A Study On Legitimacy Duality Of Foreign Subsidiaries And Technological Catch-up In Emerging Multinational Corporations

Overseas expansions enable multinational corporations(MNCs)to enter overseas markets,obtain valuable assets and transfer their capabilities in the global landscape.In particular,MNCs originating from emerging economies(or EMNCs)have become a heavyweight player by accounting for a big share of foreign direct investments in advanced countries to tap into frontier innovative resources.While the existing exponentially increased investments and milestone events have illuminated the motivations for EMNEs to boost technological catch-up performance,we have limited knowledge on how the EMNCs overcome the difficulties in acquiring and utilizing innovative resources in advanced countries.On the one hand,due to liability of origin,some foreign subsidiaries lack of external legitimacy in host countries so that obtainiing and accumulation of innovative resources may be resisted.On the other hand,on account of being weary of dealing with competing institutional forces,foreign subsidiaries may be confronted with short slab of internal legitimacy,which hinders the cross-border transfer of technologies and knowledge.Although a wide range of literature has recognized the close relationship between organizational legitimacy and technological innovation,to our knowledge,there has been no theory of empirical evidence on how EMNCs advance technological catch-up performance by make decisions on legitimacy duality of the foreign subsidiaries.Besides,how parent firms,who have roles of the "resource devotee","norm maker" and "final beneficiary",exert influence on legitimacy duality of foreign subsidiaries is inadequately discussed.Based on the above,this study attempts to answer the question:how EMNCs advance technological catch-up performance by making decisions on legitimacy duality of the foreign subsidiaries in advanced countries.This study attempts to resolve this question by drawing on the literature of institutional theory and innovation theory and designing four sub-studies in the intersections among strategic choice,external environments and organizational performance.Respectively,the four sub-studies are(1)how strategic orientations affect legitimacy duality of foreign subsidiaries,(2)how legitimacy duality of foreign subsidiaries responds to normative pressure of host countries,(3)how legitimacy duality of foreign subsidiaries influence technological catch-up performance of parent firms,and(4)how strategic orientations and normative pressure jointly exert influence on legitimacy duality of foreign subsidiaries and in turn affect technological catch-up performance of parent firms.With data on foreign direct investments of Chinese MNCs,this study focused on the research question by conducting both quantitative and qualitative research.This study outlines four main results.First,in the context of technological catch?up of EMNCs,strategic orientations affect the priority of acquiring internal and external legitimacy of foreign subsidiaries,and in turn,legitimacy duality.With different establishing mode of foreign subsidiaries,parent firms alternatively adopt buffer mechanism or partition mechanism to realize universal legitimacy duality for foreign subsidiaries.Second,normative pressure in advanced host countries influences the potential benefits and costs of buffer mechanism,thus shaping the EMNEs' decisions on legitimacy duality of acquired foreign subsidiaries.Third,universal legitimacy duality structure of acquired foreign subsidiaries is positively associated with the technological catch-up performance of parent firms.Fourth,we contend that foreign subsidiaries of EMNCS switch two strategies dynamically to obtain and sustain expected legitimacy duality.And the parent firms form different partition mechanisms with the focal subsidiary to overcome barriers in catch-up technologically.These results contribute to literature in several respects,and point to areas where future research could be conducted.First,this study provides a better understanding of how foreign subsidiaries of EMNCs deal with competing institutional duality.Second,this study proposes a new perspective,parent firms,for examining the antecedents,process and impact of legitimacy duality of foreign subsidiaries.Third,by pinpointing the exact mechanism underlying the effect of legitimacy duality of foreign subsidiaries on technological catch-up performance,this study indicates a new strategy patch for latecomers.Limitations and managerial implications are also discussed.