Post-Entry On-going Organizational Changes in Core Activities of Foreign Subsidiaries and Firm Survival

Abstract

By applying conventional organizational adaptation theory, this study explores the relationship between post-entry on-going organizational changes in core areas of foreign subsidiaries, such as investment amount, ownership, and product, and the subsequent survival of such subsidiaries in a host country. This study further investigates the relative importance of subsidiary’s organizational change in core areas. For these research questions, this study employs a sample of 2,582 foreign direct investment cases by Korean textile firms. The findings show that a foreign subsidiary’s post-entry ongoing organizational changes in the core areas are negatively associated with its mortality rate. However, we carefully qualify this result: ongoing changes in investment amount and product areas help reduce the mortality rate, whereas changes in ownership do not.