Subsidiary survival: a case study from the Portuguese electronics industry

Abstract

Purpose

The existing literature suggests that multinational corporations (MNCs) divest subsidiary units whenever they cease to enjoy the advantages of ownership, location or internalization. However, not all MNCs divest under these conditions. This paper aims to explore the factors that contributed to the survival of a particular subsidiary and prevented it from being divested.

Design/methodology/approach

The analysis focuses on an individual subsidiary of a large foreign MNC in the electronics industry, which divested other subsidiaries from Portugal. Data were collected using semi-structured interviews.

Findings

The subsidiary’s diverse customer base, specificity and high level of efficiency, the local advantages, the existing governmental agreements and the parent MNC’s previous unsuccessful relocation experiences seem to have contributed to the survival of the subsidiary.

Research limitations/implications

Although the results of the case study are not generalizable to the entire population of firms, the featured case study is a rare survival success story in the Portuguese electronics industry.

Practical implications

The proposed framework may offer public authorities measures to create conditions to encourage firms to retain their investment in a particular site. For corporate strategists, new perspectives on subsidiary survival are provided.

Originality/value

This paper is one of the few qualitative studies in the field of subsidiary survival. The results offer an integrative framework on which factors contribute to the survival of a subsidiary located on a comparatively unfavorable labor cost location and support the role of the organizational learning and of previous failed relocation experiences and relocation barriers when a parent MNC decides whether to retain a unit.

Citation

Silva, P. and Moreira, A.C. (2019), "Subsidiary survival: a case study from the Portuguese electronics industry", Review of International Business and Strategy, Vol. 29 No. 3, pp. 226-252. https://doi.org/10.1108/RIBS-10-2018-0094