How Much Does Subsidiary Experience Matter for EMNCs: Evidence From Indian Multinationals

This paper explores how direct experiential learning by foreign subsidiaries aid successful international expansion of emerging multinationals (EMNCs). Pursuing a subsidiary level analysis, this study tests all the divergent relationships, explored in the extant literature between subsidiary’s own experience and the performance of focal subsidiary in the host economy. Most recent findings in the context of developed country MNCs indicate that the link may exhibit a non-linear form, but there is no consensus on the exact shape of the curve. Precious little is known about this question in the case of EMNCs, most of which are in the state of early internationalization. By integrating organizational (un)learning, international business and strategy literature, this study predicts an new, unified three-stage, horizontal ‘S’- shaped relationship between subsidiary experience and focal subsidiary performance for EMNCs. Also we predict that the economic distance between the host and home country will moderate this relationship. These predictions are tested empirically with proprietary, longitudinal data from 695 foreign subsidiaries of 221 Indian EMNCs (those were a part of the BSE 500 index as on November, 2013) for seven years, starting from 2006-07 to 2012-13. We find supporting evidence for most of our hypothesized relationships.