International subsidiary performance of Indian multinationals in the extractive sector: The role of institutional quality, corruption and investment regime

The paper examines the impacts of host country's institutional quality, corruption perception, investment regime, economic growth and resource availability on performance of 150 overseas subsidiaries of Indian multinationals spread across 42 host countries in the extractive sectors of metals and mining during 2005-2017. The dynamic panel data estimation suggests that overseas subsidiary performance is better in countries with superior institutional quality. However, the impact of corruption perception has been sample specific. Further, performance of such subsidiaries was found to be better in countries with underdeveloped investment regime and where the competition from other investors is lower. The economic growth in the host country plays limited role in improving subsidiary performance as these subsidiaries are driven by resource-seeking motive rather than seeking local market. While institutional quality and investment regime are important determinants of subsidiary performance; the role of corruption, economic growth and resource availability in determining the subsidiary performance in the extractive sectors was found to be contrary to conventional expectation, which suggests that the direction of impact of host country-specific variables on subsidiary performance can significantly vary based on the motive of foreign direct investment.