Law and order? The influence of deficient legal services on foreign subsidiary cultivation of political ties and competitive positioning in an emerging market

How do managerial perceptions of deficient legal services affect a foreign subsidiary’s propensity to cultivate political ties and satisfaction with competitive positioning in an emerging market? We attempt to answer this question by applying resource dependence theory and institutional theory in analyzing 181 foreign subsidiaries in the Philippines.

Our results indicate that perceived deficiencies in the legal service sector by senior managers are positively related to the cultivation of political ties. Our findings suggest that the relationship between perceived deficiencies in the legal service sector and the cultivation of political ties is stronger for foreign subsidiaries that are in manufacturing-intensive and heavily regulated industries. However, we do not find the market orientation of these foreign subsidiaries to play a role in this process. Further, our results establish that the cultivation of political ties partially mediate the relationship between perceived deficient legal services and managerial satisfaction with a foreign subsidiary’s competitive position.