| With the steady promotion of the “going out” strategy,“the Belt and Road Initiative” and the establishment of a “dual circulation” development pattern in which extends and complements domestic and international economic cycle,more and more Chinese enterprises had established subsidiaries overseas.However,the political and economic game between countries has intensified,the rising wave of anti-globalization,which has fostered mistrust among people,and Chinese enterprises’ cross-border operations are facing higher uncertainties and risks.In contrast to the high priority given by the Chinese government and the rapid “going out” of Chinese companies,the performance of foreign subsidiaries of Chinese enterprises are not satisfactory.Therefore,how to improve the performance of foreign subsidiaries of Chinese enterprises has become an important issue that needs to be addressed.Research based on the institutional perspective suggests that institutions,as the "rules of the game" for the operation of a society,determine the feasibility and profitability of economic transactions by affecting legitimacy,transaction costs and uncertainty.In addition,the choice of entry mode is an important strategic decision for foreign investment,and different entry modes imply different levels of control and risk-taking,which have an important impact on the survival and development of subsidiaries.Therefore,selecting an entry based on the host country institutional environment is an important way to improve the performance of Chinese firms’ foreign subsidiaries.Although many studies have focused on the relationship between host country institutions,the choices of entry modes and the performance of foreign subsidiaries,there are still shortcomings.(1)Since informal institutions are more difficult to conceptualize and measure,the existing literature mainly pay much attention to the impact of formal institutions,while pay less attention to informal institutions,resulting in an incomplete development of the institutional perspective;(2)Due to the interference of the “self-selection” endogeneity issue,there are contradictory findings in the current research on entry modes and subsidiary performance;(3)Limited by traditional quantitative research methods,the existing studies are unable to identify the effective paths that lead to high levels of foreign subsidiary performance.In order to fill the above-mentioned research gaps,in a sample of Chinese multinational enterprises’ foreign subsidiaries from 2005 to 2020,this study aims to reveal the mechanism of social trust in the host country,an important but under-researched informal institution,on the performance of overseas subsidiaries.Specifically,this study conducts three interrelated and progressive sub-studies as follows.Study 1 explores the mechanism of the impact of the level of social trust in the host country on the performance of foreign subsidiaries and introduces the level of formal institutions and information disclosure in the host country as moderating variables.The research question is: Does the level of social trust contribute to better performance of foreign subsidiaries? Does the performance of subsidiaries perform better when there is a “social trust level-entry mode fit”? The study finds that:(1)the level of social trust has a positive effect on the performance of foreign subsidiaries and the wholly owned entry mode,and the above impact is enhanced with the improvement of formal institutional quality and weakened with the increase of information disclosure;(2)Subsidiary performance is better when “social trust level-entry pattern fit”;(3)The results of mechanism test show that the host country’s social trust level affects the performance and entry mode selection of foreign subsidiaries by reducing transaction costs;(4)The results of heterogeneity analysis find that there is no difference in the effect of social trust level on the performance of foreign subsidiaries of state-owned and private enterprises,but only on the choice of entry mode of foreign subsidiaries of private enterprises,while the effect on the choice of entry mode of foreign subsidiaries of state-owned enterprises has not been significantly presented;only when the host country government restriction level is low does the social trust level have a positive effect on subsidiary performance;regardless of the host country government restriction level,social trust level has a significant effect on entry mode selection.Study 2 explores the mechanism of the impact of social trust diversity in host countries on the performance of foreign subsidiaries and introduces formal institutions and information disclosure as moderating variables.The research question is: Does social trust diversity reduce the performance of foreign subsidiaries? Does the performance of subsidiaries perform better when there is a “social trust diversity-entry pattern fit”? The study finds that:(1)Social trust diversity has a negative effect on the performance of foreign subsidiaries and has a U-shaped relationship with the wholly owned entry mode,while host country information disclosure mitigates the negative effect of social trust diversity on the performance of foreign subsidiaries,and the moderating effect of formal institutions is not significant;(2)Subsidiary performance is better when “social trust diversity-entry pattern fit”;(3)The results of heterogeneity analysis find that the negative effect of social trust diversity on subsidiary performance is more significant when the parent company is a private enterprise,the density of Chinese overseas network in the host country is looser,and the host country’s market competition is high.Based on the study 1 and study 2,Study 3 explores the sufficiency configurations that lead to high performance of foreign subsidiaries based on the qualitative comparative analysis(fs QCA)method.The research question is: Which conditional configurations lead to high levels of foreign subsidiary performance? Are there multiple different paths that lead to high levels of subsidiary performance? The study finds that seven antecedent conditions of host country social trust level,social trust diversity,formal institutions,information disclosure,Chinese overseas network,state ownership of the parent company,and entry mode of subsidiary formed four paths that lead to high subsidiary performance.Overall,by answering the above research questions,this study has four main research contributions as follows.(1)This study reveals the effect of host country social trust,an important informal institution,on the performance of foreign subsidiaries,responds to the call for more informal institution-related research,and provides new empirical evidence to further clarify whether and how host country informal institutions affect foreign investment strategies and performance;(2)Using a strategic fit approach,this study compares the performance difference between “social trustentry mode fit” and “social trust-entry mode misfit”,effectively overcoming the “selfselection” endogeneity issue that previous studies have faced in analyzing the relationship between entry mode and subsidiary performance;(3)Although scholars have conducted a large number of studies on the impact of social trust level on firm internationalization,no research has focused on the role of social trust diversity.This study is the first to investigate the effect of social trust diversity on the performance and entry mode selection of foreign subsidiaries,thus extending the research on the impact of social trust on firm internationalization and performance;(4)This study integrates traditional quantitative research methods and fs QCA methods to clarify the theoretical path of social trust affecting the performance of foreign subsidiaries,and further explores the sufficiency configurations for resulting in high performance of foreign subsidiaries,which makes up for the shortcomings of traditional quantitative research in providing solutions and is important for multinational enterprises to select an entry mode based on the host country environment and their own conditions. |
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