Hostname: page-component-cd9895bd7-jn8rn Total loading time: 0 Render date: 2024-12-22T12:49:55.689Z Has data issue: false hasContentIssue false
  • English
  • Français

Evolving FDI Legitimacy and Strategic Choice of Japanese Subsidiaries in China

Published online by Cambridge University Press:  02 February 2015

George Z. Peng  and
Paul W. Beamish
George Z. Peng
Affiliation:
The University of Western Ontario, Canada
Paul W. Beamish
Affiliation:
The University of Western Ontario, Canada
Get access Rights & Permissions [Opens in a new window]

Abstract

We examine how evolving FDI legitimacy in China influences two strategic choices (entry mode and expatriate staffing) of Japanese subsidiaries there over the period 1993–2000, based on data aggregated from Toyo Keizai and the National Bureau of Statistics of China (various years). As FDI legitimacy improves over time, we find that smaller subsidiaries tend to choose the wholly owned subsidiary mode and deploy a higher percentage of expatriates, whereas larger subsidiaries tend to choose the joint venture mode and use a lower percentage of expatriates; and that Japanese subsidiaries are more likely to have a local manager, and this tendency may be stronger for larger subsidiaries. The theoretical and practical implications of these findings are discussed from a density dependence theory perspective.

Keywords

density dependence theoryentry modeexpatriate staffingFDI legitimacyinstitutional theorystrategic choice密度依赖理论投资进入模式外派人员编制外资正当性战略选择制度理论。
Type
Articles
Information
Management and Organization Review , Volume 3 , Issue 3 , November 2007 , pp. 373 - 396
Copyright
Copyright © International Association for Chinese Management Research 2007

