ARTICLE

https://doi.org/10.1057/s41599-023-02533-w OPEN

Is the relationship between institutional distance

and subsidiary performance moderated by top
management team? Evidence from Chinese
multinational enterprises
Xiaojing Lu 1 ✉, Sebastian Jacques Manuel Boo1,2 & Xiaming Liu2
1234567890():,;

Institutional distance is well-recognised as having a significant influence on MNE subsidiary

performance in host countries. However, there is less clarity as to how the institutional
distance is managed by top management teams of MNEs. Specifically, it is not known
whether the previous work experiences of the top management team (TMT) can moderate
how institutional distance impacts subsidiary performance. The purpose of our research is to
address the research question, how do different work experiences among the TMT moderate
the relationship between institutional distance and subsidiary performance? To empirically
answer this question, we use a sample of 6119 Chinese MNE subsidiaries with 34,870 TMT
managers. We apply ordinary least square (OLS) regression and bias-corrected and accel-
erated bootstrap (BCa) to the data. The results indicate that the strength of the negative
relationship between institutional distance and MNE subsidiary performance is conditional on
the different work experiences of the TMT. We show that the negative relationship between
institutional distance and MNE subsidiary performance is strengthened with an increase in
expatriates in the TMT who have home country work experience (β = −0.346, p < 0.05) but
mitigated with an increase of managers in the TMT who have host country work experience
(β = 0.129, p < 0.01). Additionally, the negative relationship between institutional distance
and subsidiary performance is weakened by increasing diversity of TMT’s international
experience (β = 0.555, p < 0.01). Notably, the TMT’s international experience in weak-
institution markets has a more salient mitigating effect on the negative relationship than work
experienced gained in strong-institution markets. This study contributes to the integration of
TMT perspective into institutional management and has practical implications for the staffing
strategy of MNE subsidiaries.

1 Faculty of Business and Management, BNU-HKBU United International College, Zhuhai, China. 2 Birkbeck Business School, Faculty of Business and Law,

Birkbeck College, University of London, London, UK. ✉email: carolinexjlu@uic.edu.cn

