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 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.     

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.     

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).     

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.     

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.     

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.     

Subsidiary managers' initiative pursuit: A behavioral agency model

Subsidiary managers' decisions to pursue initiatives for innovative product introductions in their host markets provide opportunities for rent creation, but also bear risks for the multinational corporation (MNC). However, we lack insights into which factors drive such decisions. Grounded in behavioral agency theory, our study investigates which factors at the individual level, the corporate level, and the subsidiary's implementation context increase subsidiary managers' likelihood of initiative pursuit. We propose that an individual manager's capability and the MNC's entrepreneurial orientation serve as reference points in a specific implementation context. Based on a stated-choice experiment with 799 respondents, results show that subsidiary managers' likelihood to pursue an innovation initiative varies depending on the context, and the choice of implementation mode activates subsidiary managers' gain frames. Our findings advance theory by providing granularity on the situational complexity across multiple methodological levels that instigate subsidiary managers' initiative pursuit.     

A coevolutionary theory of the multinational firm

We examine the multinational firm from the lens of coevolutionary theory. Coevolutionary theory encompasses both macrocoevolution with the external (local) environment and microcoevolution within the internal environment, i.e. among the MNC's parts (subsidiaries) and the whole, and the relations between the two. In making our argument, we distinguish the coevolutionary process (what happens) from coevolutionary capabilities (what is manageable and how), and then resort to the specific motors of causal ambiguity and absorptive capacity to link the two together. In this context, we argue more specifically that coevolution at different levels tends to occur at different speeds. The speed differential creates what we term a dis-synchronization effect in the coevolution of the MNC, which potentially impacts firm performance. In making our argument, we also show how a coevolutionary lens sheds novel light on the functioning of the MNC as an internal knowledge sub-economy and the advantage of hierarchies over markets in this regard. Constructively managing the tension between the macro and micro aspects of coevolution due to respective differences in coevolutionary pressures has direct implications for competitive advantage and is a critical challenge faced by managers.     

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。     

Managing exposure of direct foreign investment to political risk: The case of food businesses in China

Direct foreign investment (DFI) allows a multinational corporation (MNC) to generate and appropriate extra-normal profits from its unique assets in a foreign market. China has become increasingly attractive for foreign investment over the past 20 years. This entails political risk, but MNCs can reduce the risk by relying heavily on MNC-specific assets, often in the form of tacit knowledge. A joint venture with a local partner creates an incentive for a local stakeholder to shield the DFI from political risks and allows the partner to contribute location-specific assets to the venture, further reducing the MNC's risk.     

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.     

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.     

Innovation strategies of Asian firms in the United States

This paper examines the relationship between Asian firms’ technological and non-technological strategies and innovation capability. Particular attention is focused on subsidiaries in the United States (US) with headquarter units in South Korea, Singapore, and Taiwan. Empirical evidence from a sample of 151 subsidiary plants and establishments suggests that Asian firms invest in the US to upgrade their their knowledge base with a view to supporting new product and market-based innovations. The results of an ordered probit regression model of innovation performance suggests that new product development and marketing capability make a significant contribution to increased US patents among Asian firms while applied research is only marginally significant in explaining firms’ innovation capability. The major sources of innovation capability are revolved around a tacit understanding of technology and products than more explicit forms of knowledge. Our empirical findings also suggest that stronger business performance is associated with new product development and marketing capability.     

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.     

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.     

跨国经营海外子公司业务发展中企业的战略选择——辉瑞制药中国公司在华生产范围发展路径(1993~2002年)的启示

经济全球化给更多企业带来了跨国经营的机会与动力。本文着重分析在跨国经营中海外子公司在当地的业务范围如何演化、其发展路径通常受哪些因素的影响,而企业又可以通过做出哪些战略选择来更好地调节其发展路径。通过对辉瑞制药中国公司在1993￣2002年期间在华生产范围发展路径的描述和分析,本文提出两个观点。一是在跨国经营中企业通常面临保持公司在全球的业务整合以及适应当地市场具体条件的双重压力,当两者之间存在较大差异时,由于决策者的认知受有限理性的制约,海外子公司的业务并不会按现有文献中所提出的按母公司已有业务从强到弱顺序发展,而是呈现迂回发展的路径。二是企业可以通过对战略变量的参数的选择来调节其海外子公司的业务发展,而这样的参数调节过程有助于企业通过试探逐渐积累关于当地市场的知识,从而在跨国经营的双重压力中获取平衡。通过上述分析,本文希冀对中国企业开展国际化经营提供的启示是当企业在海外扩张中面临陌生的环境时,对当地市场的特性给予足够的关注并保持战略上的灵活性是取得成功的关键。     

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.