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
Date Written: March 20, 2019
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: Suggested Citation