Institutional antecedents of subsidiary external embeddedness: Coping with regulatory competitive constraints

We investigate institutional antecedents to subsidiary external embeddedness and relate regulation constraining competition in local service sectors to subsidiary embeddedness with local partners in complementary sectors. Combining research on business networks with arguments derived from transaction cost economics, we argue that subsidiary external embeddedness depends on the extent of transaction costs originating from small numbers bargaining, which regulatory competitive constraints in local service sectors are a source of. Based on this logic, we suggest that low and high levels of regulatory competitive constraints are associated with greater subsidiary external embeddedness. We also suggest that this U-shaped relationship is more pronounced for subsidiaries that are centers of excellence within the multinational enterprise because these subsidiaries heavily depend on the local context as a source of their competitive advantage over their sister subsidiaries.     

Subsidiary embeddedness as a determinant of divisional headquarters involvement in innovation transfer processes

This paper conceptualizes divisional headquarters as an important hub-firm within the MNE, orchestrating innovation transfer processes between subsidiaries. It is argued that the internal and external embeddedness of a subsidiary hosting an innovation development project subsequently influences divisional headquarters involvement in the transfer of that innovation. In this way, embeddedness, i.e., the relationships that firms have with each other in the innovation development phase, is brought to the fore as an important factor for MNE subsidiaries hosting innovation development projects for explaining the involvement of divisional headquarters in a subsequent transfer. This highlights divisional headquarters as an active orchestrator of innovation transfers within the MNE. Data from 169 innovation transfer projects as well as 146 internal and 121 external embedded relationships at subsidiary level support the argument of embeddedness as a driver of divisional headquarters involvement in subsidiary innovation transfer projects. From a business network perspective, the findings highlight the role of internal and external embeddedness during innovation development in the subsequent involvement of divisional headquarters in the transfer phase. Embeddedness is not only important for subsidiaries in the innovation development phase but also for divisional headquarters involvement in, and orchestration of, innovation transfer.     

External knowledge search,absorptive capacity and radical innovation in high-technology firms

Open innovation and absorptive capacity are two concepts based on the idea that companies can leverage the knowledge generated externally to improve their innovation performance. The aim of this paper is to analyse the joint effect of open innovation and absorptive capacity on a firm's radical innovation. Open innovation is expressed in terms of external search breadth and depth strategies and absorptive capacity is described by distinguishing between potential and realized absorptive capacity. In order to test our hypotheses, we carried out empirical research in firms operating in high-technology industries. The results indicate that internal routines and processes for absorbing external knowledge help explain radical innovation as they show a significant effect of potential and realized absorptive capacity. Also, there is a moderating effect of absorptive capacity on open innovation. Specifically, potential absorptive capacity exerts a positive effect on the relationship between external search breadth and depth and radical innovation. Realized absorptive capacity moderates the influence of external search breadth. These findings confirm the complementary nature of absorptive capacity and open innovation search strategies on radical innovation.     

海外子公司内外部网络的知识获取对企业绩效的影响研究

本文以在华韩国企业为对象分析了从母公司获取的知识和本地获取的知识对海外子公司绩效的影响.研究结果发现,从母公司获取的知识和本地商务知识对子公司绩效有直接的正向影响,但本地制度知识对子公司绩效没有显著影响.此外,从母公司获取的知识和本地制度知识对子公司绩效有互补效应,但是从母公司获取的知识和本地商务知识的交互效应对子公司绩效有负向影响.这说明,从母公司获取的知识、本地商务知识和本地制度知识对海外子公司绩效都有重要影响,但是各自所发挥不同的作用.     

