On the Growth of Foreign Affiliates : Multinational Plant Networks, Joint Ventures, and Flexibility

We take a flexibility perspective to analyze employment growth in a large sample of Japanese manufacturing affiliates in nine Asian countries during the years leading up and into the Asian financial crisis (1995-1999). We find that joint ventures are less flexible than wholly owned affiliates in responding to changing environmental conditions in the focal country and underperform in high growth environments. Multinational enterprises use the flexibility created by their multinational plant network to adjust affiliate employment in response to labor cost changes in other countries in which they operate plants. However, no evidence was found that the presence of joint ventures in multinational plant networks reduces this network flexibility. Our findings suggest that more research is needed on the heterogeneous responses of multinational enterprises and their affiliates to changing economic environments