Post-Entry Incremental Change in Foreign Investment and Subsidiaries Survival in Host Countries

Post-Entry Incremental Change in Foreign Investment and Subsidiaries Survival in Host Countries

This study integrates adaptation theory and government corruption and suggests a contingency framework in understanding the relationship between post-entry incremental changes and foreign subsidiaries performance. Using a sample of 2,582 overseas subsidiaries established by 842 Korean textile firms across 46 host countries from 1986 to 1995, findings reveal that post-entry incremental change of foreign subsidiaries in investment amount is negatively associated with their mortality rates. The findings also show that the effect of incremental change on subsidiaries survival chances is contingent on the level of government corruption of a host country. That is, the effect of incremental change on the mortality rate is significant in countries with both lower and higher levels of corruption, but the effect is much stronger in ones with higher levels of government corruption.