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aiken, L. S., & West, S. G. 1991. Multiple regression: Testing and interpreting interactions. Newbury Park, Calif.: Sage Publications.Google Scholar
Bartlett, C. A., & Ghoshal, S. 1989. Managing across borders: The transnational solution. Boston, Mass.: Harvard Business School Press.Google Scholar
Barnett, W. P., & Amburgey, T. L. 1990. Do larger organizations generate stronger competition? In Singh, J. (Ed.), Organizational evolution: New directions: 78–102. Newbury Park, Calif: Sage.Google Scholar
Baum, J., & Powell, W. 1995. Cultivating an institutional ecology of organizations: Comment on Hannan, Carroll, Dundon, and Torres. American Sociological Review, 60: 529–538.Google Scholar
Baum, J. A. C. 1995. The changing basis of competition in organizational populations: The Manhattan hotel industry, 1898-1990. Social Forces, 74: 177–204.Google Scholar
Beamish, P. W., & Inkpen, A. C. 1998. Japanese firms and the decline of the Japanese expatriate. Journal of World Business, 33: 35–50.Google Scholar
Boyacigiller, N. A. 1990. The role of expatriates in the management of interdependence, complexity and risk in multinational corporations. Journal of International Business Studies, 21: 357–381.Google Scholar
Brouthers, K. D. 2002. Institutional, cultural and transaction cost influences on entry mode choice and performance. Journal of International Business Studies, 33: 203–221.Google Scholar
Buckley, P. J., & Clegg, J., Wang, C. 2002. The impact of inward FDI on the performance of Chinese manufacturing firms. Journal of International Business Studies, 33: 637–655.Google Scholar
Carroll, G. R. 1985. Concentration and specialization: Dynamics of niche width in populations of organizations. American Journal of Sociology, 90: 1262–1283.CrossRefGoogle Scholar
Carroll, G. R., & Hannan, M. T. 1989a. Density dependence in the evolution of populations of newspaper organizations. American Sociological Review, 54: 524–541.Google Scholar
Carroll, G. R., & Hannan, M. T. 1989b. On using institutional theory in studying organizational populations. American Sociological Review, 54: 545–548.Google Scholar
Carroll, G. R., & Hannan, M. T. 1995. Resource partitioning. In Carroll, G. R. & Hannan, M. T. (Eds.), Organizations in industry: 215–221. New York: Oxford University Press.Google Scholar
Child, J. 1997. Strategic choice in the analysis of action, structure, organizations, and environment: Retrospect and prospect. Organization Studies, 18: 43–76.Google Scholar
Child, J., & Tsai, T. 2005. The dynamic between firms' environmental strategies and institutional constraints in emerging economies: Evidence from China and Taiwan. Journal of Management Studies, 42: 95–125.Google Scholar
Deeds, D. L., Mang, P. Y., & Frandsen, M. L. 2004. The influence of firms' and industries' legitimacy on the flow of capital into high-technology ventures. Strategic Organization, 2: 9–34.Google Scholar
Delios, A., & Beamish, P. W. 1999. Ownership strategy of Japanese firms: Transactional, institutional, and experience influences. Strategic Management Journal, 20: 915–933.Google Scholar
Delios, A., & Bjorkman, I. 2000. Expatriate staffing in foreign subsidiaries of Japanese multinational corporations in the PRC and the United States. International Journal of Human Resource Management, 11: 278–293.Google Scholar
Démurger, S., Sachs, J. D., Woo, W. T., Bao, S. M., Chang, G. H., & Mellinger, A. D. 2002. Geography, economic policy, and regional development in China. NBER Working Paper no. W8897.Google Scholar
Dhanaraj, C. 2000. Legitimacy and stability of Japanese overseas subsidiaries. Unpublished doctoral dissertation, Richard Ivey School of Business, University of Western Ontario, Canada.Google Scholar
Fan, E. X. 2003. Technological spillovers from foreign direct investment – A survey. Asian Development Review, 20(1): 34–56.Google Scholar
Gwartney, J., & Lawson, R. Various years. Economic freedom of the world: Annual report. Vancouver: The Fraser Institute. Available from URL: http://www.freetheworld.com.Google Scholar
Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. 1995. Multivariate data analysis (4th ed.). Englewood Cliffs, NJ.: Prentice Hall.Google Scholar
Hamilton, R., & Kashlak, R. 1999. National influences on multinational control system selection. Management International Review, 39: 167–189.Google Scholar
Hannan, M. T., & Carroll, G. R. 1992. Dynamics of organizational populations: Density, legitimation and competition. New York: Oxford University Press.Google Scholar
Hannan, M. T., & Carroll, G. R. 2000. The demography of corporations and industries. Princeton, N.J.: Princeton University Press.Google Scholar
Hannan, M. T., & Freeman, J. 1977. The population ecology of organizations. American Journal of Sociology, 82: 929–964.Google Scholar
Harrigan, K. R. 1985. Vertical integration and corporate strategy. Academy of Management Journal, 28: 914–925.Google Scholar
Harzing, A. W. 1997. Research note: About the paucity of empirical research in IHRM: A test of Downes' framework of staffing foreign subsidiaries Journal of International Management, 3: 153–167.Google Scholar
Harzing, A. W. 1999. Managing the multinationals: An international study of control mechanisms. Cheltenham: Edward Elgar.Google Scholar
Harzing, A. W. K. 2001a. Of bears, bumble-bees, and spiders: The role of expatriates in controlling foreign subsidiaries. Journal of World Business, 36: 366–379.Google Scholar
Harzing, A. W. K. 2001b. Who's in charge? An empirical study of executive staffing practices in foreign subsidiaries. Human Resource Management, 40: 139–158.Google Scholar