Configuring knowledge connectivity and strategy conditions for foreign subsidiary innovation

We argue that product innovation by foreign subsidiaries of multinational corporations is a complex undertaking requiring a theoretical understanding of how managers combine subsidiary structural arrangements, knowledge connectivity, and contextual conditions into configurations that yield innovative products. Accordingly, we integrate relevant conditions from interrelated literature streams and explore their complementarities and substitutions in relation to subsidiary product innovation. Using a neo-configurational approach and data on 183 foreign subsidiaries operating in Europe, we identify six equifinal configurations associated with subsidiary product innovation. We leverage the configurational patterns to elaborate theory of how subsidiary product innovation is primarily driven by the interrelations among the relevant conditions, thus contributing novel insights to research on subsidiary management and global innovation.     

Impact of subsidiaries' cross-border knowledge tacitness shared and social capital on MNCs' explorative and exploitative innovation capability

As subsidiaries' cross-border knowledge increases in tacitness, it becomes more difficult for subsidiaries to articulate and for multinational corporations' (MNCs') headquarters to integrate and apply. Herein, dynamic capabilities and social capital theory frame structural and relational social capital as capabilities that improve the productivity of subsidiaries' cross-border knowledge tacitness shared on MNCs' headquarters explorative and exploitative innovation capability. The hypotheses are tested on a data set consisting of survey data collected from 220 senior managers or executives at the headquarters of Taiwan-based MNCs. Interestingly, structural social capital between headquarters and subsidiaries strengthens the negative association between subsidiaries' cross-border knowledge tacitness shared and explorative innovation capability; relational social capital attenuates the negative association between subsidiaries' cross-border knowledge tacitness shared and both explorative and exploitative innovation capability. Stated differently, different types of social capital can facilitate (i.e., relational social capital) or impede (i.e., structural social capital) innovation capability when cross-border knowledge tacitness is high. The validity and managerial implications of these findings are explored through interviews with senior managers or executives of MNCs headquarters or subsidiaries. Theoretically, this study emphasizes the importance of understanding relationships between subsidiaries and MNCs' headquarters to understand the association between subsidiaries' resources and MNCs' headquarters innovation capability.     

Local and Global Knowledge Complementarity: R&D Collaborations and Innovation of Foreign and Domestic Firms

We analyze how research and development (R&D) collaborations affect product innovation for subsidiaries of foreign multinational firms and domestic firms. We build on the knowledge-based view to propose that subsidiaries and domestic firms differ in their ability to benefit from alternative R&D partners as a result of the variation in their knowledge complementarities. Specifically, we propose that subsidiaries may benefit more from undertaking R&D collaborations with customers and competitors, whose deeper knowledge of local conditions better complements the more global knowledge base of subsidiaries. In contrast, we argue that domestic firms may benefit more from engaging in R&D collaborations with suppliers and universities, whose more global nature of knowledge better complement the deeper local knowledge base of domestic firms.     

Where Do We Go from Here?: Globalizing Subsidiaries Moving Up the Value Chain

This paper studies the international expansion of local subsidiaries of multinational enterprises (MNEs). The main questions asked are why and how MNEs' local subsidiaries in developing economies undertake international expansion. Drawing from the global value chain (GVC) perspective, I argue that local subsidiaries that were initially established to undertake production activities for export-oriented industries do not want to remain at the lowest-value-added position forever. They therefore undertake initiatives to get out of that position. The literature on initiative-taking subsidiary has predominantly focused on them becoming centers of excellence via R&D and innovation in the host country. I propose a different route of local subsidiary upgrading via foreign direct investment in more advanced countries. This strategy helps not only to gain internal prominence within the MNE network, but also to improve its external position within the GVC vis-à-vis the lead firms. The paper uses an in-depth case study of a Thai subsidiary of a Taiwanese electronic MNE to explore the transformation of the subsidiary from simply manufacturing for exports to becoming a strategic international expansion arm for the parent MNE.     

