IDEAS home Printed from https://ideas.repec.org/a/pal/abaman/v20y2021i2d10.1057_s41291-019-00087-x.html
   My bibliography  Save this article

Seeing the tree and the forest: Japanese auto firm multinational dispersion, cultural distance, and foreign manufacturing subsidiary ownership levels

Author

Listed:
  • K. Skylar Powell

    (Western Washington University)

  • Eunah Lim

    (Western Washington University)

  • Naoki Ando

    (Hosei University)

Abstract

Firms may pursue greater equity ownership in foreign manufacturing subsidiaries to limit internal costs of coordinating and communicating with culturally dissimilar host-country partners. We offer that this relationship is strengthened when a firm’s multinational network is more geographically dispersed, or dispersed in terms of national cultural contexts, because a highly dispersed multinational network may also make coordination difficult. With a panel of 7422 firm-year observations (1993–2016) from 541 foreign manufacturing subsidiaries (32 Japanese parent automotive firms), we find the positive cultural distance and equity ownership relationship is positively moderated by geographic and cultural dispersion within parent firms’ multinational networks.

Suggested Citation

  • K. Skylar Powell & Eunah Lim & Naoki Ando, 2021. "Seeing the tree and the forest: Japanese auto firm multinational dispersion, cultural distance, and foreign manufacturing subsidiary ownership levels," Asian Business & Management, Palgrave Macmillan, vol. 20(2), pages 163-187, April.
    • Handle: RePEc:pal:abaman:v:20:y:2021:i:2:d:10.1057_s41291-019-00087-x
    DOI: 10.1057/s41291-019-00087-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41291-019-00087-x
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1057/s41291-019-00087-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Keith D. Brouthers & George Nakos, 2004. "SME Entry Mode Choice and Performance: A Transaction Cost Perspective," Entrepreneurship Theory and Practice, , vol. 28(3), pages 229-247, May.
    2. Powell, K. Skylar & Lim, Eunah, 2018. "‘Misfits’ DO try to fit: Deviations from firm-specific optimal multinationality and subsequent market entry or exit in US law firms," Journal of Business Research, Elsevier, vol. 82(C), pages 141-148.
    3. Buckley, Peter J. & Tian, Xiaowen, 2017. "Internalization theory and the performance of emerging-market multinational enterprises," International Business Review, Elsevier, vol. 26(5), pages 976-990.
    4. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0, December.
    5. Verbeke, Alain & Kano, Liena, 2016. "An internalization theory perspective on the global and regional strategies of multinational enterprises," Journal of World Business, Elsevier, vol. 51(1), pages 83-92.
    6. Pavitt, Keith, 1998. "Technologies, Products and Organization in the Innovating Firm: What Adam Smith Tells Us and Joseph Schumpeter Doesn't," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 7(3), pages 433-452, September.
    7. Jaideep Anand & Andrew Delios, 1997. "Location Specificity and the Transferability of Downstream Assets to Foreign Subsidiaries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 28(3), pages 579-603, September.
    8. Rakesh B. Sambharya & Kunal Banerji, 2006. "The effect of keiretsu affiliation and resource dependencies on supplier firm performance in the Japanese automobile industry," Management International Review, Springer, vol. 46(1), pages 7-37, February.
    9. James R. Markusen & Keith E. Maskus, 2002. "Discriminating Among Alternative Theories of the Multinational Enterprise," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 694-707, November.
    10. John H Dunning, 1998. "Location and the Multinational Enterprise: A Neglected Factor?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(1), pages 45-66, March.
    11. Anthony Goerzen & Paul W. Beamish, 2003. "Geographic scope and multinational enterprise performance," Strategic Management Journal, Wiley Blackwell, vol. 24(13), pages 1289-1306, December.
    12. Kurt A. Desender & Ruth V. Aguilera & Mónica Lópezpuertas-Lamy & Rafel Crespi, 2016. "A clash of governance logics: Foreign ownership and board monitoring," Strategic Management Journal, Wiley Blackwell, vol. 37(2), pages 349-369, February.
