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The role of subsidiary learning behavior and absorptive capacity in foreign subsidiary expansion

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  • Park, Hyeyoun
  • Chung, Chris Changwha

Abstract

We examine how subsidiaries can implement business expansion successfully to capitalize on growth potentials. Building on our baseline hypothesis, which examines the effect of the extent of business expansion on subsidiary divestment, we identify the boundary condition of the tendency of subsidiary’s learning behavior in foreign expansion. Specifically, we argue that subsidiaries that expand multiple businesses through competence-creating learning behaviors are more likely to be divested due to increasing complexity. We further suggest a remedial condition to offer a viable approach to implement business expansion through competence-creating learning successfully. Based on a sample of 6040 foreign subsidiaries operating over 14 years, we show that affiliates are more likely to expand into unfamiliar business domains successfully if they have a higher level of absorptive capacity.

Suggested Citation

  • Park, Hyeyoun & Chung, Chris Changwha, 2019. "The role of subsidiary learning behavior and absorptive capacity in foreign subsidiary expansion," International Business Review, Elsevier, vol. 28(4), pages 685-695.
    • Handle: RePEc:eee:iburev:v:28:y:2019:i:4:p:685-695
    DOI: 10.1016/j.ibusrev.2019.01.006
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    Cited by:

    1. Schmid, David & Morschett, Dirk, 2020. "Decades of research on foreign subsidiary divestment: What do we really know about its antecedents?," International Business Review, Elsevier, vol. 29(4).
    2. Wang, Meixia & Wang, Yunxia & Mardani, Abbas, 2023. "Empirical analysis of the influencing factors of knowledge sharing in industrial technology innovation strategic alliances," Journal of Business Research, Elsevier, vol. 157(C).
    3. Ozkan, Kubilay S.L., 2020. "International market exit by firms: Misalignment of strategy with the foreign market risk environment," International Business Review, Elsevier, vol. 29(6).
    4. Hutzschenreuter, Thomas & Harhoff, Philippa-Luisa, 2021. "The accelerating effect of institutional environment unfamiliarity on subsidiary portfolio expansion in a new host country," International Business Review, Elsevier, vol. 30(3).
    5. Garg, Garima & Sewak, Mayank & Sharma, Anurag, 2022. "Learning from Older Siblings: Impact On Subsidiary Performance," International Business Review, Elsevier, vol. 31(3).
    6. Ryan W. Tang & Ying Zhu & Hongbo Cai & Jinrong Han, 2021. "De-internationalization: A Thematic Review and the Directions Forward," Management International Review, Springer, vol. 61(3), pages 267-312, June.
    7. Ali, Abdilahi & Ali, Syed Imran, 2020. "Antecedents of the propensity to learn management practices and their impacts on firm outcomes in emerging markets: A Bayesian Model Averaging approach," International Business Review, Elsevier, vol. 29(4).
    8. Zhang, Tingting (Grace) & You, Yu, 2021. "Scale or efficiency? Performance shortfall and engagement in production activities of foreign subsidiaries in China," Journal of International Management, Elsevier, vol. 27(1).

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