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.     

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.     

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.     

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.     

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.     

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.     

Micropolitical Dynamics of Interlingual Translation Processes in an MNC Subsidiary

Drawing on a deep single case study of a Polish subsidiary of a US‐headquartered pharmaceutical multinational company (MNC), the paper contributes to the study of power and politics in international business (IB) by advancing understanding of the interactional and processual dynamics of micropolitics in MNCs, which supplements the current dominant actor‐centred approach. The paper advances understanding of translation in IB by demonstrating how interlingual translation can be deliberately used as a management tool to pre‐empt resistance and promote managerially desired attitudes and behaviours at the subsidiary level. It highlights how hitherto largely ignored processes of interlingual translation provide an important internal forum for the exercise of power and micropolitics. The paper puts forward an emergent model of the micropolitical dynamics of interlingual translation and demonstrates how subsidiary managers can use interlingual translation to support and oppose the views of both corporate and local managerial colleagues, and thereby influence how HQ‐level decisions will be received by subsidiary‐level employees.     

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?     

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.     

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.     

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.     

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.     

Sustainable expatriate compensation in an uncertain environment

This study examines an important area of strategic global human resource management - expatriate managers' compensation in times of global business uncertainty. While expatriation has numerous well-documented benefits for multinational corporations (MNCs), it is incredibly costly. In consequence, when global business conditions become uncertain, the expatriate program in MNCs is typically one of the first budget centres to be targeted for cost savings. The MNC typically radically restructures expatriate remuneration. The resultant effect of these actions is a negative impact on the relationship between the expatriate and the MNC, ultimately reducing expatriate performance and thereby abating the many advantages that the expatriate program brings to MNCs. Social Exchange Theory and Real Options theory help to provide a theoretical framework to understand how expatriate compensation decisions can help to create a desirable sustainable expatriate program in MNCs.     

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.     

Socio-political processes in international management in post-socialist contexts: Knowledge,learning and transnational institution building

This paper contributes to the recent debates and emerging concepts in the international business literature by applying a social–institutionalist perspective that focuses on the processes of institution building in ventures between Western multinational corporations and post-socialist enterprises. It is argued that the knowledge and learning processes within these transnational sites are constitutive of the actual management and organizational practices that emerge in these social microcosms of transformation. In transition and other emerging economic contexts, international ventures are typically based on asymmetrical relationships, in which the balance of power is structurally weighted in favor of the MNC. Notwithstanding this dominance structure, constructing new practices within the transnational social space is a socio-political process involving power-holders such as senior managers representing the Western MNC and the local enterprise. The paper argues that the strategic orientations of these key power-holders are critical variables in explaining the diversity of concrete patterns of institution building on transnational sites.     

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.     

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.     

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].     

Knowledge ties among subsidiaries in MNCs: A multi-level conceptual model

While ties among subsidiaries—the key players of a MNC network—are a prerequisite for the formation of the network and the flow of knowledge within the organization, we know little about factors influencing the formation of such ties. By building on the literature on inter-firm networks and knowledge-based view of the firm, we develop a multi-level model consisting of subsidiary characteristics, dyadic dynamics, and salient contextual factors to explain the inter-subsidiary collaboration for knowledge development and exchange. We bring to the fore the importance of examining multiple dimensions in understanding what predicts tie formation and the efficacy of these ties in creating a knowledge advantage. This paper advances the notion of subsidiary knowledge networking capability—the ability to form, manage, and leverage a network for gaining and sharing knowledge—and suggests that such capability is critical for subsidiaries and by extension the MNC, to achieve a competitive advantage.     

Determinants of strategic options in multinational market competition

This article conceptually explores the determinants of strategic options in multinational market competition. It draws on and integrates three research streams in strategy and international management: action and response in competitive rivalry; multipoint competition, and global competition and strategy. Specifically, it examines the various factors that determine whether and when a multinational corporation (MNC), while under attack from a rival MNC, will adopt the following responses: doing nothing, defending, counterattack, and total war. Those factors are organized into four categories: (1) types of attack, including price cut, introduction of new product, entry into new market, and advertising campaign; (2) awareness of interdependence of multinational markets, determined by market overlap, MNC strategy, and MNC organization; (3) motivation for globally coordinated moves, determined by the centrality of national markets, strategic importance of national markets, perceived importance of national markets, and perceived importance of rivals; and (4) feasibility of response, determined by entry barriers and diversity of national markets as well as resource heterogeneity and differential between rival MNCs. The effects of these four categories of factors on the choice of response are explored respectively. Research implications are offered in concluding remarks.