Foreign direct investments that come with globalization bring benefits with them if opportunities are handled in the best manner. One opportunity rises with the institutional difference issue. Different countries have different institutional profiles. Institutional profiles briefly include culture, social norms or governmental regulations.
When investing abroad, the bigger the institutional difference gets between the home country and the host country, the harder it gets to acquire the local institutional knowledge. This may result in a negative effect in the firm performance. To make the right decisions managers, being an important part of the decision making process, are required to have a profound understanding and knowledge of the local institutional environment.
In here the investing companies have two options; either to use local managers or to acquire knowledge through the accumulation of experience. Building on the institutional theory, sixteen multinational companies operating in the manufacturing industry in Turkey are analyzed with the aim to contribute to the understanding of whether native managers or company experience is creating a better firm performance in consideration with handling the institutional differences. The results of this study point out that, the manager origin indeed influence the firm performance and native managers have a positive effect on the firm performance.
Source: Linköping University
Author: Uzer, Emre | Tüzün, Sinan Zeki