Transnational Corporations - Volume 21, Issue 2, 2013

There is significant regional variation in the performance of foreign affiliates in Europe. The aim of this paper is to examine whether differences in their performance can be explained by the characteristics of the corporate group to which they belong. To this end, we develop a novel procedure that allows us to control for the characteristics of the groups to which each subsidiary belongs. These characteristics include the geographical spread of the group, the total number of subsidiaries and complexity of internal hierarchies, and the degree of industry diversification within the group. We also control for the different institutional characteristics at the regional level. We find that subsidiaries belonging to geographically more widely spread but relatively less diversified TNC groups have superior performance. The results also suggest that regions with quality institutions attract affiliates of such high-performance groups.

Brazilian transnational corporations (TNCs) have increased foreign direct investment nearly every year since 2001. This paper assesses Brazilian TNCs’ transnationality index and the relationship with both objective and subjective foreign performance. An empirical study was conducted of 41 Brazilian TNCs’ international activities in 2008 and 2009. The results demonstrate that an increase in the degree of internationalization is associated with better foreign performance. This relationship is stronger for the objective performance dimension than the subjective dimension. Furthermore, UNCTAD’s transnationality index is more reliable in this context than an alternative construct that includes other internationalization measures.

The literature argues that the industrial policy is most effective in an institutional environment characterized by embedded autonomy, which describes an independent yet collaborative relationship between government bureaucracy and the private sector. However, such embedded autonomy of government bureaucracy in high-growth Asian countries was created under socio-economic and political circumstances that are no longer prevalent today. Analysis of the industrial policy concerning foreign investment projects in the aluminium industry in Trinidad and Tobago in the 2000s shows that embedded autonomy is necessary, but not sufficient, for successful FDI-facilitated development. This paper posits that the institutional framework for implementing industrial policy in today’s economic and political context needs to have the characteristics of embedded autonomy, but at the same time it needs to address the issues of accountability and transparency.