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w 1

ARTICLE HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
I
Introduction
nstitutional distance is defined as the difference between the
institutional profiles of the host and home country Kostova
(1999). It is a critical construct in international business
(Beugelsdijk et al., 2018; Hutzschenreuter et al., 2016) because it
can provide explanations for multinational enterprises’ (MNEs)
behaviours. The two mechanisms through which institutional
distance influences the activities of MNEs are firstly the transfer
of strategic orientation and practices from parent companies to
their subsidiaries, and secondly, the establishment of the legiti-
macy of foreign subsidiaries in host countries (Xu and Shenkar,
2002). If subsidiaries of multinational firms are to perform well in
host countries, then it is essential to consider the role of insti-
tutional distance and how to manage it, a topic which has
received attention from scholars (Chao and Kumar, 2010; Shir-
odkar and Konara, 2017).
Despite some studies indicating that institutional distance
might have a positive influence on subsidiary performance as a
result of institutional arbitrage (Gaur and Lu, 2007), the domi-
nant view in the literature is that greater institutional distance
decreases MNE subsidiary performance due to the liability of
foreignness in a different institutional environment (Aguilera-
Caracuel et al., 2013; Dong et al., 2017; Liu et al., 2019; Shirodkar
and Konara, 2017; Teng et al., 2017; Trapczynski and Gorynia,
2017). Additionally, the various boundary conditions of the
institutional distance-MNE subsidiary performance relationship
have also been studied. These boundary conditions include dif-
ferent firm-level characteristics such as firm ownership (Gaur and
Lu, 2007; Trapczynski and Gorynia, 2017) and firm host country
experience (Carlsson et al., 2005; Shirodkar and Konara, 2017).
However, the existing studies mostly fail to comment on how
individual-level managers in the top management team (TMT)
interpret and manage the institutional distance and in turn, how
TMT managers moderate the impact institutional distance has on
MNE subsidiary performance. The purpose of this study, there-
fore is to address the research question: how does the TMT
moderate the relationship between institutional distance and
MNE subsidiary performance?
Managing institutional distance is critical if subsidiaries are to
conquer the liability of foreignness (Rickley and Karim, 2018).
Previous studies of moderation effect of institutional distance on
MNE subsidiary performance have been done on the macro-level
analysis of firm characteristics (e.g., Gaur and Lu, 2007; Shirodkar
and Konara, 2017). Our study extends this work and offers a
novel contribution by studying the moderation effect of institu-
tional distance on subsidiary performance based on the micro-
level analysis of TMT characteristics. We argue the liability of
foreignness applies not only to firms but also to individuals such
that a manager’s work experience influences their ability to deal
with the liability of foreignness (Mata and Alves, 2018). Our
research objective is to look in depth at how TMT managers’
different work experiences within their home country, host
country and international work experience influence their inter-
pretation and management of institutional distance and how, in
turn, this impacts MNE subsidiary performance.
Our paper explores the moderation effects of home, host and
international work experience of the TMT on institutional dis-
tance and subsidiary performance. We study expatriates who
have mastered the organisational practices at the parent firm but
are operating at a subsidiary in a foreign country and are influ-
ential in facilitating knowledge transfer from the parent company
to the subsidiary (Chang et al., 2012; Fang et al., 2010; Kawai and
Chung, 2019). If expatriates are unwilling to learn and unable to
adapt to the new environment, then the success of knowledge
transfer will be jeopardised (Hung-Wen, 2007). MNE subsidiaries
with lots of expatriates face challenges in acquiring legitimacy
2 HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
because of high parent control and low local responsiveness
(Salomon and Wu, 2012). Therefore, we hypothesise expatriate
managers inhibit TMT’s management of institutional distance
such that there is a negative moderating effect of expatriates on
institutional distance and MNE subsidiary performance. In
addition, we also hypothesise TMT’s work experience in the host
country and the diversity of TMT’s international work experience
will help TMTs manage institutional distance and consequently
mitigate the negative influence institutional distance has on MNE
subsidiary performance. Previous research suggests that TMT’s
international experience is influential in various aspects of firm
internationalisation because TMT’s international experience can
significantly influence firms’ ability to deal with the liability of
foreignness (Lee and Park, 2008; Reuber and Fischer, 1997;
Tihanyi et al., 2000). Liability of foreignness to do business is
primarily generated by the institutional distance which will
influence MNE’s ability to transfer strategic organisational prac-
tices and adapt to the local business environment and obtain
legitimacy (Eden and Miller, 2004). Our paper contributes to the
international business and TMT literature.
Literature review
Institutional distance and MNE subsidiary performance. Fac-
tors such as intangible assets (Delios and Beamish, 2001; Nguyen,
2011; Phene and Almeida, 2003), financing (Nguyen and
Rugman, 2015), entry modes (Zhao et al., 2017), product diver-
sification (Delios et al., 2008), market learning (Liu et al., 2016),
subsidiary entrepreneurship (Birkinshaw et al., 1998; Birkinshaw
et al., 2005), host country market environments (Gaur et al.,
2007) host country experience (Mata and Alves, 2018) all influ-
ence MNE subsidiary’s performance. In addition to all these
diverse factors, institutional distance must also be considered in
any study of MNEs performance in host countries and indeed this
topic has been receiving considerable attention from scholars
(Chao and Kumar, 2010; Gaur and Lu, 2007; Shirodkar and
Konara, 2017; Wocke and Kgotle, 2021).
Institutional distance is a crucial concept in international
business because of its explanatory power of MNE behaviours
(Bae and Salomon, 2010; Xu and Shenkar, 2002). It captures the
extent of the difference or similarity of institutional environments
between two countries (Kostova and Zaheer, 1999). Institutional
distance has been regarded as a salient factor influencing
subsidiary performance among researchers in international
business (Bai et al., 2018; Nguyen, 2011; Shirodkar and Konara,
2017; Trąpczyński et al., 2019) as it is seen as a key driver behind
the liability of foreignness (Eden and Miller, 2004). As
institutional distance increases, the liability of foreignness, which
is the social cost of doing business abroad associated with the
unfamiliarity, and relational and discriminatory hazards increases
(Eden and Miller, 2004; Zaheer, 1995). MNEs that face a high
liability of foreignness will have poor financial performance
because of the increasing cost of coordination, transaction and
knowledge transfer (Salomon and Martin, 2008; Zaheer, 1995).
Institutional distance influences MNE subsidiary performance
through its effect on legitimacy and the firms’ transfer of strategic
organisational practices (Xu and Shenkar, 2002). Specifically, the
precondition for MNEs to survive and thrive in an institutional
field is to obtain legitimacy, that is, to be accepted and approved
by the external constituents in the social system (Dowling and
Pfeffer, 1975). Institutional arrangements define the social
contexts of MNEs and shape MNE behaviours (Kostova et al.,
2008). Local isomorphism strategy is one way for MNEs to obtain
legitimacy by imitating domestic firms (DiMaggio and Powell,
1983). MNEs need to adopt a higher level of local isomorphism
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
strategy, especially when subsidiaries face more significant
institutional distance because they have to conquer a higher level
of information asymmetry and business model incompatibility in
the host country (Salomon and Wu, 2012). An alternative way for
MNEs to achieve legitimacy is to negotiate with the constituting
actors in the social system. In terms of negotiation, a political
process of interaction, communication or exchange with the
constituting actors is involved (Kostova et al., 2008). The greater
the institutional distance, the more effort is required for firms to
reach the coordination between the MNEs and the constituting
actors. Trade-offs between the external legitimacy in the host
country, such as local responsiveness, and the internal legitimacy
of the MNEs, such as global integration, are always a concern for
MNEs. A broader institutional distance makes this concern more
salient because it triggers the conflicting demands for external
legitimacy and internal legitimacy within the MNE system
(Kostova and Zaheer, 1999). Therefore, it is harder for MNEs
to obtain legitimacy in countries with distant institutions, and in
this way, institutional distance will negatively affect MNE
subsidiary performance.
Furthermore, institutional distance also influences the transfer
of strategic organisational practices from the parent company in
the home country to the subsidiary in the host country (Xu and
Shenkar, 2002). Kostova (1999, p. 308) explains that “Strategic
organisational practices are those practices considered to be
dominant, critical or crucial for achieving the strategic mission of
the firm”. Organisational practices vary across countries because
of the different socio-cultural environment (Kostova and Zaheer,
1999). The bigger the institutional distance, the greater the
difference between the home and host country institutional
profiles. A country’s institutional profile includes regulatory,
normative and cognitive institutions. Regulatory institutions refer
to the nation’s laws, whilst normative institutions relate to the
dominant societal values and cultural norms. Cognitive institu-
tions are the shared conceptions, or the frames through which
events are interpreted and meaning is constructed (Kostova,
1999). In this way, differences in the institutional profiles of two
countries, in other words the institutional distance between the
two countries, can limit and obstruct the transfer of organisa-
tional practices between home and host country. This is because
organisational practices that reflect the home country’s institu-
tional characteristics may not fit with the host country’s
institutions (Kostova and Zaheer, 1999). Another factor that
needs to be considered for the successful transfer of strategic
practices between home and host country is whether a
subsidiary’s employees have correctly understood the strategic
practices, and whether they are motivated to engage in the
transfer.
Thus the success of transfer from home to host country is
influenced by the local employees’ cognitive and psychological
perspectives (Kostova and Zaheer, 1999). If a practice from the
home country is perceived to be conflicting with the host
country’s regulatory institutions, normative institutions, cognitive
institutions, the local employees will feel reluctant to implement
the practices (Kostova, 1999). In summary, institutional distance
hinders the legitimacy of multinational subsidiaries and the
transfer of strategic organisational practices to multinational
subsidiaries. Therefore, we propose:
Hypothesis 1: There is a negative relationship between
institutional distance and MNE subsidiary performance.
The moderating role of TMT characteristics - an upper echelon
perspective. The upper echelon perspective links individuals and
organisations together and indicates that organisational outcomes
such as subsidiary performance, are partially predicted by
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
ARTICLE
background characteristics of managers in the firm (Hambrick
and Mason, 1984). Each manager’s unique background and
experiences influence their cognitive base and personal values and
consequently their behaviour. Hambrick and Mason (1984)
define cognitive base as “knowledge or assumptions about future
events, knowledge of alternatives and knowledge of consequences
attached to alternatives” and personal values as “principles for
ordering consequences or alternatives according to preference”.
Given managers’ cognitive bases and personal values, their stra-
tegic choices are made under conditions of bounded rationality.
This means firstly, managers operating in a different institutional
environment have a limited field of vision and selective percep-
tion of any situation. Secondly, managers will interpret situations
through their own personal cognitive maps and values (Hambrick
and Mason, 1984). TMT managers’ cognitive maps stem from
their stored knowledge and derives from their different life and
learning experience and careers (Denzau and North, 2000). Thus,
all things being equal, different managers with different previous
work experience may perceive and interpret situations in a host
country in a range of different ways and respond to the man-
agement of the institutional distance in a range of uniquely dif-
ferent ways. Consequently, there will be variation in the
performances of subsidiaries caused by the way individual man-
agers respond differently to situations related to managing
institutional distance.
We will use the following two mechanisms of legitimacy-
building and strategic practice transfer to explain how TMT’s
beliefs and values from their past experiences influence their
management of institutional distance. On the one hand, senior
managers’ different beliefs will manifest in the process of forming,
mobilising and managing the company’s social capital to facilitate
legitimacy building (Xu and Shenkar, 2002). On the other hand,
successful transfer depends on TMT’s beliefs about how they do
things and implement the practices (Kostova, 1999). Strategic
practice is less imitable and critical, and according to Kostova
(1999, p. 310), “more complex and broader in scope, and more
“people” rather than “technology” focused”.
The moderating role of TMT expatriates. MNEs face multiple
stakeholders such as the parent company, the home and host
country institutions such as the government and the regulatory
and tax authority (Batrancea et al., 2012; Ramona-Anca and
Larissa-Margareta, 2013). MNEs need to balance local respon-
siveness and global integration for their international business
strategy (Devinney et al., 2000). Thus, subsidiaries always face a
tension between localisation and integration. On the one hand,
subsidiaries must customise their products and business methods
in the host country using local resources and knowledge but on
the other hand, they also need to maintain consistency with the
parent organisation’s business methods and products.
When MNE consider their staffing strategy for subsidiaries in
host countries, they will often want managers to be expatriates
from the home country (Abugre et al., 2020; Lupton et al., 2022;
Rickley, 2019). Expatriates understand and operate according to
the norms and mindset of parent firms and follow parent firms’
strategic practices but that also need to adjust to the local business
environment in the host countries. Previous studies have
identified that employing expatriates in subsidiaries is not
favourable when there is greater institutional distance between
the home and host country (Abugre et al., 2020; Chao and
Kumar, 2010; Rickley and Karim, 2018). We argue expatriates’
mindsets influence their management of institutional distance,
specifically through two mechanisms, legitimacy-building and
strategic practice transfer. We start with legitimacy building. One
way for the MNE to guarantee control over a subsidiary is to
dispatch expatriates to manage and supervise the subsidiary to
3
ARTICLE HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
ensure that it is in alignment with the strategic orientation of the
parent company (Devinney et al., 2000). However, parental
control of the subsidiary comes at the expense of local
responsiveness, which means, achieving local legitimacy by
operating in line with the host country’s regulatory institutions,
social norms and cultures (Gaur et al., 2007; Lazarova et al.,
2017). Local isomorphism strategy is an important way to achieve
legitimacy by imitating domestic firms’ behaviours (Salomon and
Wu, 2012). However, as an extended form of parent supervision,
expatriates are habituated to employing the same mental models
used in the parent company (Tao et al., 2018) and tend to have
less commitment to local adaption (Fang et al., 2010). With a
substantial presence of expatriates from home, there is a challenge
for the MNE subsidiaries to establish legitimacy efficiently in the
host country.
Turning now to the second mechanism by which MNE
subsidiaries achieve legitimacy, this occurs by negotiating with
the important legitimating actors (Kostova et al., 2008). It is the
local managers rather than the expatriate managers who have
greater knowledge and competency in engaging with the political
process of approaching, interacting and bargaining with the
important legitimating actors in the host country’s environment.
An increase in expatriates in the subsidiary TMT raises the
coordination and political cost for negotiation.
In addition to exerting challenges in building legitimacy,
expatriates will also influence the process of the transfer of
strategic practices. MNEs use expatriates to facilitate knowledge
transfer from parent companies to subsidiaries (Chang et al.,
2012; Dahms, 2019; Fang et al., 2010). However, the assumption
of the facilitating role of expatriates in practice transfer is that
there is no expatriate failure. Unfortunately, in reality, expatriate
failure is a common problem (Harzing, 1995; Hung-Wen, 2007).
Given institutional distance, expatriates and their family members
may find it hard to deal with the uncertainty that is inherently
part of the oversea expatriation process with the risk that there is
expatriate failure. An example of expatriate failure would be the
inability to adapt to the new environment, or the inability of
expatriates’ spouses or dependent children to accept the
relocation, and failure of willingness or ability to learn (Hung-
Wen, 2007). As Kostova (1999) indicated, the success of strategic
practice transfer is embodied in the degree of implementation and
institutionalisation of the strategic practices in the subsidiary.
However, expatriate failure will hinder the implementation of the
strategic organisational practices in the subsidiary.
Therefore, in summary, we propose:
Hypothesis 2: The negative relationship between institutional
distance and MNE subsidiary performance is conditional on the
number of expatriates in the TMT such that the more expatriates
in the TMT, the stronger the negative relationship.
The moderating role of TMT managers’ host country work
experience. The literature on liability of foreignness proposes that
the social cost of unfamiliarity, relational and discriminatory
hazards of doing business will reduce over time (Johanson and
Vahlne, 2015). This is because company managers will gradually
gain work experience in the host country and the unfamiliarity
with the business environment and relational disadvantage will
disappear over time. By learning about the social practice of doing
business in the host country, business managers can lead the
company in adapting better to the local environment by, for
example, developing good relationships with local businesses and
thus build up legitimacy.
Existing research shows that firm-level host country experience
influences the relationship between the relationship between
institutional distance and subsidiary’s financial performance
(Gaur and Lu, 2007; Shirodkar and Konara, 2017). The literature
4 HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
also points out that liability of foreignness derived from
institutional distance applies not only to firms but also to
individuals (Mata and Alves, 2018). However, how individual-
level TMT’s host country experience influences the institutional
distance and subsidiary performance relationship is yet to be
studied. As mentioned, we can explain the moderation effect of
TMT’s host country experience on institutional distance and
MNE subsidiary performance through two mechanisms:
legitimacy-building and through strategic practice transfer.
In regard to the first mechanism of legitimacy, mangers’
previous embeddedness in social networks in the host country’s
institutional environment help them to make better sense of
social obligations, taken-for-grandness and shared understanding
that are inherent to the culture in the host country. Furthermore,
managers with host country work experience know what kind of
political process is necessary to approach, interact and negotiate
within the business ecosystem in order to obtain legitimacy
(Kostova et al., 2008; Kostova and Zaheer, 1999). Therefore, a
subsidiary can obtain legitimacy more efficiently in host countries
in which the TMT has previous work experience.
In regard to the second mechanism of strategic practice
transfer, managers with host country experience will know the
institutional idiosyncrasies that differentiate the home and host
markets. They will therefore understand how to transfer the
strategic practices to subsidiaries more efficiently without
provoking difficulties or risking conflicts. The managers’ percep-
tion of lower uncertainty makes them feel less hesitant to facilitate
the transfer of strategic organisational practices to the host
market with distant institutions. Considering the above argu-
ments, we propose:
Hypothesis 3: The negative relationship between institutional
distance and MNE subsidiary performance is conditional on the
number of managers who have host country work experience in the
TMT such that the more managers who have host country work
experience, the weaker the negative relationship.
The moderating role of TMT managers’ diversity of international
work experience. The literature on the diversity of TMT inter-
national work experience indicates their significant influence on
firm internationalisation such as export channel choice (Kalinic
and Brouthers, 2022), and international performance or innova-
tion (Belderbos et al., 2022; Miller et al., 2016). In our study,
instead of investigating the direct effect of the diversity of TMT
international work experience on MNE subsidiary performance,
we investigated the moderation effect of diversity of international
work experience, in other words, how diversity of international
work experience moderates the relationship between institutional
distance and MNE subsidiary relationship.
As mentioned, TMT’s diversity of international work experi-
ence influences institutional distance management through two
mechanisms, legitimacy-building and strategic practice transfer.
Legitimacy-building occurs in two ways. TMTs with international
experience are more capable of learning about new foreign
markets (Carlsson et al., 2005) and make sense of the
international business environment and respond appropriately
and in a timely way to the legitimacy requirements of the host
country environment (Kostova and Zaheer, 1999). Managers with
international experience know the essential legitimating factors
and can therefore obtain legitimacy more easily compared to
those with less international experience. The second way in which
legitimacy building occurs, is that TMT managers with interna-
tional experience perceive a lower level of uncertainty in
international operations (Lu et al., 2014). A lower perception of
risk and uncertainty enables managers to transfer their practice
from the home country to the host country with confidence.
Indeed, TMT’s previous work experience enlarges managers’
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w ARTICLE

social networks and can be a potential facilitator for identifying TMT work experience
novel business opportunities. Therefore, it can be argued that H2: -, TMT’s home country work experience (expatriates)
TMT’s international work experience will help the subsidiary to H3: +, TMT’s host country work experience
cope with the liability of foreignness derived from institutional H4: +, Diversity of TMT’s international work experience
distance.
Notably, managers perceive different levels of uncertainty in Institutional H1: - Multinational
subsidiary performance
different institutional environments. We posit that senior distance

