Naoki Ando

The ownership structure of foreign subsidiaries and the effect of institutional distance: a case study of Japanese firms

This study investigates how institutional distance between a home country and a host country affects the ownership structure of foreign subsidiaries. Using a sample consisting of foreign subsidiaries of Japanese firms, the effect of institutional distance on the ownership structure of foreign subsidiaries is tested. The results indicate that Japanese firms reduce equity shares in foreign subsidiaries as institutional distance increases. The study also finds that internationally experienced Japanese firms tend to have large equity ownership in institutionally distant countries. In addition, this study shows that complementing host country experience with international experience further mitigates uncertainty arising from institutional distance.

Isomorphism and foreign subsidiary staffing policies

Purpose – The purpose of this paper is to explore determinants that affect foreign subsidiary staffing policies by employing institutional theory as a theoretical foundation.Design/methodology/approach – Hypotheses are developed regarding determinants of the ratio of parent country nationals (PCNs) to foreign subsidiary employees. To examine the hypotheses, Tobit regressions are run using a sample of 1,998 foreign subsidiaries of Japanese manufacturers in 40 countries.Findings – The PCN ratio of foreign subsidiaries is positively associated with the parent firms taken‐for‐granted PCN ratio and the PCN ratio adopted by other Japanese firms in the same cognitive category. In addition, the positive relationship between the PCN ratio adopted by other Japanese firms in the same cognitive category and the PCN ratio of foreign subsidiaries is moderated by the international experience of the parent firm, such that the positive relationship is weaker as the parent firm accumulates international experience.Origina...

MNC's competitive strategies, experiences, and staffing policies for foreign affiliates

This study investigates the relationship between the strategic role of a multinational corporations (MNC) foreign affiliates and its international staffing policy. Specifically, this study examines how an MNCs decision on expatriation is affected by strategic roles assigned to foreign affiliates: global integration of activities versus local market seeking. An empirical study is conducted using a sample of 808 foreign affiliates of Japanese firms. The research findings suggest that strategic roles of foreign affiliates alone may not adequately explain the international staffing policies of Japanese MNCs. Rather, we found a significant moderating effect of international as well as host country experience on staffing practices for foreign affiliates. While the staffing policies of MNCs striving for improving global efficiency of their operation are moderated by both international and host country experience, those seeking a specific local market position are influenced only by host country experience.

The effect of localization on subsidiary performance in Japanese multinational corporations

This study examines how the localization of a foreign subsidiary in terms of staffing affects the subsidiarys performance. Hypotheses are developed regarding the effect of localization on subsidiary performance, considering the moderating effect of the host country environment. Using a panel dataset consisting of 4662 foreign subsidiaries of Japanese firms, this study finds that localization is positively associated with subsidiary performance for the subsidiaries operating in developed economies. In contrast, for subsidiaries in emerging economies, localization does not improve subsidiary performance. In addition, this study shows that the positive effect of localization on subsidiary performance becomes weaker as the institutional distance becomes greater.

Antecedents of Interorganizational Trust: Joint Decision‐Making, Cultural Adaptation, and Bargaining Power

The primary purpose of this study is to explore the antecedents of interorganizational trust within an international joint venture (IJV) context. In exploring how interorganizational trust is developed during the course of managing IJVs, we will look at fair action as a key factor in building interorganizational trust. Based on the existing literature, we propose the fair joint decision‐making process, cultural adaptation and the fair distribution of bargaining power as being antecedents of interorganizational trust within the IJV context. After developing hypotheses about the relationships between these three antecedents and interorganizational trust as well as causal relations between the antecedents, an empirical study is conducted using a sample comprised of 109 IJVs located in Korea. The findings show that perceived fairness in the joint decision‐making process and the distribution of bargaining power directly affects trust‐building between IJV participants; and also reveal the indirect effects of cultural adaptation on the development of interorganizational trust.

An integrative institutional approach to MNC performance in China

This study adopts an integrative approach that incorporates the resource-based view and institutional theory in its analyses of the performances of multinational corporations in China. Firm-specific resources have been assumed as a unique source of competitive advantages when firms go overseas. However, differences in institutional environments between the host country and the home country can negatively affect the competitiveness generated by resource exploitation. Empirical analysis using the data consisting of 209 Japanese firms operating in China finds that while the exploitation of firm-specific resources improves their performance, institutions in China moderate the positive impact on performance.

