The impact of dynamic institutional capabilities on multinational enterprises’ subsidiary performance in emerging markets

Abstract

In light of the global mining industry’s record profits in 2011, this inquiry explored the institutional drivers of mining multinational’s subsidiaries overall performance. Using a lens of institutional theory, this inquiry explored why the subsidiaries of emerging mining multinationals have outperformed the subsidiaries of developed mining multinationals in emerging markets.The inquiry used Mann-Whitney U hypothesis testing to compare the financial performance of 46 emerging mining subsidiaries and 39 developed mining subsidiaries. The inquiry ran eight multiple regression models to test subsidiary performance variables against institutional variables obtained from the 2011/2012 Fraser Institute annual survey of mining companies.The findings support and add to the institutional and international business literature. Emerging multinational enterprises and their subsidiaries possess dynamic institutional capabilities which allows them to better manage institutional uncertainty than developed multinational enterprises and their subsidiaries in emerging markets. An institutional development model has been developed to assist managers of multinational enterprises reduce their institutional uncertainty in emerging markets.