Determinants of local responsiveness: perspectives from foreign subsidiaries in an emerging market

Abstract

This study examines various determinants of local responsiveness as perceived by MNE subsidiary managers in a dynamic environment. It proposes and validates three levels of factors affecting responsiveness, including environmental, structural, and organizational. Analysis of data containing 168 MNE subsidiaries in the People’s Republic of China suggests that environmental complexity and business culture peculiarity heighten local responsiveness. Structural factors such as competition intensity, demand heterogeneity, and component localization elevate local responsiveness. A subsidiary’s local market orientation and the strength of its established network with the business community and governmental agencies also propel such responsiveness. Finally, there is a stronger relationship between environmental and industrial factors and responsiveness for firms seeking local market expansion than for those pursuing export growth.