Regulatory uncertainty and foreign subsidiary strategic proactiveness: an institutional approach
by George O. White III; Tazeeb Rajwani
European J. of International Management (EJIM), Vol. 18, No. 2/3, 2022

Abstract: As multinational enterprises invest in emerging markets, there is strong impetus to understand what drives the ability of their foreign subsidiaries to proactively seize opportunities and successfully compete in what are often uncertain environments. Drawing from neo-institutional theory and the institution-based view, we argue that perceived regulatory uncertainty in a host country will drive subsidiary managers to be more strategically proactive. However, because managers of the parent MNE simultaneously adapt to home country institutional environments, and transfer knowledge and routines to foreign subsidiaries, subsidiary strategic proactiveness should be negatively affected by current home-country regulatory stability. Further, we posit that these relationships will be amplified when foreign subsidiary parents originate from home countries with low regulatory quality and perceive the host country to have high regulatory uncertainty. An analysis of 215 foreign subsidiaries operating in the Philippines largely provides support for our theoretical predictions. As such, our study contributes to a better understanding of foreign subsidiary strategic initiatives by examining the interactive role of regulatory origins and managerial perceptions as they relate to host country-operating environments.

Online publication date: Mon, 15-Aug-2022

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