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Journal of International Business Studies

, Volume 49, Issue 6, pp 761–773 | Cite as

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

  • Jane Wenzhen Lu
  • Yuanyang Song
  • Mengmeng Shan
Research Note

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.

Keywords

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

Résumé

Des recherches récentes suggèrent que les régions infranationales peuvent expliquer la variation des performances des filiales étrangères. Toutefois, la plupart des études traitent les régions infranationales soit dans leur ensemble, soit en se concentrant sur les institutions formelles au niveau sous-national. Cette étude examine comment la confiance sociale générale, une dimension importante des institutions informelles au niveau infranational, influence la performance des filiales étrangères. Sur la base d’un échantillon de 17 886 investissements étrangers en Chine en 2012, nous constatons que le niveau de confiance sociale dans les régions infranationales a un effet positif sur la performance des filiales étrangères, réduisant ainsi la contrainte d’extranéité subie par les filiales étrangères. Nos résultats montrent également que cet effet positif est subordonné à l'intégration locale des filiales étrangères. Nos constatations soulignent l'importance d'intégrer des institutions informelles au niveau infranational pour apprécier les stratégies et les résultats de ces stratégies.

Resumen

Las investigaciones recientes proponen que las regiones sub-nacionales pueden explicar la variación en el desempeño de las filiales extranjeras. Sin embargo, la mayoría de los estudios tratan a las regiones sub-nacionales como un todo o se enfocan en las instituciones formales a nivel institucional. Este estudio examina cómo la confianza social general, una dimensión de las instituciones informales a nivel sub-nacional, afecta el desempeño de las filiales. En una muestra de 17.886 inversiones extranjeras en China en el 2012, encontramos que el nivel de confianza en las regiones sub-nacionales tiene un efecto positivo en el rendimiento de las filiales, reduciendo la desventaja de ser forastero que enfrentan las filiales extranjeras. Nuestros resultados también muestran que este efecto positivo es contingente a la incrustación local de las filiales extranjeras. Nuestros hallazgos resaltan la importancia de incorporar instituciones informales a nivel sub-nacional en examinar las estrategias y los resultados estratégicos.

Resumo

Pesquisas recentes sugerem que regiões subnacionais podem explicar a variação no desempenho das subsidiárias estrangeiras. No entanto, a maioria dos estudos trata regiões subnacionais como um todo ou se concentra em instituições formais a nível subnacional. Este estudo examina como a confiança social geral, uma dimensão importante das instituições informais ao nível subnacional, afeta o desempenho de subsidiárias estrangeiras. Em uma amostra de 17.886 investimentos estrangeiros na China em 2012, achamos que o nível de confiança social nas regiões subnacionais tem um efeito positivo no desempenho de subsidiárias estrangeiras, reduzindo a desvantagem de ser externo enfrentada por subsidiárias estrangeiras. Nossos resultados também mostram que esse efeito positivo depende do nível de incorporação local das subsidiárias estrangeiras. Nossas descobertas destacam a importância de incorporar instituições informais ao nível subnacional na análise e resultados de estratégias.

摘要

最近的研究表明, 次国家级区域可以解释境外子公司绩效的变化. 然而, 大多数研究要么将次国家级区域视为一个整体, 要么将重点放在次国家级区域的正式制度上. 本研究考察一般社会信任(作为次国家级非正式制度的一个重要的维度)如何影响境外子公司的绩效. 在2012年中国境外投资的17,886个样本中, 我们发现次国家级区域的社会信任水平对境外子公司的绩效有积极影响, 减少了境外子公司面临的局外者劣势. 我们的结果还表明, 这种积极影响取决于境外子公司的本土嵌入性. 我们的研究结果突出了将次国家级非正式制度纳入研究战略和战略结局的重要性.

Notes

Acknowledgements

We would like to thank editors Ram Mudambi and Ron Boschma, and three anonymous reviewers for their valuable comments. This study was supported partially by the National Natural Science Foundation of China (Approval Nos.: 71772062, 71402097), the National Social Science Foundation of China (Approval No.: 15CGL003).

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© Academy of International Business 2018

Open AccessThis article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

Authors and Affiliations

  • Jane Wenzhen Lu
    • 1
  • Yuanyang Song
    • 2
  • Mengmeng Shan
    • 3
  1. 1.China Europe International Business School (CEIBS)ShanghaiChina
  2. 2.School of BusinessEast China University of Science and TechnologyShanghaiChina
  3. 3.School of ManagementShanghai UniversityShanghaiChina

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