Regulatory Institutional Distance and MNCs' Subsidiary Performance: Climbing up Vs. Climbing Down the Institutional Ladder

We investigate the possibility of regulatory institutional distance exerting an asymmetric effect on multinational corporations' (MNCs') subsidiary performance depending on the direction of institutional distance. We use the term ‘institutional ladder’ to differentiate between upward distance, referred to as when the subsidiary is operating in a relatively stronger institutional environment than its parent-firm's home country, and downward distance for vice versa. Combining institutional theory with organisational imprinting and learning perspectives, we argue that the implications of regulatory institutional distance on subsidiary performance are relatively more positive (or less negative) when MNCs are climbing down the institutional ladder as compared to when MNCs are climbing up the institutional ladder. We also argue that subsidiary ownership strategy – i.e. the choice of a wholly owned subsidiary (WOS) versus joint venture (JV) – moderates the above-mentioned implications of institutional distance on subsidiary performance. We test these hypotheses based on a panel data-set of 1936 foreign subsidiaries representing 70 host countries and 66 home countries and spanning the 12-year period: 2002–2013.     

Antecedents and Outcomes of Political Tie Intensity: Institutional and Strategic Fit Perspectives

Although international nonmarket strategy research has highlighted the importance of political ties, it is still unclear why some foreign subsidiaries are more politically active than others and what conditions may render political practices beneficial in a host country. We argue that foreign subsidiary political tie intensity—the extent to which senior managers provide time and resources in informally dealing with government officials for nonmarket purposes—will be influenced by political institutions in their parent's home country, especially when the MNE parent attempts to protect foreign subsidiary resources. Additionally, we assert that fit between a parent's home country political institutions and foreign subsidiary political tie intensity will positively affect subsidiary performance. We employ primary data collected from 181 foreign subsidiaries in the Philippines and find support for our hypotheses. This study advances international nonmarket strategy research by highlighting how an MNE's home country political institutions shape subsidiary political networking and strategic performance outcomes in host country environments.     

Multinational Enterprises: Leveraging a Corporate International Entrepreneurship Lens for New Insights Into Subsidiary Initiatives

Corporate entrepreneurship has long been acknowledged as critical to multinational enterprises (MNEs), with dispersed entrepreneurial efforts involving subsidiary initiatives becoming increasingly relied upon. Yet despite the global context in which MNEs operate, the conversation has not fully embraced the extent to which many of its entrepreneurial activities overlap with internationalization. In this paper, we identify a set of opportunity phenotypes for subsidiary initiatives based on their market focus as well as the knowledge and capabilities leveraged to identify and exploit the opportunity. The recursive relationship between opportunities and dynamic capabilities is then discussed, with an emphasis on building a research agenda for corporate international entrepreneurship.     

Review of female immigrant entrepreneurship research: Past findings,gaps and ways forward

We conduct a review of the literature on entrepreneurship by females with an ethnic minority background based on immigration to a new country and focus on entrepreneurial resources, entrepreneurial strategies, outcomes, and context. The intersection of gender and ethnicity influences entrepreneurship in specific ways that we discuss. The literature review indicates that particular (human, social, and financial) resources help shape entrepreneurial strategies, which in turn result in particular outcomes at the individual, firm, and societal levels. These factors are influenced by the co-ethnic and host country cultural and institutional contexts that we review. Situating our study in the mixed embeddedness perspective, we organize and synthesize extant research on the business endeavors of female immigrant entrepreneurs and discuss important gaps that provide opportunities for future research. We also address policy and practice implications.     

Performance implications of MNE subsidiary federation: Evidence from India

Building on extant and emerging scholarship on the deepening of MNE operations in a foreign country, we develop the notion of subsidiary federation, viz., a constellation of legally independent majority-owned subsidiaries of a foreign MNE, in a single host country. We posit that subsidiary federation is a reservoir of host country experiences, resources, knowledge, and networks, and allows the parent MNE strategic flexibility in terms of where and how they choose to operate. The sharing of knowledge facilitated by interactions among the managers of affiliated subsidiaries bestows advantages that, we argue, are performance positive for the affiliates. We hypothesize that multiple subsidiaries in a foreign host country is positively associated with corporate level diversity, and that benefits to the affiliates in a subsidiary federation are associated with the size of the federation and with relative geographic location of the affiliates. We test our theory on a sample of foreign MNE subsidiaries in India during the 2000–2013 period and find strong empirical support for our hypotheses. We conclude with avenues for future research.     

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.     

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.     

