Subsidiary-level determinants of global initiatives in multinational corporations

This article examines subsidiary-level factors that promote global initiatives in MNCs. Global initiatives are a key capability of MNCs that domestic firms do not possess, yet there has been little research on how MNCs promote initiatives on a global basis. I draw principally on the knowledge-based view to develop a model in which three subsidiary-level variables explain the propensity of the MNC to pursue global initiatives. These variables are: (1) inter-unit networking, (2) subsidiary learning from internal and external sources, (3) shared strategic goals. A survey of 118 subsidiary managers, triangulated with interviews with 20 key informants, provides support for the hypothesized effect of subsidiary learning and shared strategic goals on global initiatives. The result for inter-unit networking is less clear. These variables combine to activate initiatives within the MNC and thus act as a source of competitiveness on a worldwide basis. The results have important implications for MNC managers as well as for theory, and these are discussed.     

The Role of Internal and External Complexity in Global Factory Performance: An NKC Application

The global factory literature suggests that MNCs can take advantage of global operations by extensively offshoring and outsourcing activities. However, the added difficulty for the lead firm to coordinate the resulting complex structure is often underestimated. Evidence could be found in Boeing's 787 Dreamliner project, in which the external complexity disrupted MNC performance. Motivated by the gap between theory and practice, this study focuses on systems of MNCs connected with each other with supplier-client relationships and/or outsourcing. In particular it investigates the interplay of the internal and external complexity in such systems and how their balance affects the system performance. The study models the internal and external complexity by using the NKC-simulation methodology and adjusting it to the specific MNC context. The NKC methodology is widely used in organization theory to study complex systems. Simulations comparing the performance of MNCs that use outsourcing to different degrees indicate that a balanced level of internal and external complexity is beneficial in the context of global factory.     

The Management of Information and Managers in Subsidiaries of Multinational Corporations

A key challenge facing multinational corporations (MNCs) is how to encourage the development of firm specific advantages throughout the network of subsidiaries while maintaining global coherence. As a result, a critical task for top managers in the MNC is to structure the relationship between headquarters and subsidiaries. Thus, headquarters' control of subsidiary behaviour and performance becomes a central integrating function in the MNC. We examine first the relationship between the nationality of the MNC headquarters and its information management, namely the key performance metrics utilized by the parent to evaluate subsidiary performance. Second, we investigate the relationship between the MNC nationality and its management of managers, specifically, the transfer of parent company nationals and corporate acculturation. These questions are investigated in a study of MNC subsidiaries located in Australia, Ireland and Singapore. Our data provide strong evidence that MNCs of all nationalities place the greatest emphasis on financial metrics compared to other performance metrics. Moreover, there are differences in the degree of emphasis on performance metrics across MNC nationality. We found that Japanese and German MNCs place significantly less emphasis on financial measures than US and UK MNCs. Our hypotheses relating to the management of managers were also supported by the data. In comparison with all other MNC nationalities, Japanese MNCs place greater emphasis on the transfer of Japanese managers to overseas subsidiaries and less emphasis on corporate acculturation. While some researchers have argued that management control has become more isomorphic as a result of globalization, our results show that companies from different nationalities diverge in their practices.     

Intra-firm Subsidiary Grouping and MNC Subsidiary Performance in China

Many multinational corporations (MNCs) operate multiple subsidiaries in a foreign country. Drawing upon literature of organizational network and business group, we hypothesize that the number of subsidiaries of an MNC has an impact on subsidiary financial performance in China. We further hypothesized two moderating effects, namely subsidiary's country of origin and subsidiary size. The results show that subsidiary grouping effect is more salient for subsidiaries from Japan and South Korea, and that larger subsidiaries are less affected by the subsidiary grouping effect. Our empirical results were based on a sample of 40,315 MNC subsidiaries in China. The findings underscore the importance of group-based competitive advantages of MNC subsidiaries in international business.     

How do CEOs matter? The moderating effects of CEO compensation and tenure on equity ownership in international joint ventures

We propose that CEO compensation and tenure moderate the relationship between multinational corporations' (MNCs) R&D intensities and their percentages of equity ownership in international joint ventures (IJVs). Transaction cost economics (TCE) suggests a positive relationship between MNC R&D intensity and IJV equity ownership, but this relationship has not been confirmed consistently in prior research. We examine the moderating effects of CEO compensation and tenure on the relationship between MNC R&D intensity and IJV equity ownership, thereby bringing more nuanced explanations from agency theory and upper echelons theory into the discussion. Our proposed relationships were tested using a sample of 202 IJVs formed between U.S. MNCs and foreign partners in high-tech industries for the period 1993 to 2003. We found an overall positive relationship between MNC R&D intensity and the percentage of equity ownership in IJVs. Moreover, CEO tenure and bonus compensation each weaken the positive R&D intensity-equity ownership relationship in our sample, while CEO stock options compensation amplifies it. These findings indicate that CEO compensation and tenure influence decision making about equity ownership in IJVs, suggesting that scholars and boards of directors should consider these CEO-related factors when evaluating strategic decisions regarding IJVs.     

