What determines MNC subsidiary performance? Evidence from China

The paper challenges the view that MNC dictates a subsidiary’s business strategy and operations in accordance with the integration-responsiveness (IR) framework. The paper integrates the IR framework with contingency theory to argue that a subsidiary needs discretion to craft its own effective business strategy in light of the environmental exigencies facing the subsidiary in the host country. It may do so at variance with the MNC’s strategy. Evidence from China supports that subsidiary managers should take strategic initiatives in response to specific host country environment. 2013 Published by Elsevier Inc. § The authors would like to acknowledge the constructive comments by Mike Harvey on a previous version of this paper. * Corresponding author. Tel.: +61 7 55951695. E-mail addresses: [email protected] (X. Tian), [email protected] (J.W. Slocum). 1 Tel.: +1 214768 3157. 2 Cognitive dissonance refers to an uncomfortable feeling caused by holding two contradictory ideas simultaneously. In social psychology, the theory of cognitive dissonance argues that cognitive dissonance is a source of subjective bias because people have a motivational drive to reduce dissonance by changing their attitudes, beliefs, and behaviours, or by justifying or rationalizing their attitudes, beliefs, and behaviours. This kind of biases is very likely to happen in the process of subjective data collection. 3 The sample contains, for example, 62 observations in Lin and Hsieh (2009); 351 observations in Johnson et al. (2008); 147 in Roth and Morrison (1990); 126 in Birkinshaw and Morrison (1995); 171 observations in Taggart (1997, 1998); 142 observations in Yu (2005); and 50 observations in Jarillo and Martinez (1990). G Model WORBUS-631; No. of Pages 10 Please cite this article in press as: Tian, X., & Slocum, J. W. What determines MNC subsidiary performance? Evidence from China. Journal of World Business (2013), http://dx.doi.org/10.1016/j.jwb.2013.08.002