Subnational institution, regional and foreign subsidiaries’ characteristics and foreign subsidiary performance

Abstract

This study examines how different aspects of subnational institutions influence foreign subsidiary performance based on the institution-based view. We propose that different development levels of subnational economic, political, and social institutions can facilitate and constrain foreign subsidiary performance in different ways and magnitudes, and such relationships are contingent on the different characteristics of subnational regions and foreign subsidiaries. Using panel data of 87,782 foreign subsidiaries established in China during the period 1998-2008, our results show that the development level of subnational economic, political, and social institutions has positive influence on foreign subsidiary performance, and this positive relationship is stronger when subnational regional competitive and instable levels are low, and when foreign subsidiaries are larger and older.