The role of subsidiaries in Global Value Chains (GVCs): An institutional voids perspective on LVC upgrading and integration

We explore the process through which MNE subsidiaries engage and retain a critical mass of small suppliers in Global Value Chains (GVCs) while addressing institutional voids in emerging markets. Using evidence from an interpretive inductive longitudinal case study in agribusiness, we draw on the GVC and institutional voids literatures to: (1) extend the GVC literature by offering a subsidiary-focused view of GVCs; and (2) demonstrate the dynamic process of void engagement through complementary institutional bridging activities. Our temporal sequencing of subsidiary institutional agency in response to different modalities of voids demonstrates a constellation of bridging activities that results from a dynamic interplay between voids and practices.     

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.     

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.     

Institutional agency by MNEs: A review and future research agenda

Although the study of institutional agency by MNEs is gaining traction in the IB literature, there are gaps in our understanding of how MNEs purposively engage with institutions in home and host markets. By systematically reviewing 73 articles in 26 journals over a 17-year period, I assess the embeddedness of institutional agency in the IB field; and present key findings along societal and organizational field triggers, individual and organizational enablers and types of institutional agency, as well as the consequences for institutional maintenance, creation and transformation. The review demonstrates that very few IB studies explicitly examine MNEs' intentional actions in relation to institutions. Consequently, I call for an advancement in MNE strategy and structure debates to account for the ways in which MNEs can address institutional contradictions. I develop propositions on these as well as micro-level activities that offer opportunities for MNEs to display institutional agency, setting a clear agenda for future research.     

South African MNCs' HRM Systems and Practices at the Subsidiary Level: Insights From Subsidiaries in Ghana

Despite the extensive literature on the human resource management (HRM) systems and practices of multinational companies (MNCs) from developed countries, there are serious gaps in our understanding of emerging countries multinationals HRM practices and systems at both home and host countries. This study empirically examines the similarities and differences of South African (SA) MNCs' HRM systems and practices at both the headquarters in SA and at the subsidiaries operating in Ghana. The study reveals that with the exception of compensation and industrial relation practices which are localised, EMNCs HR systems and practices are mainly transferred to subsidiaries with minimal adaptation to contextual realities. Further research and practical implications are discussed.     

Subsidiary Entrepreneurship and Entrepreneurial Opportunity: An Institutional Perspective

A subsidiary's ability to identify opportunities in the host country and to subsequently exploit these opportunities could create competitive advantages for the Multinational Corporation. While research on subsidiary entrepreneurship has focused primarily on subsidiary-specific resources and capabilities, as well as environmental factors, the type of opportunities that the subsidiaries may find in the host environment has been underexplored. Drawing on the subsidiary entrepreneurship literature, institutional perspectives, and entrepreneurship research, this paper suggests that subsidiaries embedded in institutional contexts that are different from those of their home country have unique advantages that enable the identification of entrepreneurial opportunities. Accordingly, a theoretical framework is proposed, based on contingency perspectives on the different views of entrepreneurial opportunities in relation to business processes in the host country's institutional environment, vis-a-vis uncertainty levels and legitimacy requirements. In addition, appropriate strategic approaches are suggested, through which subsidiaries can exploit these entrepreneurial opportunities.     

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.     

Subsidiary power,cultural intelligence and interpersonal knowledge transfer between subsidiaries within the multinational enterprise

We propose that individual-level knowledge transfer between subsidiaries within a multinational enterprise depends on the perceived relative power of the subsidiary and the cultural intelligence of individuals. Using a sample of 333 research and development (R&D) subsidiary employees of foreign Multinational Enterprises (MNEs) in India, we find that the perceived subsidiary power has a direct positive significant effect on knowledge sharing, and an indirect significant effect, through organizational identification, on knowledge seeking. Further, cultural intelligence moderates the effect of organizational identification on knowledge seeking, and the indirect effect of the perceived subsidiary power on it. The findings highlight the role of organizational identification and cultural intelligence in explaining the impact of the perceived subsidiary power on interpersonal knowledge transfer within the MNE.     