From Rocking the Boat to Wagging the Dog: A Literature Review of Subsidiary Initiative Research and Integrative Framework

This literature review on the topic of subsidiary initiatives discloses a certain lack of conceptual clarity concerning the phenomenon. After providing an overview of the research field, the paper applies a conception of entrepreneurship inspired by Schumpeter (1912) as a basis for refining our understanding of just what a subsidiary initiative is and of the different kinds of subsidiary initiative. A framework is developed with a view to the current and anticipated growing importance of highly populated countries like China and India which are bound to raise the MNC-internal profile and weight of subsidiaries serving these national mega-markets. The framework distinguishes between organizational disequilibrium and market disequilibrium as a way to classify different types and different degrees of subsidiary initiative. It is argued that prior conceptions of subsidiary initiative in practice reveal a bias towards organizational disequilibrium and tend to overlook important MNC subsidiary initiatives involving market disequilibrium, generally neglecting the entrepreneurial dimension that Birkinshaw (1997) associated with the term when he initiated this research stream. Metaphorically speaking, although Birkinshaw was always clearly interested in MNC subsidiary initiatives that “wag the dog,” most follow-up research examines initiatives that merely “rock the boat.” Our framework helps capture the distinction and anticipates more dog-wagging by MNC subsidiaries in the future.     

Institutions and the Diversity and Prevalence of Multinationals’ Knowledge‐Augmenting Subsidiaries

Multinational corporations (MNCs) increasingly seek to gain access to, and exploit, locationally specific sources of advanced knowledge and technological capabilities, creating a need to explain (1) the diversity among these facilities and (2) how institutions influence MNCs’ abilities to invest in different subsidiary types. Extending debates on firms’ knowledge‐augmenting activities, the authors integrate institutions into their analytical framework to a greater extent than previous work has done. Moreover, existing contributions provide typologies of R&D subsidiaries. In contrast, the authors focus on a particular subset of subsidiaries, knowledge‐augmenting ones, and put forward a theory to explain their variety and their prevalence, enabling them to identify previously neglected subsidiary types that have important managerial and policy implications. By downplaying the diversity of these subsidiaries, existing work has not been able to capture the full range of managerial challenges as well as the costs and benefits of different subsidiary types to host countries. The authors, therefore, problematize firms’ abilities to gain access to foreign knowledge‐generating assets, highlight the importance of institutional environments, provide policy recommendations and identify areas for future research.     

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.     

Gender diversity management in foreign subsidiaries: A comparative study in Germany and Japan

Gender (in)equality varies strongly across countries. However, research has not sufficiently addressed how subsidiaries of multinational companies respond to differences in gender equality between home and host countries. Based on interviews with 34 managers, our study explores how subsidiaries experience gender-related challenges in their home and host countries, what kinds of practices they implement to increase gender equality, and which role the headquarters play in the implementation of these practices. We do so by examining the cases of German subsidiaries in Japan and Japanese subsidiaries in Germany, two countries that differ greatly in gender equality. Building on our analysis, we systematically compare how subsidiaries respond to the institutional pressures from their home and host countries and develop a theoretical model that illustrates how gender diversity management in a subsidiary is contingent on the interaction of (1) global integration pressure from the headquarters and (2) the level of gender equality in the home country relative to the host country, linked via different types of collaboration and practice transfer from the headquarters. Theoretical and practical implications of our findings are discussed.     

How MNE subsidiaries transfer HRM practices in distant environments: A tale of two IKEA subsidiaries

While most research in the international business field focuses on the impact of the national institutional environment on multinational enterprises (MNEs), this paper explores the opposite relationship—the role and impact of MNE subsidiaries on the host country institutional environment. I analyze the subsidiaries' agency in the transfer activities of human resource management (HRM) practices by bringing the case of IKEA subsidiaries in Korea and Japan and find that these subsidiaries not only adapted to pressures arising from an institutional distance but also played an important role in influencing the institutional arrangement for employment system of their host countries. With a contextualized agency model, this study finds that institutional and organizational contexts that these subsidiaries are embedded in shaped their agencies and strategic responses and co-evolved with their host institutional environments while transferring HRM practices. These findings have implications for the IB and IHRM field, as they highlight the potential of MNE subsidiaries as agents.     

创业研究回顾与展望

创业实践因新兴技术驱动的经济社会环境变革而发生了重大变化,涌现出了不少组织和战略理论甚至是创业研究也难以回答的新现象和新问题,这些现象和问题在中国情境下表现得非常突出,但并没有引起学者们的足够重视。基于此,本文采用扎根理论的编码设计,开展2008~2018年间发表的1842篇国际顶级创业研究文献的统计分析,在描述和评价研究主题发展态势和进展基础上,归纳出以创业前因、创业实施、创业结果与创业情境为体系的创业研究主题框架,进一步提出未来研究趋势和中国情境下开展创业研究的建议。研究结果对于推动我国创业研究的深化发展并开展具有国际学术影响力的高水平研究有着重要的理论价值。     

The contribution of foreign subsidiaries to host country national competitiveness

In this article, we develop a conceptual model of national competitiveness, focusing on the influence of foreign subsidiaries on the competitiveness of their host countries. Essentially, we view foreign subsidiaries as potential sources of resources important to a nation in developing and maintaining its international competitiveness. We argue that there is a set of subsidiary characteristics that enables a foreign subsidiary to contribute to the national competitiveness of its host country. These characteristics include the strategic role of the subsidiary, the level of technology employed in the subsidiary's processes, the type of training provided by the parent company, and the degree to which the subsidiary is part of an interdependent network of international subunits of the firm. National policy implications are discussed.     

