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01.12.2013 | Research Article

Market Orientation, Embeddedness and the Autonomy and Performance of Multinational Subsidiaries in an Emerging Economy

verfasst von: Xiaoying Li, Prof. Xiaming Liu, Prof. Howard Thomas

Erschienen in: Management International Review | Ausgabe 6/2013

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Abstract

This paper develops a conceptual framework for market orientation, embeddedness, autonomy and performance of multinational subsidiaries in an emerging economy.
We argue that internal and external embeddedness has different performance implications for export- and local market-oriented multinational subsidiaries.
Our results, based on a sample of 233 multinational subsidiaries from China, indicate that while external embeddedness has a positive impact on specialized resources of both types of subsidiary, such resources only positively affect the performance of local market-oriented subsidiaries. By contrast, internal embeddedness has a negative impact on specialized resources of both types of subsidiary.
Managerial and policy implications are discussed.

Vorheriger Artikel How International Firms Conduct Societal Marketing in Emerging Markets

Nächster Artikel National Culture and International Differences in the Cost of Equity Capital

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We thank one referee for this input.

Strictly speaking, some subsidiaries can also be both local and export market-oriented, e.g., half of its product is sold at the local market and the other half for export. We thank one referee for this input.

We thank one referee for this input.

This hypothesis is developed based on a static approach. When a dynamic approach is adopted, the hypothesis may no longer hold. For instance, Ambos et al. (2011) observe that high internal embeddedness in the past may help an R&D subsidiary gain higher levels of autonomy in the future, while high external embeddedness may lead to lower levels of autonomy in the future.

Following Jarillo and Martinez (1990), we define a multinational subsidiary as a firm with at least 50 % foreign share of total capital.

Ideally a t-test should also be conducted in terms of the variables such as size and performance of the firms. Unfortunately we do not have such information about the non-responding firms.

We excluded firms that had been in full operation for less than two years. Eventually all firms in our sample were in full operation for at least two years, and according to the returned questionnaires, all of these firms seemed to have the functions we have asked about.

We also tested the hypotheses using a sub-sample of 103 ethnic Chinese multinational subsidiaries. We find that hypotheses H2a and H4 are marginally supported while other hypotheses are not supported. In particular, we find that the relationship between external embeddedness and autonomy is not significant. As we discussed, ethnic Chinese firms are more able to be externally embedded and obtain access to location-bound resources. Therefore, external embeddedness does not naturally lead to autonomy. The results are not reported due to space limitation but are available upon request.

The assumption of the test is that if a substantial amount of common method variance exists in the data, a single factor or a general factor that accounts for most of the variance will emerge when all the variables are entered together (Harman 1967). If the first unrotated factor accounts for a relatively small portion of the total variance (no more than 50 %, but the smaller the better), the implication is that CMB is not likely to be a significant problem. Despite increasing criticism of its insufficiency, Harman’s one factor test remains the most commonly used test for CMB.

In fact, among the 92 studies investigated in the study of Shook (2004), only 43 (47 %) list a respecification.

For a sample of 250 observations, factor loadings of 0.35 or above are significant (Hair et al. 2006, p. 128).

The chi-square statistic has two mathematical properties that are problematic in its use as a goodness-of-fit measure (Hair et al. 2006, p. 747). First, the chi-square statistic is a mathematical function of the sample size and the difference between the estimated and observed covariance matrices. As sample size increases so does the chi-square value. Secondly, the chi-square statistic is also likely to be greater when the number of observed variables increases.

For a sample larger than 250 and a model with more than 12 indicator variables, a significant chi-square can be expected (Hair et al. 2006, p. 753).

Based on a sample of larger than 250 and a five-construct model with 19 indicator variables, a CFI of at least 0.92 or above and a RNI of 0.92 or above should be evidences of good fit (Hair et al. 2006, p. 753).

We re-estimated the model by omitting the insignificant relationships, that is, the link between internal embeddedness and autonomy and the link between specialized resources and autonomy. By so doing, we obtained a much improved p-value of 0.076. In this paper, we aim to test the hypotheses based on theoretical justification instead of searching for a model with the best goodness of fit. Therefore, we choose to estimate and discuss the full model. The results of the re-specified model are not reported here due to space limitation but are available upon request.

The absence of significance for export focus firms (n = 76) for H1b as compared to n = 91 with another cut off point can be a sample size issue, as the factor loadings are close: 0.23 vs. 0.24. We thank an anonymous referee for this comment.

We thank one referee for this input.

The detailed results of this alternative model are not presented in the paper due to space limitation, but available upon request.

We thank an anonymous referee for this input.

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Titel: Market Orientation, Embeddedness and the Autonomy and Performance of Multinational Subsidiaries in an Emerging Economy
verfasst von: Xiaoying Li
Prof. Xiaming Liu
Prof. Howard Thomas
Publikationsdatum: 01.12.2013
Verlag: Springer Berlin Heidelberg
Erschienen in: Management International Review / Ausgabe 6/2013
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-013-0177-0

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