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Survival of Japanese subsidiaries: impacts of sequential investment, institutional distances, and location factors

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  • Flavio Jorge Freire D Andrade Battistuzzo

    (ESPM)

  • Mario Henrique Ogasavara

    (ESPM)

Abstract

Most studies still consider foreign direct investment (FDI) a single and independent decision. However, FDI involves sequential and interdependent processes of investments, impacting subsidiary's performance. Surprisingly, little is known about the relationship between sequential FDI (SFDI) and investment failure. Based on institutional theory, this study evaluates how SFDI, institutional distances, and location factors affect subsidiary's survival. The findings indicate that location plays a vital role in a subsidiary's success/failure. Normative and regulatory distances have no impact on survival, and cultural–cognitive distance increases survival probability. However, when considering the moderation of ownership entry strategy, institutional distances play a central role for wholly owned subsidiaries' survival but are not vital for joint ventures. The results show that SFDI at the country level reduces the likelihood of survival. We contribute to the broad study of success/failure and its relationship to SFDI while showing that monitoring time is relevant when applying the institutional theory.

Suggested Citation

  • Flavio Jorge Freire D Andrade Battistuzzo & Mario Henrique Ogasavara, 2023. "Survival of Japanese subsidiaries: impacts of sequential investment, institutional distances, and location factors," Asian Business & Management, Palgrave Macmillan, vol. 22(3), pages 903-934, July.
    • Handle: RePEc:pal:abaman:v:22:y:2023:i:3:d:10.1057_s41291-022-00179-1
    DOI: 10.1057/s41291-022-00179-1
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