Exchange rate challenges, flexible intra-firm adjustments, and subsidiary longevity

We examine how multinational corporations’ (MNCs) foreign subsidiaries enhance their performance through flexible intra-firm adjustments and reduce their exit ratio under exchange rate changes in their host countries. We analyze Korean MNCs where foreign subsidiaries engage in intra-firm sales or purchases of product with counterpart affiliates with opposite price competitiveness. Results show that such subsidiaries can enhance their performance and thereby reduce their exit rates within their host countries. We also find that high host market uncertainty or large subsidiary investment size positively moderates the impact of a subsidiary's performance—enhanced through flexible adjustments through intra-firm trade—on its exit.