Industry Agglomeration, Sub-National Institutions and the Profitability of Foreign Subsidiaries
Xiaoying Li (),
Yin-Fang Zhang and
Additional contact information
Xiaoying Li: Keele University
Yin-Fang Zhang: University of Manchester
Laixiang Sun: University of Maryland
Management International Review, 2018, vol. 58, issue 6, 969-993
Abstract This study investigates the impact of industry agglomeration and its interaction with sub-national institutions on the profitability of multinational enterprises (MNEs) subsidiaries operating in an emerging economy. We argue that in an emerging economy like China, competition in product and factor markets is more intense between foreign firms than between foreign and domestic firms owning to market segmentation. Consequently, industry agglomeration with other foreign firms has negative impact on the profitability of foreign subsidiaries. In contrast, foreign firms agglomerating with domestic firms may reap gains owning to less competition and improved access to local resources and knowledge. We find that these effects are more pronounced to domestic-market-oriented foreign firms. Furthermore, sub-national institutions moderate the relationships between industry agglomeration and the profitability of foreign firms. Our arguments are supported by the empirical analysis based on a comprehensive dataset of foreign firms operating in China over the period from 1999 to 2005.
Keywords: Industry agglomeration; MNE subsidiaries; Sub-national institutions; Emerging economies; China (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s11575-018-0361-3 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:manint:v:58:y:2018:i:6:d:10.1007_s11575-018-0361-3
Ordering information: This journal article can be ordered from
Access Statistics for this article
Management International Review is currently edited by Michael-Jörg Oesterle and Joachim Wolf
More articles in Management International Review from Springer
Bibliographic data for series maintained by Sonal Shukla ().