Market Seeking Orientation and Performance in China: The Impact of Institutional Environment, Subsidiary Ownership Structure and Experience

Many foreign firms tend to follow the market-seeking mandate in China. However this orientation alone does not guarantee superior performance. From the perspectives of strategic fit and institutional theory, this research seeks to reveal several conditions under which market-seeking MNEs can achieve superior performance in China. We identify three performance contributors to marketing seeking FDI: the host country's favorable formal institutions towards FDI, the subsidiaries' operational experience and absorptive capacity in the host country, and the ownership structure of the subsidiary. Using data of 5,080 foreign invested subsidiaries in 2003–2010, our findings support the hypotheses that market-seeking orientation becomes more profitable for foreign subsidiaries in China when (1) the host country provides a more favorable institutional framework towards FDI; (2) the subsidiary has a longer history of FDI operation in the host country that leads to stronger absorptive capacity; and (3) the subsidiary is organized in a wholly owned manner.