Cross-National Distance as a Determinant of Foreign Subsidiary Adaptive Capability Building

Integrating institutional theory with dynamic capabilities, this study examines the influence of cross-national distance as a determinant of multinational enterprise (MNE) wholly owned foreign subsidiaries (WOFSs) organizational adaptive capabilities in an emerging market environment. By employing data gathered from 175 WOFSs operating in the Philippines, we find that cross-national distance negatively affects a WOFS’s tendency to build organizational adaptive capabilities. In addition, our results reveal that the simultaneous presence of perceived corruption pervasiveness and manufacturing intensity diminish the negative relationship between cross-national distance and a WOFS’s propensity to develop organizational adaptive capabilities. Managerial implications and avenues for future research are offered.