The impact of “distance” on multinational enterprise subsidiary capabilities: a value chain perspective

Verbeke, A. and Yuan, W. (2016) The impact of “distance” on multinational enterprise subsidiary capabilities: a value chain perspective. Multinational Business Review, 24 (2). pp. 168-190. ISSN 1525-383X doi: 10.1108/MBR-05-2015-0021

Abstract/Summary

Purpose The aim of this paper is to investigate how multinational enterprise (MNE) subsidiary capabilities are influenced by the firm-specific advantages (FSAs) of the parent company, as well as by cultural and geographic distance between the home and host country. Design/methodology/approach This paper assesses how the effects of the parent FSAs, cultural distance and geographic distance on subsidiary capabilities vary for different value-chain activities, with an empirical application to 60 foreign subsidiaries operating in Canada. Findings This paper uncovers distinct, three-way interaction effects among parent-level FSAs, cultural distance and geographic distance for upstream versus downstream activities in the value chain. Originality/value We find that in special cases, high levels of distance can be positive for MNEs, in terms of driving the creation of stronger subsidiary capabilities.