TY - JOUR
T1 - Which country matters? Institutional development and foreign affiliate performance
AU - Chan, Christine M.
AU - Isobe, Takehiko
AU - Makino, Shige
PY - 2008/11
Y1 - 2008/11
N2 - This article investigates the effect of the level of institutional development of host countries on the level of and variation in foreign affiliate performance. Institutional development is defined as the extent to which the economic, political, and social institutions in a host country are developed and are favorable for foreign affiliates. A longitudinal analysis of over 30,000 foreign affiliate-year cases that include 6,985 foreign affiliates in 38 host countries between 1996 and 2001 shows that foreign affiliate performance varies noticeably both across and within host countries. The results suggest that the level of institutional development, as determined by the Institutional Development Index (IDI), a new measurement developed in this study, has a strong negative curvilinear relationship with the variation in foreign affiliate performance and a negative effect on the level of foreign affiliate performance. The implications for future research, practice, and policymaking are discussed.
AB - This article investigates the effect of the level of institutional development of host countries on the level of and variation in foreign affiliate performance. Institutional development is defined as the extent to which the economic, political, and social institutions in a host country are developed and are favorable for foreign affiliates. A longitudinal analysis of over 30,000 foreign affiliate-year cases that include 6,985 foreign affiliates in 38 host countries between 1996 and 2001 shows that foreign affiliate performance varies noticeably both across and within host countries. The results suggest that the level of institutional development, as determined by the Institutional Development Index (IDI), a new measurement developed in this study, has a strong negative curvilinear relationship with the variation in foreign affiliate performance and a negative effect on the level of foreign affiliate performance. The implications for future research, practice, and policymaking are discussed.
KW - Emerging economies
KW - Institution-based view of foreign affiliate performance
KW - Institutional development index
KW - Legitimacy and competition
KW - Risk and return in foreign direct investment
KW - Strategic choice under uncertainty
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U2 - 10.1002/smj.705
DO - 10.1002/smj.705
M3 - Article
AN - SCOPUS:55349132382
VL - 29
SP - 1179
EP - 1205
JO - Strategic Management Journal
JF - Strategic Management Journal
SN - 0143-2095
IS - 11
ER -