ABSTRACT
This study draws upon a firm level database for EU countries to explore the Foreign direct investment (FDI) behaviour of firms .An econometric model based on economic theories of MNC behaviour is used to carry out an empirical analysis. The performance of subsidiaries firms with FDI in EU countries could be explained by this model which focuses mostly upon parent size, industrial and macroeconomic environment of the host country
INTRODUCTION
In the era of globalization in today’s global economic environment, many people argue that a single country cannot develop its economy without integrating itself with the international marketplace, “the international flow of ideas and knowledge, the sharing of cultures, global civil society, and the global environmental movement” (Stiglitz,2006) shapes worldwide markets. The global nature of the current world economy and the increasing financial and economic interdependence between countries has given rise to multinational corporations, which are expanding their boundaries from the country of their origin to a number of markets.
Multinational corporations are essential agents that influence global production, distribution, and flow of capital and resources. Foreign direct investment (FDI), its classic form is defined as a company from one country making a physical investment into building a factory in another country. It is the establishment of an enterprise by a foreigner. Chowdhury and Mavrotas (2005) study on the role of FDI in host countries suggests that FDI: is an important source of capital, complements domestic private investment which is usually associated with new job opportunities; enhances both technology transfer and spill over and human capital (knowledge and skill) enhancement boosts overall economic growth in host countries
This research will explore the performance of the MNC subsidiaries and its relationship with investment size, macroeconomic factors of the economy and the industry-specific characteristics from a representative sample of EU countries.
The first section of the paper will study the European Union FDI, followed by the theoretical framework of FDI along with the literature review exploring previous studies related with the performance of subsidiaries, macroeconomic factors and industry-related factors and its relationships with the investment size of the parent company. Subsequently, there are the results and the discussion of the relationships in EU countries.
EUROPEAN UNION
Foreign direct investment (FDI) is of vital importance in the European Union. In the last 15 years, the structure of the European economies changed substantially.
In economies that were separated by an ‘iron curtain’, there was a significant tendency for increased integration. In particular the 10 new members’ states of the European Union underwent deep changes to their economies. In second half of the 1990s, the economic performance of the countries was quite vibrant while on the first half GDP levels decreased significantly in most EU countries. The dynamic change together with the prospective EU membership also attracted considerable amount of foreign direct investment inflows (FDI)
A number of industrialization strategies could be motivated by motives such as market extension, efficiency seeking. The industrial base of the host country is benefited by whatever motive of FDI because the increasing information content in nearly all products requires specialist in a variety of fields to contribute in the development and design of commodities. Therefore, global firms seek to develop production and research and development facilities in various locations all over the world, offering them cost effective production or a large number of educated workforce.
Carstensen and Toubal (2003) proved that Central European Economies are most successful in attracting FDI because of their relatively high market potential, the sound legal and economic environment. On the other hand, Eastern European countries have positively benefited from low labour costs.
Anasstasopoulos et al (2008) examined six new EU member countries and five old member countries from 2000-2004 in terms of the determinants of distribution of inward FDI. The level of FDI in old EU countries is positively controlled by their economic environment, productivity gains and availability of skills. It is negatively controlled by increases in labour costs and high levels of entrepreneurship pointed out the significance of efficiency types of MNCs actions. On the other hand, the level of FDI in new member countries is negatively influenced by rise in unit labour costs and high level of entrepreneurship and positively influenced by the business environment and globalization
The result of economic integration in Western Europe was the emergence of a single market which is anticipated to have contributed to the growth of trade and investment. Extensive liberalization and competition results to rising cross border penetration of economic activity (Kyrkilis, —).
According to H.Flam (2007) the euro, but not the Single Market, has had a large impact on trade and that the Single Market, but not the euro, has had a large impact on FDI. While Landsbury et al. (1996) and Holland and Pain (1998), also argue that the business environment and the privatisation process are primary determinants of FDI in CEECs.
THEORY AND LITERATURE REVIEW
Theory
It’s assumed that the firm which enters the market has at least enough potential to recover the overhead of a high-control entry mode. However, if this does not apply then it is not worth considering high-control modes (Williamson 1979). On the other hand, the entrant has a choice to make in case a market is large enough to break even on the fixed cost of high-control mode. The optimal degree of control consists of four constructs which are: 1. Transaction-specific assets: investments (physical and human) that are specialized to one or a few users or uses; 2. External uncertainty: the unpredictability of the entrant’s external environment; 3. Internal uncertainty: the entrant’s lack of ability to determine its agents’ performance by observing output measures; 4. Free-riding potential: agents’ aptitude to receive benefits without bearing the related costs.
