Local Density and Foreign Subsidiary Performance

Local density (the number of firms vying for similar resources in a local environment) has been overlooked in explaining foreign subsidiary performance. This study draws upon the literatures on liability of foreignness and density dependence to examine how local density within the host country affects performance, both directly and indirectly through its effects on market experience and strategic conformity. We find that local density is negatively related to foreign subsidiary performance, and that market experience is less beneficial in high density environments. Strategic conformity enhances performance in low density environments, but adversely affects performance in high density environments