An empirical evaluation of the management resourcing strategy of a Western multinational within a post-socialist Polish subsidiary

The continued globalization process and internationalization of business is increasingly raising issues concerning human resource strategy and practice in those organizations operating across international boundaries. This paper presents an empirical evaluation of the management resourcing strategy of a Western multinational corporation (MNC) within a post-socialist Polish subsidiary. Findings suggest a high level of pragmatism in relation to management staffing decisions. Whilst normative resourcing models emphasize the importance of environment, organization and job analysis in selecting and preparing managers for expatriate appointments, these processes are contingency constrained. Difficulties of adaptation and integration of the Polish subsidiary serve to increase reliance on expatriate managers.     

Opportunity and opportunism: The expatriation practices of Indian information technology multinational corporations

Although effective International Human Resource Management during an international assignment constitutes a significant factor in ensuring success of an expatriate assignment, there has not been much research that studies the expatriation practices associated with the global delivery model that has come to be identified with global outsourcing. The purpose of this paper is to understand the expatriation practices of Emerging Market Multinational Corporations (EMNCs) in the Indian IT sector, by examining the experiences of Indian IT workers sent to work on international client projects in a western country. We have used qualitative semi-structured interviews with 47 Indian IT expatriates from Indian IT MNCs working at client sites in Australia. We find that there is inadequate attention paid to expatriation both prior to emigration and while workers are overseas and employed at client sites. Such human resource shortcomings may be inherent in the global delivery model that is an important feature of Indian IT business. The implications of these findings are discussed in the paper.     

False foe? When and how code switching practices can support knowledge sharing in multinational corporations

The operating environment of multinational corporations (MNC) is multilingual, adding significant complexity to knowledge-sharing interactions between employees. In this paper, we explore how knowledge sharing in MNCs is influenced by code switching, or shifting between languages during interaction. Previous international business research has mostly described code switching as a behavior that has a negative impact on knowledge sharing by creating distrust and exclusion. Our case study of a major Finnish MNC from the perspective of faultline theory shows that in situations where organizational norms and routines help limit the potential impacts of code switching on subgroup formation and inter-subgroup animosity, it can also aid knowledge sharing by (i) supporting the development and maintenance of key technical vocabulary, (ii) enhancing inclusion in knowledge-sharing interactions, and (iii) supporting knowledge contextualization processes. Thus, code switching is not necessarily just a form of linguistic interference, but it can also be intended—and often functions—as a strategic behavior that draws on multiple languages to build efficient and successful knowledge-sharing interactions.     

MNC Considerations in Identifying and Managing LGB Expatriate Stigmatization

Lesbian, gay and bisexual (LGB) expatriates are rightfully sceptical, and at times fearful, of international assignment experiences, owing to the sometimes hostile reception at assignment locations as a result of their sexual orientation. The authors argue that this hostility arises from a perceived incompatibility in values between the host country and LGB expatriates. Dissonance between the two value systems leaves LGB expatriates seemingly powerless to self‐manage imposed stigmas inside and outside the workplace at international assignment locations. The authors suggest that it is essential for the multinational corporation (MNC) to help manage these stigmas by implementing human resource management (HRM) practices and policies that recognize the needs of traditional and non‐traditional expatriates as substantially different. Using organizational legitimacy theory, the authors assert that MNCs’ strategic actions should entail a set of distinct practices and policies for LGB expatriates as a way to strive for acceptance within the LGB expatriate community and beyond. Managing value congruence in this manner ensures greater willingness of the LGB talent pool to undertake international career opportunities and is likely to result in better assignment experiences and outcomes. Outcomes of LGB stigmatization are discussed and suggestions are put forward on the MNC's role in supporting LGB expatriates and their families. Propositions relative to support are offered.     

