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

Abstract

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.

Citation

Verbeke, A. and Yuan, W. (2016), "The impact of “distance” on multinational enterprise subsidiary capabilities: A value chain perspective", Multinational Business Review, Vol. 24 No. 2, pp. 168-190. https://doi.org/10.1108/MBR-05-2015-0021