National capital city location and subsidiary portfolio expansion: The negative effect of geographic distance to the capital city at inception on the speed of subsequent investments

Thomas Hutzschenreuter () and Philippa-Luisa Harhoff ()
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Thomas Hutzschenreuter: Technical University of Munich
Philippa-Luisa Harhoff: WHU - Otto Beisheim School of Management

Journal of International Business Studies, 2020, vol. 51, issue 7, No 4, 1107-1132

Abstract: Abstract A multinational enterprise develops its subsidiary portfolio by investing in new foreign markets and subsequently pursuing further investments within these host countries. We find that firms which locate their first equity investment closer to the national capital city can subsequently expand their subsidiary portfolio within the host country at a higher speed. This effect is particularly strong in emerging economies. Further analyses of various contingencies support the robustness of our findings. We discuss different theoretical mechanisms which could cause these effects, in particular face-to-face interactions with governmental actors and opportunities to develop political connections. Our research contributes to the literature on internationalization processes by analyzing how the initial location choice affects the development of the subsidiary portfolio.

Keywords: internationalization; MNEs; expansion speed; subsidiary portfolio; capital cities; geographic distance (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (11)

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DOI: 10.1057/s41267-020-00305-1

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