 85–104.
 Yan, D. Nankai Economic Studies (南开经济研究), (5): 75–97 (2011).
 Jiang, G. World Economy Studies (世界经济研究), (8): 37–47(2015).
 North, D.C. Institutions, Institutional Change, and Economic Performance. Cambridge University Press, 1990: 151–155.
 Song, Y. & Li, Y. Nankai Business Review (南开经济评论), 16(1): 70–82 (2013).
 Kostova, T. Transnational Transfer of Strategic Organizational Practices: A Contextual Perspective. Academy of Management Review, 1999, 24(2): 308–324.
 Xu, D., Pan, Y. and Beamish, P. W. Management International Review, 2004, 44(3): 285–307.
 Dimaggio, P. J. and Powell, W. W. The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields. American Sociological Review, 1983, 48(2): 147–160.
 Xu, X. doctoral thesis, Huaqiao University, (2017).
 Gaur, A. S. and Lu, J. W. Ownership Strategies and Survival of Foreign Subsidiaries: Impacts of Institutional Distance and Experience. Journal of Management, 2007, 33(1): 84–110.
 Rottig, D. Institutional Distance, Social Capital, and the Performance of Foreign Acquisitions in the United States. Florida: Florida Atlantic University, 2008.
 Higoon, D. A. and Antolin, M. M. Multinationality, Foreignness and Institutional Distance in the Relation Between R&D and Productivity. Research Policy, 2012, 41(3): 592–601.
 Ionascu, D., Meyer, K. E. and Estrin, S. Institutional Distance and International Business Strategies in Emerging Economies. work paper, 2004.
 Pan, Z., Yin, H. & Lu, M. Management World (管理世界), (7): 103–115 (2008).
 Zhang, R. doctoral thesis, Huaqiao University, (2017).
 Peng, M. W. Towards an Institutional Based View of Business Strategy. Asia Pacific Journal of Management, 2002, 19(23): 251–267.
 Michailova, S. and Hutchings, K. National Cultural Influences on Knowledge Sharing: A Comparison of China and Russia. Journal of Management Studies, 2006, 43(3): 383–405.
 Johanson, J. and Vahlne, J.E. The Internationalization Process of the Firm - A Model of Knowledge Development and Increasing Foreign Market Commitments. Journal of International Business Studies, 1977, 8(1): 23–32.
 Kostova, T. and Zaheer, S. Organizational Legitimacy under Conditions of Complexity The Case of the Multinational Enterprise. Academy of Management Review, 1999, 24(1): 64–81.
 Siegel, J. I., Licht, A. N. and Schwartz, S. H. Egalitarianism, Cultural Distance, and Foreign Direct Investment: A New Approach. Organization Science, 2012, 24(4): 1174–1194.
 Souza, C. D. and Peretiatko, R. Cultural Impact on Investment Destination Choice of US-Multinational Corporation in Australia. Cross Cultural Management: An International Journal, 2005 (3): 14–31.
 Flores, R. G. and Aguilera, R. V. Globalization and Location Choice: An Analysis of US Multinational Firms in1980 and 2000. Journal of International Business Studies, 2007, 38(7): 1187–1210.
 Ang, S. H., Benischke, M. H. and Doh, J. P. The Interactions of Institutions on Foreign Market Entry Mode. Strategic Management Journal, 2015, 36(10): 1536–1553.
 Shi, W. S., Markoczy, L. and Stan, C. V. The Continuing Importance of Political Ties in China. The Academy of Management Perspectives, 2014, 28(1): 57–75.
 Li, Z. & Shen, Y. Times Finance (时代金融), (26): 10–11 (2014).
 Buckley, P. J., Clegg, L. J. and Cross, A. R. The Determinants of Chinese Outward Foreign Direct Investment. Journal of International Business Studies, 2009, 40(2): 353.
 Inoue, C., Lazzarini, S. and Musacchio, A. Leviathan as a Minority Shareholder: Firm-level Implications of Equity Purchases by the State. Academy of Management Journal, 2013, 56(6): 1775–180.
 Vaaler, P. M. and Schrage, B. N. Residual State Ownership, Policy Stability and Financial Performance Following Strategic Decisions by Privatizing Telecoms. Journal of International Business Studies, 2009, 40(4): 621–641.
 Li, X. Jianghan Forum (江汉论坛), (11): 16–18 (2011).
 Cui, L. & Jiang, F. State Ownership on Firms’ FDI Ownership Decisions under Institutional Pressure: A Study of Chinese Outward-investing Firms. Journal of International Business Studies, 2012, 43(3), 264–284.
 Perlmutter, H. V. The Tortuous Evolution of the Multinational Corporation. Columbia Journal of World Business, 1969 (4): 9–18.
 Sohn, J. H. D. Social Knowledge as a Control System: A Proposition and Evidence from the Japanese FDI Behavior. Journal of International Business Studies, 1994, 25(2): 295–324.
 Luo, Y. and Peng, M.W. Learning to Compete in a Transition Economy: Experience, Environment, and Performance. Journal of International Business Studies, 1999, 30(2): 269–295.
 Mitchell, W., Shaver, J. M. and Yeung, B. Getting There in a Global Industry: Impacts on Performance of Changing International Presence. Strategic Management Journal, 1992, 13(6): 419–432.
 Zaheer, S. and Mosakowski, E. The Dynamics of the Liability of Foreignness: A Global Study of Survival in Financial Services. Strategic Management Journal, 1997, 18(6): 439–463.
 Shenkar, O. Beyond Cultural Distance: Switching to a Friction Lens in the Study of Cultural Differences. Journal of International Business Studies, 2012, 43(1): 12–17.
 Li, T. doctoral thesis, Nanjing Normal University, (2015).
 Li, Y., Lou, P. & Fan, P. Cross-Cultural Management (跨文化管理), (2): 98–111 (2017).
 Yi, C., Xu, X., Liu, X. et al. World Economy Studies (世界经济研究), 112: 122–137 (2018).
 Kogut, B. and Singh, H. The Effect of National Culture on the Choice of Entry Mode. Journal of International Business Studies, 1988,19(3): 411–432.