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.     

Subsidiary marketing knowledge and strategic development of the multinational corporation

This paper explores distinctive marketing knowledge of subsidiaries as an important resource contributing to the performance of the multinational corporation (MNC). Two different paths are analyzed. The first is the direct effect of the usage of subsidiary marketing knowledge on the perceived performance of other MNC units. The second is the indirect effect in which an MNC's usage of subsidiary marketing knowledge affects its performance via capability development in technology and market expansion within the MNC. Using data on 237 MNC subsidiaries in Sweden, six hypotheses are tested in a LISREL model. The results indicate that an MNC's usage of subsidiary marketing knowledge directly affects its performance. Additionally, the results reveal a strong relation between subsidiary marketing knowledge and the subsidiary's impact on development of the capabilities of other MNC units' technology and their expansion on the market, which in turn, positively impacts the performance of the MNC.     

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.     

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.     

Does proactivity matter? the importance of initiative selling tactics for headquarters acceptance of subsidiary initiatives

By integrating literature on proactive behavior, in particular voice behavior theory, with the attention-based view of the firm, we examine how the use of a set of initiative selling tactics influences the acceptance of subsidiary initiatives by MNC headquarters. The findings suggest that the initiative selling tactics that matter most for the headquarters acceptance of subsidiary initiatives are related to proactive efforts such as the preparation and the packaging of the subsidiary initiative. The paper contributes to academia and practice by providing a richer understanding of proactive behavior among subsidiaries in terms of the “voice tactics” used to get their subsidiary initiatives recognized and accepted by headquarters. The study uses data from a questionnaire survey of 110 MNC subsidiaries and qualitative interview data.     

跨国公司在华子公司角色演化:理论及案例分析

本文根据影响子公司角色转变的因素,将子公司的角色根据每种因素的强弱不同分为八种类型,即起步者、淘汰者、办事员、支持者、小诸侯、贡献者、直辖领袖和自由领袖.根据该子公司角色划分方法和演化路径分析方法,本文深入研究了一家跨国公司在华子公司-BEC公司的角色演化情况,研究证实了本文得出的角色划分方法和演化路径分析框架的适用性,也得到了跨国公司在华子公司的一个具体演化路径.     

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.     

Transferring knowledge in MNCs: The role of sources of subsidiary knowledge and organizational context

We link up with the recent literature on the differentiated MNC and in particular with its stress on intra-MNC knowledge flows. However, rather than focusing on the characteristics of knowledge as determinants of knowledge transfer within MNCs, we focus instead on levels of knowledge in subsidiaries, the sources of transferable subsidiary knowledge and on the organizational means and conditions that realize knowledge transfer as the relevant determinants. We find largely positive support for the relevant hypotheses. These are tested on a unique dataset on knowledge development in subsidiary firms [the Centre of Excellence (CoE) project].     

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).     

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.     

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.     

Sustaining competence creation in the multinational enterprise: The role of piloting in subsidiaries

While competence-creating subsidiaries have been widely acknowledged as a source of new capabilities for the multinational enterprise (MNE), less is known about how such subsidiaries continually renew their capabilities to sustain their competence-creating role over time. In this paper, we bring together theories of capability lifecycles and subsidiary capability to explore multiple case studies of competence-creating subsidiaries in the information and communications technologies (ICT) sector. We find that to sustain their competence creation over time, subsidiaries engage in what we call piloting: a fast-moving cycle of practices recognising opportunities and trends, innovating competences in response, and surrendering those competences that are expected to become ‘commoditised’ and obsolete to enable subsidiary repositioning and renewal. Our main contribution is to advance theory on competence-creating subsidiaries by revealing piloting as a mechanism for MNE strategic renewal. We also build on theories of subsidiary evolution by identifying how subsidiaries voluntarily surrender commoditising activities to allow resource flexibility for competence creation.     

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.     

Does ‘the China Option’ influence subsidiary technology sourcing strategy?

We draw on transaction cost economics and the technology innovation management literature to advance a contextual model of the link between the perceived influence of China on technology strategy and MNC subsidiary sourcing strategy. In particular, we hypothesize that the relationship between a perceived influence of China on technology strategy and MNC subsidiary process technology sourcing strategy is moderated by the innovation context. Here, we consider the innovation context to be externally represented by the appropriability regime and dominant design, while internally it is measured by the subsidiary's level of complementary assets. We test our predictions on a multi-industry sample of 111 MNC subsidiaries from the Association of Equipment Manufacturers. We find support for the moderating influence of the innovation contexts of appropriability regime and complementary assets.     

Product development in MNC subsidiaries: Local linkages and global interdependencies

The aim of this paper is to identify and explain how different forms of local linkages vary across different patterns of global workflow interdependence in MNC subsidiaries' product development activities. Both global workflow interdependence and local linkages are essential for innovating and long-term success of a subsidiary. This paper's theoretical approach differs from previous MNC research in that we combine the tightly coupled (or rational) network model with the more common loosely coupled (or differentiated, federative) network model. Empirical data was obtained from subsidiaries in Brazil using web-survey design. Our findings show a positive relationship between local outsourcing linkages and global workflow interdependence in product development provided local cooperative linkages are low. Furthermore, results suggest empirical support for the tightly coupled model and its extension, the adaptively rational model proposed by Astley and Zajec [Astley, W.G., Zajac, E.J., 1991. Intraorganizational power and organizational design: reconcilling rational and coalitional models of organization. Organization Science 2 (4), 104–113.]. Accordingly, our study implies that the more subsidiaries create dependent and counter-dependent relationships, the better they will be positioned within their MNC innovation network and the more pronounced their innovative activities shall be.     

