Taking a prospector local-market focus and foreign subsidiary performance : evidence from China

Purpose: The purpose of this paper is to examine the relationships among taking a prospector local-market focus, managerial ties (business ties and political ties) and performance in the Chinese market. Design/methodology/approach: This study, using a sample of 371 Taiwanese subsidiaries of multinational corporations (MNCs) in China, applies regression analyses to investigate the following questions: does taking a prospector local-market focus negatively impact performance? Do managerial ties (business ties and political ties) positively impact performance? Do these managerial ties positively moderate the effect of the taking a prospector local-market focus on performance? Findings: Taking a prospector local-market focus negatively impacts the performance of MNC subsidiaries. Business ties positively impact the performance of MNC subsidiaries, as do political ties. Finally, the impact of a prospector local-market focus on performance is positively moderated by business ties. Practical implications: The Chinese market is still aguanxiexchange business system and political connections usually require significant investment in exchange for advantageous market conditions. Thus, political ties must be carefully considered by MNC subsidiaries when they employ a prospector local-market focus in the Chinese business environment. Originality/value: First, this study clarifies the key relationship between the strategic choice of taking a prospector local-market focus and performance of MNC subsidiaries in the Chinese market. Second, it identifies the moderating role of managerial ties (political and business ties) in influencing the relationship between a prospector local-market focus and subsidiary.