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Article
Publication date: 8 August 2022

Saisai Li, Qianhua Lei and Liuyang Ren

With the development of the economy, an increasing number of listed companies form subsidiaries in China. Though the increase in the number of subsidiaries affects the…

Abstract

Purpose

With the development of the economy, an increasing number of listed companies form subsidiaries in China. Though the increase in the number of subsidiaries affects the hierarchical structure and risk of conglomerates, few studies relate the hierarchical relationship between the parent company and its subsidiaries to its capital market performance at the conglomerate level. Therefore, this study aims to investigate the relationship between the number of subsidiaries and crash risk.

Design/methodology/approach

Using a sample of all the A-share companies in the Shanghai and Shenzhen stock markets from 2007 to 2015, this study conducts multivariate regression analyses between the number of subsidiaries and the stock price crash risk.

Findings

This study finds an inversed U relationship between the number of subsidiaries and the stock price crash risk, and the above inversed U relationship is steeper in conglomerates with stronger managerial power and less finance distress.

Originality/value

This research has an incremental contribution to the agency problem and governance effect of the parent–subsidiary system in conglomerates. To the best of the authors’ knowledge, this is the first study to show a significant quadratic relationship between the future crash risk and the number of subsidiaries. This paper provides new evidence that the number of subsidiaries has an incremental ability to predict future firm-specific crash risk above other predictors identified by previous research.

Details

Pacific Accounting Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 10 August 2022

Nadia Albis Salas, Isabel Alvarez and John Cantwell

This paper explains the mechanisms underlying the generation of two-way knowledge spillovers through the interaction of subsidiaries with differentiated local…

Abstract

Purpose

This paper explains the mechanisms underlying the generation of two-way knowledge spillovers through the interaction of subsidiaries with differentiated local responsibilities and domestic firms.

Design/methodology/approach

The study is based on firm-level panel data from a census of Colombian manufacturing firms for the period 2003–2012. The estimation procedure involves two stages. In the first one, total factor productivity (TFP) of foreign and domestic firms is estimated. In a second step, we estimate conventional spillovers (from foreign-owned to local firms) and reverse spillovers (from local to foreign-owned firms) separately, using a random effect approach.

Findings

This study’s findings reveal that only locally creative subsidiaries enjoy positive and significant two-way knowledge spillover effects. The connectivity of subsidiaries to local and international networks is reinforced by reciprocal relationships among actors that enhance bidirectional knowledge flows, these being favored by the dynamics of clustering effects.

Originality/value

The paper contributes with new empirical evidence about the mechanism explaining how the technological heterogeneity of subsidiaries plays a determinant role in the generation of both knowledge flows from foreign to domestic firms and to the reverse, all integrated into the same framework.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 6 November 2020

The research was governed by the following questions: 1. What opportunities and conflicts do subsidiary initiatives create in HQ-subsidiary relationships? 2. How does the…

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Abstract

Purpose

The research was governed by the following questions: 1. What opportunities and conflicts do subsidiary initiatives create in HQ-subsidiary relationships? 2. How does the MNC subsidiary network stifle or oppose subsidiary initiatives, and what role does HQ play in this process? 3. Does the subsidiary’s operating environment generate obstacles to new initiatives? 4. What factors moderate subsidiary initiative conflict in the MNC network?

Design/methodology/approach

The authors reviewed publications focusing on subsidiary initiatives from four leading databases – JSTOR, EBSCO, Google Scholar and Science Direct. They chose 52 papers for analysis of HQ-subsidiary issues. They chose an additional 62 publications that related to local environmental pressures that hindered subsidiaries. They narrowed their focus to emerging markets such as Nigeria

Findings

For subsidiary initiatives to do well, it’s essential to attract the “attention or interest” of HQ. But HQ pays attention only if it sees how the local plans will contribute to the corporation's overall interests. The corporate immune system (CIS) may become a major obstacle. It usually arises when CIS conflict triggers intra-firm competition over similar products between rival subsidiaries. However, if HQ perceives a subsidiary as having superior strategy it will be supportive of its initiatives.

