Relation-based strategic responses to volatile regulatory environments: Conceptual and empirical analyses of wholly owned foreign subsidiaries in Southeast Asia

George O. White, University of Texas at El Paso

Abstract

There are three chapters to this dissertation. Chapter 1 conceptualizes how volatile (i.e., easily changeable, elastic, unpredictable, unverifiable) regulatory environments in emerging markets influence multinational enterprise wholly owned foreign subsidiary (WOFS) strategy formulation, implementation, and performance. More specifically, prior research has primarily looked at how and why MNE subsidiaries enter and operate in more developed and stable regulatory institutional environments. However, we suggest that past literature has neglected how WOFSs operate in volatile regulatory environments. We propose that certain WOFSs will create competitive advantages in such markets through the use of organizational dynamic capability induced relation-based strategies (RBSs); by establishing deeply embedded relationships with key government authorities and the local business community in the host country they are operating in. In particular, we develop propositions with regard to the theoretical antecedents and subsequent performance implications for WOFSs that formulate and implement RBSs. This includes inquiring into how WOFSs that use RBSs will perform in volatile emerging market regulatory environments. We also propose that legal system uncertainty and regulatory constraints in volatile emerging market host countries will moderate these relationships and performance outcomes. Finally, we suggest that RBSs will play a mediating role in the relationship between organizational dynamic capabilities and WOFS performance in volatile emerging market regulatory environments. Implications of our framework and an agenda for future research inquiry are presented. ^ Chapter 2 empirically examines whether or not (1) WOFS managerial adaptation, strategic positioning, business culture specificity, and (manufacturing) business sector will be positively associated with relation-based strategy (RBS) implementation in a volatile regulatory environment, and will (2) the positive association of managerial adaptation, strategic positioning, or business sector (manufacturing) on business and government RBSs become stronger for WOFSs that perceive deficient legal services, commercial law inadequacy, judicial arbitrariness, and corruption pervasiveness in the legal system to be high. Our analysis of 181 WOFSs in the Philippines suggests that managerial adaptation, strategic positioning, and the manufacturing based business sector are antecedents to both business and government RBS implementation. In addition, we find that the positive association of managerial adaptation and strategic positioning on business and government RBSs become stronger when WOFS perceptions of commercial law inadequacy and judicial arbitrariness are high. This effect also holds true for the association of the manufacturing business sector and business RBSs when WOFSs in manufacturing perceive commercial law inadequacy to be high; as well as for the association of strategic positioning and government RBSs when WOFSs perceive corruption pervasiveness to be high. Implications for our findings and suggestions for future research are presented. ^ Chapter 3 empirically investigates (1) what dimensions of strategic (qualitative) and financial (quantitative) performance will be enhanced through wholly owned foreign subsidiary (WOFS) business or government relation-based strategy (RBS) implementation in volatile regulatory environments?, and (2) how will different regulatory constraints, and regulatory distance, moderate the relationship between WOFS business or government RBS implementation on different dimensions of strategic and financial performance? Our analysis of 181 WOFSs in the Philippines suggests that business and government RBSs are positively related to different dimensions of strategic performance, but negatively or not related to different dimensions of financial performance. We find that the positive relationship between business and government RBSs on strategic performance become stronger when WOFS perceptions of regulator vulnerability and regulatory excessiveness, as well as regulatory distance, are high. This effect also holds true for the negative relationship between government RBSs and financial performance when WOFSs perceive regulatory excessiveness to be high. Implications for our findings and suggestions for future research are presented. ^ Furthermore, these analyses provide a better picture of how and why WOFSs formulate and implement RBSs, as well as the performance implications of WOFS RBSs, in a volatile Southeast Asian regulatory environment.^

Subject Area

Business Administration, General|Business Administration, Management

Recommended Citation

White, George O., "Relation-based strategic responses to volatile regulatory environments: Conceptual and empirical analyses of wholly owned foreign subsidiaries in Southeast Asia" (2008). ETD Collection for University of Texas, El Paso. AAI3310700.
http://digitalcommons.utep.edu/dissertations/AAI3310700

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