The digital economy, entry mode strategies, and the profitability of foreign subsidiaries: A global view

Yong Yang and Yan Wu

Economic Modelling, 2023, vol. 127, issue C

Abstract: Drawing on more than 60,000 multinational parents and their over 100,000 foreign subsidiaries in the period from 2008 to 2016, we find that subsidiary profitability is higher when the subsidiary operates in the digital sectors, and this finding is robust from different specifications. Moreover, we present evidence that the role of digital sector affiliation in fostering subsidiary performance is contingent upon the entry mode choice. More specifically, the performance of digital subsidiaries is higher when subsidiaries are the joint ventures with local companies than when they are the joint ventures with other foreign companies; such joint venturing creates greater value relative to wholly-owned subsidiaries. Additionally, we find that the value of parent intangible assets on subsidiary performance is bigger when the subsidiary is in the digital, rather than non-digital, sectors.

Keywords: Foreign subsidiary performance; Digital economy; Entry mode; Intangible assets (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:127:y:2023:i:c:s0264999323002924

DOI: 10.1016/j.econmod.2023.106480

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