Legal system contingencies as determinants of political tie intensity by wholly owned foreign subsidiaries: Insights from the Philippines

George O. White, Jean J. Boddewyn and Roberto Martin N. Galang

Journal of World Business, 2015, vol. 50, issue 2, 342-356

Abstract: How will managerial perceptions concerning specific dimensions of legal system uncertainty affect wholly owned foreign subsidiary (WOFS) political tie intensity? This study employs the institution-based view of international business strategy to explore how managerial perceptions of specific dimensions of legal system uncertainty – ex-ante commercial law inadequacy and ex-post judicial arbitrariness – will act as determinants of WOFS political tie intensity. Our analysis of 181 WOFSs in the Philippines suggests that managerial perceptions of ex-ante commercial law inadequacy and ex-post judicial arbitrariness, being two distinct dimensions of legal system uncertainty, are determinants of political tie intensity. We also find that the positive association between managerial perceptions of ex-ante commercial law inadequacy and the intensification of political ties grows stronger when a WOFS is committed to organizational adaptation of capabilities to the local context, while the positive association between managerial perceptions of ex-post judicial arbitrariness and the intensification of political ties grows stronger when a WOFS is engaged in strategically positioning operations in an emerging market environment.

Keywords: Legal system uncertainty; Political tie intensity; Organizational capabilities; Nonmarket strategy; Institution-based view; Wholly owned foreign subsidiary; Emerging markets (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (36)

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DOI: 10.1016/j.jwb.2014.10.010

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