Multinational corporations and industrial relations research: A road less travelled

While there is a large body of academic debate surrounding human resource management issues in multinational corporations (MNCs), industrial relations (IR) issues often fail to receive the same degree of attention. This paper attempts to move the debate forward by critically reviewing some of the key debates surrounding IR in an international context. First, some key themes surrounding the comparison of industrial relations across borders and IR in multinational companies are delineated and defined. Then, the reasons why an international IR (IIR) perspective has been under‐represented in the literature to date are considered. The paper then explores the contribution which an IIR perspective can bring to the study of management practices in MNCs. This is discussed in terms of IIR's potential contribution as an alternative analytical approach and also differences in its substantive coverage. The impact of IR systems on MNC location and relocation decisions, key issues for employees, trade unions and managers of MNCs, is then discussed as an example of the former. The potential for, and evidence of, international collective bargaining as a potential counter‐balance to the power the MNC in the global environment is then considered as an example of a differing area of substantive coverage of IIR. Finally, some avenues for potential study are outlined.     

Sustaining the Financial Value of Global CSR: Reconciling Corporate and Stakeholder Interests in a Less Regulated Environment

In this article we examine the association between corporate social responsibility (CSR) and firm value. This line of research is important since firms continue to invest in CSR even though past studies reveal a limited linkage between financial value and CSR. However, the business case for CSR or “doing good while making a profit,” appears to be advancing within the business ethics literature as a preferred conception of CSR. We conjecture that the greater unification and refinement of both profit maximization and stakeholder interests through corporate acts, not statements alone, will sustain the financial value of CSR in a less regulated global business environment. We study the triangle of what companies say, what companies do, and firm financial performance. We analyze Fortune 250 firms and find a positive association between what companies do based on KLD Research and Analytics, Inc. (KLD) ratings, and what companies state about ethics in their CSR statements. We then employ regression analysis and find that companies’ socially responsible acts are positively associated with overall firm value and financial performance. Yet we do not find a statistically significant association between what companies say regarding ethics in their CSR statements and their financial outcomes. These results suggest that firm value and financial performance is associated with what companies do and not what they say. Our results seem to be driven by multinational corporations (MNCs) and not by non‐MNCs. This is possibly because MNCs generally operate in a less regulated global business environment that often necessitates strong ethical corporate leadership to further stakeholder interests. Overall, these results help reconcile corporate and stakeholder objectives since evidence of a link between financial performance and doing good sustains global CSR.     

Getting the seal of approval: Pathways to subsidiary initiative acceptance

Multinational corporations (MNCs) are proactive, entrepreneurial, and decentralized organizations. They seek to incorporate and leverage knowledge from their foreign subsidiaries. Initiatives in which subsidiaries pursue new business opportunities are one way that subsidiaries contribute to MNCs' knowledge stocks, but prior research suggests that few subsidiary initiatives secure headquarters approval. We argue that the extent to which initiatives are accepted by the headquarters of an MNC depends on a range of relational and contextual conditions that configure in complex ways. Using a neoconfigurational approach, we identify five equifinal configurations associated with the acceptance of subsidiary initiatives. We advance theory of subsidiary management by uncovering how subsidiary activities gain traction within the MNC.     

Politics and Power within Multinational Corporations: Mainstream Studies,Emerging Critical Approaches and Suggestions for Future Research

Given the increased public interest in the use and misuse of power in multinationals in the aftermath of the financial crisis, it is notable that power relations in multinational corporations (MNCs) have not gained enhanced attention in the academic community. What is missing so far in the study of MNCs is a systematic examination of how power and politics within MNCs have been addressed in mainstream international business (IB) and sociological research studying the MNC. This paper starts by critically reviewing these two mainstream approaches in the study of MNCs as organizations and seeking to understand the shortcomings of former research. Next, it reviews new emergent critical perspectives, which the authors call socio‐political studies of MNCs, where power and politics are addressed not just more prominently, but also differently, from a more bottom‐up and actor‐centred perspective. After reviewing this emergent stream of research, the authors propose that future studies should take a more micro‐political perspective and focus in more detail on the micro‐foundations of power relations. In the concluding section, the authors show how future studies of MNCs can learn from both critical interactionist and discursive theories when analysing organizational politics and power relations. A framework is proposed for the study of micro‐level political game‐playing in MNCs, based on a three‐dimensional framework for organizational power (episodic, rules of the game and domination), and some key research questions for future studies are suggested.     

Upgrading local operations for global arbitrage

This study shows that upgrading sales operations in host countries towards production allows MNCs to perform global arbitrage in their networks of foreign subsidiaries and thereby contributes to a strategy of reaping the benefits of multinationality. We predict and find that operation upgrades follow opportunities of improving resource flows in the subsidiary network to exploit the advantages of host countries in tax rates, investment incentives, and technological knowledge across borders. Performance effects on the level of the MNC network give evidence of these benefits from global arbitrage.     