    13. Alain Verbeke & Lei Li & Anthony Goerzen, 2009. "Toward More Effective Research on the Multinationality-Performance Relationship," Management International Review, Springer, vol. 49(2), pages 149-161, April.
    14. Ilhan-Nas, Tulay & Okan, Tarhan & Tatoglu, Ekrem & Demirbag, Mehmet & Wood, Geoffrey & Glaister, Keith W., 2018. "Board composition, family ownership, institutional distance and the foreign equity ownership strategies of Turkish MNEs," Journal of World Business, Elsevier, vol. 53(6), pages 862-879.
    15. Megan Min Zhang & Paul W. Beamish, 2019. "An institutional response model to economic liberalization: Japanese MNEs’ ownership choices in China," Asia Pacific Journal of Management, Springer, vol. 36(1), pages 33-59, March.
    16. Jan Johanson & Jan-Erik Vahlne, 1977. "The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 8(1), pages 23-32, March.
    17. Keith D Brouthers, 2013. "A retrospective on: Institutional, cultural and transaction cost influences on entry mode choice and performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(1), pages 14-22, January.
    18. Naoki Ando, 2012. "The ownership structure of foreign subsidiaries and the effect of institutional distance: a case study of Japanese firms," Asia Pacific Business Review, Taylor & Francis Journals, vol. 18(2), pages 259-274, April.
    19. K Skylar Powell, 2014. "From M–P to MA–P: Multinationality alignment and performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(2), pages 211-226, February.
    20. Tony W Tong & Jeffrey J Reuer, 2007. "Real options in multinational corporations: organizational challenges and risk implications," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(2), pages 215-230, March.
    21. López-Duarte, Cristina & Vidal-Suárez, Marta M., 2013. "Cultural distance and the choice between wholly owned subsidiaries and joint ventures," Journal of Business Research, Elsevier, vol. 66(11), pages 2252-2261.
    22. Jon I Martinez & J Carlos Jarillo, 1989. "The Evolution of Research on Coordination Mechanisms in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 20(3), pages 489-514, September.
    23. Malhotra, Shavin & Sivakumar, K. & Zhu, PengCheng, 2011. "Curvilinear relationship between cultural distance and equity participation: An empirical analysis of cross-border acquisitions," Journal of International Management, Elsevier, vol. 17(4), pages 316-332.
    24. Powell, K. Skylar & Lim, Eunah, 2018. "Motive meets experience: Cultural distance, motive, related experience, and foreign subsidiary ownership structure," Journal of Business Research, Elsevier, vol. 92(C), pages 81-92.
    25. Kendall Roth, 1992. "International Configuration and Coordination Archetypes for Medium-Sized Firms in Global Industries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(3), pages 533-549, September.
    26. Christine M Chan & Shige Makino, 2007. "Legitimacy and multi-level institutional environments: implications for foreign subsidiary ownership structure," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 621-638, July.
    27. Heather Berry & Mauro F Guillén & Nan Zhou, 2010. "An institutional approach to cross-national distance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1460-1480, December.
    28. Bruce Kogut & Harbir Singh, 1988. "The Effect of National Culture on the Choice of Entry Mode," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(3), pages 411-432, September.
    29. Malhotra, Shavin & Lin, Xiaohua & Farrell, Carlyle, 2016. "Cross-national uncertainty and level of control in cross-border acquisitions: A comparison of Latin American and U.S. multinationals," Journal of Business Research, Elsevier, vol. 69(6), pages 1993-2004.
    30. W Chan Kim & Peter Hwang, 1992. "Global Strategy and Multinationals' Entry Mode Choice," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(1), pages 29-53, March.
    31. Keith D. Brouthers & Lance Eliot Brouthers, 2003. "Why Service and Manufacturing Entry Mode Choices Differ: The Influence of Transaction Cost Factors, Risk and Trust," Journal of Management Studies, Wiley Blackwell, vol. 40(5), pages 1179-1204, July.
    32. Jean-François Hennart, 2019. "Digitalized service multinationals and international business theory," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1388-1400, October.
