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Performance of Multinational Firms’ Subsidiaries: Influences of Cumulative Experience

Author

Listed:
  • Gerald Yong Gao

    (University of Missouri-St. Louis)

  • Yigang Pan

    (York University)

  • Jiangyong Lu

    (Tsinghua University)

  • Zhigang Tao

    (University of Hong Kong)

Abstract

and Key Results In this study, we examine the impact of cumulative experience that arise from a series of sequential entries on the performance of foreign subsidiaries of multinational firms. Drawing upon the literature on organizational learning, we propose that multinational firms acquire different types of experience at the firm level, including general entry experience, entry specific experience, and exporting experience, which exert different influences on their performance. We also investigate the effect of experience on performance at the subsidiary level. Using a dataset of 245 subsidiaries of 81 large U.S. firms in China, we find that firms’ entry specific experience, exporting experience, and subsidiary level experience exhibit significant effects on the return on sales of foreign subsidiaries. Further, the effect of exporting experience gets weaker as firms accumulate more entry specific experience. Firms’ general entry experience, however, is not related to subsidiary performance.

Suggested Citation

  • Gerald Yong Gao & Yigang Pan & Jiangyong Lu & Zhigang Tao, 2008. "Performance of Multinational Firms’ Subsidiaries: Influences of Cumulative Experience," Management International Review, Springer, vol. 48(6), pages 749-768, December.
    • Handle: RePEc:spr:manint:v:48:y:2008:i:6:d:10.1007_s11575-008-0105-x
    DOI: 10.1007/s11575-008-0105-x
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    Cited by:

    1. Stefano Elia & Marcus M. Larsen & Lucia Piscitello, 2019. "Entry mode deviation: A behavioral approach to internalization theory," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(8), pages 1359-1371, October.
    2. Quyen T. K. Nguyen, 2017. "Multinationality and Performance Literature: A Critical Review and Future Research Agenda," Management International Review, Springer, vol. 57(3), pages 311-347, June.
    3. Irina Surdu & Kamel Mellahi & Keith Glaister, 2018. "Boomerang Multinationals? Strategic Flexibilities or Rigidities? A Perspective on Developed versus Emerging Market Re-entrants," John H Dunning Centre for International Business Discussion Papers jhd-dp2018-09, Henley Business School, University of Reading.
    4. Claudio Giachetti & Giancarlo Manzi & Cinzia Colapinto, 2019. "Entry Mode Degree of Control, Firm Performance and Host Country Institutional Development: A Meta-Analysis," Management International Review, Springer, vol. 59(1), pages 3-39, February.
    5. Cher-Hung Tseng, 2015. "Determinants of MNC’s Knowledge Inflows to Subsidiaries: A Perspective on Internalization Advantages," Management International Review, Springer, vol. 55(1), pages 119-150, February.
    6. Tao Bai & Jialin Du & Angelo M. Solarino, 2018. "Performance of foreign subsidiaries “in” and “from” Asia: A review, synthesis and research agenda," Asia Pacific Journal of Management, Springer, vol. 35(3), pages 607-638, September.
    7. Christian Schwens & Florian B Zapkau & Keith D Brouthers & Lina Hollender, 2018. "Limits to international entry mode learning in SMEs," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 49(7), pages 809-831, September.
    8. Albertoni, Filippo & Elia, Stefano & Piscitello, Lucia, 2019. "Inertial vs. mindful repetition of previous entry mode choices: Do firms always learn from experience?," Journal of Business Research, Elsevier, vol. 103(C), pages 530-546.
    9. Ming Pu & Pek-Hooi Soh, 2018. "The role of dual embeddedness and organizational learning in subsidiary development," Asia Pacific Journal of Management, Springer, vol. 35(2), pages 373-397, June.
    10. Fu, Xiaolan & Hou, Jun & Liu, Xiaohui, 2018. "Unpacking the Relationship between Outward Direct Investment and Innovation Performance: Evidence from Chinese firms," World Development, Elsevier, vol. 102(C), pages 111-123.

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