Abstract:

While cross-national distance (CND) is a central construct in the IB literature, we challenge its conceptualisation and measurement as a static construct. Instead, we propose that cross-national distance (CND) between country pairs is a dynamic construct that changes over time. In this paper, we formulate a theoretical framework to examine the impact of change in CND between two countries on foreign subsidiary survival. Drawing upon the eclectic paradigm and knowledge-based view, we argue that the change in CND increases the external uncertainty and puts pressure on the internal capabilities of the firms. We propose that an increase in CND will decrease foreign subsidiary survival. Moreover, we propose that the intensity of the ownership advantages and learning help overcome difficulties arising from the change in CND. Finally, we propose that change in the ownership mode is an alternative strategy to tackle the contingent effect of change in CND. Our study contributes to the distance literature by showing that the dynamism of the ways in which two countries differ over time has a significant impact on foreign subsidiary survival. We also contribute to the eclectic paradigm and knowledge- based view by demonstrating that ownership advantages and learning not only explains investment decisions but also help subsidiaries deal with dynamic environments.

Please choose your submission type: Developmental Paper

Primary Track: International Business and International Management

Keywords: Internationalization: process,Internationalization: headquarters, subsidiaries

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Dr. Yi Wang