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.     

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.     

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.     

Quality Management and Cooperative Values: Investigation of Multilevel Influences on Workgroup Performance

Unsuccessful quality initiatives often are attributed to an organizational culture that does not recognize the importance of the cooperative values that underlie “soft” quality management practices, like customer focus and empowerment. Yet, the literature remains unclear as to how quality management and cooperative values interrelate by failing to incorporate the multilevel influences on this relationship in organizations. This research analyzes a multilevel model based on sociotechnical systems and quality management theories. Secondary data are used to test an explanation of how organizational‐level and workgroup‐level quality management practices relate to cooperative cultural values and workgroup performance. A single‐level model is also tested to demonstrate its inadequacies. Based upon the support for a multilevel model, managerial insights are provided that aid in deciding where resources should be allocated during a quality initiative.     

Building Organizational and Scientific Platforms in the Pharmaceutical Industry: A Process Perspective on the Development of Dynamic Capabilities

In this paper, we examine the process of dynamic capability development in a large pharmaceutical firm. Using interviews with multiple managers at different organizational levels, we developed two narratives of the process of developing two separate dynamic capabilities in the same firm. We focus on three areas that prior research has shown to be critical in the early stages of the process of implementing new strategic initiatives: the cognitive orientations of key personnel, managerial action undertaken within the firm, and the firm's internal and external contexts. We provide evidence that managers undertake specific initiatives based on their own particular cognitive orientations , and that senior managers play a major role in the development of capabilities by imprinting the organization with their specific cognitive orientation and then orchestrating the multilevel organizational routines necessary for actualization of a capability. These replicable actions by senior management during the early stages of capability development can lead to the development of a capability that is not initially in the cognitive frames of lower level employees. Finally, we will show that internal and external contingencies have a profound impact on the decision to develop a capability, and to discontinue its development. Our findings thus suggest that the process of developing new capabilities shares common elements with other strategic initiatives.     

The more,the merrier? How a subsidiary's organizational identification with the MNE affects its initiative

How does a subsidiary's organizational identification influence its tendency to demonstrate initiative? In this study, we argue that a subsidiary's organizational identification with the MNE may affect its initiative via two mechanisms: subsidiary motivation and headquarters screening. On the one hand, subsidiary motivation mechanism suggests that a subsidiary's organizational identification with an MNE may affect its tendency to demonstrate initiative. On the other hand, the headquarters screening mechanism maintains that headquarters may rely on organizational identification to support or dismiss the subsidiary's projects. In light of the two mechanisms, we propose that a subsidiary's organizational identification may first increase its initiative, but after a certain point, the effect will diminish, ultimately leading to an inverted U-shaped relation. Building on this central argument, we also examine the boundary conditions at the subsidiary and MNE levels that may shape the proposed effect. Findings based on a sample of Taiwanese MNEs support these arguments. Our findings contribute to the literature by highlighting the role that a subsidiary's organizational identification plays in its initiative.     

Institutionalization or Decoupling? An Exploratory Analysis of the UN Global Compact LEAD Initiative

Institutionalization occurs when organizations adopt policies and practices in an attempt to increase their legitimacy and competitive position. This process assumes that an organization's formal policies (macro‐level) are translated into organizational practices (micro‐level). This translation, however, can fail to occur, resulting in organizational decoupling and de‐institutionalization. Drawing on an institutionalization typology based on different levels of legitimacy (macro) and taken‐for‐grantedness (micro), the article draws on data from an assessment of the United Nations Global Compact LEAD initiative, assessing the extent to which this initiative is being institutionalized in the member firms and examining the implications for the LEAD initiative and our thinking about institutionalization.     

Isolated Foreign Subsidiary's Initiative in Knowledge Transfer Within the MNE

Knowledge transfer is an essential issue of strategic management in MNEs, because it enables them to utilize their strategic resources across borders. However, it is far from perfect, and there are isolated foreign subsidiaries that are excluded from the knowledge network within the MNE. A primary contribution of this paper is to shed light on a fact which such an isolated foreign subsidiary can initiate the internal knowledge transfer within the MNE, in order to overcome the liability of internal isolation. This paper analyzes such a subsidiary initiative, with an extreme case of a large Japanese ICT company's Finnish subsidiary, which initiated an adoption of its headquarters' strategic practice. I collected and analyzed data by ethnographic fieldwork in this subsidiary for over one year. After depicting the details of the initiation process, I show how the initiation process was influenced by the subsidiary managers' dual motivation; solving the liability of internal isolation, and keeping the advantage of isolation. I hope that this study would enrich theory building of subsidiary isolation and also contribute to subsidiary managers who have struggled with the liability of internal isolation.     

Enriching Absorptive Capacity through Social Interaction

Absorptive capacity is frequently highlighted as a key determinant of knowledge transfer within multinational enterprises. But how individual behaviour translates into absorptive capacity at the subsidiary level, and how this is contingent on subsidiaries' social context, remains under‐addressed. This not only limits our understanding of the relationship between individual‐ and organizational‐level absorptive capacity, but also hampers further research on potentially relevant managerial and organizational antecedents, and limits the implications we can draw for practitioners who seek to increase their organization's capacity to put new knowledge to use. To address this shortcoming we conduct an in‐depth comparative case study of a headquarters‐initiated knowledge transfer at two subsidiaries of the same multinational enterprise. The findings demonstrate that social interaction is a prerequisite for subsidiary absorptive capacity as it enables employees to participate in the transformation of new knowledge to the local context and the development of local applications. The findings also illustrate how organizational conditions at the subsidiary level can impact subsidiary absorptive capacity by enabling or constraining local interaction patterns. These insights contribute to the absorptive capacity literature by demonstrating the scale and scope of social interaction as a key link between individual‐ and organizational‐level absorptive capacity.     