managers with international experience in countries with weak Control variables

institutions helps them to better obtain the ability to deal with Firm age, Firm size, SOE, Parent-Subsidiary
ownership, Capital, Current ratio, Intangibles,
institutional uncertainty compared to senior managers with
GDP per capital, GDP annual growth rate
international experience in countries with strong institutions.
Institutional voids and weak institutions prevail in developing Fig. 1 The moderating role of TMT on institutional distance-subsidiary
markets because of the rapid changes in politics, economy and performance relationship. We theorise that the moderation effect of
institutions (Hoskisson et al., 2013; Wright et al., 2005). TMT’s home country work experience between institutional distance and
Companies operating in this kind of institutional environment multinational subsidiary performance is negative, the moderation effect of
have a strong impetus to engage, negotiate and solve problems TMT’s host country work experience between institutional distance and
with the other actors in the social system (Carney et al., 2016). multinational subsidiary performance is positive, the moderation effect of
Under this situation, companies gradually accumulate the the diversity of TMT’s international work experience between institutional
institutional capabilities through experiential learning, and the distance and multinational subsidiary performance is positive.
heuristics, skills and routines that enable companies to navigate
under institutional voids or weak institutions (Carney et al.,
2016). Senior managers’ experiential learning about how to
(Limaj and Bernroider, 2019; Trąpczyński and Banalieva, 2016).
engage, negotiate and solve problems under high institutional
The Orbis database provides company information and was used
uncertainty help them when they face a new market with distant
to identify foreign subsidiaries belonging to Chinese MNEs.
institutions. Therefore, MNEs with internationally experienced
Chinese foreign subsidiaries in 58 host economies outside of
TMTs in a weak institutional environment show the attributes of
mainland China were studied. The following selection criteria
institutional entrepreneurial ability in managing the institutional
were used to retrieve the final sample: 1) subsidiaries where more
uncertainty (Guillén and García-Canal, 2009).
than 50% of shares are controlled by the ultimate owner; 2)
Given the above, we posit that managers with the improved
subsidiaries whose ultimate owners operate in China; 3)
institutional entrepreneurial ability obtained through their prior
subsidiaries that are located in foreign countries other than
experiential learning in markets with institutional uncertainty, are
China; 4) subsidiaries that have complete information on key
better equipped to deal with institutional uncertainty. They are
variables of return on assets, TMT background information, date
also better able to penetrate the local networks through political
of incorporation, and total assets; 5) subsidiaries located in
processes and overcome the liability of “outsider-ship” (Carney
overseas territories such as Bermuda or Cayman Islands are
et al., 2016). The higher the ability to approach, negotiate with
omitted because of the lack of the measurement of governance
and achieve coordination among the important constituting
indicators in these territories.
actors, the more efficiently the MNE subsidiary will obtain
Following the above procedures, a primary sample consisting
legitimacy. At the same time, managers who have experience in a
of 6145 foreign subsidiaries with a corresponding 35,906 TMT
market where the rules of the game are in flux will be more
manager observations from 58 host economies was obtained. This
flexible as to how they transfer and implement the strategic
paper focuses on the TMT given their leading role in decision-
practices. With an open mind to dealing with uncertainty, these
making and strategic management (Shahul Hameed et al., 2022).
managers may be more innovative and capable of modifying their
Next, the dataset was prepared by undertaking the following
firm’s business model in order to fit with the local social-
procedures. First, individual-level TMT managers’ information
economic conditions (Carney et al., 2016).
from Orbis was summarised and aggregated to the firm-level. The
Based on the above arguments, we propose:
number of expatriates and the number of TMT managers who
Hypothesis 4a: The negative relationship between institutional
have host country work experience as well as the diversity of
distance and MNE subsidiary performance is conditional on the
international work experience within the TMT for each
diversity of the TMT’s international work experience, such that the
subsidiary were calculated. Second, the dataset from Orbis was
more diverse the TMT’s international work experience, the weaker
merged with World Governance Indicators (WGI) data devel-
the negative relationship.
oped by the World Bank (Kaufmann et al., 2011). Third, GDP per
Hypothesis 4b: The negative relationship between institutional
capita and GDP annual growth rate were extracted from the
distance and multinational subsidiary performance will be
World Development database developed by the World Bank.
weakened by TMT’s international work experience, especially
Fourth, the Index of Economic Freedom (IEF) developed by the
when the work experience was obtained in markets with weak
Heritage Foundation and the Wall Street Journal (HF-WSJ) was
institutions rather than markets with strong institutions.
added to our dataset for a further robustness check. The final
The theoretical framework of this study is shown in Fig. 1.
dataset included 6119 Chinese foreign subsidiaries with a
corresponding 34,870 TMT manager observations. The slight
reduction of observations is due to the deletion of outliers in our
Methodology
analysis model based on Cook’s distance (Mehmetoglu and
Data and Sample. The hypotheses were tested using data on
Jakobsen, 2022). Stata (version 17) software was used to analyse
Chinese foreign subsidiaries obtained from Orbis which a com-
the data.
prehensive database with information on about 360 million pri-
vate and public companies and is globally complied by Bureau
van Dijk. The database provides detailed information on com- Dependent variables. The dependent variable in our study is
panies’ financial performance, TMT’s characteristics, ownership return on asset (ROA). ROA is calculated as the net income
structures and is widely used in international business research divided by the total value of assets. It is widely used as an

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w 5

ARTICLE HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
indicator for organisations’ economic performance and often
adopted in international business research (Kotabe et al., 2002).
Independent variables. Institutional distance is our independent
variable. The World Bank Governance Indicators were chosen to
measure institutional distance in line with previous research
(Dikova, 2009; Gallego and Casillas, 2014; Hernandez et al., 2018;
Malhotra et al., 2009). Beugelsdijk et al.’s (2018) guidelines were
followed to construct and operationalise the concept to ensure
validity. Kogut and Singh’s (1988) approach shown in Eq. (1) was
employed to calculate institutional distance.
n

2 
KSIndexj ¼ ∑ Gij  GiHOME =Vi =N ð1Þ
i¼1
The KSIndexj is a Euclidean distance with variance connec-
tion. Equation 1, Gij refers to the host country j’s score on the
ith dimension of WGI. GiHOME refers to the home country’s
score on the ith dimension of WGI. Vi refers to the variance of
the ith dimension of WGI and N refers to the number of
dimensions. According to Beugelsdijk et al. (2018, p. 1119),
‘World Bank calculates standardised country scores for these
six dimensions, hence re-scaling the dimensions by correcting
for variance differences is not required’. Thus, the measurement
of institutional distance was operationalised based on WGI
indicators following Eq. 2. Additionally, to check the model’s
robustness, IEF was used as an alternative measurement of
institutional distance following De Beule et al., (2014). Equation
1 was used to compute the institutional distance variable based
on the IEF. All 12 dimensions of IEF were used to construct the
institutional distance indicator and to perform a robustness
check. The 12 dimensions of IEF include property rights,
government integrity, judicial effectiveness, government spend-
ing, tax burden, fiscal health, business freedom, labour freedom,
monetary freedom, trade freedom, investment freedom and
financial freedom.
rffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
2ffi
n

ð2Þ
EuclidenDistj ¼ ∑ Gij  GiHOME
i¼1
Moderating variables. The TMT characteristics are the mod-
erators in the institutional distance and firm performance rela-
tionship in this study.
TMT managers who have home country work experience as
expatriates. Parent companies influence the strategic decisions of
subsidiaries by posting expatriates. The expatriates in this study
refer to employees who have Chinese nationality but reside in
host countries. The number of expatriates among the subsidiary
TMT was calculated. This helped to capture the parent level
influence on the relationship between institutional distance and
subsidiary performance.
TMT managers who have host country work experience. The
TMT’s capability of dealing with the liability of foreignness in the
host country was captured by measuring the TMT’s host country
work experience. This indicator is measured by the number of
TMT managers who have worked in the host country.
TMT’s diversity of international work experience. Whether TMT
managers were previously or currently working in a country
outside of China was manually coded. The number of countries
represented among TMT was recorded to capture the diversity of
the TMT’s international experience. In addition, the differences in
international experience of TMT managers in terms of their work
6 HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
experience in countries with different levels of institutional
developments were noted and categorised. Previous studies have
argued that there are profound differences in institutional
development between developing and developed markets
(Cuervo-Cazurra and Genc, 2008; Peng et al., 2008; Xiao et al.,
2013). Following the United Nations’ country classification of
developing and developed countries, TMT’s international
experience was categorised into two groups, international
experience in markets with weak or international experience in
markets with strong institutions.
Control variables
Subsidiary firm-specific characteristics. Firm age was controlled
to measure the accumulated influence of subsidiaries’ specific
resources on performance, using the duration of operation in
years since a subsidiary’s incorporation. Firm size was con-
trolled for by using the natural logarithm of the subsidiary’s
total assets. State ownership of the focal subsidiary was also
controlled for. This is because state-owned enterprises and
non-state-owned enterprises are exposed to different political
pressures to implement government policies and have different
capabilities to access political resources. Capital was controlled
for using the total capital in the subsidiary in the given year to
capture the influence of financial assets on subsidiary perfor-
mance. Current ratio was controlled to capture liquidity per-
formance, which is the current assets divided by the current
liabilities. Intangible assets were employed as a proxy for firm
specific advantages which determine the subsidiary perfor-
mance (Nguyen, 2011). Intangible fixed assets were controlled
for in the focal subsidiary.
Host country-specific characteristics. Market attractiveness of the
host country has generally been considered a driver of subsidiary
performance. Therefore, the annual percentage growth rate of
GDP at the market price based on constant local currency was
controlled to capture the market potential in the host country.
GDP per capita was used to control for the market size in the host
country. Both these indicators were extracted from the WDI
database developed by the World Bank.
Statistical Model.
ROAi ¼ α0 þ α1 INDIS WGIi þ α2 TMT Expatriatesi þ α3 TMT Host Expi
þ α4 TMT Int Expi þ α5 INDIS WGIi *TMT Expatriatesi
þ α6 INDIS WGIi *TMT Host Expi þ α7 INDIS WGIi *TMT Int Expi
þ α8 Controli þ εi
ð3Þ
Where TMT expatriates denotes TMT managers’ home country
work experience manifested in expatriates, TMT Host Exp
denotes TMT managers’ host country work experience, TMT Int
Exp denotes TMT managers’ diversity of international work
experience all over the world. Control collectively denotes a vector
of previously denoted control variables. The robustness of the
model was tested by using an alternative measurement of insti-
tutional distance. The institutional distance measured by World
Governance Indicator in Eq. 3 was replaced with the institutional
distance measured by the Index of Economic Freedom in Eq. (4)
in the robustness check.
ROAi ¼ α0 þ α1 INDIS IEFi þ α2 TMT Expatriatesi þ α3 TMT Host Expi
þ α4 TMT Int Expi þ α5 INDIS IEFi *TMT Expatriatesi
þ α6 INDIS IEFi *TMT Host Expi þ α7 INDIS IEFi *TMT Int Expi
þ α8 Controli þ εi
ð4Þ
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w ARTICLE

Table 1 Measurement of variables and data sources.

