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Navigating Local Environments with Global Strategies: A Contingency Model of Multinational Subsidiary Performance

Smeal College of Business, The Pennsylvania State University, University Park, Pennsylvania 16802
Australian School of Business, University of New South Wales, Sydney NSW 2031, Australia
College of Business, University of Cincinnati, Cincinnati, Ohio 45221
rug2{at}psu.edu
muralic{at}asgm.edu.au
bob.dwyer{at}uc.edu

Multinational corporations (MNCs) often pursue global strategies that emphasize efficiency, flexibility, and learning, but globally developed strategies often clash with the environmental idiosyncrasies of MNC country subsidiary markets in which the strategy is actually implemented. Extant research pays little attention to the contingent efficacy of such global strategies from the perspective of MNC country subsidiary markets. We adopt the strategy-environment alignment principle and study how host country task- and institutional environments might influence the efficacy of global strategies for MNC subsidiary performance. We assess MNC subsidiary performance using subjective managerial judgments, and on the basis of recent research on human judgments, we theorize that these judgments embody information about judgment magnitude and uncertainty. A mean-variance function model simultaneously teases out the effects of the explanatory variables on the magnitude and uncertainty of MNC subsidiary performance judgments. To test the hypotheses, we analyze survey data from German and Japanese subsidiaries in the United States. The results support the use of the mean-variance function model and specific theory about the antecedents of performance judgment magnitude and uncertainty. Findings pertaining to interactions between global strategies and the facets of the local country environment reveal ways in which MNCs can adapt "global" strategies to navigate the complex array of country markets they face.

Key Words: multinational corporation; global strategies; environment; judgment uncertainty
History: Received: March 15, 2007;