Production stage allocation problem in large corporations

This paper studies a strategic-level decision problem on assigning production stages to geographically distributed subsidiaries in a large corporation so as to minimize the fixed cost and the expected value of the production/transportation costs under stochastic demands of customers. The influence of the economies and diseconomies of scale on unit production cost is considered. A nonlinear mixed integer programming model is designed for this problem. A local branching based solution method and a particle swarm optimization based solution method are developed for solving the model. Computational tests on real world data of Shanghai Volkswagen Auto Corp. are conducted. The results show that the proposed model can save about 2.5% of its revenue by comparing with the current decisions.     

Tax attractiveness and the location of German-controlled subsidiaries

This paper analyzes whether taxation has an influence on the location decisions of multinational enterprises. We employ a novel set of 22 tax variables, such as the taxation of dividends and capital gains, withholding taxes, the existence of a group taxation regime, and thin capitalization rules. Furthermore, we use the Tax Attractiveness Index, a new aggregate measure containing the 22 tax variables. Our count data regression analysis is based on a novel hand-collected dataset consisting of the subsidiaries of German DAX30 companies in 97 countries. Controlling for non-tax effects, we find that a country’s tax environment has a significantly positive effect on the number of German-controlled subsidiaries and, therefore, on the location decisions of German multinational enterprises. Specifically, our analysis reveals that German multinational firms place affiliates in countries that offer favorable statutory tax rates, withholding taxes, double tax treaty networks, and holding incentives. Additionally, we find that the Tax Attractiveness Index has explanatory power in subsidiary location decisions and, therefore, it can be used as alternative composite measure, for example, when 22 single tax variables are not at disposal.     

Green Purchasing by MNC Subsidiaries: The Role of Local Tailoring in the Presence of Institutional Duality

To examine the essential determinants of green purchasing by multinational corporations’ (MNC) subsidiaries, this study takes institutional theory as a foundation and focuses on the institutional duality associated with localization and globalization. Specifically, we develop a model to explain subsidiaries’ green purchasing and empirically test the model with data from 141 purchasing managers and senior purchasing staff members from subsidiaries in 39 countries. Our results suggest that pressures from headquarters and the local environment do not affect subsidiaries’ green purchasing directly; rather, they exert indirect influences through local tailoring. This study contributes to extant literature by revealing the significance of local tailoring in an MNC context. In addition, our findings offer several implications for practice by providing a roadmap for disseminating green purchasing across the subsidiaries of an MNC, as well as highlighting the importance of both clear communication about the benefits of green purchasing and internal audits.     

跨国公司在华子公司战略角色演变的影响因素与路径：以业务范围和竞争能力为框架

通过文献研究和对世界500强在华子公司战略角色及其演变的问卷调查,发现以下结论:依据职能活动范围及竞争能力2个变量,跨国公司在华子公司可以分为单一活动、微型复制、高度专业化和战略中枢4种类型,同时存在稳定型、成长型、退化型和波动型4种演变路径。跨国公司在华子公司战略角色演变受子公司选择、母公司决策和环境驱动3方面因素的影响。跨国公司既可主动制定战略以调整子公司角色,也可以被动适应经营环境变化而改变子公司战略角色,二者均可能使子公司沿稳定型或成长型的路径演变。     

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.     

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.     

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.     

Conflict in foreign subsidiaries of Japanese and western multinational corporations: The impact of cultural distance and differences in home-host country combinations

This article investigates the degree of conflict between different groups of employees in MNC subsidiaries in relation to different home-host country combinations. More specifically, we compared the degree of conflict of Western subsidiaries in Japan and Japanese subsidiaries in the West. We based our comprehensive investigation on data from 617 US and German subsidiaries in Japan as well as Japanese subsidiaries in the USA and Germany (and, for comparative reasons, US subsidiaries in Germany and German subsidiaries in the US). Possibly rather surprisingly, our results indicate that different degrees of cultural distance between home and host country do not lead to different degrees of conflict in MNC subsidiaries. We suggest that expected conflicts, due to substantial cultural differences, induce employees to actively counteract such problems, leading ultimately to a reduction of real conflicts. Furthermore, while previous literature suggested that in particular Japanese subsidiaries in the West are prone to a high degree of conflicts, our findings suggest that Western subsidiaries in Japan are even more conflict-laden. This should caution Western companies against complacency when operating in Japan.     

