Legal system contingencies as determinants of political tie intensity by wholly owned foreign subsidiaries: Insights from the Philippines

• Main Authors: White, George O, III, Boddewyn, Jean J, Galang, Roberto Martin N
• Format: text
• Published: Archīum Ateneo 2015
• Subjects: Legal system uncertainty; Political tie intensity; Organizational capabilities; Nonmarket strategy; Institution-based view; Wholly owned foreign subsidiary; Emerging markets; Business; Business Law, Public Responsibility, and Ethics
• Online Access: https://archium.ateneo.edu/leadership-and-strategy-faculty-pubs/19; https://www.sciencedirect.com/science/article/abs/pii/S1090951614000844
• Institution: Ateneo De Manila University

How will managerial perceptions concerning specific dimensions of legal system uncertainty affect wholly owned foreign subsidiary (WOFS) political tie intensity? This study employs the institution- based view of international business strategy to explore how managerial perceptions of specific dimensions of legal system uncertainty – ex-ante commercial law inadequacy and ex-post judicial arbitrariness – will act as determinants of WOFS political tie intensity. Our analysis of 181 WOFSs in the Philippines suggests that managerial perceptions of ex-ante commercial law inadequacy and ex-post judicial arbitrariness, being two distinct dimensions of legal system uncertainty, are determinants of political tie intensity. We also find that the positive association between managerial perceptions of ex-ante commercial law inadequacy and the intensification of political ties grows stronger when a WOFS is committed to organizational adaptation of capabilities to the local context, while the positive association between managerial perceptions of ex-post judicial arbitrariness and the intensification of political ties grows stronger when a WOFS is engaged in strategically positioning operations in an emerging market environment.