Geographically Dispersed Technological Capability Building and MNC Innovative Performance: The Role of Intra-firm Flows of Newly Absorbed Knowledge

This study identifies key mechanisms linking multinationality with the knowledge advantages of multinational corporations (MNCs). These mechanisms are the absorption of new knowledge by one individual MNC unit and the subsequent flows of such newly absorbed knowledge to other geographically distant units of the same firm. The intra-MNC and inter-unit flows of such newly absorbed knowledge include exchanges between a parent and its overseas subsidiaries and those between subsidiaries. Through analyzing the U.S. patent data of the world's largest firms in the electrical equipment industry, our study shows that those two mechanisms are complementary in affecting MNC innovative performance. More notably, given the geographically dispersed new knowledge absorption within an MNC, only the flows of the newly absorbed knowledge between the parent and subsidiaries, in contrast to those between subsidiaries, are positively associated with MNC innovative performance. This study contributes to the MNC literature. Managerial implications are also discussed.     

Isolated Foreign Subsidiary's Initiative in Knowledge Transfer Within the MNE

Knowledge transfer is an essential issue of strategic management in MNEs, because it enables them to utilize their strategic resources across borders. However, it is far from perfect, and there are isolated foreign subsidiaries that are excluded from the knowledge network within the MNE. A primary contribution of this paper is to shed light on a fact which such an isolated foreign subsidiary can initiate the internal knowledge transfer within the MNE, in order to overcome the liability of internal isolation. This paper analyzes such a subsidiary initiative, with an extreme case of a large Japanese ICT company's Finnish subsidiary, which initiated an adoption of its headquarters' strategic practice. I collected and analyzed data by ethnographic fieldwork in this subsidiary for over one year. After depicting the details of the initiation process, I show how the initiation process was influenced by the subsidiary managers' dual motivation; solving the liability of internal isolation, and keeping the advantage of isolation. I hope that this study would enrich theory building of subsidiary isolation and also contribute to subsidiary managers who have struggled with the liability of internal isolation.     

跨国公司子公司自主性活动研究——从有限理性角度的分析

在跨国公司(MNCs)子公司演进模型中,子公司有着明显的自主愿望,自主权可以超越母公司的控制,引起对闲置资源的很大兴趣,激发子公司的积极性和创造性,但母公司也常常担心子公司的自主行为带有投机性,有可能偏离母公司的资源配置目标,使得MNCs迷失方向。而本论文认为母公司的有限理性是管理子公司自主性活动的主要交易成本,而非子公司的机会主义,母公司除了利用传统的克服机会主义的控制和协调工具之外,还应当重视使用内部市场机制和社会化方法,来减轻母公司的有限理性约束,形成母子公司间共同的认知地图,达成有意义的双方互利的联盟,从日益增多的子公司自主性活动中受益。     

Performance effects of MNC headquarters–subsidiary conflict and the role of boundary spanners: The case of headquarter initiative rejection

Recent research suggests that both the scholarly and the managerial perspectives on intra-organizational conflict in multinational corporations (MNC) between headquarters (HQ) and their foreign subsidiaries have changed. Today, conflict is not necessarily regarded as dysfunctional or the result of inefficient global integration. Instead, conflict is now considered a normal consequence of organizing and managing across national borders. This research advances the literature on HQ–subsidiary relationships by adding new insights to the Headquarters–subsidiary conflict discussion, especially in the so far under-researched case of headquarter initiative rejection by foreign subsidiaries. We specifically focus on subsidiary conflict negotiation tactics, the effects of organizational and individual managerial power, and the characteristics and roles of MNC managers that act as boundary spanners during intra-organizational conflict processes. A qualitative, iterative, multiphase research approach was used to develop new theory pertaining to the phenomenon. The results show that in the presence of boundary spanners, dysfunctional conflict is less common and better overall organizational performance can be achieved for both the subsidiary and the MNC as a whole. The results also indicate that the boundary spanning ability is only partly formalizable and that some MNCs are able to foster boundary spanners better than others.     

Towards a re-conceptualization of firm internationalization: Heterogeneous process,subsidiary roles and knowledge flow

This paper proposes a re-conceptualization of firm internationalization to understand and predict the rapid global expansion of firms since the 1990s, especially those from emerging markets. First, based on a review of existing literature, we re-conceptualize firm internationalization as a heterogeneous process of strategic development of subsidiaries in overseas countries or regions. This re-conceptualization captures the pluralistic character of the process of firm internationalization.Second, we delineate peculiar roles played by subsidiaries in pursuit of multinational enterprise (MNE) headquarters' internationalization strategies. We argue that the HQ's heterogeneous strategies toward overseas subsidiary development define the corresponding roles of subsidiaries, which in turn shape the knowledge-flow patterns within the MNEs. Finally, we link firms' internationalization strategies with different subsidiary roles to generate hypotheses concerning the effect of such links on subsidiary performance. We argue that the proper alignment of HQ's internationalization strategies with subsidiary roles will lead to success of the overseas subsidiaries; by contrast, a mismatch will lead to subsidiary failure. The paper thus contributes to the field of firm internationalization by linking its new conceptualization with the literature on subsidiary roles and knowledge flows in MNEs.