Unfavorable Market Conditions,Institutional and Financial Development,and Exits of Foreign Subsidiaries

In this paper, we examine how market conditions in host countries affect the entry and exit decisions of multinational corporations' foreign subsidiaries. Taking the real options perspective, we expect that smaller investments will be associated with more flexible entries and exits. We also predict that better-established host countries with greater institutional and financial development will facilitate the exits of foreign subsidiaries with smaller investments under unfavorable market conditions. We run a Cox proportional hazard rate model with a dataset of Korean foreign direct investments, and find that when market conditions become more unfavorable, foreign subsidiaries making smaller investments that were endogenously chosen under the influence of market demand uncertainty are more likely to engage in earlier exits than subsidiaries making larger investments. We also find that strong institutional and financial development positively moderates small subsidiaries' exits under conditions of unfavorably resolved uncertainty.     

Internal and External Social Capital for Radical Product Innovation: Do They Always Work Well Together?

We examine the role of internal and external relational social capital (SC) as determinants of radical product innovation (RPI). By analysing both sides of SC, we provide interesting insights on their relative influence and their interaction effect on this type of innovation. Besides, traditional assumptions on SC and innovation are questioned. In our empirical study using a sample of 142 manufacturing and service companies we found that, of the two types of SC analysed, internal SC is the most relevant predictor of RPI in relation to either technological or market dimensions. The influence of external SC is not as strong as the internal one. Regarding their interaction effect, external SC reduces the positive effect of internal SC on the market dimension of RPI. Interesting implications arise for practitioners, who should pay special attention to the higher impact of internal SC on RPI and the need to carefully manage the difficulties that emerge when it is combined with external SC.     

Corporation taxes and the debt policy of multinational firms

This paper analyzes the impact of corporate taxes on the capital structure of foreign subsidiaries of multinational firms. The empirical investigation employs a large micro-level panel dataset of German multinationals covering 31 countries over a 10-year period. A special feature of this dataset is that it allows us to distinguish between internal and external debt financing. Our results confirm a positive effect of local tax rates on both types of debt. Moreover, while adverse local credit market conditions are found to reduce external borrowing, internal debt is increasing, supporting the view that the two channels of debt finance are substitutes. Our findings suggest that internal credit markets give rise to significant advantages and enhance multinationals?? opportunities to use debt as a tax shield.     

Headquarters′ monitoring mechanisms,subsidiaries’ financial slack,and the contingent role of subsidiaries′ external embeddedness

Within MNCs’ foreign subsidiaries financial slack, i.e., uncommitted financial resources in excess of those needed for current operations, may incur costs for headquarters. These costs may emanate from subsidiaries' decision to forego investment opportunities and stockpile cash instead, which, in turn, may lead to fewer resources being available for redistribution within the organization. From an agency theory perspective, headquarters can minimize these costs through monitoring mechanisms. While agency theory is considered theoretically appropriate for the study of the headquarters-subsidiary relationship, it reflects a rather undersocialized manifestation of human behaviour, which in turn limits its applicability. In this paper, we attempt to address this limitation by suggesting and empirically exploring that the effect of monitoring mechanisms is dependent (1) on the different types of monitoring used, and (2) on subsidiaries' external embeddedness. Drawing on empirical evidence from 94 subsidiaries of foreign multinationals operating in Greece, we provide some initial evidence on the differential impact of monitoring through expatriates and monitoring through bureaucratic processes. Most importantly, we show that subsidiaries' structural embeddedness moderates both associations. In doing so, we reveal that whether subsidiaries behave opportunistically or as good citizens is partially determined by the social context in which they are embedded. An unexpected finding concerns the positive effect of the origin of the CEO on subsidiaries' financial slack for expatriates compared to local managers. This finding underscores the importance of the CEO identity, and highlights the need for future research exploring its effect on subsidiaries' performance.     

