Country-level Mechanisms and Subsidiary Performance and Functioning

Research in International Business and Strategy has focused on Multinational Enterprise (MNE) subsidiaries located in foreign host countries, particularly examining the mechanisms that influence their outputs. Extending this scholarship, this dissertation explores country-level mechanisms and their impact on the performance and functioning of subsidiaries in host countries through three interrelated studies, integrating different theoretical frameworks. The first study investigates how the colocation of multiple subsidiaries within the same MNE, (i.e., subsidiary grouping) affects the performance of individual subsidiaries, with attention to differences based on subsidiary age. We further develop theoretical arguments regarding how younger and older subsidiaries benefit from grouping, especially under conditions of uncertainty, proposing that uncertainty affects younger vs older subsidiaries differently. The second study extends this analysis by positing that co-located subsidiaries develop new benchmarks for comparing their own performance, which serves as a reference point influencing their risk-taking behavior. We explore how subsidiaries' responses to performance deviations from these benchmarks vary, depending on whether their performance is above or below the reference point, and how this behavior differs by subsidiary age. The third study integrates cultural dimensions to examine how subsidiaries respond when their performance surpasses that of other co-located subsidiaries. We argue that when performance exceeds aspiration levels, the change in risk-taking behavior depends on the cultural context of the host country, with each cultural dimension exerting a distinct influence on overperforming subsidiaries. Theoretical contributions and practical insights are developed in each study, along with suggestions for future research.