Headquarters’ scanning of the foreign subsidiary environment:: An empirical study

The article reports on an empirical study of environmental scanning within multinational corporations (MNCs) at the headquarters-foreign subsidiary (HQ-FS) level. Specifically, the study examines the following questions: (1) How actively do MNC HQs scan their foreign subsidiary environments? (2) Do MNC HQs differentiate their scanning practices across segments of the foreign subsidiary environment? (3) Which MNC level and FS level characteristics affect the scanning behavior of MNCs at the HQ-FS level?     

A coopetition perspective of MNC–host government relations

Building on convergent insights of resource dependence and business political behavior, this article attempts to develop a conceptual and typological framework of coopetition in which cooperation and competition simultaneously coexist in the relationship between multinational corporations (MNCs) and host governments. The coopetition view does not see the MNC–government relationship (MGR) as dichotomous or as a continuum between cooperation and competition but as a simultaneous, inclusive partnership containing cooperation and competition as two separate yet interrelated continua. This article addresses why coopetition arises, what coopetition constitutes, and how coopetition configures with environmental and organizational dynamics. It offers a typology of coopetition that identifies MNCs involving varying cooperation and competition (estranger, contender, partner, and integrator) and elucidates each identity's political responses.     

Knowledge-based resources as determinants of MNC structure: tests of an integrative model

This paper develops and tests a theoretical model of the structural choice by multinational corporations (MNCs). The model draws on three research streams: the contingency framework, integration–responsiveness (IR) framework, and organizational economics. Insights from the three streams of work are integrated into a theory of optimal structural choice under the assumption that both the MNC and its managers make decisions on the basis of their self-interests. An important feature of the model is its exposition of knowledge-based resources as a key determinant of MNC structure. The predictions of the model are tested on a sample of 101 MNCs using a multivariate regression approach. The results confirm the role of knowledge-based resources in influencing MNC structures.     

Expatriate mangers: A historical review

As expatriate managers continue to be a viable means for exercising control over foreign operations, they can have a direct impact on organizational performance, and therefore a delineation of the history of these key leaders in order to enhance our understanding of their continued significant impact is a laudable goal. The paper discusses each stage of the human resource management process, beginning with the identification and concluding with the repatriation stage of expatriate managers. Each stage is discussed in terms of the successes as well as problems/failures associated with the individual, organizational, environmental and systemic unit in mind. The paper concludes with future implications emphasizing the necessity to create new and/or enhance current practices relating to the development of expatriate managers' maximum global impact depending on the evolving nature of the globalization of business.     

The influence of “country of origin” on multinational corporation global strategy: A conceptual framework

This article examines the proposition that MNCs from a particular country are likely to exhibit profile similarities that are distinct from those of MNCs emanating from another country due to differences in home country factors. We call this “country of origin effect” (COE). A generalized framework is presented briefly explaining the nature of relationships among various COE elements that influence MNC strategy. A number of research propositions are offered that postulate the presumed effect of COE elements on MNC strategy and competitive behavior. Finally, suggestions are made as to the implications of this avenue of enquiry for further research as well as guide for management action.     

Fostering operational management “Best Practices” in subsidiary plants in the Western Balkans: The role of MNC home-country environment and resource allocation

We investigate the adoption of operational management “best practices” in multinational corporation (MNC) subsidiary plants in the Western Balkans. Building on the Practice-Based View (PBV), we suggest that subsidiary plants are more likely to operate according to widely recognized best practices, if these practices are already common in the MNC home country. We also examine the degree to which the MNC can facilitate best practices in their plants by allocating organizational and human resources. We test our hypotheses using survey data from subsidiary managers and secondary company data (n = 129), supplemented with manager interviews (n = 14), collected from European, U.S., and Asian MNCs with subsidiary plants in Bosnia and Herzegovina, Croatia, Serbia, and North Macedonia. Results indicate that the subsidiary plants adopt practices that are common in the MNC home country. They do so to a greater extent when the MNC commits organizational resources to the plants, such as codified written procedures and trainings. Contrary to our expectations, there is no benefit to allocating human resources, such as expatriates and business travelers. We provide insights into the transfer and implementation of best practices in the Western Balkan context, enhance our understanding of the PBV by presenting a specific application of this theoretical perspective, and provide practically relevant results for managers and policymakers.