The diminishing effect of cultural distance on subsidiary control

This paper explores the diminishing influence of national cultural distance on two subsidiary control issues, expatriate staffing and parent company ownership level of the foreign subsidiary. Previous studies have produced conflicting findings: one stream of research argues that when cultural distance is greater firms increase their level of control; while the other stream suggests that greater cultural distance is associated with a loosening of control. To reconcile these discrepant outcomes we hypothesize and find that subsidiary age moderates the effect of cultural distance on expatriate staffing and ownership. Cultural distance has a significantly greater impact on subsidiary control mechanisms for newer subsidiaries than for older subsidiaries. Implications for future research are discussed.     

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.     

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.     

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.     

Intra- and inter-regional diversification,subsidiary value chain activities and expatriate utilization

Although it is well established in the current staffing literature that why and how multinational enterprises (MNEs) allocate more or fewer expatriates in some subsidiaries than others, little is known about why and how some MNEs utilize more or fewer expatriates than other MNEs. This paper builds on regionalization theory to argue that intra- and inter-regional diversification has to do with the overall use of expatriates in MNEs. An empirical investigation of Korean MNEs demonstrates that the degree of intra- and inter-regional diversification has significant impacts on the level of expatriate utilization by MNEs. The results also reveal an interesting moderating influence of subsidiary value chain activities. MNEs tend to vigorously adjust their use of expatriates in downstream subsidiaries depending on the degree of intra- and inter-regional diversification. However, they do not adjust their use of expatriates in manufacturing subsidiaries upon the degree of international diversification. Overall, this study extends our understanding of how MNEs manage a geographically dispersed organization in a semi-globalized world.     

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.     

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.     

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.     

Japanese marketing strategies in the United Kingdom

This article is based on a study which examined hypotheses about Japanese marketing using a matched sample of British companies and their major Japanese competitors. Japanese subsidiaries in Britain were shown to be much more marketing-oriented, more responsive to strategic opportunities, and more single-minded in their pursuit of market share. Organizationally, there were few differences between the two groups. The Japanese subsidiaries, however, were more inclined to use product or market-based divisions and continuous, informal planning and control procedures. The result is that managerial focus and responsibility are centred upon overall product-market rather than financial or production performance, with continuous feedback facilitating rapid adaptation and implementation of marketing plans and strategy.     

Pyramids and the separation between direction and control of non-financial Italian family companies

This paper uses a multiple case study analysis of ten Italian business groups controlled by families to answer the following research questions: Does the controlling shareholder, through the parent company at the top of the pyramidal group, always exercise the direction activity of the subsidiaries? If not, why does the parent company not exercise that activity, delegating it to its subsidiaries? What is the degree of separation between control and direction within the group? A high percentage of our sample declares not to be directed by the parent company. However, the presence of family members on the subsidiaries’ boards and the low boards’ independence makes the separation between direction and control more apparent than real. The credibility of the separation is questioned mostly for those non-directed subsidiaries that operate in the same sector. Our analysis suggests some elements, in order to understand in which cases the direction activity by the parent (or its delegation to the subsidiaries) should be interpreted positively or negatively in terms of controlling shareholder expropriation, by proposing to use the degree of separation between direction and control as a proxy to assess indirectly the degree of that expropriation.     

Facility location decisions with environmental considerations: a case study from the petrochemical industry

The recently growing concerns of customers and governments about environmental protection and greenhouse gas reduction have forced companies to integrate the topic of environmental sustainability into their decision making. Facility location decisions are of special relevance in this respect because of their strategic nature. Furthermore, many different trade-offs must be considered, for example between operational costs and customer service. But as soon as environmental issues are concerned, other critical issues must be considered as well. Based on a case study from the petrochemical industry, this paper extends two basic facility location models and shows the impact of distribution network-design decisions on the economic and environmental performance of the company. The results show a trade-off between total (distribution) costs and transport carbon emissions.