MNEs' Agency Within Institutional Contexts: A Study of Walmart's Post-acquisition Practices in Mexico,Germany, and Japan

The issue of MNEs' adaptation to host country institutional environments in their post-cross-border acquisition implementation, and the outcomes thereof, remains underexplored in international management studies. The purpose of this paper is to assess the applicability of three institutional approaches — (1) the earlier variant of the neoinstitutional theory (ENIT), (2) its recent variant (RNIT), and the comparative institutional analysis approach (CIA) — to explain (non)adaptation behavior in host country environments. Using Walmart's acquisition cases, we show that the MNE adopted a non-adaptation behavior in Mexico and Germany—countries which represent vastly different institutional environments—and succeeded in the former, but failed and withdrew from the market in the latter. However, in the Japanese institutional environment, which is similar to the German one, Walmart engaged in selective adaptation and survived in the market. Based on the case data, we offer a critical assessment of the applicability of the three approaches. These three approaches provide a base on which to develop a model to explain the relationship between institutional influences, an MNE's organizational agency and adaptation behavior, as well as outcomes. Moreover, we discuss future research directions and provide implications for practitioners related to MNEs' adaptation behavior and the ensuing outcomes in host markets.     

Overcoming the liability of foreignness without strong firm capabilities — the value of market-based resources

The concept of “liability of foreignness” — the costs of doing business abroad — has been known and discussed since the mid-1970s. At the core of these discussions is the role that firm capabilities play in overcoming or limiting these costs. This raises the question of how firms with inappropriate, limited or constrained capabilities relative to their host environment overcome the liability of foreignness. This paper focuses on the subsidiaries of “emerging multinationals” and how they manage the demands of a technologically and economically highly developed host country. A host location with sophisticated markets and well-developed institutional infrastructure may be a highly challenging environment for firms that have grown their organizational capabilities in less developed contexts. This paper explores that situation and considers how resources available on the market — for example through supplier inputs — assist subsidiaries to benefit from their presence in a munificent location. Despite the acknowledged limitations of a transaction-based approach, this paper presents evidence that purchasing knowledge provides an accessible strategy for overcoming some liabilities of foreignness.     

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.     

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.     

Regional Integration,Multinational Enterprise Strategy and the Impact of Country‐level Risk: The Case of the EMU

The European Monetary Union (EMU) provides a new macro‐level, institutional setting for multinational enterprises (MNEs). The authors investigate the impact of regional integration on MNE strategy by analysing Belgian firms’ entry‐mode choices in foreign markets, both EMU and non‐EMU ones, with a focus on what impact remains of country‐level risk. They demonstrate that regional integration has altered the impact of country‐level institutional risk on MNE entry‐mode choices inside the EMU. The conventional predictions of international business theory have been reversed, with higher country‐level risk inside the EMU driving a preference for wholly owned subsidiaries. Within the integrated region, insider firms now view higher country‐level risk as the equivalent of higher, micro‐level contracting risk. Such risk can best be mitigated through full internalization, combined with arm's length contracts, rather than through equity joint ventures.     

Multinationals and Skills Policy Networks: HRM as a Player in Economic and Social Concerns

This paper uses an embeddedness framework to reconceptualize HRM agency over the external labour market, and in so doing bring into focus the societal implications of HRM. Drawing on qualitative data from 53 key informants in two English regions, we identify the ways in which the subsidiaries of foreign multinationals (MNCs) engage with labour market skills actors. Our findings reveal how power structures are mobilized by local economic actors to align labour market skills with MNCs’ demand priorities. We show that multinationals may seek to partially endogenize (i.e. take ownership of) the resources of local labour markets when their competitive value is redefined in social as well as economic terms, and demonstrate that the social structure of sub‐national institutional governance arrangements and firm strategic action on skills creates the conduit through which resource endogenization may occur. Theoretically, this paper identifies the social structure of networks as a casual mechanism to bridge divergent skill interests, which is mobilized when network actors have the capacity to frame fields within the social structure of the network around ideas on economic sustainability and moral interest.     

