Corporate Strategy and Subsidiary Performance: The Effect of Product and Geographic Diversification

Jie Jiao, Yang Liu,Rui Wu,and Jun Xia

ABSTRACT In this study, we argue that foreign subsidiaries may benefit from the corporate strategies of multinational enterprises (MNEs) in different ways in terms of knowledge transfer and strategic flexibility. From this viewpoint, we explore the relationship between product diversification and financial performance of their subsidiaries under the condition of MNE geographic diversification. Using panel data on foreign subsidiaries in European countries from 2006 to 2011, we find a U-shaped relationship between product diversification and subsidiary performance and the joint effect of product and geographic diversification. Given the importance of transition economies in international business today, we conducted a subsample test contrasting the results based on the transitional (Central and Eastern European) versus Western European countries. The contrasting results provide important implications for other transition economies like China. We validate the relationship in several ways in our robustness tests.

KEYWORDS foreign subsidiary performance, geographic diversification, product diversification, strategic flexibility, transition economies

When Are Pay Gaps Good or Bad for Firm Performance? Evidence from China

Jin-hui Luo, Yuangao Xiang, and Ruichao Zhu

ABSTRACT There is still an ongoing debate regarding the firm performance implications of pay gaps between top executives and subordinate employees. This study integrates relative deprivation theory and tournament theory to investigate the potential nonlinear effects of pay gaps. We expect that at low levels of pay inequality, increased inequality hurts firm productivity, while at higher levels of pay inequality, increased inequality helps firm productivity. Our study of Chinese firms confirms that pay gaps have an approximately U-shaped relationship with firm performance. This nonlinear relationship is weaker in state-owned enterprises (SOEs) than in non-SOEs, suggesting that state ownership is an important moderator in the association. Overall, this study explains previous mixed findings regarding consequences of pay gaps with meaningful implications for policymakers and entrepreneurs in China and other economies with similar cultural and institutional backgrounds.

KEYWORDS China, firm performance, ownership structure, pay gap, relative deprivation theory, tournament theory 

The Impact of Japanese Labels on the Perceived Relevance of Lean Production Practices in a Russian Bank

Valery Yakubovich and Daniela Lup

ABSTRACT We investigate how the relevance of the Lean Production System (LPS) as perceived by employees of a Russian bank depends on whether LPS practices are labeled with transliterated original Japanese words or translated Russian words. Building on organizational translation scholarship contextualized to Russia, we formulate hypotheses about the mechanism through which labels affect the perceived relevance of practices. The results of an experimental study situated in a Russian bank show that transliterated Japanese labels have a negative impact on the perceived relevance of LPS practices by Russian employees. Further analysis reveals that this negative perception is fully mediated by the label’s semantic fit, that is, the extent to which the label complies with the linguistic codes of the Russian language. Specifically, we find that, on average, the transliterated Japanese labels have a lower semantic fit than the translated Russian labels, and this difference in semantic fit explains the Japanese labels’ lower relevance as perceived by the bank’s employees. By unpacking the causal effect of the labels used for management practices on the practices’ perceived relevance, this study advances our understanding of how organizations could influence employees’ acceptance of foreign management practices.

KEYWORDS field experiment, language, lean production, management practices, organizational transition, Russia, semantic fit

Wining and Dining Government Officials: What Drives Political Networking in Chinese Private Ventures?

Jianjun Zhang, Pei Sun, and Kunyuan Qiao

ABSTRACT Managerial networking with political actors has long been recognized as a crucial co-option strategy to navigate the challenging institutional environment in emerging economies. However, we know much less about what drives the variation of political networking investment by private ventures. Drawing on resource dependence theory, we unpack the dyadic business-government relations and identify the key organizational and environmental factors that shape the power dependence relationships between private ventures and the government. By examining power imbalance and mutual dependence in this dyadic relationship and considering both the necessity and the capability of political networking, we develop hypotheses regarding the ways in which size-, connection-, and location-based dependencies affect firms’ political networking intensity. These hypotheses are tested through a unique survey of Chinese private ventures. Our study finds that political networking intensity (1) has an inverted U-shaped relationship with firm size, (2) is negatively associated with the presence of embedded political ties while positively associated with that of achieved political connections, and (3) is smaller when the focal firm is located in business development zones. This research bears rich implications for our understanding of corporate political activity in emerging economies from a resource dependence lens.

KEYWORDS China, political networking, private ventures, resource dependence theory (RDT)