We contend that the international strategy adopted by and the international experience of top executives in parent firms, as well as the embeddedness of foreign subsidiaries in host countries, moderate the impact of institutional distance between home and host countries on the divergence of isomorphic pressures experienced by foreign subsidiary managers. We further suggest that diverging isomorphic pressures are more likely to spur foreign subsidiary managers to deinstitutionalize organizational routines from parent firms when these managers possess knowledge‐based power, the subsidiary’s performance is declining, or social controls are lacking from the parent firm. Implications for research and practice are discussed.