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Management International Review

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01.06.2013 | Research Article

FDI Experience Location and Subsidiary Mortality

Differences in National Culture and the Expansion of Korean MNEs

verfasst von: Prof. Yuping P Zeng, Prof. Oded Shenkar, Prof. Sangcheol Song, Prof. Seung-Hyun Lee

Erschienen in: Management International Review | Ausgabe 3/2013

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Abstract

Purpose: This study examines the relationship between an MNE’s experience with foreign direct investments (FDI) and subsidiary mortality when considering learning limitations that an MNE are susceptible to under the influence of national cultural differences.

Methods: We apply event history analysis on a sample of subsidiaries of Korean MNEs during 1990–2006.

Results: We find that subsidiary mortality has a negative relationship with FDI experience from countries culturally similar to both the MNE’s home country and the focal host country; an inverse U-shaped relationship with both experience from countries culturally similar to the home country but different from the focal host country, and experience from countries culturally different from the home country but similar to the focal host country. Experience from countries culturally dissimilar to both the focal host country and the home country has a negative effect when a subsidiary is located in countries dissimilar to the home country, and an insignificant effect when a subsidiary is located in countries similar to the home country.

Conclusions: Our findings show that prior experience has different effects depending on where it is accumulated and that MNEs are susceptible to limitations both when drawing inferences from their FDI experiences and when applying these experiences toward subsequent FDIs.

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Grouping an MNE’s experience is necessary in order to capture the two types of cultural differences simultaneously, since it is empirically impractical to examine the effect of individual prior FDI experiences on a subsequent focal FDI.

https://www.cia.gov/library/publications/the-world-factbook/.

Since both host-proximate and home-proximate experiences have an inverted U-shaped effect on the mortality of a subsequent FDI in a dissimilar country, one may argue that the underlying mechanism of the detrimental effect of these two types of experience may be the same. However, if the detrimental effect of host-proximate experience is caused by experience misapplication as opposed to a low learning ability of the MNE that we suggested in the paper, we should also expect a similar detrimental effect of double-proximate experience since there is no evidence showing that an MNE may more likely misapply experience in dissimilar cultures. Furthermore, if the detrimental effect of home-proximate experience is caused by a low learning ability of the MNE as opposed to experience misapplication that we suggested, we should also see a detrimental effect of double-proximate experience since it is also a type of home-proximate experience. Our finding of a beneficial effect of double-proximate experience does not validate these two possibilities, supporting our arguments that the mechanisms underlying the detrimental effects of host and home-proximate experience are different.

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Titel: FDI Experience Location and Subsidiary Mortality
Differences in National Culture and the Expansion of Korean MNEs
verfasst von: Prof. Yuping P Zeng
Prof. Oded Shenkar
Prof. Sangcheol Song
Prof. Seung-Hyun Lee
Publikationsdatum: 01.06.2013
Verlag: Springer-Verlag
Erschienen in: Management International Review / Ausgabe 3/2013
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-013-0169-0

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