Anderson (1997) summarizes the key entering modes of MNC’s overseas and separates them into four types; 1. Entering mode is a chain of establishments: in the entry process there are four steps; no initial export, then export by the independent representative, followed by a sales subsidiary and then the establishment of manufacturing plants. The primary theory of Anderson is a resources based theory were he suggests that the entering mode depends on the firms experience, knowledge, growth and risk. 2) Transaction cost theory: this approach argues that the entering mode is determined by the transaction cost
The theory states that the characteristics of transactions are the main factors for determining entry mode. The principle for optimal decision is the minimization of transaction cost. 3) Organization capability: is the company potential in investigating ‘know-how” as the key for entering mode decision. 4) Electric construction: Dunning(—) incorporates the transaction cost theory, international trade theory and resource-based theory to develop an electric construction in order to clarify FDI by ownership advantages, location advantages and lastly, internalization advantages
The ownership specific advantage is transferable within the MNC at low costs and in most cases is intangible. Costs of operating at a distant location abroad can be offset by the ownership specific advantage of giving rise to high revenues and/or lower costs. In order to be profitable abroad the MNC needs to have a separate advantage over its competitors and the advantages need to be readily transferable between countries or within the firm and directly related to the firm. Advantages of this kind are known as firm specific, core competencies or ownership advantages.
The firm must employ some foreign factors in connection with its local firm specific advantages in order to full rents on these Firm specific advantages. Therefore the location advantages of diverse countries are a key in determining which countries will host the MNC.
The MNC has quite a lot of choices of entry mode, ranking from the market (arms length transaction) to the hierarchy (wholly owned subsidiary The more OLI advantages a firm possess the better the prosperity of implementing an entry mode with a high level of control.
Every Multinational enterprise has its individual strategic logic and planning for FDI. Resources seeking FDI is when the MNC is looking for resources at a lower costs. Market seeking FDI is driven by access to local or regional markets. Efficiency seeking FDI is when the firm seeks to set up efficient structure through useful factors, culture, policies or markets
Literature Review
It could be argued that business firms investing in foreign countries need to take into consideration the factors that may affect the investment performance. Among these are the financial capital factors, industry-related factors and the domestic and foreign macroeconomic environment. Consequently, as suggested by Anderson & Gatingnon (1986), a correct decision on entry mode should improve a company’s long-term performance. Minor, Wu & Choi (1991) suggest that business firms will adopt high-control entering mode for long-term performance when foreign countries have attractive environments. In contrast, a firm will approve a low-control entering mode for maximal short-term performance.
It is true to say that when multinational corporations invest in foreign countries, capital financing activities (such as the size of the parent company, the size of investment and the parent’s growth rate) affect their entering mode and their investment performance. Thus, one of the major factors that reflect the business firms’ competitive capability is the size of the multinational corporations. Gomes-Cassers (1990) argue that the performance of big business may be better than that of small business firms. This is mainly because large multinational corporations not only have better capital-obtaining capability but they also have more opportunities to capture a greater market share.
Moreover, by measuring the parent company size as the employee number, Cavusgil & Nevin (1981) verified that the business firms’ size is the predictable index for profitability. That is to say, Cavusgil & Nevin (1981) suggest that there is a strong relationship between the size of the company and its performance. On the same line, Vernon (1983) implies that business firms perform well when parent companies provide abundant capital for investment. Consequently, it could be argued that a high investment size may lead to a better profit performance.
Looking at the industry-related factors, such as competitive markets and production techniques, we notice how it may affect industrial profitability. That is to say, the performance and high profitability of a business can be enhanced by its market competition, local production and potential sales growth. According to Porter (1980), a fast industrial growth ensures a strong financial performance. Yao (2001) suggest that a higher sales growth rate of the parent company would result in perfect performance of its overseas business.
In addition to this, Gatigon & Anderson (1986) verified that the R&D intensity level of a parent company would have significantly positive effect on its overseas investment. Similarly, Prasad & Kang (1996) suggest that there is a strong relationship between R&D intensity levels, overseas partnership and performance. Moreover, Barbosa & Louri (2005) argue that the degree of foreign presence in an industry and the direct effect of MNCs transference of assets on efficiency and performance of their affiliates increase the average performance of firms.
