The role of subsidiary learning behavior and absorptive capacity in foreign subsidiary expansion

Hyeyoun Park and Chris Changwha Chung

International Business Review, 2019, vol. 28, issue 4, 685-695

Abstract: We examine how subsidiaries can implement business expansion successfully to capitalize on growth potentials. Building on our baseline hypothesis, which examines the effect of the extent of business expansion on subsidiary divestment, we identify the boundary condition of the tendency of subsidiary’s learning behavior in foreign expansion. Specifically, we argue that subsidiaries that expand multiple businesses through competence-creating learning behaviors are more likely to be divested due to increasing complexity. We further suggest a remedial condition to offer a viable approach to implement business expansion through competence-creating learning successfully. Based on a sample of 6040 foreign subsidiaries operating over 14 years, we show that affiliates are more likely to expand into unfamiliar business domains successfully if they have a higher level of absorptive capacity.

Keywords: Subsidiary business expansion; Competence-creating; Learning behavior; Absorptive capacity; Subsidiary divestment (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:iburev:v:28:y:2019:i:4:p:685-695

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DOI: 10.1016/j.ibusrev.2019.01.006

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