Host country uncertainty, intra-MNC production shifts, and subsidiary performance

Abstract

This study examines whether or not production shifts occur among the foreign subsidiaries of multinational corporations (MNCs) under the influence of differing macroeconomic conditions in their host countries. This study compares intra-MNC production shifts under the influence of exchange rate changes across different host countries. Our findings indicate that the increase of a subsidiary's production at the time of its host country currency depreciation decreases the production of other subsidiaries within the same MNC network. Our empirical evidence also shows that MNC subsidiaries that engage in production shifts with other affiliated subsidiaries command a higher performance. Copyright © 2012 John Wiley & Sons, Ltd.