Variables Measurement Source

Dependent variable
Subsidiary’s performance
Independent variables
Institutional distance-WGI
Institutional distance-IEFKS
Moderating variables
TMT expatriates
TMT host country work experience
Diversity of TMT international work
experience
Control variables
Firm age (year)
Firm size (US dollars)
Capital (million US dollars)
Current ratio (%)
Intangible assets (million US dollars)
Host country GDP per capital (US dollars)
Host county GDP annual growth rate (%)
SOE (yes/No)
The total return on assets using net income in the focal subsidiary Orbis
The Euclidean distance of institutions between host and home country based on World WGI
Governance Indicators (Eq. 1)
The Euclidean distance of institutions constructed based on all the 12 dimensions of the Index HF-WSJ
of Economic Freedom (Eq. 2)
The number of expatriates among TMT in the focal subsidiary Orbis
The number of TMT managers who have work experience in the host country Orbis
The number of countries TMT managers have worked in outside of China Orbis
Number of years after the company’s incorporation Orbis
Natural logarithm of the firm’s total assets Orbis
Capital used in the focal subsidiary in the focal year Orbis
Current assets divided by the current liabilities Orbis
Intangible fixed assets in the focal subsidiary Orbis
Natural logarithm of host country GDP per capita WDI
The annual percentage growth rate of GDP at the market price based on constant local WDI
currency
Equals to 1 if the focal subsidiary is state-owned, 0 otherwise Orbis

Table 2 Descriptive Statistics of the data.

Variables Observations Mean SD Skewness Kurtosis

Dependent variable
1. ROA 6119 −0.296 20.56 −0.569 9.52
Independent variables
2. INDIS-WGI 6119 3.467 1.201 −0.033 1.668
3. INDIS-IEFKS 5535 26.66 13.56 0.115 1.671
Moderating variables
4. TMT Expatriates 6119 0.651 1.571 10.536 231.612
5. TMT Host country work experience 6119 4.308 7.843 14.645 423.627
6. Diversity of TMT international work experience 6119 1.730 1.291 2.553 11.979
Control variables
7. Firm age 6119 11.06 12.40 3.223 21.992
8. Firm size 6119 7.604 3.082 0.099 2.425
9. Capital 6119 0.0136 0.158 40.244 2133.423
10. Intangible assets 6119 0.007 0.100 26.627 879.171
11. Current ratio 6119 3.872 10.06 5.281 34.71
12. GDP PC 6119 10.19 0.822 −0.858 3.273
13. GDP AG 6119 3.145 1.746 0.848 4.58
14. SOE 6119 0.140 0.347 2.078 5.319

Results non-normal distribution of ROA (Ghasemi and Zahediasl, 2012).

Descriptive analysis. We report the variables of interest, mea-
surements and the sources for each variable in Table 1. We report
the descriptive analysis, results of the number of observations,
variable mean, standard deviations, skewness, kurtosis in Table 2
and the correlation matrix in Table 3. To summarise, our sample
includes 6199 observations of Chinese multinational enterprises
in 58 host countries. The observations are recoded based on the
latest year for which information was available in Orbis. The
dependent variable ROA has a mean of −0.296 which means on
average the management of Chinese multinational subsidiaries is
not very efficient in generating profit from their total assets.
However, the standard deviation of 20.556 indicates the Chinese
subsidiaries’ performance varies a lot from firm to firm. Fur-
thermore, the ROA is slightly negatively skewed (−0.569) but
largely leptokurtic (9.52). Both the Skewness and Kurtosis test for
normality and the Jarque Berra test are significant confirming a
Following the same analysis, we found that the independent
variable institutional distance and moderating variables including
home, host work experience and diversity of international work
experience are similarly not normally distributed. Therefore, we
conducted the correlation analysis with Spearman’s rank corre-
lation analysis which, as a nonparametric analysis, does not
require data to be normally distributed (Bishara and Hittner,
2015; Schober et al., 2018). Moreover, the test is much less sen-
sitive towards outliers and extreme values than the Pearson’s
correlation test (Bishara and Hittner, 2015; Schober et al., 2018).
Table 3 showed the Spearman’s rank correlation matrix with
Spearman’s rho. The result shows that the dependent variable is
significantly correlated with most of the predictors and the cor-
relation coefficients are all smaller than 0.3 which can be inter-
preted as weak correlations (Xiao et al., 2016). Regarding the focal
moderating variables, TMT expatriates with home country work

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w 7

ARTICLE HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w

Table 3 Spearman’s rank correlation matrix.

(1) (2) (3) (4) (5) (6) (7) (8)

1. ROA 1
2. INDIS-WGI −0.0150 1
3. INDIS-IEFKS −0.0146 0.8822* 1
4. Firm age 0.0964* 0.1017* 0.1182* 1
5. Firm size 0.1150* 0.4316* 0.4229* 0.2599* 1
6. Capital 0.0174 0.2622* 0.3007* 0.4037* 0.5286* 1
7. Intangible assets 0.0311* −0.0049 −0.0009 0.1157* 0.3077* 0.2895* 1
8. Current ratio 0.2674* −0.0079 −0.0304* 0.0798* 0.0074 0.1419* 0.0066 1
9. TMT Expatriates −0.0317* −0.1152* −0.2179* −0.0413* −0.0814* −0.0833* −0.1042* 0.0003
10. TMT Host country work experience 0.0475* 0.2533* 0.3031* 0.2437* 0.4736* 0.2939* 0.3128* 0.0364*
11. Diversity of TMT international work 0.0460* 0.4007* 0.3533* 0.2572* 0.5593* 0.3037* 0.1514* 0.0714*
experience
12. GDP PC −0.0192 0.9178* 0.8126* −0.0014 0.4452* 0.2017* 0.0109 −0.0374*
13. GDP AG −0.0302* −0.2733* −0.3316* −0.0673* −0.0800* −0.1783* −0.3394* −0.0229
14. SOE 0.0628* 0.1986* 0.2073* 0.0911* 0.3543* 0.1701* 0.0423* −0.0037
(9) (10) (11) (12) (13) (14)
9. TMT Expatriates 1
10. TMT Host country work experience −0.0812* 1
11. Diversity of TMT international work 0.0334* 0.3519* 1
experience
12. GDP PC −0.1206* 0.2881* 0.4036* 1
13. GDP AG 0.2359* −0.2302* −0.0417* −0.2750* 1
14. SOE 0.0245 0.1998* 0.2641* 0.2186* 0.0204 1

Significance levels are denoted as *p < 0.05.

experience is negatively weakly correlated with ROA (rho =
−0.0317), TMT host country work experience (rho = 0.0475)
and international work experience diversity (rho=0.0460) are
positively weakly correlated with ROA. Institutional distance
captured by World Governance Index and Economic Freedom
Indicator are highly correlated with a correlation coefficient of
0.8822. Besides this, the absolute values of the correlation coef-
ficient among the rest of the predictors are all less than 0.7 which
is seen as a benchmark for distinguishing high correlation in
Spearman’s rank correlation matrix (Xiao et al., 2016), indicating
that the selected predictors have low multicollinearity in a linear
regression analysis, confirmed by the variance of inflation factor
(VIF) ranging from 1.02 to 4.83, which is far below the threshold
for multicollinearity at 10 (Baum, 2006).
Moderation analysis with ordinary list square regression and
the bias-corrected and accelerated bootstrap method. A mod-
eration effect is said to occur when a third variable changes the
relationship between a predictor and outcome (Hayes, 2013).
According to central limit theorem, the Ordinary least square
(OLS) coefficient estimators are asymptotically normally dis-
tributed in large samples and the usual test procedures such as the
t and F tests are still valid (Ghasemi and Zahediasl, 2012;
Gujarati, 2022; Lumley et al., 2002; Schmidt and Finan, 2018).
Therefore, as our sample is sufficiently large with 6119 observa-
tions, we tested our moderation effect with OLS estimators and
the results are shown in the multiple regression models M0 to M4
in Table 4. To confirm that our results are robust, we also con-
ducted the bias-corrected and accelerated bootstrap method (BCa
bootstrap) to test the moderation effects for M0 to M4 following
previous studies (Batrancea et al., 2018; Nichita et al., 2019). BCa
bootstrap is advantageous due to improved accuracy in con-
fidence intervals (CIs) such as the bias corrected intervals and
percentile intervals compared to other bootstrap methods and
furthermore BCa bootstrap does not require the normality
assumption for the regression (Efron and Hastie, 2021;
Rochowicz, 2011). Results of the bootstrap with the 95% BCa
confidence intervals and 5000 resamples for the multiple regres-
sions are reported following OLS regressions from Table 4.
We mean-centred the variables of institutional distance and
TMT characteristics, including the number of expatriates, TMT
managers’ host country work experience, and the diversity of the
TMT’s international work experience to generate the interaction
terms (Aiken et al., 1991). To address any potential hetero-
scedasticity, we also adopted robust standard errors in our
regression. The main results are presented in Table 4. Model
0 serves as the baseline, which contains the subsidiary, parent
firm-level and host country-level control variables and the
independent variable. Hypothesis 1 predicted that institutional
distance would exert a negative effect on MNE subsidiary
performance. Consistent with hypothesis 1, the results indicate
that there is a significant negative relationship between institu-
tional distance and MNE subsidiary performance in both the OLS
models (M0, β = −2.420, p < 0.01; M1, β = −2.489, p < 0.01; M2,
β = −2.349, p < 0.01; M3, β = −2.333, p < 0.01; M4, β = −2.376,
p < 0.01) and the BCa bootstrap models (M0, β = −2.420, 95% CI
[−3.356,−1.563]; M1, β = −2.489, 95% CI [−3.396,−1.578]; M2,
β = −2.349, 95% CI [−3.259,−1.482]; M3, β = −2.333, 95% CI
[−3.218,−1.476]; M4, β = −2.420, 95% CI [−3.356,−1.563]).
Therefore, Hypothesis 1 is strongly supported. Model 1 to Model
4 exhibit the moderating effects of TMT work experiences in the
institutional distance-subsidiary performance relationship.
Hypothesis 2 states that the negative relationship between
institutional distance and MNE subsidiary performance is
conditional on the number of expatriates in the TMT such that
the more expatriates in the TMT, the stronger the negative
relationship. The findings confirm this assertation. The negative
relationship between institutional distance and MNE subsidiary
performance is strengthened because the interaction term INDIS-
WGI*TMT Expatriates is negative and significant in both the
OLS model (M1, β = −0.346, p < 0.05) and the BCa bootstrap
model (M1, β = −0.346, 95% CI [−0.637, −0.056], p < 0.05).
Thus, Hypothesis 2 is supported. Hypothesis 3 states that the
negative relationship between institutional distance and MNE

8 HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w ARTICLE

Table 4 aOLS models of the moderating effects of TMT work experiences on the institutional distance-subsidiary performance
relationship.

