Service sector subsidiary performance in emerging markets: is it who or what you know?

Abstract

This research investigates performance determinants of service sector foreign-owned subsidiaries located in an emerging market. The focus is on the two dimensions of organizational networks (Who do you know?) and competencies (What do you know?). Data were collected via a large-scale survey of managing directors located in the midrange emerging economy of Taiwan. The data are analyzed using partial least squares structured equation modeling (PLS-SEM) and fuzzy set qualitative comparative analysis (fsQCA) techniques. The results show the importance of intraorganizational network strength as a key determinant of subsidiary performance, and that combinations of interorganizational network strength and competencies can determine performance in several subsidiaries. This article offers new insights by testing a theoretical framework based on network perspective and the competence-based view of the firm in an emerging market context. It also offers an additional twist by employing symmetric (PLS-SEM) and nonsymmetric (fsQCA) methods to test the framework. This allows to arrive at robust conclusions about the complementarity and substitutability of the applied theories. This research also contributes to the current literature by providing fine-grained insights into the nature and impact of competencies and networks. It is also one of the few studies to focus specifically on service sector subsidiaries.