An investigation into the factors contributing to the performance of the overseas subsidiaries of emerging multinationals from India

Abstract

This dissertation consists of three essays investigating the factors contributing to the performance and location choices of the foreign subsidiaries of emerging multinationals (EMNCs). It does so drawing upon the literature on organizational (un)learning (Levitt & March, 1988; March, 1991; Tsang & Zahra, 2008), knowledge transfer (Kogut & Zander, 1993; 2003), and the business group literature (Khanna & Yafeh, 2007; Yiu, Lu, Bruton, & Hoskisson, 2007; Chari, 2013; Gaur, Kumar, & Singh, 2014). The first essay reexamines all the divergent relationships, explored in the extant literature and their theoretical underpinnings between subsidiary's own experience and the performance of focal subsidiary in the host economy. By integrating organizational (un)learning, international business and strategy literature, this study predicts an new, unified three-stage, horizontal 'S'-shaped relationship between subsidiary experience and focal subsidiary performance for EMNCs. Empirical results based on a proprietary, longitudinal data from 695 foreign subsidiaries of 221 Indian EMNCs (those were a part of the BSE 500 index as on November, 2013) for seven years, starting from 2006-07 to 2012-13 found support for most of the hypothesized relationships. The second essay explores how accumulated international experiences of EMNCs aid successful international expansion. Pursuing a subsidiary level analysis, this study advances and tests the relationship between parent firm's experiential knowledge (i.e. general international experience and host country specific experience), and the performance of its foreign subsidiaries of EMNCs. By integrating the learning theory, organizational capability and knowledge transfer literature, this study predicts an overall U-shaped relationship between parent firm's general international experience and host country experience and focal subsidiary performance. The results of this study strongly support the hypothesized relationships between different experience profiles and foreign subsidiary performance. The third essay illustrates the temporal and permanent impact of the level of economic development of the host country relative to that of the home country on subsidiary performance of EMNCs. By integrating the institutional and learning theory literature, I argue that level of economic development in host economies provide opportunities and impose constraints on EMNCs. Though in early stage of internationalization, EMNCs may experience more hostile environment and unfavorable policies in more developed economies, over time, generative learning delivers positive performance outcomes. However, in similar or less developed economies, EMNCs may enjoy an early success, however, over time, adaptive learning leads to negative performance outcomes. These predictions are also tested empirically with proprietary, longitudinal data from 695 foreign subsidiaries of 221 Indian EMNCs (those were a part of the BSE 500 index as on November, 2013) for seven years, starting from 2006-07 to 2012-13. I find supporting evidence for most of our hypothesized relationships. In summary, the results of this dissertation might provide a holistic presentation of the effects of MNC experience, knowledge transfer and firm specific ownership advantages on subsidiary performance and its contingencies; thus will enrich the growing literature on internationalization of EMNCs.