Social trust in subnational regions and foreign subsidiary performance: Evidence from foreign investments in China

Wenzhen Lu (First Author), Mengmeng Shan (Participant Author), Yuanyang Song (Participant Author)

Research output: Contribution to journalJournal

45 Citations (Web of Science)

Abstract

Recent research suggests that subnational regions can explain the variation in foreign subsidiary performance. However, most studies either treat subnational regions as a whole or focus on formal institutions at the subnational level. This study examines how general social trust, an important dimension of informal institutions at the subnational level, affects foreign subsidiary performance. In a sample of 17,886 foreign investments in China in 2012, we find that the level of social trust in subnational regions has a positive effect on the performance of foreign subsidiaries, reducing the liability of outsidership faced by foreign subsidiaries. Our results also show that this positive effect is contingent on local embeddedness of the foreign subsidiaries. Our findings highlight the importance of incorporating informal institutions at the subnational level in examining strategies and strategy outcomes.
Original languageEnglish
Pages (from-to)761-773
JournalJournal of International Business Studies
Volume49
Issue number6
DOIs
Publication statusPublished - 2018

Corresponding author email

yysong@ecust.edu.cn

Project name

东道国社会信任、海外子公司治理结构设计及绩效的关系研究

Project sponsor

国家自然科学基金

Project No.

71402097

Keywords

  • hierarchical linear modeling
  • informal institutions
  • institutional theory
  • liability of outsidership
  • social trust
  • subsidiary performance

Indexed by

  • FT
  • ABDC-A*
  • Scopus
  • SSCI

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