How much does host country matter, really?

How much does the host country matter in explaining foreign affiliate performance? Using a global sample of 34,708 foreign affiliates operating in 91 host countries, we revisit the relative importance of the host country effect as a performance determinant. Our variance decomposition results suggest that the host country effect is less salient than previously identified, often explaining a small portion of affiliate performance differences. We offer implications for future international strategy research on foreign affiliate performance, advancing an understanding of the relative importance of external and internal determinants. We direct scholarly attention to other effect classes, namely the affiliate effect.

Automated summary

This study reexamines the relative importance of the host country effect on foreign affiliate performance by analyzing a global sample of 34,708 foreign affiliates operating in 91 host countries. The results of the variance decomposition indicate that the host country effect is often less significant than previously believed, only explaining a small portion of the performance differences among affiliates. The study offers implications for future international strategy research, promoting a better understanding of the relative importance of external and internal determinants. Furthermore, it directs scholarly attention to other effect classes, such as the affiliate effect.