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The cost of distance on subsidiary performance

Asian Business & Management volume 14, pages 171–193 (2015)Cite this article

Abstract

Using a sample of Japanese–US dyads, we find that the time required to travel between geographically separated locations affects subsidiary performance and survival. Longer travel time harms financial performance, and poor performers face higher closure rates. While distant subsidiaries perform poorly, they also survive longer. This is because remediation attention is focused on easier-to-access subsidiaries, there are increased information processing complexities, and parents more often change managers to address deteriorating performance. Further, distant subsidiaries are more likely to be relocated. By measuring travel time instead of geographic distance, we provide validation for the assumption that there are costs to being geographically distant.

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Authors and Affiliations

  1. University of Florida, Warrington College of Business Administration, 100 Bryan Hall, Gainesville, 32611, FL, USA

    Kevin K Boeh

  2. Western University, Ivey Business School, 1255 Western Road, London, N6G 0N1, ON, Canada

    Paul W Beamish

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  1. Kevin K Boeh
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  2. Paul W Beamish
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Boeh, K., Beamish, P. The cost of distance on subsidiary performance. Asian Bus Manage 14, 171–193 (2015). https://doi.org/10.1057/abm.2015.5

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  • DOI: https://doi.org/10.1057/abm.2015.5

Keywords

  • distance
  • multinationals
  • foreign direct investment
  • performance
  • survival