The contingent effect of political ties on post-entry performance: A three-way interaction of political ties, entry mode, and industry restriction

Abstract

Purpose

Political ties are critical for multinational enterprises’ (MNE) survival and success. However, the effect of political ties is not monotonic. The purpose of this paper is to look into the contingent effect of political ties on MNEs’ post-entry performance.

Design/methodology/approach

Based on survey data collected from 416 foreign subsidiaries operating in China, which was combined with several secondary data sources, this study examined the three-way interaction of political ties, entry mode and industry restriction.

Findings

The findings support the hypotheses that the impact of political ties on firm performance is contingent on firms’ ownership-based entry modes and industry restriction. In particular, the impact of political ties is stronger for joint ventures (JV) in less restricted industries and wholly owned subsidiaries (WOS) in more restricted industries.

Practical implications

Political ties have different effects on WOS and JV. While in general political ties have a stronger impact for JV than for WOS, their impacts on both parties vary on industry restriction. Managers should consider ownership structure as well as industry restriction when making non-market strategies and decisions.

Originality/value

By analyzing the impacts of intra-organizational and market environmental factors, this study provides a fine-grained view of foreign firms’ non-market strategy in China from a post-entry performance perspective.

Citation

Ma, J., Yang, J. and Song, Y. (2021), "The contingent effect of political ties on post-entry performance: A three-way interaction of political ties, entry mode, and industry restriction", Management Decision, Vol. 59 No. 1, pp. 104-117. https://doi.org/10.1108/MD-03-2019-0334