Internal social aspirations, expectations, and multinational corporations' subsidiary exit decisions

Jung-hyun Suh, Shige Makino, Ramakrishna Devarakonda

Research output: Chapter in Book/Report/Conference proceedingConference contributionScientificpeer-review


In this study, we argue that foreign subsidiary exit decisions made by managers in multinational corporations (MNCs) are driven by backward- and forward-looking determinants: internal social aspirations and expectations. MNC managers’ internal social comparisons—benchmarking a foreign subsidiary’s past performance against other sister subsidiaries in the same parent firm in the same host country—allow within-parent firm, within-host country comparisons, thereby effectively steering MNC managers’ decisions on whether to maintain or terminate a particular subsidiary. This aspiration setting is importantly bounded by MNC managers’ forward-looking expectations that the subsidiary has a potential to make a turnaround. Using data on Japanese MNCs and their subsidiary exit decisions from 1997 to 2001, we find support for our arguments that a foreign subsidiary is more likely to be terminated if its past performance falls below internal social aspirations. However, this relationship is less pronounced for a subsidiary with a short (vs. long) host country tenure and a subsidiary operating in a politically unstable (vs. stable) environment because such a subsidiary is expected to make a turnaround in the future based on experience accumulation and non-market strategies.
Original languageEnglish
Title of host publicationProceedings of the Academy of Management
PublisherAcademy of Management
Publication statusPublished - 2021
Event81st Annual Meeting of the Academy of Management -
Duration: 29 Jul 20214 Aug 2021


Conference81st Annual Meeting of the Academy of Management


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