M0 M1 M2 M3 M4
VARIABLES ROA ROA ROA ROA ROA
INDIS-WGI −2.420*** −2.489*** −2.349*** −2.333*** −2.376***
(0.456) (0.459) (0.451) (0.452) (0.453)
Firm age 0.0643*** 0.0605*** 0.0677*** 0.0634*** 0.0624***
(0.0212) (0.0213) (0.0213) (0.0212) (0.0215)
Firm size 1.089*** 1.107*** 1.158*** 1.124*** 1.192***
(0.135) (0.135) (0.139) (0.136) (0.140)
Capital −1.680* −1.565* −1.804* −1.789* −1.734*
(0.932) (0.929) (0.949) (0.955) (0.959)
Intangible assets −1.074 −1.030 −2.260** −1.652 −2.439***
(1.244) (1.255) (0.917) (1.036) (0.907)
Current ratio 0.181*** 0.181*** 0.182*** 0.182*** 0.182***
(0.0329) (0.0328) (0.0330) (0.0329) (0.0329)
TMT Expatriates 0.00629 0.292 −0.0318 −0.0386 0.261
(0.108) (0.181) (0.107) (0.109) (0.178)
TMT Host Exp −0.0637** −0.0633** −0.166*** −0.0650** −0.151***
(0.0316) (0.0314) (0.0366) (0.0316) (0.0378)
TMT Int Exp −0.274 −0.244 −0.326* −0.681*** −0.566**
(0.199) (0.200) (0.198) (0.220) (0.223)
GDP PC 1.132* 1.078* 1.339** 1.209** 1.302**
(0.607) (0.607) (0.614) (0.608) (0.614)
GDP AG −0.0793 −0.139 −0.136 −0.0795 −0.195
(0.127) (0.127) (0.127) (0.127) (0.128)
SOE 0.280 0.372 0.495 0.348 0.613
(0.666) (0.666) (0.668) (0.668) (0.668)
INDIS-WGI*TMT Expatriates −0.346** −0.386***
(0.145) (0.142)
INDIS-WGI*TMT Host Exp 0.129*** 0.110***
(0.0291) (0.0313)
INDIS-WGI*TMT Int Exp 0.555*** 0.382**
(0.168) (0.181)
Constant −12.15** −11.50** −14.53*** −13.05** −14.09***
(5.180) (5.175) (5.262) (5.189) (5.257)
Observations 6119 6119 6119 6119 6119
R-squared 0.028 0.029 0.030 0.029 0.031

The numbers in parenthesis are standard errors. Significance levels are denoted as *p < 0.1, **p < 0.05, ***p < 0.01.
aM0 is the initial model which includes all the direct effects and excludes all the moderating effects. M1 is the initial model with the moderating effect of TMT expatriates. M2 is the initial model with the
moderating effect of TMT host country experience. M3 is the initial model with the moderating effects of TMT diversity of international experience. M4 is the comprehensive model with all the direct and
moderating effects.

subsidiary performance will be weakened by TMT’s host country

work experience. The result shows that the interaction term
INDIS-WGI*TMT Host is positive and significant in both the
OLS model (M2, β = 0.129, p < 0.01) and the BCa bootstrap
model (M1, β = 0.129, 95% CI [0.072, 0.193], p < 0.05). Therefore,
Hypothesis 3 is supported. Hypothesis 4 suggests that the
negative relationship between institutional distance and MNE
subsidiary performance will be weakened by the diversity of
TMT’s international work experience. The findings confirm this
assertation. The interaction term INDIS-WGI*TMT Int Exp is
positive and significant in both the OLS model (M3, β = 0.555,
p < 0.01) and the BCa bootstrap model (M3, β = 0.555, 95% CI
[0.217, 0.886], p < 0.05). Therefore, Hypothesis 4a is supported.
When we consider all the TMT managers’ international work
experience in aggregate in M4, we found that the moderation
effect of TMT managers’ home country experience is negative and
significant in both the OLS model (M4, β = −0.386, p < 0.01) and Fig. 2 Moderation effects of TMT expatriates. The figure shows how TMT
the BCa bootstrap model (M4, β = −0.386, 95% CI [−0.690, expatriates moderate the institutional distance–subsidiary performance
−0.117], p < 0.05). In contrast, the moderation effect of TMT relationship at its 50th, 75th, 90th, 95th and 99th percentiles.
managers’ host country experience is positive and significant in

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w 9

ARTICLE HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w

Table 5 Additional OLS models of the moderation effects of

TMT international experience in the institutional distance-
MNE subsidiary performance.

(1) M0 (2) M1 (3) M2 (4) M3

VARIABLES ROA ROA ROA ROA
INDIS_WGI −2.333*** −2.305*** −1.816*** −1.820***
(0.452) (0.458) (0.453) (0.454)
Firm age 0.0634*** 0.0460** 0.0567*** 0.0529**
(0.0212) (0.0211) (0.0204) (0.0210)
Firm size 1.124*** 1.029*** 1.212*** 1.201***
(0.136) (0.130) (0.136) (0.138)
Capital −1.789* −1.422* −1.454* −1.428*
(0.955) (0.839) (0.835) (0.823)
Intangible assets −1.652 −1.084 −1.055 −1.249
(1.036) (1.038) (1.097) (1.008)
Fig. 3 Moderation effect of TMT host country work experience. The figure Current ratio 0.182*** 0.178*** 0.181*** 0.180***
shows how TMT’s host country work experience moderate the institutional (0.0329) (0.0329) (0.0329) (0.0329)
distance–subsidiary performance relationship at its 50th, 75th, 90th, 95th TMT Expatriates −0.0386 −0.00621 0.0463 0.0399
and 99th percentiles. (0.109) (0.108) (0.114) (0.114)
TMT Host Exp −0.0650** −0.0830** −0.0614** −0.0669**
(0.0316) (0.0349) (0.0303) (0.0315)
SOE 0.348 0.418 0.728 0.752
(0.668) (0.671) (0.661) (0.664)
GDP PC 1.209** 0.698 0.162 0.247
(0.608) (0.633) (0.621) (0.636)
GDP AG −0.0795 −0.113 −0.0777 −0.0796
(0.127) (0.125) (0.124) (0.125)
TMT Int Exp −0.681***
(0.220)
INDIS_TMT Int 0.555***
Exp
(0.168)
TMT DEV 0.750*** 0.00293
(0.234) (0.250)
INDIS_TMT DEV −0.161 0.214
(0.187) (0.196)
TMT DEVING −1.736*** −1.715***
(0.274) (0.301)
INDIS_TMT 0.640*** 0.734***
DEVING
Fig. 4 Moderation effect of diversity of TMT’s international work (0.215) (0.230)
experience. The figure shows how TMT’s international work experience Constant −13.05** −8.522 −4.845 −5.626
moderate the institutional distance–subsidiary performance relationship at (5.189) (5.364) (5.236) (5.374)
its 50th, 75th, 90th, 95th and 99th percentiles. Observations 6119 6119 6119 6119
R-squared 0.029 0.029 0.033 0.033
the OLS model (M4, β = 0.110, p < 0.01) and the BCa bootstrap The numbers in parentheses are standard errors. Significance levels are denoted as * p < 0.1, **
model (M4, β = −0.110, 95% CI [0.489, 0.178], p < 0.05). The p < 0.05, *** p < 0.01.
moderation effect of the diversity of TMT managers’ international
work experience is positive and significant in both the OLS model
(M4, β = 0.382, p < 0.05) and the BCa bootstrap model (M4,
performance would be weakened particularly by the TMT’s
β = 0.382, 95% CI [0.223, 0.735], p < 0.05).
international work experience in markets with weak institutions
To further show the moderation effects visually, we plotted
as opposed to strong institutions. Our findings in Table 5 support
marginal moderating effects shown in Figs. 2–4 which are based
this assertation. The interaction term INDIS-WGI*TMT Int Exp
on M1, M2 and M3 in Table 4. Figure 2 shows the moderation
Weak between institutional distance and TMT’s international
effects of TMT expatriates with home country work experience.
experience in weak-institution markets is positive and significant
Figure 3 shows the moderation effects of TMT managers with
in both the OLS model (M2, β = 0.640, p < 0.01) and the BCa
host country work experience. Figure 4 shows the diversity of
bootstrap model (M2, β = 0.640, 95% CI [0.213, 1.067], p < 0.05),
TMT managers’ international work experience. We present the
but the interaction term INDIS-WGI*TMT Int Exp Strong
moderation effects at the 50th percentile, 75th percentile, 90th
between institutional distance and TMT’s international experi-
percentile, 95th percentile, 99th percentile, respectively, where the
ence in strong-institution markets is not significant in neither the
data exhibits conspicuous variations.
OLS model (M1, β = −0.161, p > 0.1) nor the BCa bootstrap
model (M1, β = −0.161, 95% CI [−0.537, 0.204], p > 0.05).
Additional analyses. We further distinguished subsidiary TMT Therefore, we can confirm that the TMT managers’ international
managers’ international work experience in markets with strong experiences in weak-institution markets have a higher weakening
and weak institutions. We hypothesised that the negative rela- effect on the negative impact that institutional distance imposes
tionship between institutional distance and MNE subsidiary on subsidiary performance. Therefore, hypothesis 4b is

10 HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w ARTICLE

Table 6 Robustness check OLS models of the moderating effects of TMT work experiences on the institutional distance-
subsidiary performance relationship.

(1) M0 (2) M1 (3) M2 (4) M3 (5) M4

VARIABLES ROA ROA ROA ROA ROA
INDIS-IEF −0.135*** −0.133*** −0.120*** −0.133*** −0.123***
(0.0294) (0.0295) (0.0290) (0.0293) (0.0294)
Firm age 0.0576*** 0.0548** 0.0560** 0.0527** 0.0496**
(0.0218) (0.0219) (0.0219) (0.0219) (0.0220)
Firm size 1.025*** 1.036*** 1.043*** 1.073*** 1.089***
(0.142) (0.142) (0.143) (0.144) (0.145)
Capital −1.330 −1.263 −1.394 −1.598* −1.534
(0.819) (0.825) (0.882) (0.941) (0.964)
Intangible assets −0.838 −0.882 −0.243 −0.471 −0.241
(1.218) (1.202) (1.420) (1.480) (1.522)
Current ratio 0.185*** 0.184*** 0.185*** 0.188*** 0.187***
(0.0348) (0.0348) (0.0349) (0.0348) (0.0348)
TMT Expatriates −0.145 0.0520 −0.191* −0.233** −0.0492
(0.112) (0.171) (0.115) (0.117) (0.172)
TMT Host Exp −0.0785* −0.0796* −0.108*** −0.0730* −0.0902**
(0.0408) (0.0408) (0.0397) (0.0397) (0.0376)
TMT Int Exp −0.343* −0.323 −0.387* −0.787*** −0.739***
(0.205) (0.206) (0.206) (0.203) (0.204)
GDP PC −0.450 −0.518 −0.341 −0.166 −0.210
(0.412) (0.413) (0.413) (0.413) (0.414)
GDP AG −0.309** −0.349*** −0.319** −0.279** −0.329**
(0.134) (0.134) (0.134) (0.133) (0.133)
SOE 0.471 0.523 0.556 0.589 0.673
(0.680) (0.678) (0.680) (0.683) (0.680)
INDIS-IEF*TMT Expatriates −0.0213* −0.0215*
(0.0126) (0.0126)
INDIS-IEF*TMT Host Exp 0.00836** 0.00446
(0.00391) (0.00422)
INDIS-IEF*TMT Int Exp 0.0644*** 0.0570***
(0.0174) (0.0187)
Constant 1.072 1.619 −0.442 −1.821 −1.744
(3.834) (3.835) (3.870) (3.860) (3.877)
Observations 5535 5535 5535 5535 5535
R-squared 0.026 0.027 0.027 0.028 0.028

