Japanese Global Management: Theory and Practice at Overseas Subsidiaries

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Culture and international management: a review | Emerald Insight

Ask a Specialist! Drafting and Negotiating JV Contracts. Risk Management concerning Direct Investment into P. China by a Foreign Company. However, other aspects related to the institutional environment could have a key role to the structure and organizational behavior. For instance, Hsu and Pereira found the importance of the moderation effect of organizational learning on internationalization and performance.

According to Delios and Henisz , a firm tries to accumulate experience prior to entering hazardous countries. Hutzschenreuter and Horstkotte found that international experience attenuates the negative effect of cultural distance on firm performance. Thus, it is expected that local experience could moderate the impact of CND on the subsidiary longevity, thus:.

Japanese Global Management - Theory And Practice At Overseas Subsidiaries Hardcover

H Local experience moderates the relationship between CNDs and the hazard of subsidiary survival. The scope of this research is to examine the survival of foreign MNE subsidiaries established in European countries by applying the perspective of CND, local experience, and their moderating effects. We used secondary database published by Toyo Keizai. We used Japanese subsidiaries as a background to test our hypotheses based on the following aspects. Moreover, Japan is the only Asian country to be among the top five in outflow foreign direct investments FDIs.

Second, Japanese companies are considered in the ranking of the Fortune Global , which lists 62 firms among the largest in the world. Third, the availability of data at the subsidiary level is very limited. Most of the available data consists of the firm level and aggregate data. Thus, this is an opportunity to use a database of Japanese subsidiaries to test empirically many critical issues on international business literature, such as CND.

The selection to analyze foreign investment in European countries during the period is motivated by the following reasons. The period of analysis covers a recent transformation that the European continent has experienced in terms of economic aspects concerning the crisis with political and institutional changes. Based on these arguments, it would be an appropriate time and context to investigate the cross-national effects on survival of these international operations.

Our dependent variable is subsidiary survival. The analyzed event is failure, while survival is the continuity of data.

Isomorphism and foreign subsidiary staffing policies

There is another important concept in survival analysis, the hazard ratio. This is a risk assessment that is considered essential to perform the survival analysis. The model has its description as follows:. The regression analysis shows variables that positively or negatively contribute to the subsidiary survival. The advantage that the hazard ratio has any relationship to not only considers the total number of subsidiaries linearly, but also addresses the observation time.

This technique demonstrates effectiveness in cases where there is no uniformity of time, a characteristic found in the survival analysis. The independents variables are nine CND and local experience. The other independent variable is local experience, which measures total experience in years of the subsidiary in the local market.

For this information, we considered the year of entry declared in the country in the Toyo Keizai dataset, which is the beginning of the activities of that subsidiary.

We used the control variable related to the size of the subsidiary, country, and continent. To determine subsidiary size, it considers the number of employees reported in the directory of Toyo Keizai data. The sample with 14, observations from foreign subsidiaries was subjected to preliminary tests and analyses to verify the correlation indices between the variables. The correlation results can be seen in Table 1. The index revealed a very weak degree of correlation between the variables COHEN, and did not indicate correlation problems. The results Table 2 confirm the impact of five out of nine CNDs on subsidiary survival.

The models were run separately, considering the effect of each distance and local experience with the control variables Models 1 to 9. The results highlight that five distances were significant. Four distances i. The findings show that CNDs related to demographic, political, financial, and knowledge negatively impact subsidiary survival, while cultural distance has a positive impact on survival.

The characteristics presents in Demographic CND can highlight the existing challenge between different countries that the firm should consider for its effectiveness. It means that this distance is a threat to subsidiary survival, implying that politically distant countries tend to cause a greater threat to their adaptation. The findings corroborate to the findings of Dai et al. In addition, Delios and Henisz stated that the political distance can be a problem for multinational companies to adapt and, thus, impede their continuity.

The result is similar to the results of Chung and Beamish , Tsang and Yip , and Fang et al. Delios and Henisz argued that Japanese firms appear to make investment decisions regardless of the level of uncertainty in the host environment and when considering financial aspects. It means that this CND is a threat to subsidiary survival and is similar to the results of Fang et al. They revealed that country differences matter when transferring knowledge to the subsidiary.

An interesting result is related to the Cultural CND. It presents an inverse implication than expected in H9. This implies that countries with higher cultural distance exhibit a higher likelihood of subsidiary survival. Some researchers have highlighted such findings as likely. According to Barkema et al. Furthermore, the results demonstrate a meaningful connection between local experience and survival.

