Subsidiary Network and Location on Multinational Performance

The book develops two sets of concepts to describe the strategic choices of Japanese multinational enterprises (MNEs) with respect to firm expansion and the subsequent effect of these choices on performance. The first set of concepts reflects firm level factors of scope, intensity and location pattern of firm international network of subsidiaries. They are tested for theoretical relevance on a sample of 1,052 Japanese firms with 11,288 subsidiaries outside Japan. The second set of concepts reflects factors of subsidiary location that are outside firm sphere of influence. By using the bargaining power model, we test the hypothesis that location factors different from government regulations and country risks have strong predictive power for firm mode of establishment and ownership choice, in a sample of 751 manufacturing subsidiaries of 405 Japanese firms located in Europe. The conclusion is that firms able to reduce the information asymmetry, inherent in international activity, by increasing their participation scope rather than involvement are most likely to be successful.