The macroeconomic environment factors, such as the age of the subsidiary in the host country, could have an effect on performance. This is because the longer an affiliate has been in operation in the host country, the more likely it has accumulated more knowledge about the market, including culture, institutional characteristics, and other country specific knowledge (Gao et al., 2008). Thus, the firm may possess better management skills and selling abilities. In fact, Shaver, Mitchell & Yeung (1997) found that firms with prior experience in a host country have a higher survival rate than firms with no prior experience. Similarly, Luo & Peng (1999) suggests that the intensity and diversity of experience in the host country can have positive effects on performance for the multinational corporations. On the other hand, Johanson & Zaheer (1995) argue that as firms become more familiar with the host country market, the benefit from additional experience is likely to decreased, mainly due to redundant information.
Furthermore, it could be argued that the labour cost per unit is one of the major issues that should be taken into consideration when analysing the production cost for the MNCs. According to Chen (1992), the differences in wage levels between the parent country and foreign country may affect the business firms’ production operation cost. Shama (1995) argues that there is a positive relationship between the local market potential and entry model. In other words, before business firms make entering decisions, they will assess the potential market growth and the local market competition (Shama, 2000).
METHODOLOGY
Our analysis draws on Orbis Dataset, including detailed accounting and financial information for large firms across the world. In this case, we will utilise annual data for the period of 1997-2006 for a representative sample of EU countries. We are using the Ordinary Least Square (OLS) method following by fixed effects, controlling for sector, to estimate the coefficients of regression between performance and investment size, macroeconomic and industry factors
We hypothesise that the subsidiary firms in the representative sample of European countries with big investment size abroad will perform better in the host countries. The following are our hypothesis:
H0: The bigger the investment size of the parent company abroad,the better the performance of the subsidiaries in an EU country even after controlling for macroeconomic environment factors and industry related factors.
H1: The bigger the investment size of the parent company abroad , not effect on the performance of the subsidiaries in an EU country even after controlling for macroeconomic environment factors and industry related factors.
The dependent variable is firm performance which is measured by the return on sales (ROS) an accounting based variable, defined as after-tax profits divided by total sales.
This paper will be using a regression method with different independent variables (table 1).
The regression models for both OLS and Fixed effects are shown in the following two equations:
ROS=β0+β1cashinvestment+β2lnLA+β3equity+β4OSTS+β5lnassets+β6lngdp+β7lnage+β8employees +ε1
ROS=β0+β1cashinvestment+β2lnLA+β3equity+β4OSTS+β5lnassets+β6lngdp+β7lnage+β8employees + csector + ε1
Where the β0,β1,β2,β3, β4,β5,β6,β7,β8are coefficients of regression,ε1is the residual of regression and csector is a set of fixed parameters
Table 1: Name of Variable and Code
Parent investment |
lncashinvestment |
Assets of parent |
lnassets |
Labour cost |
lnla |
Number of employees |
employees |
Equity of the subsidiary |
equity |
Duration of a subsidiary in a country |
lnage |
Overseas subsidiarie in relation to all subsidiaries |
OSTS |
Market size of invested countries |
lngdp |
Relationship between investment size of parent and subsidiary performance
Throughout the literature it has been pointed out several times that big parent could transfer technology, knowledge and the subsidiary could replicate parent management practices. Additionally, the parent would financially support its “children” and would act quickly using its reputation in the case of a threat on its subsidiaries
However all the aforementioned does not necessarily occur in practice as there are other factors to consider, such as the decentralized or centralized control of the subsidiary , type of the economy they operate in and the government policies on FDI implemented in the host countries.
Results and Discussion
Implementing the regression model, we obtained significant results for the coefficients of the following independent variables that are used as a proxy for size of the parent company: parent investment, assets, ratio of the number of overseas subsidiaries in relation to all subsidiaries.
Positive coefficients and significant t-values were obtained from our representative sample of European Countries for the relationship between parent investment and subsidiary performance. This was achieved by running a regression analysis for all countries together and for a number of countries with informative results. UK, Greece, Denmark, Belgium and all countries have a positive coefficient which suggests that an increase of one log point of the parent investment will enhance the performance of the subsidiary by the coefficient of 0.0012016.
Coefficients and t-values are given in the following table.
