Page 142 - Ebook HTKH 2024

Based on the study's findings, this paper examines how foreign subsidiaries can
achieve sustainable development in Vietnam. The country's dynamic institutional

environment, characterized by ongoing regulatory changes and economic reforms to
promote industrial growth and foreign investment (Nguyen, Le, & Bryant, 2020),
requires a multi-faceted approach for subsidiaries.
First, they must engage in institutional adaptation by aligning their operations with
local regulations and remaining flexible to policy changes. Building collaborative
relationships with local stakeholders, such as government agencies and business
associations, is essential for navigating regulatory shifts (Meyer & Nguyen, 2005).
Second, economic alignment is vital for thriving in Vietnam’s manufacturing-

driven economy. By leveraging cost advantages, access to raw materials, and a growing
consumer market, subsidiaries can better integrate into local and global supply chains
(Thangavelu, Wei, & Oum, 2021). However, they must also be aware of economic
challenges like currency fluctuations and inflation, and develop appropriate risk
mitigation strategies.
Successful subsidiaries in Vietnam must balance localization and global

integration. While upholding global operational standards, they should tailor aspects
like sourcing, hiring, and marketing to meet local consumer preferences and societal
expectations (Vo & Le, 2021). Additionally, embracing sustainable practices—such as
environmentally friendly manufacturing and corporate social responsibility (CSR)
initiatives—can enhance their reputation and contribute to long-term success in a
market that increasingly values CSR (Kolk, 2016). By implementing these strategies,
foreign subsidiaries can position themselves for sustainable growth and remain

competitive amid local and global challenges.
2. Theoretical background and hypothesis
2.1. MNE subsidiary performance
Firm performance is a complex concept without a universal definition, varying
based on context (Wheelen and Hunger, 2010). Numerous literature reviews have
explored this topic (e.g., Cardinal et al., 2011; Hennart, 2011; Hitt et al., 2006),
highlighting key debates and gaps. In examining the economic environment, Kawai &
Strange (2014) found that environmental turbulence pressures subsidiaries in China to

become locally responsive to enhance performance. Supporting this, earlier studies
(Cyert & March, 1963; Meyer & Peng, 2005) argued that localized strategies help
subsidiaries manage turbulence effectively. While some scholars suggest a positive
linear relationship between internationalization and performance, this view has faced
criticism for oversimplifying the complexities involved (Cardinal et al., 2011). More
nuanced, nonlinear relationships have emerged, such as a U-shaped curve indicating
that performance may initially decline due to adaptation costs but improve as firms gain
knowledge and capabilities (Hymer, 1976; Zaheer, 1995).

Conversely, the inverted U-shaped relationship posits that benefits of
internationalization peak at a certain point, beyond which costs outweigh advantages
(Geringer et al., 1989; Gomes & Ramaswamy, 1999). Lastly, proponents of a sigmoid

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