The numbers in parentheses are standard errors. Significance levels are denoted as * p < 0.1, ** p < 0.05, *** p < 0.01. The indicator of institutional distance is constructed based on the overall score of the
Index of Economic Freedom.

supported. Model 3 in Table 5 also confirms our assertion that the
negative relationship between institutional distance and multi-
national subsidiary performance will be weakened by TMT’s
international work experience, especially when the work experi-
ence was obtained in markets with weak institutions as opposed
to markets with strong institutions.
Robustness test. We used the economic freedom score to cal-
culate the institutional distance indicator, and the corresponding
results are presented in Table 6. The robustness check confirms
Hypothesis 1 that institutional distance has a significant and
negative impact on subsidiary performance in both the OLS
model (M0-M4, p < 0.01) and the BCa bootstrap model (M0-M4,
p < 0.05). In the robustness check, we find the interaction term
NDIS-IEF*TMT Expatriates is negative and marginally significant
in the OLS model (M1, β = −0.0213, p < 0.1) but not significant
in the BCa bootstrap model (M1, β = 0.382, 95% CI [−0.048,
0.735], p > 0.05). Therefore, Hypothesis 2 is not supported in the
robustness check. The interaction term INDIS-IEF*TMT Host is
positive and significant in the OLS model (M3, β = 0.008,
p < 0.05) and in the BCa bootstrap model (M2, β = 0.008, 95% CI
[0.001, 0.016], p < 0.05). Therefore, Hypothesis 3 is supported.
The interaction term INDIS-IEF*TMT Int Exp is negative and
significant in both the OLS model (M3, β = 0.064, p < 0.01) and
the BCa bootstrap model (M3, β = 0.064, 95% CI [0.030, 0.097],
p < 0.05). Therefore, Hypothesis 4a is supported.
Discussion
Institutional distance generates liability of foreignness when MNE
subsidiaries operate abroad. Mata and Alves (2018) point out that
the liability of foreignness applies not only to firms but also
affects individuals. We specifically explore the liability of for-
eignness exerted by institutional distance at the individual level.
We extend the work of Shirodkar and Konara (2017) and Gaur
and Lu (2007) who both similarly explored the moderation effect
of host country experience on the institutional distance-MNE
subsidiary performance relationship. In contrast to their focus on
firms’ host country experience, we investigate the role that TMT
managers’ host country work experience plays in the relationship
between institutional distance and Chinese MNE subsidiaries’
performance. Following the postulates of the institutional per-
spective and the upper echelon perspective, we have tested
hypotheses in relation to the moderation effects of TMT’s dif-
ferent work experiences including home, host and international
work experience. Our findings correspond with previous work
revealing the negative impact that institutional distance imposes
on MNE subsidiary performance (Aguilera-Caracuel et al., 2013;
Dong et al., 2017; Liu et al., 2019; Shirodkar and Konara, 2017;

HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w 11

ARTICLE HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
Teng et al., 2017; Trapczynski and Gorynia, 2017). Our findings
extend this literature by demonstrating that the magnitude of the
negative impact of institutional distance on MNE subsidiary
performance is conditional on the TMT’s work experience. Our
findings are of particular importance for MNE subsidiaries’
staffing strategies. Specifically, our findings suggest that MNE’s
consider recruiting mangers for their subsidiaries with host
country work experience. Furthermore, MNE should consider
recruiting in order to achieve greater diversity of international
work experience among the TMT of their subsidiaries. Our results
are congruent with the extant literature which has identified that
MNEs are less likely to staff their subsidiaries with expatriates
mangers when institutional distance between the home and host
country is large (Abugre et al., 2020; Chao and Kumar, 2010;
Rickley and Karim, 2018). However, our findings differ from the
work of Abugre et al. (2020) and Rickley and Karim (2018) both
of whom directly investigated the effect of institutional distance
on staffing of expatriates in MNE subsidiaries. In contrast, we
investigated the indirect effect of expatriates in the TMT on their
management of the institutional distance and how this impacts
MNE subsidiary performance. We identified that expatriates are
not fit for managing the institutional distance and conquering the
liability of foreignness, and this will increase the negative impact
institutional distance has on MNE subsidiary performance.
We found that the moderation effect of expatriates with the
home country experience on institutional distance and MNE
subsidiary performance is only weakly supported in our main
analysis and not supported in the robustness check. Theoretically,
an explanation for this finding is that the extent of the negative
impact of institutional distance on MNE subsidiary performance
is confounded by how well expatriates can adjust to the host
country work environment (Abugre et al., 2020). MNEs can
minimise expatriate failure by providing cross-culture training or
a comprehensive overseas expatriate support system (Petison and
Johri, 2008). If the expatriate managers can adapt well to the new
physical, social and cultural environment, they will integrate
better, have greater employee voice (Hosseini et al., 2022) and feel
more confident, competent and motivated in working overseas.
As a result, there will be less hindrance from the expatriate
managers to manage the liability of foreignness. Our findings
suggest that if expatriates can adapt to their host country work
environment avoiding expatriate failure, then the negative impact
which institutional distance has on MNE subsidiary performance
will be significantly attenuated.
We also investigated the moderation effect of TMT’s host, as
opposed to home, country work experience. Our findings here
also resonate with and supplement the previous literature in this
area which demonstrates that host country experience reduces the
negative impact institutional distance has on MNE subsidiary
performance. Previous studies investigated the moderator of firm
level host country experience (Gaur and Lu, 2007; Quer et al.,
2019; Shirodkar and Konara, 2017). Our findings supplement
previous work in this area by looking at the individual level
moderator of TMT host country work experience. The results
confirm that host country experience equips managers with the
enhanced ability to manage the liabilities of foreignness derived
from institutional distance.
In addition to the findings of TMT’s host and home country
work experience, we also confirmed our assertion that the nega-
tive relationship between institutional distance and MNE sub-
sidiary performance is conditional on the diversity of the TMT’s
international work experience, such that the more diverse the
TMT’s international work experience, the weaker the negative
relationship. Previous research by Belderbos et al. (2022) and
Miller et al. (2016) identified that diversity in TMT’s international
work experience positively impacts MNE subsidiary performance.
12 HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
Our work adds to this by revealing a positive moderation effect of
diversity of TMT’s international experience on the negative
relationship between institutional distance-MNE subsidiary per-
formance. We also present novel findings on the differential
effects of TMT’s international work experience, specifically dif-
ferences between experience gained in markets with strong
institutions compared to experience gained in markets with weak
institutions. Empirically, we found that TMT managers’ inter-
national work experience, especially work experience gained in
the weak-institution markets, mitigates the negative relationship
between institutional distance and MNE subsidiary performance.
An interpretation of this finding is that MNEs with TMT man-
agers who have more experience in markets with weak institu-
tions are more capable of navigating weak institution
environments and dealing with adverse and uncertain situations
(Ramamurti, 2009). These TMT managers are required to be
innovative in circumventing the institutional voids and develop-
ing institutional capabilities that their MNEs can leverage to
optimise performance across-borders (Carney et al., 2016).
Contributions. This study makes three main contributions to the
international business and the TMT literature by examining how
the TMT moderates the institutional distance-subsidiary perfor-
mance relationship. First and foremost, theoretically, we have
applied upper echelon theory in a novel way to interpret the
moderation effect of micro-level TMT international experiences
on the macro-level institutional distance and subsidiary perfor-
mance relationship. TMT’s international work experience shapes
managers’ cognitive maps which influences the way they perceive
and interpret institutional distance. Whilst previous studies on
the moderation effects of firm characteristics on institutional
distance and MNE subsidiary performance have been based on
macro-level analysis (e.g., Gaur and Lu, 2007; Shirodkar and
Konara, 2017), our study of the same moderation effect is based
on the micro-level analysis of TMT managers’ characteristics.
Second, our study reveals how different TMT’s characteristics
increase or decrease the negative effect of institutional distance on
MNE subsidiary performance and our results provide practical
implications for MNE subsidiaries’ staffing strategies.
Third, our study also contributes to the TMT international
experience literature. It does this in three ways. First, we look at
the moderation effect of TMT’s work experience theoretically
from two important mechanisms that are subsidiary legitimacy
building and strategic organisational practices transfer (Xu and
Shenkar, 2002). Second, whilst previous work focuses on one
aspect of TMT’s work experience (Belderbos et al., 2022; Vallone
et al., 2022), we have adopted a more comprehensive approach by
including home, host and international work experience. Third,
we extend the TMT literature in international business by
examining more contextual features of TMT managers’ experi-
ence obtained from different institutional environments, i.e.,
strong versus weak and multiple as opposed to singular
institutional environments (Georgakakis et al., 2016; Mohr and
Batsakis, 2019).
Finally, our work has managerial implications. We identified
that TMT managers who gained work experience in weak-
institution markets, as opposed to strong-institution markets, are
associated with a greater mitigating effect on the negative
relationship between institutional distance and MNE subsidiary
performance. This finding therefore suggests that for staffing
foreign subsidiaries MNE should seek to employ managers with
work experience gained in weak-institution environments, over
those with experience gained in strong-institution environments,
as the former are likely to be more skilled at managing
institutional distance.
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
Limitations and future research. The focus of this research is the
moderating effect of TMT managers’ work experience on the
institutional distance-subsidiary performance relationship.
Therefore, we simply look at institutional distance as a abstract
construct. Future research should explore the complexity of
institutions and distinguish different institutional contexts
(Jackson and Deeg, 2008). The abstract construct of institutional
distance is criticised for lost dimensionality and assumed sym-
metry (Zaheer et al., 2012). Different dimensions of institutional
distance and the directions of institutional distance have been
gaining growing attention (Gama et al., 2016; Hernandez et al.,
2018). We outline below the potential to revisit this relationship
in the following ways.
Theoretically, a thicker view of institutional contexts is called
for in international business, and comparative capitalism offers
the opportunity to look at how particular kinds of institutional
configurations influence particular kinds of MNE activities
(Jackson and Deeg, 2019). Our study could be extended from a
comparative capitalism perspective to breakdown the institutional
distance in a more context-specific manner. For example,
Fortwengel (2017) argues the particular combination of different
dimensions of institutional distance, including coordination,
strength, thickness and resources, will actually translate into
behaviours involving MNEs overcoming institutional distance. In
addition to the dimensionality, the direction of institutional
distance whether positive or negative, should also be considered
(Hernandez et al., 2018).
Methodologically, further research can explore how TMT
managers’ international experience influence their management
of different dimensions of institutional distance, and institutional
distance with different directions. Furthermore, longitudinal data
would be conducive to revealing more information about how the
institutional distance between two countries changes over time
and how the TMT’s international background influences their
management of institutional distance over time.
In addition to quantitative research methods, qualitative
research methods such as multiple case studies and qualitative
comparative analysis offer the possibility to study the moderation
effect of TMT on the institutional distance and subsidiary
performance relationship in novel ways. These qualitative
approaches would enable the contextualisation of insights into
the conditions when MNEs can overcome institutional distance
(Fortwengel, 2017). Identifying the interaction effects between
these context-specific conditions of institutional distance and
TMT characteristics will lead to fruitful theoretical and empirical
results.
Conclusion
MNE subsidiary TMT managers need to manage institutional
distance because it is the key driver of the liability of foreignness.
The current literature neglects how TMT managers’ individual
level international work experience may influence their percep-
tion, interpretation and management of institutional distance.
Our study disentangles how the TMT managers’ different work
experience moderates the relationship between institutional dis-
tance and subsidiary performance. Our findings indicate that
there is significant moderation effect of the TMT’s work experi-
ence on institutional distance and subsidiary performance rela-
tionship. TMT managers’ home country work experience
aggravates, while TMT managers’ host country work experience
and the diversity of their international work experience mitigates
the negative impact that institutional distance has on MNE
subsidiary performance. Our research contributes to the TMT
and international business literature and has managerial
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
ARTICLE
implications especially for the staffing strategy of Chinese mul-
tinational subsidiaries.
Data availability
The datasets generated during and/or analysed during the current
study are available from the corresponding author upon reason-
able request. This is due to using a proprietary database Orbis of
Bureau van Dijk.
Received: 11 June 2023; Accepted: 8 December 2023;
References
Abugre JB, Williams K, Debrah YA (2020) Dimensions of expatriates adjustment
in distant subsidiaries: a field study of a sub‐Saharan African institutional
distance. Thunderbird Int Bus Rev 62(4):371–384. https://doi.org/10.1002/tie.
22105
Aguilera-Caracuel J, Hurtado-Torres NE, Aragon-Correa JA, Rugman AM
(2013) Differentiated effects of formal and informal institutional distance
between countries on the environmental performance of multinational
enterprises. J Bus Res 66(12):2657–2665. https://doi.org/10.1016/j.jbusres.
2013.04.002
Aiken LS, West SG, Reno RR (1991) Multiple regression: testing and interpreting
interactions (Vol 2, 513–531). Sage Publications google schola
Bae J-H, Salomon R (2010) Institutional distance in international business research.
In The past, present and future of international business & management (Vol
23, pp 327–349). Emerald Group Publishing Limited
Bai T, Du J, Solarino AM (2018) Performance of foreign subsidiaries ‘in’ and ‘from’
Asia: a review, synthesis and research agenda. Asia Pac J Manag
35(3):607–638. https://doi.org/10.1007/s10490-017-9552-x
Batrancea L, Nichita A, Batrancea I, Gaban L (2018) The strenght of the rela-
tionship between shadow economy and corruption: evidence from a world-
wide country-sample. Soc Indic Res 138:1119–1143
Batrancea L, Nichita R, Batrancea I (2012) Tax non-compliance behavior in the
light of tax law complexity and the relationship between authorities and
taxpayers. Ann Alexandru Loan Cuza Univ-Econ 59(1):97–106
Baum CF (2006) An introduction to modern econometrics using Stata. Stata press
Belderbos R, Lokshin B, Boone C, Jacob J (2022) Top management team inter-
national diversity and the performance of international R&D. Glob Strategy J
12(1):108–133
Beugelsdijk S, Ambos B, Nell PC (2018) Conceptualizing and measuring distance
in international business research: recurring questions and best practice
guidelines. J Int Bus Stud 49(9):1113–1137. https://doi.org/10.1057/s41267-
018-0182-4
Birkinshaw J, Hood N, Jonsson S (1998) Building firm‐specific advantages in
multinational corporations: the role of subsidiary initiative. Strateg Manag. J.
19(3):221–242
Birkinshaw J, Hood N, Young S (2005) Subsidiary entrepreneurship, internal and
external competitive forces, and subsidiary performance. Int Bus Rev
14(2):227–248
Bishara AJ, Hittner JB (2015) Reducing bias and error in the correlation coefficient
due to nonnormality. Educ Psychol Meas. 75(5):785–804
Carlsson J, Nordegren A, Sjöholm F (2005) International experience and the
performance of Scandinavian firms in China. Int Bus Rev 14(1):21–40
Carney M, Dieleman M, Taussig M (2016) How are institutional capabilities
transferred across borders? J World Bus 51(6):882–894. https://doi.org/10.
1016/j.jwb.2015.12.002
Chang Y-Y, Gong Y, Peng MW (2012) Expatriate knowledge transfer, subsidiary
absorptive capacity, and subsidiary performance. Acad Manag J
55(4):927–948
Chao MC-H, Kumar V (2010) The impact of institutional distance on the inter-
national diversity–performance relationship. J World Bus 45(1):93–103
Cuervo-Cazurra A, Genc M (2008) Transforming disadvantages into advantages:
developing-country MNEs in the least developed countries. J Int Bus Stud
39(6):957–979
Dahms S (2019) Foreign-owned subsidiary knowledge sourcing: the role of location
and expatriates. J Bus Res 105:178–188. https://doi.org/10.1016/j.jbusres.
2019.08.013
De Beule F, Elia S, Piscitello L (2014) Entry and access to competencies abroad:
emerging market firms versus advanced market firms. J Int Manag
20(2):137–152
13
ARTICLE HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
Delios A, Beamish PW (2001) Survival and profitability: the roles of experience and
intangible assets in foreign subsidiary performance. Acad Manag J
44(5):1028–1038
Delios A, Xu D, Beamish PW (2008) Within-country product diversification and
foreign subsidiary performance. J Int Bus Stud 39:706–724
Denzau AT, North DC (2000) Shared mental models: ideologies and institutions.