TABLE 2: Coefficients and t-values for ‘parent investment’
| UK | GREECE | DENMARK | BELGIUM | ALL COUNTRIES | |
| Coefficient of parent_investment | .0023444 | .0069158 | .0048014 | .0035208 | .0012016 |
| t | 3.53 | 2.88 | 2.75 | 3.32 | 3.51 |
Ogasawara (2009) explains the effects of the parent investment in the subsidiary performance in terms of the number of investments. Namely, when a subsidiary makes a number of investments in a host country it will increase its performance. It is claimed that the increase in the firm’s network of subsidiaries in the target country causes greater economies of scale by sharing facilities, information and workers (as these will increase the performance of the subsidiary). Moreover, in order to increase the performance of the firm, in the case of one single investment in a target country, the high amount of investment will be used to purchase high-technology, to hire qualified workers or spent on advertisement. Thus, a positive relationship between the amount of investment and performance was expected.
On the same line of our research project, Shin, Mirza and Kim (2009) conducted a research to understand how the investment size of the parent company increases the performance level in MNC subsidiaries abroad. In the (this) research, the performance is measured in terms of local management ratio and export to sales ratio. According to the results of their empirical research, subsidiaries with large investment amounts have a higher proportion of local managers and executives. For this reason ,the size of the investment increases the subsidiaries’ performance through increasing the number of managers and exports. They also found that large investment is positively related to the ratio export to sales which is another measure used to illustrate the subsidiaries’ performance.
The approach(reasoning) claiming that exports affect subsidiaries’ performance is supported by Jenn-hwa(—). He supports that there is a positive relationship between the exports and FDI. Additionally, he advocates that the sales of the subsidiaries is positively related to the scale of the parent firm. Firm scale( scale?? i think is sales) is correlated not only with the parent size but also with the ability to conduct FDI. In that sense, the bigger the scale of the parent company, the bigger is the investment size and the bigger(better) is the performance of subsidiary.
According to the results of an empirical research conducted by Choe (2000), both the parent’s company’s size and the parent’s export ratio are determinants of the FDI size. Furthermore, the positive effect of the investment size of the parent on the subsidiaries’ performance can(could) be explained by these determinants. As it is claimed from different authors before(delete), the size of the parent company is positively related to the subsidiaries’ performance. In addition, it is assumed that the export performance of the parent company is a proxy for the foreign competitive power of this firm. For instance, the more successful the parent in competitive foreign markets, the bigger is the investment size and the bigger(better) is the performance of subsidiary.
Additionally, significant results for the variables ‘asset’ and ‘ratio of the number of overseas subsidiaries in relation to all subsidiaries (OSTS)’ were obtained, which suggests they are positively related to firm performance. The assets of the parent for all countries have statistically significant t-values. All countries together have a t-value of 32.01 which means that one log point change in the asset variable increases the firm performance by 0.0196674
Although the results obtained for the effect of OSTS are also positive, they are not significant for Greece, Belgium and Denmark. For the case of Greece perhaps it is because of the relative small absolute domestic market size and the rather low rate of improving local technological capabilities (Pantelides & Nikolopoulos, 2006). Once more, the most significant results were obtained through the regression for ‘all countries’ with a t-value of 5.11. It shows that one unit increase in the OSTS increases the firm performance by 0.0110321.
TABLE 3: Coefficients and t-values for ‘asset’ and ‘ratio number of overseas subsidiaries (OSTS)’
| UK | GREECE | DENMARK | BELGIUM | ALL COUNTRIES | |
| asset | .0212857 | .0151237 | .0262981 | .013802 | .0196674 |
| t | 17.53 | 3.76 | 8.05 | 7.21 | 32.01 |
| OSTS | .0289878 | .0045493 | -.000098 | .011244 | .0110321 |
| t | 4.32 | 0.51 | -0.01 | 1.94 | 5.11 |
Siripaisalpipat and Hoshino (2000) suggest that total assets of the foreign parent firm are used as a proxy for the power of a parent. Large firm usually own essential assets, because of intensive investments in advanced technology, product differentiation and extensive advertising. Transaction-specific advantages originating from proprietary product or technology and management know-how of parent MNCs appear to be the primary factors for the success of their overseas subsidiaries.
Our results for parent investment, assets and OSTS support the first hypothesis that the higher the investments size of the parent company the better the performance of the subsidiaries in the host countries.
Ambos and Schlegelmilch (2006) explain this relationship in terms of knowledge management. They argue that multinational companies are like knowledge integration centres and headquarters that transfer knowledge to the internationally dispersed subsidiaries. It is believed that the larger the number of overseas subsidiaries, the better the transfer of knowledge which could lead to better performance.
