Legal distance and entrepreneurial orientation of foreign subsidiaries: Evidence from Southeast Asia

George O. White, Tazeeb Rajwani and Sorin M.S. Krammer

Journal of World Business, 2022, vol. 57, issue 6

Abstract: How will variation in legal distance influence a foreign subsidiary's propensity to engage in entrepreneurially orientated initiatives within the context of an emerging market environment? We answer this question by combining elements of institutional theory to suggest that legal distance between a foreign subsidiary's parent home and host country, as well as managerial perceptions of deficiencies in the host country legal service sector, will influence EO initiatives. By analyzing 352 multinational enterprise foreign subsidiaries operating in the Philippines and Thailand our results indicate the complexity of these relationships in that there is a curvilinear (U-shaped) relationship concerning the legal distance between a foreign subsidiary's parent home and host country and its propensity to engage in EO initiatives. Our findings also suggest that this curvilinear relationship will strengthen as managerial perceptions of host country legal deficiencies increase, particularly when the parent possess an in-house legal affairs department. Following these insights, we discuss theoretical implications and future research opportunities.

Keywords: Entrepreneurial orientation; Legal distance; Deficient legal services; Legal department; Foreign subsidiary; Emerging markets. (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jwb.2022.101382

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