Headquarter Services in the Global Integration of Production

This study examines knowledge management within multinational enterprises (MNEs) by analyzing whether greater interdependence of production between U.S. parent firms and their foreign subsidiaries increases the provision of headquarter (HQ) services from the home country. The findings suggest that U.S. parents provide more assistance to their foreign subsidiaries that are linked in a global value chain than to those that are not involved in production sharing. This study builds on the earlier studies of the relationship between intra-MNE product flows and knowledge flows in multiple ways. First, it separately examines the relationship for high-tech and low-tech manufacturing industries, and finds that knowledge services from HQ that could be combined with knowledge of the subsidiary, such as R&D services, are primarily associated with production sharing with subsidiaries in high-tech manufacturing industries, which are assumed to be more technologically capable. Likewise, it finds that knowledge services from HQ that might be considered to be more passively received from the parent, such as industrial-type maintenance and design, are primarily associated with subsidiaries in low-tech manufacturing industries, which are assumed to be less technologically capable. Second, this study is the first one, to our knowledge, that gauges intra-firm knowledge flows using dollar-denominated measures of HQ services provided by parents to their subsidiaries.     

创新网络嵌入与高技术企业研发人员创新绩效关系研究

 创新驱动的实质是人才驱动,企业技术管理的重要核心之一是人员管理。研发人员是高技术企业的核心人力资本和主导资源,具有典型的稀缺性、创造性、主导性、体验性以及高信息需求等异质性特征,能否采取切实有效措施满足研发人员的异质性需求,激活其创新潜力和活力,是提升高技术企业创新绩效和管理技术人员的关键。        聚焦于高技术企业研发人员的异质性需求特征,运用创新网络嵌入理论,提出创新网络嵌入、创新效能感与创新绩效的关系假设模型;借鉴成熟量表,设计相关测量变量的调查问卷;利用Spss 19.0和Amos 21.0软件,对北京、上海、武汉、广州等地高技术企业研发人员的269个调查数据进行分析,考察创新网络嵌入对研发人员创新绩效的影响和作用机理,并验证创新效能感的中介作用。        研究结果表明,高技术企业研发人员的创新网络结构嵌入对创新过程和创新结果均具有显著正向影响,而关系嵌入仅对创新过程具有正向影响;创新网络结构嵌入和关系嵌入对创新效能感均具有显著正向影响,创新效能感对创新过程和创新结果具有显著正向影响;创新效能感在研发人员结构嵌入和关系嵌入对创新过程的影响中起完全中介作用,在结构嵌入对创新结果的影响中起部分中介作用。        从技术人员创新绩效管理的微观视角入手,探究高技术企业研发人员创新绩效的内涵、实质和影响因素,对高技术企业研发人员的创新网络嵌入与创新绩效的关系、创新效能感的中介作用以及创新网络嵌入与创新绩效的关系研究中关系嵌入悖论进行实证检验和解读,提出提升高技术企业研发人员创新绩效的创新网络嵌入式开发策略,包括聚焦产学研战略协同和集群创新、强化关系网络建设和位置管理、营造宽松氛围以提升创新效能感等。     

The impact of autonomy on information systems planning effectiveness

Autonomy for information systems planning may have an impact on the effectiveness of that planning. Theory Y suggests that when managers have more autonomy, they have greater feelings of ownership, commitment, and responsibility, and thus perform better. A postal survey of 131 chief information officers of US subsidiaries of multinational firms collected data to test hypotheses based on the theory. Data analysis revealed that autonomy for IS planning in general and the strategy selection planning activity in particular significantly predicted IS planning effectiveness. These findings thus extend the theory to a new domain, namely IS planning in multinational firms, and thereby facilitate a better understanding of the management of IS planning. They further suggest that parent managers consider delegating greater autonomy to the managers of their foreign subsidiaries.     

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.     

Short-term foreign exchange risk management: Zero net exposure models

By balancing the relevant end of period assets and liabilities (i.e. a zero net exposure approach to foreign exchange risk management) the multinational corporate treasurer can, conservatively, protect against parity fluctuations without requiring exchange rate forecasts. This paper presents two goal programming formulations for short-term money management and evaluates the resulting strategies (via simulation) in terms of their impact on corporate profits. A hypothetical multinational corporation with headquarters in the US and subsidiaries in Canada, West Germany, and the United Kingdom serves as the experimental unit. The results suggest that the zero net exposure approach is no better than a naive ‘dart-throwing’ approach.     

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.     

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.     

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).