Host country corruption and MNE location choice: The view of institutional pluralism

Whether to invest in a corrupt host country is an important decision for MNEs. Although scholars have investigated the contingent impacts of the institutional characteristics of the MNE parent's home country, extant research concentrates on examining the country-level contingent impact. It neglects the institutional pluralism view that MNEs could face different institutional logics through firm-level channels in their home country, which influences their decision to enter a corrupt host country. Employing the unique dataset of 42,126 Japanese MNE-host country-year pairs, this study finds that MNEs are discouraged from investing in corrupt host countries when they have greater foreign ownership or a higher ratio of independent board members because they face shareholder-oriented institutional logic in the home country. Such an effect is mitigated when MNEs are embedded in cross-equity holdings, as they face stakeholder-oriented logic.     

Recruiting channels of foreign subsidiaries in Japan

Despite increasing interest in recruitment and selection, surprisingly little is known regarding recruiting practices and channels in foreign subsidiaries. This study focuses on the utilization and success of recruiting channels of foreign subsidiaries in Japan. Interviews with 40 company managers show that recruitment strategies in foreign subsidiaries progress through different stages. Lacking social networks but possessing substantial financial resources, small and newly established subsidiaries rely primarily on headhunters. However, larger subsidiaries with longer presence in Japan tend to diversify and localize their recruitment channels. Owing partly to a reduction in ethnocentric attitudes, foreign subsidiaries in certain industries are capable of attracting high-quality job candidates. Overall, the interviews revealed that referrals are the best recruiting channel for the production of high-quality candidates who fit in well, exhibit high company loyalty, and perform well on the job.     

The Performance of MNE Subsidiaries in China: Does It Matter to Be Close to the Political or Business Hub?

This study examines the impact of distance on financial performance of multinational enterprise (MNE) subsidiaries in China. We hypothesized and found that MNE subsidiaries performed better when located closer to the country's business hub, but performed less well when located closer to the political hub. We also hypothesized that distance effects are moderated by subsidiary size, subsidiary network, and state capital contribution to subsidiary. Our findings were based upon 45,248 MNE subsidiaries with location and geographic distance measured at the prefectural level in China.     

The impact of external,internal, and dual relational embeddedness on the innovation performance of foreign subsidiaries: Evidence from a developing country

As parts of a global network, foreign-owned subsidiaries enjoy privileged access to knowledge sources both internal (within their multinational group) and external (involving other organizations in the host location), and this has proven especially relevant in their assumption of greater creative responsibilities that increase the technological capabilities of their multinational group. This study investigates whether external and internal relational embeddedness are mutually reinforcing (complementary) or whether they act separately in explaining superior innovation performance of foreign-owned subsidiaries in terms of a greater propensity to obtain radical innovations. The empirical analysis uses both direct and indirect tests to evaluate the complementarity, as well as a rich firm-level panel data on foreign subsidiaries, extracted from a census of Colombian manufacturing firms for the period 2008–2014. Our findings reveal that external relational embeddedness in isolation (without internal embeddedness) has a positive impact on performance only in terms of incremental innovation, while internal embeddedness alone (without external embeddedness) has no effect on the innovation performance of subsidiaries. However, we find that a complementary and dynamic relationship exists between external and internal linkages to spur radical innovation outcomes, which in turn are related to the competence-creating roles in foreign subsidiaries as prior literature has shown.     

Strategic management staffing decisions among German subsidiaries in Japan

This study discusses the composition of strategic management teams in foreign subsidiaries beyond decisions solely about the general manager, i.e. encompassing third-country nationals; locally hired “foreigners” as well as managers on short-term assignments. We extend the discussion about expatriates by developing hypotheses about those issues based on the resource-based view of the firm and the principal agent theory and find that both are important for understanding staffing decisions. This research analyses these issues by means of a data set on German subsidiaries in Japan and shows that recent changes in the global environment are providing multinationals greater latitude when staffing foreign-based subsidiaries, including choices that have not been given due weight in IHRM literature.     

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.