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The performance of cross-border units in China: a test of natural selection, strategic choice and contingency theories

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Abstract

This study tests the explanatory power of three theoretical frameworks for the performance of cross-border affiliates, by examining the experience of 615 Hong Kong firms managing operations in mainland China. The frameworks tested are: the natural selection approach, focused on the influence of the environment; the strategic choice approach, focused on managerial action; and the contingency approach, which emphasises the ‘fit’ between environmental contingencies and internal organisation. The results show that natural selection and strategic choice have a role to play, even when controlling for each other. They also support a simple approach to contingency, but not a more complex version involving interactions. Although the business and institutional environments do have a significant influence on the performance of cross-border affiliates in a transition economy, performance can be improved through strategic managerial action. In particular, leveraging local resources by developing trust between parent and affiliate, and maintaining close control and integration with the parent, are associated with enhanced performance.

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Authors and Affiliations

  1. Birmingham Business School, University of Birmingham, UK

    J Child

  2. St John's College, University of Cambridge, UK

    L Chung

  3. Department of Business Studies, The Hong Kong Polytechnic University, Hong Kong

    H Davies

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  1. J Child
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  2. L Chung
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  3. H Davies
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Correspondence to J Child.

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Accepted by Tom Brewer; outgoing Editor, 17 October 2002.

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Child, J., Chung, L. & Davies, H. The performance of cross-border units in China: a test of natural selection, strategic choice and contingency theories. J Int Bus Stud 34, 242–254 (2003). https://doi.org/10.1057/palgrave.jibs.8400033

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  • DOI: https://doi.org/10.1057/palgrave.jibs.8400033

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