COMPETITION BARRIERS AND STRATEGY MODERATIONS: IMPACT ON FOREIGN SUBSIDIARY PERFORMANCE

The global firm needs to recognize the crucial role of foreign subsidiary strategy in building global competitive advantage and emphasize corporate control of important strategy elements. In particular, there is a need to examine the role of foreign subsidiary strategy in the firm's efforts to break through local barriers to competition that obstructs the search for global competitive advantage. This study seeks answers to two questions. First, how does the business relatedness between a foreign subsidiary and the parent firm moderate the performance impact of local competition barriers? Second, how does the business strategy of a foreign subsidiary moderate the performance impact of local competition barriers? To test contingency hypotheses, the study used data from 191 subsidiaries in Germany, the United Kingdom, and the United States. The subsidiaries belong to Swedish manufacturing firms. It was found that greater business relatedness and business scope of the subsidiary weaken the negative impact of competition barriers on subsidiary performance, while product differentiation and customer responsiveness differentiation have no moderating effects. The study contributes to theory on control of foreign subsidiaries by extending the knowledge of strategy drivers of foreign subsidiary performance, and the knowledge facilitates the formulation of effective global strategies. Copyright (C) 2012 Strategic Management Society.