The interesting point illustrated by the results is that the coefficient of OSTS is negative only for Denmark and Belgium. The reason for the opposite relationship between OSTS and the subsidiaries’ performance may be(could be due to) the economic policies in these countries. Both Denmark and Belgium have small, open economies and both of them are heavily dependent on trade. So,(For this reason,) the levels of FDI in Denmark and Belgium are quite low compared to other EU countries.
The impact of ‘the sector’ was controlled for all countries by fixed effects. Because sector does not change over time, its effect was controlled by keeping the sector variable constant using the ‘areg, absorb’ command on Stata. The t-value equalling to 14.396 of sector confirms that the type of sector for each subsidiary has a significant effect on performance. It is observed that absorbing ‘sector’ did not change any positive coefficient to negative and vice versa but, some changes in the t-values were obtained. The greatest changes are in parent investment and firm age. The t-value of parent_investment decreased from 3.51 to 1.18 now not statistically significant and the t-value of lnage increases from 0.33 to 2.73 and now age of the subsidiary is statistically significant. These changes illustrate both investment and age of the company has different effects in different sectors. In other words, their effects are dependent on which sector the firm operates in.
TABLE 4: Effect of ‘sector’ on the results
| (for all countries) |
Absorbing (sector) |
|||
| Coefficient |
t |
Coefficient |
t |
|
cashinvestment |
.0012016 |
3.51 |
.0004033 |
1.18 |
lnage |
.0002394 |
0.33 |
.0020066 |
2.73 |
It is important to note that the sectors that dominate our sample of 10 countries are mostly, profession, scientific and technical activities which are predominantly in the U.K. However, this is not surprising as UK is one of the largest economies included in the sample of our 10 E.U countries along with France and Germany. On the same line, we distinguish the air transport sector is as important as all of the countries of the sample have a share on this part of the sector.
As already stated, parent investment and age of the subsidiary in the host country have diverse effects on the performance of different sectors. Taking into account the two sectors dominating the sample, it could be assumed that, the longer the subsidiary participates in the two specialised sectors of science and air transport, the better the knowledge on the host country’s environment by the subsidiary and its employees, and the greater the support needed from the parent. Thus, the help from the parent along with the knowledge from the country could have a positive affect on the performance.
So far, we have proved that the bigger the investment size of the parent firm the better the performance of its “children” in an EU country. It is rather interesting to explore the effect of these macroeconomic factors and industry factors on the performance of the subsidiaries when controlling for the investment size of the parent.
The relationship of macroeconomic factors
and subsidiary performance were illustrated by testing ‘labour cost’ and ‘Gross Domestic Product (GDP)’ effect on return on sales (ROS). Booth and Frank (1999) clarify the relationship between labour cost and the performance in terms of performance-related pay (PPP). Workers who get paid higher wages provide greater effort therefore both the productivity and the performance of the firm is improved. Additionally, the amount paid for specialized workers is higher in comparison with unspecialized workers; this specialization will increase the productivity and performance of the firm. The coefficient obtained for ‘all countries’ (0.2346426) shows that one log point increase in the value of labour cost will increase the firm performance by the amount of the coefficient.
The second macroeconomic effect is the market size which is described by the GDP. The effect of Gross Domestic Product (GDP) on the performance is statistically significant with a negative coefficient of 0.0047242 and a t-value of -6.00 compared to the positive results for the other countries which are 0.09 for UK, 0.13 for Greece, 0.013 for Denmark.
Many studies argue that the relationship between GDP and firm performance is positive. However, we did not acquire positive results for all countries regression analyses. Jaumotte (2006) advocates that market size has an important role in indicating foreign direct investment (FDI). It is assumed that the market size is positively related to FDI which is necessary to enhance the performance of overseas subsidiaries. Symeou (2009) also supports this idea. He states that firms operating in small size economies have a positive effect on firms’ efficiency. In fact, market size is positively related to market competition and competition is highlighted as an important necessity of success.
The effects of industry-related factors will be analyzed in terms of the number of employees, the duration of the subsidiary in the host country (age) and the equity of the firm. The results of the regression analysis, which are given in the table below, show that the number of employees negatively affects firm performance. The most significant result was obtained for ‘all countries’ suggesting that an increase by one person in the number of employees the firm performance will decrease by the amount of the coefficient (-8.95e-07).