    33. Klaus E. Meyer & Ram Mudambi & Rajneesh Narula, 2011. "Multinational Enterprises and Local Contexts: The Opportunities and Challenges of Multiple Embeddedness," Journal of Management Studies, Wiley Blackwell, vol. 48(2), pages 235-252, March.
    34. Farok J. Contractor & Vikas Kumar & Sumit K. Kundu & Torben Pedersen, 2010. "Reconceptualizing the Firm in a World of Outsourcing and Offshoring: The Organizational and Geographical Relocation of High‐Value Company Functions," Journal of Management Studies, Wiley Blackwell, vol. 47(8), pages 1417-1433, December.
    35. Megan Min Zhang, 2015. "Cross-national distance and insidership within networks: Japanese MNCs' ownership strategies in their overseas subsidiaries," Asia Pacific Business Review, Taylor & Francis Journals, vol. 21(3), pages 403-423, July.
    36. Slangen, Arjen H.L. & van Tulder, Rob J.M., 2009. "Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research," International Business Review, Elsevier, vol. 18(3), pages 276-291, June.
    37. Contractor, Farok J. & Kumar, Vikas & Kundu, Sumit K., 2007. "Nature of the relationship between international expansion and performance: The case of emerging market firms," Journal of World Business, Elsevier, vol. 42(4), pages 401-417, December.
    38. Jiatao Li & Stephen Guisinger, 1992. "The Globalization of Service Multinationals in the “Triad” Regions: Japan, Western Europe and North America," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 23(4), pages 675-696, December.
    39. Liena Kano, 2018. "Global value chain governance: A relational perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(6), pages 684-705, August.
    40. Lo, Fang-Yi, 2016. "Factors leading to foreign subsidiary ownership: A multi-level perspective," Journal of Business Research, Elsevier, vol. 69(11), pages 5228-5234.
    41. Powell, K. Skylar & Lim, Eunah, 2017. "Investment motive as a moderator of cultural-distance and relative knowledge relationships with foreign subsidiary ownership structure," Journal of Business Research, Elsevier, vol. 70(C), pages 255-262.
    42. Petr MATOUS & TODO Yasuyuki, 2015. ""Dissolve the Keiretsu , or Die": A longitudinal study of disintermediation in the Japanese automobile manufacturing supply networks," Discussion papers 15039, Research Institute of Economy, Trade and Industry (RIETI).
    43. repec:bla:jomstd:v:47:y:2010:i:s2:p:1417-1433 is not listed on IDEAS
    44. Yoshikawa, Toru & Phan, Phillip H., 2003. "The Performance Implications of Ownership-driven Governance Reform," European Management Journal, Elsevier, vol. 21(6), pages 698-706, December.
    45. Jean‐Francois Hennart & Sabine Reddy, 1997. "The Choice Between Mergers/Acquisitions And Joint Ventures: The Case Of Japanese Investors In The United States," Strategic Management Journal, Wiley Blackwell, vol. 18(1), pages 1-12, January.
    46. Keith D Brouthers, 2013. "Institutional, cultural and transaction cost influences on entry mode choice and performance," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 44(1), pages 1-13, January.
    47. Kirca, Ahmet H. & Fernandez, Whitney Douglas & Kundu, Sumit K., 2016. "An empirical analysis and extension of internalization theory in emerging markets: The role of firm-specific assets and asset dispersion in the multinationality-performance relationship," Journal of World Business, Elsevier, vol. 51(4), pages 628-640.
    48. Hongxin Zhao & Yadong Luo & Taewon Suh, 2004. "Transaction cost determinants and ownership-based entry mode choice: a meta-analytical review," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 35(6), pages 524-544, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ando, Naoki, 2024. "Multinationals’ intraregional geographic expansion and foreign subsidiary performance," International Business Review, Elsevier, vol. 33(1).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Powell, K. Skylar & Lim, Eunah, 2018. "Motive meets experience: Cultural distance, motive, related experience, and foreign subsidiary ownership structure," Journal of Business Research, Elsevier, vol. 92(C), pages 81-92.
    2. Powell, K. Skylar & Lim, Eunah, 2017. "Investment motive as a moderator of cultural-distance and relative knowledge relationships with foreign subsidiary ownership structure," Journal of Business Research, Elsevier, vol. 70(C), pages 255-262.