Subsidiary-level determinants of global initiatives in multinational corporations

This article examines subsidiary-level factors that promote global initiatives in MNCs. Global initiatives are a key capability of MNCs that domestic firms do not possess, yet there has been little research on how MNCs promote initiatives on a global basis. I draw principally on the knowledge-based view to develop a model in which three subsidiary-level variables explain the propensity of the MNC to pursue global initiatives. These variables are: (1) inter-unit networking, (2) subsidiary learning from internal and external sources, (3) shared strategic goals. A survey of 118 subsidiary managers, triangulated with interviews with 20 key informants, provides support for the hypothesized effect of subsidiary learning and shared strategic goals on global initiatives. The result for inter-unit networking is less clear. These variables combine to activate initiatives within the MNC and thus act as a source of competitiveness on a worldwide basis. The results have important implications for MNC managers as well as for theory, and these are discussed.     

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.     

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.     

Perceptions of organization development in South Korea: the use of a sensemaking approach

ABSTRACT

This qualitative study explores how employees engage in sensemaking during Organization Development (OD) initiatives in chaebols, that is, large family-owned firms in South Korea. In adopting a case study approach, semi-structured interviews were conducted with 37 respondents drawn from different levels of a chaebol to address three research questions. First, what key contextual factors are associated with employees’ sensemaking at different levels of an organization? Second, how do individuals at different levels of the organization make sense of an OD initiative through the ‘searching for plausibility’ property of sensemaking? Third, what contextual cues are influential when employees engage in ‘identity construction’ in sensemaking in response to an OD initiative? The findings and implications of the study demonstrate multiple subjective realities, which employees from different levels construct, indicating that the prevailing norms and practice within the existing culture, which have been influential in constructing the identities of employees should be identified when attempting to implement OD to change the organizational culture.     

Sustaining the Benefits of a Quality Initiative through Cooperative Values: A Longitudinal Study

Although research has shown that organizational cultural values influence the success of quality initiatives, how and when cultural values are influential is unclear. This longitudinal study asserts that quality management should be viewed from a dynamic perspective to better understand the role of cooperative cultural values in a quality initiative. We use a multilevel model of quality management, and develop time‐oriented hypotheses using a sociotechnical systems perspective to examine the role of cooperative values. Our analysis uses longitudinal data from over 30 U.S. federal government agencies, collected during an enterprise‐wide quality initiative. We find that, over time, the influence of organization‐level quality practices diminishes, but the influence of cooperative values increases; workgroup‐level quality practices remain consistently important. Our findings reveal the unexplored influences of cooperative values to sustain the benefits of quality management.     

The influence of organizational identification on organizational knowledge management (KM)

Information technology (IT) outsourcing vendor organizations contain isolated business units whose creation and sustenance greatly facilitate business operations. But they also introduce important challenges for organizational knowledge management (KM). In this paper, based on 7 months of intensive field-work at India Inc., a leading Indian IT firm, we looked at how members’ identification with two organizations, their own and their client organization, influences their compliance with an organizational KM initiative. The findings show that members have difficulties in complying with the expectations of the organizational KM initiative owing to a stronger identification with their client organizations. At the same time, they comply readily with KM initiatives at the business unit level. The findings show that KM managers at India Inc. use the help of middle level managers in the business units in their efforts to improve members’ compliance with organizational KM. Theoretical and managerial implications of the study are discussed.     

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.     

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.     

The relative influence of country conditions, industry structure, and business strategy on multinational corporation subsidiary performance

Two competing theories of firm performance have been proposed in the business strategy literature, the industry structure view and the resource-based view of the firm. Empirical studies have estimated the relative contribution of industry structure, corporate, and business unit effects to business unit performance. These studies, however, have been restricted to using only single-country data. Missing from this debate is an international dimension that includes the relative importance of country conditions as a determinant of firm performance. The objective of this article is to fill this void by adding country characteristics to the analysis. Using cross-country data of four large multinationals in a single industry, we estimate the relative importance of country characteristics in addition to industry structure, corporate characteristics, and subsidiary strategy as determinants of subsidiary performance by using multiple regression analysis. This analysis also will contribute to the discussion on environmental determinism versus strategic choice. Country and industry characteristics are mainly outside the control of management, whereas corporate characteristics and subsidiary strategy are under management's control. Results show that country characteristics are by far the most important determinant of subsidiary performance, followed by industry structure, subsidiary strategy, and corporate characteristics. Thus, country conditions are a very important determinant of firm performance that so far has been overlooked in previous studies. These results indicate that subsidiary performance is determined mainly by conditions outside the control of subsidiary management. In terms of competing theories, these results support the environmental determinism view more than the strategic choice view and the resource-based view of the firm more than the industry structure view. These results also have important implications for multinational corporations' selection of countries for entry and investment and for performance evaluation of subsidiary management.     

Knowledge Spillovers from FDI: A Critical Review from the International Business Perspective

This paper reviews and organizes the theoretical and empirical research on foreign direct investment (FDI) knowledge spillovers from the international business perspective. In doing so, it develops a framework for the analysis of this phenomenon. The suggested FDI knowledge spillover framework integrates both the macro‐level (country, industry, institutions) and micro‐level (multinational firm, headquarters, subsidiary, local firms) antecedents of spillovers with their consequences, and proposes to analyse spillovers along three main attributes that characterize their occurrence, i.e. their magnitude, scope and speed.     

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.