This provides opportunities for accumulated experience to be transferred to its knowledge to deal with business operations. Finally, we analyzed whether the moderating effect of the local experience could reduce the impact of CNDs on subsidiary survival. It implies that local experience moderates the negative effect between the economic distance between countries and subsidiary survival.

As the experience in the local market increases, the effect of economic distance becomes lower for subsidiary longevity. In this way, it partially supports H Some general discussions about our findings in the empirical analysis could be realized. First, one implication of this research is that CNDs and local experience matter to understand the longevity of foreign subsidiaries. Moreover, local experience is an important factor to moderate differences related to economic aspects between countries. Evans and Mavondo argued that when managers are responsible for a decision involving countries, they must exert greater efforts to understand foreign markets.

Our study provides the benefits of recognizing multidimensional CNDs as important indicators for subsidiary survival. By using more than one CND, it is possible to better analyze which distance would be valuable to support decision making in international business and, consequently, increase the likelihood of survival of foreign operations in different markets. Therefore, the process of market selection can achieve strong benefits using multidimensional CNDs, providing information to the MNEs to be prepared to answer, confront, and fit their goals towards market challenge levels.

Finally, by using longitudinal information, managers can better engage in strategies for subsidiary survival, select markets with more accuracy, decide the entry mode, and become more effective in international business operations. This paper investigates the relationship of CND and local experience on subsidiary longevity.

The findings contribute to the understanding of how subsidiaries are impacted by CND among the countries involved in the relationship between the parent firm and its subsidiary in different markets. Some points need to be highlighted concerning the contribution to the international business field. First, the empirical nature of this research broadens the investigation of survival with many CND aspects. It extended prior studies by exploring multiple dimensions of distances on firm performance BERRY et al.

It shows the existence of a promising field of research on the action of CND and survival analysis. Second, the accumulation of local experience concentrates another important aspect for decreasing the hazard of mortality. Although prominently invested in the examination of survival, no prior study had expanded the local experience in many constructs in the field of CND. This research shows the possibility of investigating this perspective and contributes in this direction. Moreover, although we analyzed different moderation effects of local experience and CND, our findings validate that accumulated experience in the local market moderates the negative relationship between economic distance and subsidiary survival.

Future studies could broaden empirical analysis by testing other variables that could moderate the relationship between CND and firm performance. Third, the findings indicate that five CND play a key role in understanding the subsidiary longevity. It implies the similarities analysis decision and the inequalities between countries involved in the internationalization process. It is necessary that MNEs analyze the differences between countries in-depth, and take into consideration how extreme is the range of CND, as individual observations of its elements.

In this way, might be better strategically advance to understanding of these distances and the confrontation scenario for firm survival. Fourth, through a longitudinal analysis, we found more precise evidence about which CNDs matter for subsidiary survival, compared to cross-sectional analysis. Due to the lack of understanding the different institutional perspectives involved in international business, we encourage researchers to use multidimensional CNDs in longitudinal analysis for future studies.

Engaging in an analysis over an extended period helps to elucidate the internationalization phenomenon. As a managerial contribution, the results show important evidence of CND and may provide relevant information to managers concerning the strategic and decision-making processes. Survival in the market exceeds financial performance barriers, as there are constructs related to CND that can contribute to the success in operating internationally.

Therefore, CND has been considered due to the risk of investment in the selection of countries for the establishment of foreign subsidiaries. For the academic implications, it is expected that these findings will encourage the development of more research on institutional approaches. We need to better understand how CND relates among them and other variables, and not only restricted to subsidiary survival.

Although this study provides important findings for international business literature, this research presents some limitations. First, only exogenous features, or external environment variables, of the CNDs were applied. Investigating endogenous features in interaction with exogenous may provide opportunities for further research. Second, our analysis is based on subsidiaries of Japanese firms in European countries, which could have an influence on certain special characteristics of these multinational firms or with the specific context of this region.

Future studies may look to different regions, country of origin of the MNEs, and time management to confirm our findings or even reveal other discoveries. Third, due to the availability of data, we could not control for firm industries. Some industries could be less sensitive to CND. Further studies could control for differences related to industry sector. Furthermore, it indicates that future research should investigate the relationship with expatriates, entry mode, and the ability to adapt, learn, and transfer knowledge among MNE networks. Many of challenges could be exploited in further research to analyze in-depth the impact of diversity between countries and maximize the likelihood of attaining success in the internationalization process.

ANDO, N. Determinants of foreign subsidiary staffing by service firms.

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