Hill, C. W. L., Hwang, P., & Kim, W. C. 1990. An eclectic theory of the choice of international entry mode. Strategic Management Journal, 11: 117–128.Google Scholar
Huang, Y. S. 2003. Selling China: Foreign direct investment during the reform era. New York: Cambridge University Press.Google Scholar
Li, J. T. 1995. Foreign entry and survival: Effects of strategic choices on performance in international markets. Strategic Management Journal, 16: 333–351.CrossRefGoogle Scholar
Liang, G. 2004. New competition: Foreign direct investment and industrial development in China. Doctoral dissertation, Erasmus Universiteit Rotterdam, the Netherlands.Google Scholar
Luo, Y. 2001. Determinants of entry in an emerging economy: A multilevel approach. Journal of Management Studies, 38: 443–472.Google Scholar
Luo, Y. 2007. From foreign investors to strategic insiders: Shifting parameters, prescriptions and paradigms for MNCs in China. Journal of World Business, 42: 14–34.Google Scholar
Martinez, J., & Jarillo, J. 1991. Coordination demands of international strategies. Journal of International Business Studies, 22: 429–444.Google Scholar
Meyer, K. E. 2004. Perspectives on multinational enterprises in emerging economies. Journal of International Business Studies, 35: 259–276.CrossRefGoogle Scholar
Meyer, K. E., & Nguyen, H. V. 2005. Foreign investment strategies and sub-national institutions in emerging markets: Evidence from Vietnam. Journal of Management Studies, 42: 63–93.Google Scholar
Meyer, K. E., & Peng, M. W. 2005. Probing theoretically into Central and Eastern Europe: Transactions, resources, and institutions. Journal of International Business Studies, 36: 600–621.CrossRefGoogle Scholar
Micklewright, J. 1994. The analysis of pooled cross-sectional data: Early school leaving. In Dale, A. & Davies, R. B. (Eds.), Analyzing social and political change: A casebook of methods: 78–97. London: Sage Publications.Google Scholar
Miller, S. R., & Eden, L. 2006. Local density and subsidiary performance. Academy of Management journal, 49: 341–355.Google Scholar
National Bureau of Statistics of China. Various years. China statistics yearbook. Beijing: House: China Statistical Publishing.Google Scholar
Nickel, M. N., & Fuentes, J. M. 2004. Relationship between legitimation, competition and organizational death: Current state of the art. International Journal of Management Reviews, 5/6: 43–62.Google Scholar
Nippa, M., Beechler, S., & Klossek, A. 2007. Success factors for managing international joint ventures: A review and an integrative framework. Management and Organization Review, 3: 277–310.Google Scholar
North, D. C. 1990. Institutions, institutional change and economic performance. Cambridge: Cambridge University Press.Google Scholar
Paik, Y., & Sohn, J. D. 2004. Expatriate managers and MNC's ability to control international subsidiaries: The case of Japanese MNCs. Journal ofWorld Business, 39: 61–71.Google Scholar
Peduzzi, P., Concato, J., Kemper, E., Holford, T. R., & Feinstein, A. 1996. A simulation of the number of events per variable in logistic regression analysis. Journal of Clinical Epidemiology, 49: 1373–1379.Google Scholar
Peng, M. W. 2000. Business strategies in transition economies. Thousand Oaks, Calif.: Sage Publications.Google Scholar
Peterson, R. B., Napier, N. K., & Shim, W. S. 1996a. Expatriate management – The differential role of national multinational corporate ownership. The International Executive, 38: 543–562.Google Scholar
Peterson, R. B., Sargent, J., Napier, N. K., & Shim, W. S. 1996b. Corporate expatriate HRM policies, internationalization, and performance in the world's largest MNCs. Management International Review, 36: 215–230.Google Scholar
Rosenzweig, P. M., & Nohria, N. 1994. Influences on human resource management practices in multinational corporations. Journal of International Business Studies, 25: 229–251.Google Scholar
Ruef, M., & Scott, W. R. 1998. A multidimensional model of organizational legitimacy: Hospital survival in changing institutional environments. Administrative Science Quarterly, 43: 877–904.Google Scholar
Scott, W. R. 2001. Institutions and organizations (2nd ed.). Thousand Oaks, Calif: Sage Publications.Google Scholar
Studenmund, A. H. 1992. Using econometrics: A practical guide. New York: HarperCollins.Google Scholar
Suchman, M. C. 1995. Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20: 571–610.Google Scholar
Thompson, K., & Keating, M. 2004. An empirical study of executive nationality staffing practices in foreign-owned MNC subsidiaries in Ireland. Thunderbird International Business Review, 46: 771–797.Google Scholar
Winter, S. G. 1990. Survival, selection, and inheritance in evolutionary theories of organization. In Singh, J. V. (Ed.), Organizational evolution: Netu directions: 269–97. Newbury Park, Calif: Sage.Google Scholar
Xu, D., Pan, Y., & Beamish, P. W. 2004. The effect of regulative and normative distances on MNE ownership and expatriate strategies. Management International Review, 44: 285–307.Google Scholar
Yiu, D., & Makino, S. 2002. The choice between joint venture and wholly owned subsidiary: An institutional perspective. Organization Science, 13: 667–683.Google Scholar
Zhao, H., Luo, Y., & Suh, T. 2004. Transaction cost determinants and ownership-based entry mode choice: A meta-analytical review. Journal of International Business Studies, 35: 524–544.Google Scholar
Zhou, C., & Li, J. 2006. Innovation of international joint ventures in emerging markets. Paper presented at the 48th Annual Meeting of the Academy of International Business, Beijing, June 2006.Google Scholar
Zucker, L. G. 1989. Combining institutional theory and population ecology: No legitimacy, no history (comments on Carroll-Hannan, 1989). American Sociological Review, 54: 542–545.Google Scholar