    3. Trąpczyński, Piotr & Halaszovich, Tilo F. & Piaskowska, Dorota, 2020. "The role of perceived institutional distance in foreign ownership level decisions of new MNEs," Journal of Business Research, Elsevier, vol. 108(C), pages 435-449.
    4. Del Bosco, Barbara & Cristina Bettinelli, 2020. "How Do Family SMEs Control Their Investments Abroad? The Role of Distance and Family Control," Management International Review, Springer, vol. 60(1), pages 1-35, February.
    5. Lars Matysiak & Alan M. Rugman & Andreas Bausch, 2018. "Dynamic Capabilities of Multinational Enterprises: The Dominant Logics Behind Sensing, Seizing, and Transforming Matter!," Management International Review, Springer, vol. 58(2), pages 225-250, April.
    6. Xie, En & Reddy, K.S. & Liang, Jie, 2017. "Country-specific determinants of cross-border mergers and acquisitions: A comprehensive review and future research directions," Journal of World Business, Elsevier, vol. 52(2), pages 127-183.
    7. Seok Jin Ko, 2019. "The Differing Foreign Entry Mode Choices for Sales and Production Subsidiaries of Multinational Corporations in the Manufacturing Industry," Sustainability, MDPI, vol. 11(15), pages 1-18, July.
    8. Chenxi Wan & Carlos M. P. Sousa & Jorge Lengler & Qun Tan, 2023. "Entry Mode Choice: A Meta-Analysis of Antecedents and Outcomes," Management International Review, Springer, vol. 63(2), pages 193-246, April.
    9. Gooris, Julien & Peeters, Carine, 2014. "Home–Host Country Distance in Offshore Governance Choices," Journal of International Management, Elsevier, vol. 20(1), pages 73-86.
    10. Jonas Puck & Markus K. Hödl & Igor Filatotchev & Hans-Georg Wolff & Benjamin Bader, 2016. "Ownership mode, cultural distance, and the extent of parent firms’ strategic control over subsidiaries in the PRC," Asia Pacific Journal of Management, Springer, vol. 33(4), pages 1075-1105, December.
    11. Venkateswaran, Ramya Tarakad & George, Rejie, 2020. "When does culture matter? A multilevel study on the role of situational moderators," Journal of Business Research, Elsevier, vol. 116(C), pages 99-122.
    12. Moalla, Emna & Mayrhofer, Ulrike, 2020. "How does distance affect market entry mode choice? Evidence from French companies," European Management Journal, Elsevier, vol. 38(1), pages 135-145.
    13. Powell, K. Skylar & Lim, Eunah, 2018. "‘Misfits’ DO try to fit: Deviations from firm-specific optimal multinationality and subsequent market entry or exit in US law firms," Journal of Business Research, Elsevier, vol. 82(C), pages 141-148.
    14. Mehmet Demirbag & Martina McGuinness & Hüseyin Altay, 2010. "Perceptions of Institutional Environment and Entry Mode," Management International Review, Springer, vol. 50(2), pages 207-240, April.
    15. Hitt, Michael A. & Li, Dan & Xu, Kai, 2016. "International strategy: From local to global and beyond," Journal of World Business, Elsevier, vol. 51(1), pages 58-73.
    16. Liedong, Tahiru Azaaviele & Peprah, Augustine Awuah & Amartey, Abednego Okoe & Rajwani, Tazeeb, 2020. "Institutional voids and firms' resource commitment in emerging markets: A review and future research agenda," Journal of International Management, Elsevier, vol. 26(3).
    17. Cristina López-Duarte & Marta M. Vidal-Suárez & Belén González-Díaz & Nuno Rosa Reis, 2016. "Understanding the relevance of national culture in international business research: a quantitative analysis," Scientometrics, Springer;Akadémiai Kiadó, vol. 108(3), pages 1553-1590, September.
    18. Huanglin Wang & Jean-Louis Schaan, 2008. "How much distance do we need? Revisiting the “National cultural distance paradox”," Management International Review, Springer, vol. 48(3), pages 263-278, May.
    19. Jan Hendrik Fisch & Bjoern Schmeisser, 0. "Phasing the operation mode of foreign subsidiaries: Reaping the benefits of multinationality through internal capital markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-33.
    20. Youngok Kim & Sidney J. Gray, 2008. "The impact of entry mode choice on foreign affiliate performance: The case of foreign MNEs in South Korea," Management International Review, Springer, vol. 48(2), pages 165-188, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:abaman:v:20:y:2021:i:2:d:10.1057_s41291-019-00087-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.