Abstract
Purpose
Research on MNE subsidiaries has recently started to examine the risk-taking behavior at the subsidiary level, leveraging insights from the Behavioral Theory of the Firm (BTOF). While prior studies have demonstrated that as performance falls below the aspiration, subsidiaries will take more risks, this study focuses on when subsidiary performance surpasses the aspiration by unveiling the mechanisms guiding subsidiaries' risk-taking behavior. In doing so, it proposes that subsidiaries' decision-making autonomy and self-assurance are contingent on contextual factors such as the headquarter influence and the cultural conditions of the host country.
Design/methodology/approach
This study draws on panel data from foreign subsidiaries operating in five European countries (the UK, Germany, France, Italy, and Spain) between 2013 and 2022, sourced from the Orbis database. Fixed effects regression models were used to test the hypotheses.
Findings
Findings suggest that as performance exceeds the aspiration level, decision-makers within subsidiaries become inclined to take more risks. Moreover, our study reveals that the increase in risk-taking is not uniform across all subsidiaries. In particular, those situated in countries characterized by high power distance and uncertainty avoidance exhibit a weaker inclination towards risk-taking in response to performance exceeding aspirations. Conversely, subsidiaries in individualistic countries demonstrate a stronger propensity for risk-taking under similar circumstances.
Originality/value
This is an original study contributing to the literature on subsidiary risk behavior and the BTOF by elucidating the underlying conditions shaping such behavior.
Research on MNE subsidiaries has recently started to examine the risk-taking behavior at the subsidiary level, leveraging insights from the Behavioral Theory of the Firm (BTOF). While prior studies have demonstrated that as performance falls below the aspiration, subsidiaries will take more risks, this study focuses on when subsidiary performance surpasses the aspiration by unveiling the mechanisms guiding subsidiaries' risk-taking behavior. In doing so, it proposes that subsidiaries' decision-making autonomy and self-assurance are contingent on contextual factors such as the headquarter influence and the cultural conditions of the host country.
Design/methodology/approach
This study draws on panel data from foreign subsidiaries operating in five European countries (the UK, Germany, France, Italy, and Spain) between 2013 and 2022, sourced from the Orbis database. Fixed effects regression models were used to test the hypotheses.
Findings
Findings suggest that as performance exceeds the aspiration level, decision-makers within subsidiaries become inclined to take more risks. Moreover, our study reveals that the increase in risk-taking is not uniform across all subsidiaries. In particular, those situated in countries characterized by high power distance and uncertainty avoidance exhibit a weaker inclination towards risk-taking in response to performance exceeding aspirations. Conversely, subsidiaries in individualistic countries demonstrate a stronger propensity for risk-taking under similar circumstances.
Originality/value
This is an original study contributing to the literature on subsidiary risk behavior and the BTOF by elucidating the underlying conditions shaping such behavior.
| Original language | English |
|---|---|
| Pages (from-to) | 1-27 |
| Number of pages | 27 |
| Journal | Cross Cultural and Strategic Management |
| Early online date | 3 Dec 2025 |
| DOIs | |
| Publication status | E-pub ahead of print - 3 Dec 2025 |
Bibliographical note
Copyright © Afshin Hamrabadi and Fabio ZonaPublished by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors.
Keywords
- Culture
- Host country
- Performance
- Risk
- Subsidiary