This study examines how larger, state-level structural factors influence the performance of transnational firms in foreign markets, focusing on the roles of sanctions and monitoring. We propose that transnational firms from countries with stronger structural ties to a host country—through shared membership in international organizations, the host country’s export dependence, and immigration—can better ease concerns about value appropriation by both public and private entities in the host country. These firms are therefore more motivated to create value and achieve greater success in those foreign markets.
Our regression analysis, based on the sales performance of foreign transnational firms from various home countries in six large host countries across over 35 industries during 2000–2001, supports our hypothesis. The results show that the three structural indicators—international organization membership, export dependence, and immigration—positively and independently impact the foreign market performance of these firms. Dependence and immigration, in particular, facilitate sanctioning and monitoring, providing additional explanations for the success of transnational firms beyond capabilities and trust.