Three essays on distance: Examining the role of institutional distance on foreign firm entry, local isomorphism strategy and subsidiary performance

This dissertation consists of three essays on the impact of institutional distance on foreign firm entry, local isomorphism strategy and foreign subsidiary performance. These studies employ two samples: the first one includes the foreign banks that entered the United States from 61 home countries during 1956-2006. The second one includes all foreign bank subsidiaries (83 in Essay 2 and 84 in Essay 3) that operated in the United States from 1978 to 2006.;The first essay focuses on the impact of institutional distance on foreign firm entry. It examines the relationship between the cultural/economic/regulatory/political distances and the number of foreign entrants from a particular home country. Moreover, it tests whether vicarious experience moderates the impact of institutional distance. The results support the argument that fewer foreign firms enter the host country market as the institutional distance increases. In addition, the finding also suggests that the negative impact of institutional distance on foreign firm entry is likely to decrease as there are more prior entrants from the same home country.;The second essay examines foreign firms' decision to imitate local domestic competitors, i.e. the local isomorphism strategy. In this essay, I argue that foreign firms are likely to imitate local domestic incumbents more as the institutional distance increases. Furthermore, this impact of institutional distance is likely to be moderated as foreign firms learn from others' experience and their own experience. The empirical findings support the primary argument by showing that foreign banks imitate local U.S. banks to a greater extent as the cultural/economic/regulatory distance between the home country and the U.S. increases. Moreover, this impact of institutional distance persists over time.;The third essay tests the performance impact of local isomorphism strategy. Contrary to prior research, this study finds a positive association between local isomorphism and foreign subsidiary performance. In this empirical test, local isomorphism strategy is treated as a self-selected endogenous variable. The results support the hypothesis that local isomorphism strategy, as a function of individual firm characteristics and environmental conditions, has a positive impact on foreign subsidiary performance.