The Interplay of Mahalanobis Distance and Firm Capabilities on MNC Subsidiary Exits from Host Countries

Jingoo Kang, Jeoung Yul Lee () and Pervez N. Ghauri
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Jingoo Kang: Nanyang Technological University
Jeoung Yul Lee: Hongik University
Pervez N. Ghauri: University of Birmingham

Management International Review, 2017, vol. 57, issue 3, No 3, 379-409

Abstract: Abstract We examine how the cross-national Mahalanobis distance between home and host countries may affect a multinational corporation subsidiary’s exit from its host country by applying a longitudinal Cox proportional hazard model analysis using data from Korean MNCs between 1990 and 2012. Our findings show that increasing cross-national distance is positively related to the likelihood of a subsidiary’s exit from the host country for most cross-national distance dimensions, while increasing cross-national distance is negatively related to the likelihood of a subsidiary’s exit from the host country for knowledge and global connectedness dimensions. However, the positive relationship between the seven dimensions of cross-national distance and subsidiary exit becomes weaker when the MNC has strong technological and experiential capabilities, while the negative relationship between two dimensions (i.e., knowledge and global connectedness) of cross-national distance and subsidiary exit becomes stronger. Our study contributes to the international business literature by examining the impact of diverse cross-national distance dimensions on subsidiary exit by showing the significance of firm capabilities in overcoming cross-national distance challenges, as well as by finding both a “problem-focused view” and “positive organizational perspective” in the results.

Keywords: Cross-national distance; Mahalanobis distance; Multinational corporation (MNC); MNC capabilities; Subsidiary exit (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (19)

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DOI: 10.1007/s11575-016-0287-6

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