Subnational Institutions, Performance Feedback and Subsequent Expansion of A Foreign Subsidiary

Abstract

Drawing on the institutional perspective, this study compares the influences of formal and informal institutional environment of subnational regions within a host country on entry mode choice of MNCs. Using 5,131 foreign subsidiaries of MNCs entering into 26 subnational regions of China, our results show that both formal and informal institutional environment have significant impacts on entry mode choice of MNCs. However, informal institutional environment of subnational regions has stronger influence on that choice than do subnational economic and political institutions of formal institutional environment of subnational regions. Discussion and implications of the study are also provided.