TABLE 5: Effect of the number of employees
| UK | GREECE | DENMARK | BELGIUM | ALL COUNTRIES | |
| employees | -1.06e-06 | -4.69e-06 | -.8.86e-07 | -1.82e-06 | -8.95e-07 |
| t | -9.74 | -1.93 | -3.72 | -4.31 | -14.18 |
Moreover we examined whether the duration of the subsidiary in the host country has an effect on the firm performance. Because none of the results for the effect of firm age on performance are significant it cannot be assumed that there is a relationship between performance and age. Acar (1991) also states that the impact of the age on the performance could not be proved. A negative relationship was expected because corporate ageing could cause an organization rigidity which may decline R&D activities, investment, and profitability. Corporate ageing could reflect a cementation of organizational rigidities over time. Consistent with that, profitability drops, costs rise, growth slows, assets become obsolete, and investment and R&D activities decline.
TABLE 6: Effect of the subsidiaries’ age
| UK | GREECE | DENMARK | BELGIUM | ALL COUNTRIES | |
| lnage | .0006405 | -.0135636 | .0003178 | .0020252 | .0002394 |
| t | 0.48 | -2.44 | 0.10 | 0.80 | 0.33 |
The last independent variable observed for industry-related factors is equity. While the results for UK and Denmark are significant with small coefficients (2.07e-12 and 2.57e-12).
Although the H0 is supported by our results, it could be argued that, to some extent, the impact of macroeconomic and industry related factors have an impact on the subsidiaries’ performance.
Moreover , R-squared values can be evaluated to assess the quality of the overall regression analysis. We observe a change between 8% and 16%. R-squared is a measure to predict the strength of association of dependent variable to the independent variables by giving the proportion of variance in the dependent variable, which can be explained by the independent variables. Thus, it should be kept in mind that the association of variables may depend on the nature of the regression. In other words, some other factors which cannot be illustrated in the regression analysis may affect the results. As a result, it cannot be accurately stated that ‘the higher R-squared, the more reliable the results’. In fact, a result with a low R-squared may include much more information than a result with a really high R-squared.
In this regressions analysis, panel data were used. R-squared usually is around 10% for panel data sets because results may be affected by many other factors in panel-datasets. Consequently, we can say that, overall, the association between independent and dependent variables in our analyses could be regarded as of good quality.
TABLE 7: R-squared values
| UK | GREECE | DENMARK | BELGIUM | ALL COUNTRIES | ALL COUNTRIES (sector absorbed) | |
| R-squared | 12.10 % | 8.13 % | 13.16 % | 9.59 % | 9.67 % | 16.02 % |
Conclusion
This research has explored whether the investment size of the parent company abroad is positively related to the performance of the subsidiaries on an EU country. Additionally, the impacts of relevant macroeconomic and industry-related factors on the MNC subsidiaries’ performance have been controlled. The relationship between macroeconomic factors and subsidiaries’ performance is exemplified by the effects of GDP and labour cost. Number of employees giving the duration of the subsidiary in the host country and the amount of equity are tested as industry- related factors. The results of our regression analyses show that parent companies with higher investment size would show better performance of subsidiaries. The higher the amount of cash investment, assets and number of subsidiaries in relation to all subsidiaries, the better is the performance of subsidiaries in EU countries. Results about the impacts of macroeconomic and industry-related factors determine: The lower the GDP, and number of employees(its industry related? did u mix them with macroeconomic?- I wrote both of them together. “macroeconomic and industry-related factors determine:” ) and the higher the labour cost, the better is the performance of subsidiaries in EU countries. However, the effects of equity and the duration of the subsidiary could not be related to the performance of subsidiaries. ( you missed one factor- I did not. All of them are mentioned. Cash investment, asset and OSTS are mentioned before industry-related and macroeconomic factors. Maybe because of this you missed them)
Research Limitations and Future Research
We have identified some limitations in our research. For instance, the number of observations for some EU countries was not sufficient and no eastern European countries were included in the sample. For this reason, it is not possible to make any generalizations for EU in total
In addition to this, due to data limitations our model could be regarded biased towards the parent characteristics and not the subsidiaries.
Moreover, this particular research could be expanded by comparing the E.U and U.S relation of the parent size with performance. Additionally, a geographical comparison between Eastern and Central European countries could be carried out, controlling for a greater range of macroeconomic and industry related factors.