Influence of Experiential Learning on Subsidiary Performance of Emerging Multinationals

This paper explores how accumulated international experiences of emerging multinationals (EMNCs) aid successful international expansion. Pursuing a subsidiary level analysis, this study advances and tests the relationship between parent firm’s experiential knowledge (i.e. general international experience and host country specific experience), subsidiaries’ own experience, and the performance of its foreign subsidiaries of EMNCs. By integrating the learning theory, organizational capability and knowledge transfer literature, this study predict: 1). An inverted U-shaped relationship between subsidiary experience and focal subsidiary performance, 2) An overall U- shaped relationship between parent firm’s general international experience and host country experience and focal subsidiary performance. These predictions are tested empirically with proprietary, longitudinal data from 787 foreign subsidiaries within 253 Indian MNCs (those were a part of the BSE 500 index as on November, 2013) for three years, starting from 2010-11 to 2012-13. The results of this study strongly support the hypothesized relationships between different experience profiles and foreign subsidiary performance.