University of Illinois at Urbana-Champaign, United States
Trade policies are increasingly a source of friction in the contemporary environment for global business; thereby, calling for examination of the organizational responses undertaken by MNEs. We first contend that trade wars lead to the scaling down of MNE subsidiary operations in the affected host countries. Further, the multinationality – and regionality – of an MNE’s subsidiary network provides operational flexibility that accentuates these responses. Using the US-China trade war as an empirical context, we employ panel data composed of 1,412 Chinese subsidiaries of US MNEs that yield 5,648 subsidiary-level annual observations to conduct difference-in-differences analysis. The empirical results corroborate our priors as US MNEs downscaled their Chinese operations and these effects were pronounced for both highly-multinational and highly-regional MNEs.