Determinants of foreign subsidiary staffing by service firms

Purpose - The purpose of this paper is to examine how service firms determine foreign subsidiary staffing, emphasizing the joint effect of an attribute specific to the service sector and the institutional environment of the host countries. Design/methodology/approach - This study develops hypotheses regarding the joint effect of human capital intensity and institutional distance on the ratio of parent country nationals to foreign subsidiary employees. A Tobit regression is conducted to test the hypotheses, using a sample that consists of 1,067 foreign subsidiaries of Japanese service firms. Findings - This study finds that the human capital intensity of a service firm has a positive impact on the ratio of parent country nationals to foreign subsidiary employees. The study also finds that the institutional distance between the host country and the home country is negatively associated with the ratio of parent country nationals. In addition, this study finds that the positive impact of human capital intensity on the ratio of parent country nationals becomes weaker as the institutional distance becomes greater. Originality/value - This study explores the factors that affect the decisions regarding foreign subsidiary staffing in the service sector. It advances the understanding of the foreign subsidiary staffing of service firms by examining the joint effect of an attribute specific to the service sector and the institutional environment of the host countries. This study shows evidence that the effect of an attribute specific to the service sector is more complex than a linear relationship.

Internal mimetic behavior of MNCs with respect to foreign subsidiary staffing

Purpose - – The purpose of this paper is to fill the following research gaps. First, few studies have examined isomorphic behavior of multinational corporations (MNCs) with respect to foreign subsidiary staffing. Second, the adoption by an MNC of its internally preferable practices, which is referred to as internal mimetic behavior, has been less extensively investigated when compared with the imitation of practices adopted by a large number of peer firms. Lastly, factors that facilitate internal mimetic behavior have not been extensively explored. Design/methodology/approach - – This study hypothesizes that internal mimetic behavior is affected by both formal and informal institutional distance. The hypotheses are tested using the panel data set that consists of 3,981 foreign subsidiaries of Japanese MNCs. Findings - – This study finds that as the formal institutional distance between the host country and the home country increases, MNCs are more likely to adopt internal mimetic behavior. Furthermore, it demonstrates that as the informal institutional distance increases, the likelihood that MNCs adopt internal mimetic behavior decreases. Practical implications - – This study suggests that MNCs need to consider the consequences of internal mimetic behavior when they adopt it without having economic rationale. It also suggests that when uncertainty can be mitigated, MNCs should avoid internal mimetic behavior. Originality/value - – This study fills the aforementioned research gaps by examining what factors facilitate internal mimetic behavior. It suggests that both economic rationale and isomorphic behavior need to be considered to advance an understanding of foreign subsidiary staffing.

Effects of two staffing decisions on the performance of MNC subsidiaries

Purpose - – The purpose of this paper is to examine the relationship between foreign subsidiary staffing and subsidiary performance by focussing on two staffing practices: first, the ratio of parent country nationals (PCNs) to foreign subsidiary employees and second, the number of PCNs assigned to the foreign subsidiary. Design/methodology/approach - – Hypotheses predicting curvilinear relationships between the assignment of PCNs and subsidiary performance are tested using a panel data set consisting of 4,858 foreign subsidiaries of Japanese multinational corporations (MNCs). Findings - – The results demonstrate that the two staffing practices have different effects on subsidiary performance. The ratio of PCNs to foreign subsidiary employees has an inverted U-shaped relationship with subsidiary performance, while the number of PCNs assigned to the subsidiary has a linear and negative effect on subsidiary performance. Research limitations/implications - – The results of this study are subject to limitations. First, the sample used in this study consists solely of the foreign subsidiaries of Japanese firms. This research design limits the generalizability of the findings of this study. Second, other decisions related to subsidiary staffing such as the ratio of PCNs in the subsidiarys top management team need to be examined to advance understandings of the relationship between subsidiary staffing and subsidiary performance. Practical implications - – MNCs need to identify the appropriate number of PCNs at which they can achieve the optimal trade-off with the PCN ratio to enhance the competitiveness and the performance of a foreign subsidiary. In doing so, they need to take into consideration that an increase in the number of PCNs has an immediate negative effect on the workplace morale of host country nationals. Originality/value - – This study incorporates two staffing practices into its analyses and shows that they have different implications for subsidiary performance. The results suggest that focussing on one staffing practice alone limits understanding of the complex relationship between foreign subsidiary staffing and subsidiary performance.