Abstract/Summary

Purpose: Foreign subsidiaries of multinational enterprises (MNEs) operate in complex and competitive international environments, implement market and non-market strategies, manage resources and value-added activities, and contribute to the overall performance of their parent firms. Thus, the research question on the determinants of MNE foreign subsidiaries’ performance is of interest to managers and academic researchers. The empirical literature has flourished over the recent decades; however, the domains are fragmented, and the findings are inclusive. The purpose of this study is to systematically review, analyse, and synthesize the empirical articles in this area, identify research gaps, and suggest a future research agenda. Design/ methodology/ approach: This study uses the qualitative content analysis method in reviewing and analysing 150 articles published in 24 scholarly journals during the period 2000-2023. Findings: The literature uses a variety of theoretical perspectives to examine the key determinants of subsidiary performance which can be grouped into six major domains, namely, home and host country level factors; distance between home and host countries; the characteristics of parent firms and of subsidiaries; governance mechanisms (the establishment modes and ownership strategy, subsidiary autonomy, and the use of home country expatriates for transferring knowledge from the headquarters and controlling foreign subsidiaries). A range of objective and subjective indicators are used to measure subsidiary performance. Yet, the research shows a lack of broader integration of theories, presents inconsistent theoretical predictions, inconclusive empirical findings, and estimation bias, which hinder our understanding how the determinants independently and jointly shape the performance of foreign subsidiaries. Originality/value: This study provides a comprehensive, nuanced, and systematic review that synthesizes and clarifies on the determinants of subsidiary performance, offers deeper insights from both theoretical, methodological, and empirical aspects, and proposes some promising avenues for future research directions.