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Between a rock and a hard place: internal- and external institutional fit of MNE subsidiary political strategy in contexts of institutional upheaval

Schnyder, Gerhard and Sallai, Dorottya (2020) Between a rock and a hard place: internal- and external institutional fit of MNE subsidiary political strategy in contexts of institutional upheaval. Journal of International Management, 26 (2). ISSN 1075-4253

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Identification Number: 10.1016/j.intman.2020.100736

Abstract

We investigate how subsidiaries’ political capabilities in emerging markets are not just shaped by their home- or host country institutions, but by both simultaneously - presenting a dilemma for subsidiaries of multinational enterprises (MNEs) in host countries. Subsidiaries need to develop CPA that simultaneously “fit” parent company requirements and “external fit” requirements in relation to the host environment. Achieving this dual fit is particularly difficult in volatile host contexts, where the value of political capabilities changes rapidly. Subsidiaries face a dilemma because the easily transferable capabilities – that draw on parent resources - lose value due to their decreasing “external fit” with the host country’s volatile institutional environment. Conversely, the most valuable relational political capabilities lack “internal fit,” as they may not be legitimate in the home environment. To understand how firms deal with this dilemma, we develop a typology of political capabilities that takes into account their transferability/stickiness and their dynamic institutional contingency in the host country. Our study shows that MNEs - even from institutionally very different economies - can successfully transfer political capabilities to develop effective CPA in a volatile political environment. Yet, as political risk becomes discontinuous, this strategy may reach its limits.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-inter...
Additional Information: © 2020 Crown copyright
Divisions: Management
Subjects: H Social Sciences > HD Industries. Land use. Labor
Date Deposited: 18 Dec 2019 11:15
Last Modified: 30 Jun 2020 13:00
URI: http://eprints.lse.ac.uk/id/eprint/102942

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