Unraveling formal and informal business ties in shaping foreign subsidiary capabilities
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Issued Date
2024-01-01
Resource Type
ISSN
20596014
eISSN
20596022
Scopus ID
2-s2.0-85190365366
Journal Title
Review of International Business and Strategy
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SCOPUS
Bibliographic Citation
Review of International Business and Strategy (2024)
Suggested Citation
Thoumrungroje A., Siri N.S. Unraveling formal and informal business ties in shaping foreign subsidiary capabilities. Review of International Business and Strategy (2024). doi:10.1108/RIBS-08-2023-0098 Retrieved from: https://repository.li.mahidol.ac.th/handle/123456789/98048
Title
Unraveling formal and informal business ties in shaping foreign subsidiary capabilities
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Abstract
Purpose: Drawing upon the resource-based view this study aims to examine the connections between formal and informal business relationships and resource-bridging and adaptive capabilities within the context of foreign subsidiaries of multinational enterprises (MNEs) operating in Thailand. Based on prior literature emphasizing business network ties as sources of competitive advantage in emerging markets, this study extends the discourse by investigating the moderating effects of technological turbulence, power distance and assertiveness. Design/methodology/approach: This study uses a quantitative research approach, using data obtained from a self-administered survey conducted among 168 foreign subsidiaries spanning diverse industries in Thailand. The data were analyzed by using multiple-group structural equation modeling to test the hypothesized relationships. Findings: Cultivating different types of business ties enables foreign subsidiaries to improve different types of capabilities. While interpersonal relationships (i.e. informal businessties) enable them to develop their abilities to combine various resources (i.e. resource-bridging capability), rigid contractual-based relationships (i.e. formal businessties) help them to be more adaptive (i.e. adaptive capability). These relationships are also contingent upon the levels of technological turbulence, host-country power distance and host-country assertiveness. Originality/value: This research builds upon prior research on network ties and capability building by delineating the specific nature of capabilities. Contradicting to the previous findings, demonstrating a negative relationship between formal business ties and capabilities, this study found that each type of business tie enables foreign subsidiaries to enhance different types of capabilities under different circumstances. Moreover, this study adopts a lens of host-country national culture rather than home-country culture in investigating the moderating effects of power distance and assertiveness.