Subsidiary Size, Internationalization, Product Diversification, and Subsidiary Performance in an Emerging Market

Abstract

Purpose – This study aims to explore subsidiaries` diversification strategies, both internationally and with regard to their product offerings. The study seeks to examine, at the subsidiary level, the relationships between subsidiary size, internationalization, production diversification, and performance. Design/methodology/approach – Based on the archival data of an officially conducted survey, the study used ordered logit regression analysis to test its hypotheses using data from 920 Taiwanese subsidiaries in China. Findings – The study`s results revealed: larger subsidiaries tend to engage in internationalization and product diversification activities to a greater degree, and, as a result, tend to exhibit superior performance; and subsidiaries that pursue outward internationalization and that reinvest in related businesses enjoy enhanced performance. Research limitations/implications – This study examines Taiwanese firms that have one foreign subsidiary in China. Future research should examine larger firms with numerous foreign subsidiaries in developed countries, and should employ more fine-grained measurements of subsidiary size to provide a clearer picture of subsidiary-specific advantages. Originality/value – Unlike the existing literature, which has tended to take the perspective of the multinational corporation, this study examines internationalization and product diversification at the subsidiary level. By extending the resource-based view to the subsidiary level, larger subsidiaries might be able to exploit their advantages so as to more successfully implement international and product diversification strategies and improve their performance in a host country.