Subsidiary Grouping and Performance: The Role of Upper-echelon Size and Firm Age under Uncertainty

New research on MNC subsidiaries has recently begun to examine the performance-enhancing effects of subsidiary grouping, i.e., the co-location of multiple subsidiaries in the same nation. While previously-published studies have shown that subsidiary grouping fosters the performance of the focal firm, this study draws from the upper echelon and liability of newness perspectives to reveal the inner mechanisms by which such a phenomenon occurs. It thus suggests that subsidiary grouping is not equally beneficial for all the subsidiaries; rather, its effects are magnified in those subsidiaries that have smaller upper-echelon managerial architectures and younger ages. Moreover, this study further examines the inner functioning of these two mechanisms, explaining why their effect changes under uncertainty. An analysis of a large sample of foreign subsidiaries in Italy provides support for the hypotheses. This study extends the theory of subsidiary grouping in that it illuminates the mechanisms linking grouping to performance. New promising perspectives for scholars and practitioners are offered and discussed.