Host Country’s Non-Economic Factors, Local Managers, and Foreign Affiliate Performance

Journal of Korea Trade Vol. 23, No. 2, April 2019, 88-109

22 Pages Posted: 24 Jul 2019

See all articles by Sung Ryong Kim

Sung Ryong Kim

Kyungpook National University - School of Economics and Trade

Seungrae Lee

Hankuk University of Foreign Studies

Date Written: March 20, 2019

Abstract

Purpose - This paper examines the effects of host country’s non-economic factors on foreign affiliate’s financial and operational performance.

Design/Methodology - Using Korean-owned foreign affiliate-level data, we employ various measures that represent host country’s non-economic factors and examine their effects on foreign affiliate’s performance. We further investigate the effects of local top managers and local middle managers on the impact of country’s non-economic factors on foreign affiliate’s performance.

Findings - We find that local top managers are effective in increasing foreign affiliate’s financial performance by dealing with institutional and cultural factors, particularly in high-income countries, while local middle managers are effective in increasing affiliate’s operational performance by responding to the changes in doing business factors, particularly in low-income countries.

Originality/value - Considering that most of previous FDI studies focus on examining host country’s economic factors on firm’s FDI decision, our findings suggest that country’s non-economic factors are strongly associated with actual business performance of foreign affiliates.

Keywords: Foreign Affiliate Performance, Local Managers, Non-economic Factors

JEL Classification: F21, F23

Suggested Citation

Kim, Sung Ryong and Lee, Seungrae, Host Country’s Non-Economic Factors, Local Managers, and Foreign Affiliate Performance (March 20, 2019). Journal of Korea Trade Vol. 23, No. 2, April 2019, 88-109, Available at SSRN: https://ssrn.com/abstract=3424505

Sung Ryong Kim (Contact Author)

Kyungpook National University - School of Economics and Trade ( email )

1370 Sangyeok-dong
Daegu, Taegu 702-701
Korea, Republic of (South Korea)

Seungrae Lee

Hankuk University of Foreign Studies ( email )

270 Imun-dong Dongdaemun-gu
Seoul, 130-791
Korea, Republic of (South Korea)

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