Does country matter?

TLDR

Previous research on business unit performance has largely examined industry, corporate, and unit effects within single countries, treating country as an external factor. This study investigates how country effects influence the performance of foreign affiliates in multinational corporations. Country effects are as strong as industry effects, ranking after affiliate and corporate effects, and while corporate and affiliate effects dominate in developed countries, country and industry effects are more salient in developing countries. © 2004 John Wiley & Sons, Ltd.

Abstract

Abstract Previous studies have explored the predictors of business unit performance in multiple‐business firms and investigated the extent of the effect of industry, corporate, and business unit on the performance of a business unit. These studies have focused almost exclusively on examining performance differences within a single country, thus treating country effects as external to business unit performance. In contrast, this study focuses on multinational corporations and examines the extent to which country effects explain the variation in the performance of foreign affiliates. Our findings show that country effects are as strong as industry effects, following affiliate effects and corporate effects. Our results also suggest that corporate and affiliate effects tend to be more critical in explaining the variation in foreign affiliate performance in developed countries, whereas country and industry effects are more salient in developing countries. Copyright © 2004 John Wiley & Sons, Ltd.