Elements of reason: cognition, choice, and the bounds of rationality, pp 23–46
Devinney TM, Midgley DF, Venaik S (2000) The optimal performance of the global
firm: formalizing and extending the integration-responsiveness framework.
Organ Sci 11(6):674–695
Dikova D (2009) Performance of foreign subsidiaries: does psychic distance mat-
ter? Int Bus Rev 18(1):38–49. https://doi.org/10.1016/j.ibusrev.2008.11.001
DiMaggio PJ, Powell WW (1983) The iron cage revisited: institutional iso-
morphism and collective rationality in organizational fields. Am Sociol Rev
48:147–160
Dong MC, Fang Y, Straub DW (2017) The impact of institutional distance on the
joint performance of collaborating firms: the role of adaptive interorganiza-
tional systems. Inf Syst Res 28(2):309–331
Dowling J, Pfeffer J (1975) Organizational legitimacy: Social values and organiza-
tional behavior. Pac Sociol. Rev 18(1):122–136
Eden L, Miller SR (2004) Distance matters: liability of foreignness, institutional
distance and ownership strategy. Adv Int Manag 16(4):187–221
Efron B, Hastie T (2021) Computer age statistical inference, student edition:
algorithms, evidence, and data science (Vol 6). Cambridge University Press
Fang Y, Jiang GLF, Makino S, Beamish PW (2010) Multinational firm knowledge,
use of expatriates, and foreign subsidiary performance. J Manag Stud
47(1):27–54
Fortwengel J (2017) Understanding when MNCs can overcome institutional dis-
tance: a research agenda. Manag Int Rev 57(6):793–814
Gallego Á, Casillas JC (2014) Choice of markets for initial export activities: dif-
ferences between early and late exporters. Int Bus Rev 23(5):1021–1033
Gama MAB, Lana J, Calixto C, Bandeira-de-Mello R (2016) Business group
internationalization: choosing a host country according to institutional dis-
tance. Rev Bras Gest Neg 18(61):327–347. https://doi.org/10.7819/rbgn.
v18i61.2894
Gaur AS, Delios A, Singh K (2007) Institutional environments, staffing strategies,
and subsidiary performance. J Manag 33(4):611–636
Gaur AS, Lu JW (2007) Ownership strategies and survival of foreign subsidiaries:
impacts of institutional distance and experience. J Manag 33(1):84–110.
https://doi.org/10.1177/0149206306295203
Georgakakis D, Dauth T, Ruigrok W (2016) Too much of a good thing: does
international experience variety accelerate or delay executives’ career
advancement? J World Bus 51(3):425–437. https://doi.org/10.1016/j.jwb.2015.
11.008
Ghasemi A, Zahediasl S (2012) Normality tests for statistical analysis: a guide for
non-statisticians. Int J Endocrinol Metab 10(2):486
Guillén MF, García-Canal E (2009) The American model of the multinational firm
and the “new” multinationals from emerging economies. Acad Manag Per-
spect 23(2):23–35
Gujarati DN (2022) Essentials of econometrics. Sage Publications
Hambrick DC, Mason PA (1984) Upper echelons: the organization as a reflection
of its top managers. Acad Manag Rev 9(2):193–206
Harzing A-WK (1995) The persistent myth of high expatriate failure rates. Int J
Hum Resour Manag 6(2):457–474
Hayes AF (2013) Mediation, moderation, and conditional process analysis.
Introduction to mediation, moderation, and conditional process analysis: a
regression-based approach. 2nd. THE GUILFORD PRESS, pp 20
Hernandez V, Nieto MJ, Boellis A (2018) The asymmetric effect of institutional
distance on international location: family versus nonfamily firms. Glob
Strategy J 8(1):22–45. https://doi.org/10.1002/gsj.1203
Hoskisson RE, Wright M, Filatotchev I, Peng MW (2013) Emerging multinationals
from mid-range economies: the influence of institutions and factor markets. J
Manag Stud 50(7):1295–1231. https://doi.org/10.1111/j.1467-6486.2012.01085.x
Hosseini E, Tajpour M, Salamzadeh A, Ahmadi A (2022) Team performance and
the development of Iranian digital start-ups: the mediating role of employee
voice. In Managing human resources in SMEs and start-ups: international
challenges and solutions (pp 109–140)
Hung-Wen L (2007) Factors that influence expatriate failure: an interview study.
Int J Manag 24(3):403
Hutzschenreuter T, Kleindienst I, Lange S (2016) The concept of distance in
international business research: a review and research agenda. Int J Manag
Rev 18(2):160–179. https://doi.org/10.1111/ijmr.12065
Jackson G, Deeg R (2008) Comparing capitalisms: understanding institutional
diversity and its implications for international business. J Int Bus Stud
39(4):540–561. https://doi.org/10.1057/palgrave.jibs.8400375
Jackson G, Deeg R (2019) Comparing capitalisms and taking institutional context
seriously. J Int Bus Stud 50(1):4–19. https://doi.org/10.1057/s41267-018-
0206-0
14 HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
Johanson J, Vahlne JE (2015) The Uppsala Internationalization Process Model
revisited: from liability of foreignness to liability of outsidership. In Knowl-
edge, networks and power: the Uppsala School of International Business (pp
153–186). https://doi.org/10.1057/9781137508829_7
Kalinic I, Brouthers KD (2022) Entrepreneurial orientation, export channel
selection, and export performance of SMEs. Int Bus Rev 31(1):101901
Kaufmann D, Kraay A, Mastruzzi M (2011) The worldwide governance indicators:
methodology and analytical issues. Hague J Rule Law 3(2):220–246. https://
doi.org/10.1017/S1876404511200046
Kawai N, Chung C (2019) Expatriate utilization, subsidiary knowledge creation and
performance: the moderating role of subsidiary strategic context. J World Bus
54(1):24–36
Kogut B, Singh H (1988) The effect of national culture on the choice of entry mode.
J Int Bus Stud 19(3):411–432
Kostova T (1999) Transnational transfer of strategic organizational practices: a
contextual perspective. Acad Manag Rev 24(2):308–324
Kostova T, Roth K, Dacin MT (2008) Institutional theory in the study of multi-
national corporations: a critique and new directions. Acad Manag Rev
33(4):994–1006
Kostova T, Zaheer S (1999) Organizational legitimacy under conditions of
complexity: the case of the multinational enterprise. Acad Manag Rev
24(1):64–81
Kotabe M, Srinivasan SS, Aulakh PS (2002) Multinationality and firm performance:
the moderating role of r and d and marketing capabilities. J Int Bus Stud
33(1):79–97. https://doi.org/10.1057/palgrave.jibs.8491006
Lazarova M, Peretz H, Fried Y (2017) Locals know best? Subsidiary HR autonomy
and subsidiary performance. J World Bus 52(1):83–96
Lee HU, Park JH (2008) The influence of top management team international
exposure on international alliance formation. J Manag Stud 45(5):961–981
Limaj E, Bernroider EWN (2019) The roles of absorptive capacity and cultural
balance for exploratory and exploitative innovation in SMEs. J Bus Res
94:137–153. https://doi.org/10.1016/j.jbusres.2017.10.052
Liu K, Tang JT, Yang K, Arthurs J (2019) Foreign IPOs in the US: when entre-
preneurial orientation meets institutional distance. J Bus Res 101:144–151.
https://doi.org/10.1016/j.jbusres.2019.04.011
Liu X, Gao L, Lu J, Lioliou E (2016) Does learning at home and from abroad boost
the foreign subsidiary performance of emerging economy multinational
enterprises? Int Bus Rev 25(1):141–151. https://doi.org/10.1016/j.ibusrev.
2014.10.012
Lu J, Liu X, Wright M, Filatotchev I (2014) International experience and FDI
location choices of Chinese firms: the moderating effects of home country
government support and host country institutions. J Int Bus Stud
45(4):428–449
Lumley T, Diehr P, Emerson S, Chen L (2002) The importance of the normality
assumption in large public health data sets. Annu Rev public health
23(1):151–169
Lupton NC, Baulkaran V, No Y (2022) Subsidiary staffing, location choice, and
shareholder rights effectivenes. J Bus Res 151:222–231. https://doi.org/10.
1016/j.jbusres.2022.07.007
Malhotra S, Sivakumar K, Zhu P (2009) Distance factors and target market
selection: the moderating effect of market potential. Int Mark Rev
26(6):651–673. https://doi.org/10.1108/02651330911001332
Mata J, Alves C (2018) The survival of firms founded by immigrants: Institu-
tional distance between home and host country, and experience in the host
country. Strateg Manag J 39(11):2965–2991. https://doi.org/10.1002/smj.
2945
Mehmetoglu M, Jakobsen TG (2022) Applied statistics using Stata: a guide for the
social sciences. Sage
Miller SR, Lavie D, Delios A (2016) International intensity, diversity, and distance:
unpacking the internationalization-performance relationship. Int Bus Rev
25(4):907–920. https://doi.org/10.1016/j.ibusrev.2015.12.003
Mohr A, Batsakis G (2019) The contingent effect of TMT international experience
on firms’ internationalization speed. Br J Manag 30(4):869–887
Nguyen QT, Rugman AM (2015) Internal equity financing and the performance of
multinational subsidiaries in emerging economies. J Int Bus Stud
46(4):468–490
Nguyen QTK (2011) The empirical literature on multinational enterprises, sub-
sidiaries and performance. Multinatl Bus Rev 19(1):47–64. https://doi.org/10.
1108/15253831111126749
Nichita A, Batrancea L, Marcel Pop C, Batrancea I, Morar ID, Masca E, Roux-Cesar
AM, Forte D, Formigoni H, da Silva AA (2019) We learn not for school but
for life: empirical evidence of the impact of tax literacy on tax compliance.
East Eur Econ 57(5):397–429
Peng MW, Wang DY, Jiang Y (2008) An institution-based view of international
business strategy: a focus on emerging economies. J Int Bus Stud
39(5):920–936
Petison P, Johri L (2008) Managing local employees: expatriate roles in a sub-
sidiary. Manag Decis 46(5):743–760
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | https://doi.org/10.1057/s41599-023-02533-w
Phene A, Almeida P (2003) How do firms evolve? The patterns of technological
evolution of semiconductor subsidiaries. Int Bus Rev 12(3):349–367. https://
doi.org/10.1016/S0969-5931(03)00020-9
Quer D, Rienda L, Andreu R, Miao S (2019) Host country experience, institutional
distance and location choice of Chinese MNEs: the moderating effect of
government official visits. Cross Cult Strateg Manag 26(1):24–45
Ramamurti R, Singh JV (Eds.) (2009) Emerging multinationals in emerging mar-
kets. Cambridge University Press
Ramona-Anca N, Larissa-Margareta B (2013) The implications of tax morale on
tax compliance behaviour. Ann Fac Econ 1(1):739–744
Reuber AR, Fischer E (1997) The influence of the management team’s international
experience on the internationalization behaviors of SMEs. J Int Bus Stud
28:807–825
Rickley M (2019) Cultural generalists and cultural specialists: examining interna-
tional experience portfolios of subsidiary executives in multinational firm. J
Manag 45(2):384–416. https://doi.org/10.1177/0149206317748745
Rickley M, Karim S (2018) Managing institutional distance: examining how firm-
specific advantages impact foreign subsidiary CEO staffing. J World Bus
53(5):740–751. https://doi.org/10.1016/j.jwb.2018.05.002
Rochowicz JJA (2011) Bootstrapping analysis, inferential statistics and EXCEL.
Spreadsh Educ 4(3)
Salomon R, Martin X (2008) Learning, knowledge transfer, and technology
implementation performance: A study of time-to-build in the global semi-
conductor industry. Manag Sci 54(7):1266–1280
Salomon R, Wu Z (2012) Institutional distance and local isomorphism strategy. J
Int Bus Stud 43(4):343–367
Schmidt AF, Finan C (2018) Linear regression and the normality assumption. J
Clin Epidemiol 98:146–151
Schober P, Boer C, Schwarte LA (2018) Correlation coefficients: appropriate use
and interpretation. Anesth Analg. 126(5):1763–1768
Shahul Hameed NS, Salamzadeh Y, Abdul Rahim NF, Salamzadeh A (2022) The
impact of business process reengineering on organizational performance
during the coronavirus pandemic: moderating role of strategic thinking.
Foresight 24(5):637–655
Shirodkar V, Konara P (2017) Institutional distance and foreign subsidiary per-
formance in emerging markets: moderating effects of ownership strategy and
host-country experience. Manag Int Rev 57(2):179–207. https://doi.org/10.
1007/s11575-016-0301-z
Tao F, Liu X, Gao L, Xia E (2018) Expatriates, subsidiary autonomy and the
overseas subsidiary performance of MNEs from an emerging economy. Int J
Hum Resour Manag 29(11):1799–1826
Teng L, Huang D, Pan Y (2017) The performance of MNE subsidiaries in China: does
it matter to be close to the political or business hub? J Int Manag 23(3):292–305
Tihanyi L, Ellstrand AE, Daily CM, Dalton DR (2000) Composition of the top
management team and firm international diversification. J Manag
26(6):1157–1177. https://doi.org/10.1177/014920630002600605
Trąpczyński P, Banalieva ER (2016) Institutional difference, organizational
experience, and foreign affiliate performance: evidence from Polish firms. J
World Bus 51(5):826–842
Trapczynski P, Gorynia M (2017) A double-edged sword? The moderating effects
of control on firm capabilities and institutional distance in explaining foreign
affiliate performance. Int Bus Rev 26(4):697–709. https://doi.org/10.1016/j.
ibusrev.2016.12.009
Trąpczyński P, Halaszovich TF, Piaskowska D (2019) The role of perceived
institutional distance in foreign ownership level decisions of new MNEs. J Bus
Res. https://doi.org/10.1016/j.jbusres.2019.02.018
Vallone T, Elia S, Greve P (2022) International environmental complexity and the
demand for generalists and specialists in executive selection. Glob Strategy J
13(3):581–619
Wocke A, Kgotle MA (2021) How do Expatriates Experience Institutional Distance
in their Host Countries and What Mechanism do they Implement to Respond
to the Distance (Doctoral dissertation, University of Pretoria, South Africa)
HUMANITIES AND SOCIAL SCIENCES COMMUNICATIONS | (2024)11:103 | https://doi.org/10.1057/s41599-023-02533-w
ARTICLE
Wright M, Filatotchev I, Hoskisson RE, Peng MW (2005) Strategy research in
emerging economies challenging the conventional wisdom. J Manag Stud
42(1):1–33
Xiao C, Ye J, Esteves RM, Rong C (2016) Using Spearman’s correlation coefficients
for exploratory data analysis on big dataset. Concurr Comput Pract Exp
28(14):3866–3878
Xiao SS, Jeong I, Moon JJ, Chung CC, Chung J (2013) Internationalization and
performance of firms in China: moderating effects of governance structure
and the degree of centralized control. J Int Manag 19(2):118–137. https://doi.
org/10.1016/j.intman.2012.12.003
Xu D, Shenkar O (2002) Institutional distance and the multinational enterprise.
Acad Manag Rev 27(4):608–618. https://doi.org/10.2307/4134406
Zaheer S (1995) Overcoming the liability of foreignness. Acad Manag J
38(2):341–363
Zaheer S, Schomaker MS, Nachum L (2012) Distance without direction: restoring
credibility to a much-loved construct. J Int Bus Stud 43(1):18–27
Zhao HX, Ma JQ, Yang J (2017) 30 years of research on entry mode and perfor-
mance relationship: a meta-analytical review. Manag Int Rev 57(5):653–682.
https://doi.org/10.1007/s11575-017-0314-2
Author contributions
All contributing authors confirm they satisfy the journal’s criteria for authorship.
Ethical approval
Ethical approval was not required as the study did not involve human participants.
Informed consent
This article does not contain any studies with human participants performed by any of
the authors.
Competing interests
The authors declare no competing interests.
Additional information
Supplementary information The online version contains supplementary material
available at https://doi.org/10.1057/s41599-023-02533-w.
Correspondence and requests for materials should be addressed to Xiaojing Lu.
Reprints and permission information is available at http://www.nature.com/reprints
Publisher’s note Springer Nature remains neutral with regard to jurisdictional claims in
published maps and institutional affiliations.
Open Access This article is licensed under a Creative Commons
Attribution 4.0 International License, which permits use, sharing,
adaptation, distribution and reproduction in any medium or format, as long as you give
appropriate credit to the original author(s) and the source, provide a link to the Creative
Commons license, and indicate if changes were made. The images or other third party
material in this article are included in the article’s Creative Commons license, unless
indicated otherwise in a credit line to the material. If material is not included in the
article’s Creative Commons license and your intended use is not permitted by statutory
regulation or exceeds the permitted use, you will need to obtain permission directly from
the copyright holder. To view a copy of this license, visit http://creativecommons.org/
licenses/by/4.0/.
© The Author(s) 2024
15