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21.08.2017 | Research Article

The Effect of Corporate Political Activity on MNC Subsidiary Legitimacy: An Institutional Perspective

verfasst von: Shantanu Banerjee, Sunil Venaik

Erschienen in: Management International Review | Ausgabe 5/2018

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Abstract

MNC subsidiaries engage in a variety of corporate political activities to gain legitimacy in the host country. Based on institutional theory, our study examines five types of strategies that MNC subsidiaries pursue to gain legitimacy in foreign markets. Using data from Australian subsidiaries of MNCs operating in different industries, and whose parents originate from 28 different countries, we find that mimetic isomorphism strategy has the strongest effect whereas information strategy has no effect on subsidiary legitimacy. The other three strategies, namely, financial, constituency building and relational have strong to moderate effects on subsidiary legitimacy. In addition, we show that multiple CPA strategies are essential and work together synergistically to contribute to the legitimacy of MNC subsidiaries. Our paper provides empirical support to the widely recognized need for MNC subsidiaries to engage in different types of CPA to legitimize their operations in diverse institutional contexts across the globe.

Vorheriger Artikel Political Schemas and Corporate Political Activities During Foreign Market Entry: A Micro-process Perspective

Nächster Artikel The Differential Effects of Minority State Ownership Types on the Internationalization of Emerging Market Multinationals from Democratic States

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For simplicity in exposition, and to avoid confusion with the different labels and models of CPA that (a) theoretically (but not empirically) distinguish between strategies and approaches (Hillman and Hitt 1999), or (b) use the terms “strategy” and “approach” interchangeably (Dorobantu et al. 2017; Luo and Zhao 2013), we refer to the five CPA strategies/approaches that we examine in our paper under the common umbrella term of CPA.

Although DiMaggio and Powell (1983, p.150) consider their isomorphism “typology is an analytic one; the types are not always empirically distinct”, our paper empirically tests the relationship between subsidiary isomorphism strategy and legitimacy within the broader CPA framework.

As expected, due to the high standard errors in 2SLS regressions, the CPA strategies are not statistically significant in the second stage 2SLS equations. However, since our endogeneity tests show that our predictor variables are exogenous, and for brevity, we do not include the second stage regression results here, but these are available from the authors.

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Titel: The Effect of Corporate Political Activity on MNC Subsidiary Legitimacy: An Institutional Perspective
verfasst von: Shantanu Banerjee
Sunil Venaik
Publikationsdatum: 21.08.2017
Verlag: Springer Berlin Heidelberg
Erschienen in: Management International Review / Ausgabe 5/2018
Print ISSN: 0938-8249
Elektronische ISSN: 1861-8901
DOI: https://doi.org/10.1007/s11575-017-0324-0

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