Survival of the foreign subsidiaries of TMNCs: The influence of business group affiliation

We investigate the survival rates of the foreign subsidiaries of multinational firms from India to test if affiliation to a business group affects a subsidiary's survival chances. Business group affiliation is an important organizational attribute of firms in emerging economies. Business groups are complex organizations with heterogeneous resources that evolve along with changes in the institutional environment of a firm's home country. We examine how business group affiliation and the development stage of the host country jointly influence the survival chances of foreign subsidiaries. Our results show that business group affiliation does not have an independent influence on a subsidiary's survival rates, but it does have a contingent effect, where the contingency emerges from the development stage of the host country. Our findings thus have implications for the theory of TMNCs, and business group strategy in emerging economies.     

Between a rock and a hard place: Internal- and external institutional fit of MNE subsidiary political strategy in contexts of institutional upheaval

We investigate how subsidiaries' political capabilities in emerging markets are not just shaped by their home- or host country institutions, but by both simultaneously - presenting a dilemma for subsidiaries of multinational enterprises (MNEs) in host countries. Subsidiaries need to develop CPA that simultaneously “fit” parent company requirements and “external fit” requirements in relation to the host environment. Achieving this dual fit is particularly difficult in volatile host contexts, where the value of political capabilities changes rapidly. Subsidiaries face a dilemma because the easily transferable capabilities – that draw on parent resources – lose value due to their decreasing “external fit” with the host country's volatile institutional environment. Conversely, the most valuable relational political capabilities lack “internal fit,” as they may not be legitimate in the home environment. To understand how firms deal with this dilemma, we develop a typology of political capabilities that takes into account their transferability/stickiness and their dynamic institutional contingency in the host country. Our study shows that MNEs - even from institutionally very different economies - can successfully transfer political capabilities to develop effective CPA in a volatile political environment. Yet, as political risk becomes discontinuous, this strategy may reach its limits.     

Developing subsidiary contribution to the MNC—Subsidiary entrepreneurship and strategy creativity

Despite its theoretical and managerial significance, subsidiary entrepreneurship and its effects on subsidiary contribution remain underexplored in the literature. We propose that subsidiary entrepreneurship encourages more creative strategic responses to escalating environmental change. We explore the direct and mediating effects of subsidiary entrepreneurship on subsidiary contribution to the MNC, particularly subsidiary strategy creativity. We use structural equation modelling to test our propositions on data generated from surveying the population of Irish subsidiaries of foreign MNCs, and find strong support for our theoretical predictions. The managerial implications of subsidiary entrepreneurship in generating creative strategy, prompting strategic initiatives and improving performance are discussed.     

Does attention from headquarters influence subsidiary behavior? A social psychological perspective

Prior research has not explored fully the effect of headquarters (HQ) attention on subsidiary behavior. We address the gap via a social psychological lens, proposing that subsidiaries with more HQ attention often deal with higher performance expectation in terms of contributing towards the MNC, and thus, they tend to have a greater participation in the activities that can demonstrate such contribution. We test the idea in the context of MNC knowledge flows, hypothesizing a positive correlation between HQ attention and a subsidiary's reverse knowledge, and further the moderation effects of a subsidiary's shared vision and local market performance. Results lend support for the model. The study introduces a novel perspective of how HQ attention may influence subsidiaries, as well as the importance of attention allocation for the multinational corporation (MNC).     

Managing corporate community responsibility in multinational corporations: Resolving institutional duality

Addressing calls to explore how subsidiaries of MNCs operating in different institutional contexts resolve institutional duality, this paper brings together dual theoretical explanations from legitimacy and neo-institutional theory, to examine how decision-making for corporate community responsibility (CCR) occurs across ten subsidiaries operating in Sri Lanka. Using qualitative data, it shows that while subsidiaries’ implementation of local CCR conform to that of their parents at an aggregate level, those subsidiaries encountering higher levels of institutional conflict in the host-country, are sanctioned by their parent companies to de-couple their local CCR projects. These findings raise interesting questions about the dynamism in subsidiary responses to resolving institutional duality relevant for future scholarly research.     

Subsidiary role development: The effect of micro-political headquarters–subsidiary negotiations on the product,market and value-added scope of foreign-owned subsidiaries

This paper focuses on subsidiary role development in terms of changes in the market, product and value-added scope of foreign subsidiaries within multinational corporations (MNC). In its theoretical part, it identifies three interrelated reasons to explain such role changes: (1) subsidiary capabilities, (2) host-country localization advantages and (3) headquarters' realized strategies—that is, headquarters' intended strategies and the outcomes of micro-political headquarter–subsidiary negotiations. Based on the results of interviews with 65 managers in 11 German headquarters and their 13 Hungarian subsidiaries, the paper reveals the interrelated effects of the three factors on subsidiary role development and shows that headquarters' intended strategies are decisive to explain role development in peripheral host countries, though micro-political headquarter–subsidiary negotiations being an integral part of subsidiary role development.