FDI Experience Location and Subsidiary Mortality

Yuping P Zeng (), Oded Shenkar, Sangcheol Song and Seung-Hyun Lee
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Yuping P Zeng: Southern Illinois University Edwardsville
Oded Shenkar: The Ohio State University
Sangcheol Song: Saint Joseph’s University
Seung-Hyun Lee: University of Texas at Dallas

Management International Review, 2013, vol. 53, issue 3, No 6, 477-509

Abstract: Abstract Purpose: This study examines the relationship between an MNE’s experience with foreign direct investments (FDI) and subsidiary mortality when considering learning limitations that an MNE are susceptible to under the influence of national cultural differences. Methods: We apply event history analysis on a sample of subsidiaries of Korean MNEs during 1990–2006. Results: We find that subsidiary mortality has a negative relationship with FDI experience from countries culturally similar to both the MNE’s home country and the focal host country; an inverse U-shaped relationship with both experience from countries culturally similar to the home country but different from the focal host country, and experience from countries culturally different from the home country but similar to the focal host country. Experience from countries culturally dissimilar to both the focal host country and the home country has a negative effect when a subsidiary is located in countries dissimilar to the home country, and an insignificant effect when a subsidiary is located in countries similar to the home country. Conclusions: Our findings show that prior experience has different effects depending on where it is accumulated and that MNEs are susceptible to limitations both when drawing inferences from their FDI experiences and when applying these experiences toward subsequent FDIs.

Keywords: FDI; Cultural differences; Experience; Subsidiary mortality; Erroneous inferences; Experience misapplication (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s11575-013-0169-0

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