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Management International Review

, Volume 57, Issue 3, pp 379–409 | Cite as

The Interplay of Mahalanobis Distance and Firm Capabilities on MNC Subsidiary Exits from Host Countries

  • Jingoo Kang
  • Jeoung Yul Lee
  • Pervez N. Ghauri
Research Article

Abstract

We examine how the cross-national Mahalanobis distance between home and host countries may affect a multinational corporation subsidiary’s exit from its host country by applying a longitudinal Cox proportional hazard model analysis using data from Korean MNCs between 1990 and 2012. Our findings show that increasing cross-national distance is positively related to the likelihood of a subsidiary’s exit from the host country for most cross-national distance dimensions, while increasing cross-national distance is negatively related to the likelihood of a subsidiary’s exit from the host country for knowledge and global connectedness dimensions. However, the positive relationship between the seven dimensions of cross-national distance and subsidiary exit becomes weaker when the MNC has strong technological and experiential capabilities, while the negative relationship between two dimensions (i.e., knowledge and global connectedness) of cross-national distance and subsidiary exit becomes stronger. Our study contributes to the international business literature by examining the impact of diverse cross-national distance dimensions on subsidiary exit by showing the significance of firm capabilities in overcoming cross-national distance challenges, as well as by finding both a “problem-focused view” and “positive organizational perspective” in the results.

Keywords

Cross-national distance Mahalanobis distance Multinational corporation (MNC) MNC capabilities Subsidiary exit 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  • Jingoo Kang
    • 1
  • Jeoung Yul Lee
    • 2
    • 3
  • Pervez N. Ghauri
    • 4
  1. 1.Nanyang Business SchoolNanyang Technological UniversitySingaporeSingapore
  2. 2.School of Business ManagementHongik UniversitySejongSouth Korea
  3. 3.Leeds University Business SchoolThe University of LeedsLeedsUK
  4. 4.Birmingham Business SchoolUniversity of BirminghamBirminghamUK

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