NATURE AND DETERMINANTS OF PRODUCTIVITY GROWTH OFFOREIGN SUBSIDIARIES IN CENTRAL AND EAST EUROPEANCOUNTRIES

The paper examines the determinants of productivity growth in foreign manufacturingsubsidiaries in five Central and East European (CEE) countries by analysing patterns ofcontrol, nature of firms’ capabilities and firms’ market orientation. Building on the socalled ‘developmental subsidiaries’ perspective we show that productivity growth isdetermined jointly by corporate governance, production capability and market orientationvariables. CEE subsidiaries have relatively strong autonomy over control of theirbusiness functions, but within a dominantly production oriented mandate. Majorityforeign equity share has a significant and positive impact on subsidiaries’ productivitygrowth. These results present very strong regional characteristic....