Originality/value

Previous studies had focused on internal issues at the multinationals, whereas the authors wanted to study also the environmental obstacles to subsidiary initiatives

Details

Human Resource Management International Digest , vol. 29 no. 2
Type: Research Article
ISSN: 0967-0734

Keywords

Article
Publication date: 1 June 2000

Sally Bowman, James Duncan and Charlie Weir

The increasing globalisation of markets has generated new debates about the decision‐making role of MNC subsidiaries. Globalisation may be expected to result in greater…

2513

Abstract

The increasing globalisation of markets has generated new debates about the decision‐making role of MNC subsidiaries. Globalisation may be expected to result in greater centralisation of the decision‐making process. This study analyses the extent to which subsidiaries are being given control over a range of decisions. A sample of MNC subsidiaries operating in Scotland was sent questionnaires which dealt with financial, production, employment and research and development decision making. It was found that considerable authority was devolved to subsidiaries in terms of operational decisions. However, strategic decision making remained very much under the control of the parent. This indicates that the control systems being imposed on subsidiaries are selective and that the benefits created for local economies may be not be as great as it initially appears.

Details

European Business Review, vol. 12 no. 3
Type: Research Article
ISSN: 0955-534X

Keywords

Article
Publication date: 28 February 2006

Ming‐Ten Tsai, Ming‐Chu Yu and Kuo‐Wei Lee

The primary goal of this study is to examine the relationships among Taiwan’s overseas subsidiaries based on their strategic roles, organizational configurations and…

491

Abstract

The primary goal of this study is to examine the relationships among Taiwan’s overseas subsidiaries based on their strategic roles, organizational configurations and business performance. However, their relationships also depend on the subsidiaries’ cultural differences between parent company and its subsidiary. Using regression analysis, we show that different types of industries, stages of internationalization, degrees of integration, degrees of localization, and degrees of resource dependence are the most important factors on the subsidiaries’ perceived activity satisfaction. The results indicate that the sample of Taiwanese MNC affiliates falls into three subgroups depending on their global strategies. Active Subsidiaries are highly integrated and have high local responsiveness, Autonomous Subsidiaries have high local responsiveness but low integration,while Respective Subsidiaries have low local responsiveness, but are highly integrated.

Details

International Journal of Commerce and Management, vol. 16 no. 1
Type: Research Article
ISSN: 1056-9219

Keywords

Article
Publication date: 7 August 2007

Riliang Qu

The paper aims to explore the role of market orientation in the multinational company's subsidiary's business performance.

1487

Abstract

Purpose

The paper aims to explore the role of market orientation in the multinational company's subsidiary's business performance.

Design/methodology/approach

The paper is based on a questionnaire survey/analysis of a sample of 252 foreign subsidiaries in the UK.

Findings

The paper finds that market orientation is a key driver for business performance at foreign subsidiaries. However, the strength of its impact on performance depends on the subsidiary role.

Originality/value

This is the first systematic investigation of the role of market orientation in multinational companies' subsidiaries.

Details

Management Decision, vol. 45 no. 7
Type: Research Article
ISSN: 0025-1747

Keywords

Article
Publication date: 1 October 1998

David Williams

The development of multinational subsidiaries is of interest to academics, policy‐makers and the business community. Although there is a considerable literature on…

827

Abstract

The development of multinational subsidiaries is of interest to academics, policy‐makers and the business community. Although there is a considerable literature on subsidiary typologies, there is a dearth of empirical investigation to accompany this. This article reports on a field‐work survey which was undertaken to analyse the nature of subsidiary development in the UK economy. A large sample of companies were asked to provide details of their value‐added activities and degree of strategic autonomy granted by their parent organisations. These data were collected in respect of their entry to the UK and at the time of the survey so that a comparison would yield conclusions about subsidiary development. The analysis of the data reveals that subsidiary development is associated with the ownership (i.e. geographical location) of the parent company, as well as the entry mode which the parent company chooses to enter the host economy. The precise nature of these relationships is complex and the article concludes by suggesting some future research agendas in this area.

Details

European Business Review, vol. 98 no. 5
Type: Research Article
ISSN: 0955-534X

Keywords

Article
Publication date: 4 January 2011

Pamela Scott and Patrick T. Gibbons

Subsidiary units have traditionally feared relocation of their activities to lower‐cost locations. The authors identify other emerging threats which are changing how

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Abstract

Purpose

Subsidiary units have traditionally feared relocation of their activities to lower‐cost locations. The authors identify other emerging threats which are changing how multinational corporations (MNCs) manage their subsidiary units, and develop a cycle of subsidiary decline demonstrating how these threats can undermine a subsidiary's position within the MNC.

Design/methodology/approach

The paper presents the results of a survey targeted at over 1,100 subsidiary CEOs of MNCs located in Ireland, a program of in‐depth interviews of 24 subsidiary CEOs/directors, and a review of the literature relating to MNC and subsidiary management, are combined to identify emerging threats to subsidiary activities.

