The Effect of Corporate Political Activity on MNC Subsidiary Legitimacy: An Institutional Perspective

MNC subsidiaries engage in a variety of corporate political activities to gain legitimacy in the host country. Based on institutional theory, our study examines five types of strategies that MNC subsidiaries pursue to gain legitimacy in foreign markets. Using data from Australian subsidiaries of MNC...

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Bibliographic Details
Published in:Management international review 2018-10, Vol.58 (5), p.813-844
Main Authors: Banerjee, Shantanu, Venaik, Sunil
Format: Article
Language:English
Subjects:
Analysis
Business and Management
Business Strategy/Leadership
Emerging Markets/Globalization
Foreign subsidiaries
Isomorphisms (Mathematics)
Legitimacy
Management
Markets
Multinational corporations
Office politics
Operations Management
Organization
Political aspects
Political behavior
Political corruption
Political participation
Research Article
Services
Studies
Subsidiaries
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Summary:MNC subsidiaries engage in a variety of corporate political activities to gain legitimacy in the host country. Based on institutional theory, our study examines five types of strategies that MNC subsidiaries pursue to gain legitimacy in foreign markets. Using data from Australian subsidiaries of MNCs operating in different industries, and whose parents originate from 28 different countries, we find that mimetic isomorphism strategy has the strongest effect whereas information strategy has no effect on subsidiary legitimacy. The other three strategies, namely, financial, constituency building and relational have strong to moderate effects on subsidiary legitimacy. In addition, we show that multiple CPA strategies are essential and work together synergistically to contribute to the legitimacy of MNC subsidiaries. Our paper provides empirical support to the widely recognized need for MNC subsidiaries to engage in different types of CPA to legitimize their operations in diverse institutional contexts across the globe.
ISSN:0938-8249
1861-8901
DOI:10.1007/s11575-017-0324-0