Findings

The main threats to subsidiaries' efforts to enhance their role within the MNC comprise: erosion of barriers to trade; growing complexities in corporate governance; and increasingly sophisticated information and communication technology (ICT) capabilities. These threats are enabling the disaggregation of value chains and increased headquarters monitoring and control. This shift in how subsidiaries are managed is leading to a cycle of subsidiary decline.

Research limitations/implications

the results from the survey are subject to the standard limitations and a larger pool of interviewees may have reinforced the qualitative findings.

Practical implications

To increase subsidiary managers' awareness of the need for a strategic response, the authors develop a cycle of subsidiary decline which illustrates how these emerging threats combine to undermine a subsidiary's position within the MNC. Disaggregating value chains and tighter headquarters control can reduce subsidiary bargaining power constraining its abilities to challenge for resources, in turn restraining its combinative capabilities and leading to a decline in its position and contribution to the MNC.

Originality/value

This paper is the first to build a framework illustrating how emerging threats in the external environment may impact the ability of subsidiary units to maintain and develop their position within the MNC.

Details

Journal of Business Strategy, vol. 32 no. 1
Type: Research Article
ISSN: 0275-6668

Keywords

Article
Publication date: 3 July 2009

Pamela Sharkey Scott and Patrick T. Gibbons

This paper aims to enhance the understanding of how subsidiary CEOs can move their unit's activities up the value chain and reduce the risk of subsidiary closure and

1118

Abstract

Purpose

This paper aims to enhance the understanding of how subsidiary CEOs can move their unit's activities up the value chain and reduce the risk of subsidiary closure and relocation of its activities.

Design/methodology/approach

The entire population of over 1,100 subsidiaries of multinational corporations (MNCs) located in Ireland were sampled for this study, representing a diversified pool in terms of foreign ownership. Respondents were largely subsidiary CEOs. In addition, 24 subsidiary CEOs/directors from a cross section of eight subsidiaries were interviewed.

Findings

CEOs/directors are taking active steps to enhance their subsidiary's role within the MNC and to move their activities up the value chain. These include positioning to extend subsidiary autonomy, building information networks, creating a climate for entrepreneurship and promoting strategy development processes.

Research limitations/implications

Results from the survey are subject to the standard limitations and a larger pool of interviewees may have strengthened the findings.

Practical implications

Little practical guidance is available to subsidiary CEOs on how they can reduce their subsidiary's relocation risk. This paper addresses this gap and provides a stimulus to CEOs to be proactive in managing their subsidiary's ability to recognize and exploit opportunities to enhance subsidiary contribution and position within their MNC.

Originality/value

While other papers have focused on how subsidiaries can generate initiatives or promote entrepreneurship, the unique contribution of this paper is the identification of strategies CEOs can adopt to enhance their subsidiary's ability to respond to opportunities and position for survival and growth within their MNC.

Details

Strategy & Leadership, vol. 37 no. 4
Type: Research Article
ISSN: 1087-8572

Keywords

Article
Publication date: 16 October 2018

Marc André Baumgartner and Esther Tippmann

Strategizing in a multinational corporation requires balancing global and local strategy. The purpose of this paper is to provide some insights into how multinational…

Abstract

Purpose

Strategizing in a multinational corporation requires balancing global and local strategy. The purpose of this paper is to provide some insights into how multinational corporations succeed in this endeavor.

Design/methodology/approach

The authors conducted a detailed qualitative investigation of the strategy-development processes at Gamma – a European multinational corporation in the materials industry. Specifically, the authors investigated strategy development in the DACH region (i.e., for the German, Austrian and Swiss subsidiaries). To collect data, they conducted interviews with key informants at the corporate headquarters and the subsidiaries and collected archival data.

Findings

The data revealed that Gamma had found an approach to strategy development that balanced its global strategy with local conditions, finding a suitable way to align its global and local strategies. The authors therefore unravel three key insights revolving around subsidiaries’ unique interpretations of the basic idea of global strategy, idiosyncratic strategy development processes in subsidiaries and globally and locally synchronized temporal structures.

Originality/value

Knowing how to balance the strategic needs of headquarters and subsidiaries allows multinational corporations to follow a general strategy while simultaneously developing a local market strategy responsive to the individual market requirements.

Details

Journal of Business Strategy, vol. 40 no. 3
Type: Research Article
ISSN: 0275-6668

Keywords

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