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Foreign subsidiaries of multinational enterprises (MNEs) operate in complex and competitive international environments, implement market and non-market strategies, manage resources and value-added activities and contribute to the overall performance of their parent firms. Thus, the research question on the determinants of MNE foreign subsidiaries’ performance is of interest to managers and academic researchers. The empirical literature has flourished over the recent decades; however, the domains are fragmented, and the findings are inclusive. The purpose of this study is to systematically review, analyse and synthesize the empirical articles in this area, identify research gaps and suggest a future research agenda.

This study uses the qualitative content analysis method in reviewing and analysing 150 articles published in 24 scholarly journals during the period 2000–2023.

The literature uses a variety of theoretical perspectives to examine the key determinants of subsidiary performance which can be grouped into six major domains, namely, home- and host country-level factors; distance between home and host countries; the characteristics of parent firms and of subsidiaries; and governance mechanisms (the establishment modes and ownership strategy, subsidiary autonomy and the use of home country expatriates for transferring knowledge from the headquarters and controlling foreign subsidiaries). A range of objective and subjective indicators are used to measure subsidiary performance. Yet, the research shows a lack of broader integration of theories and presents inconsistent theoretical predictions, inconclusive empirical findings and estimation bias, which hinder our understanding of how the determinants independently and jointly shape the performance of foreign subsidiaries.

This study provides a comprehensive, nuanced and systematic review that synthesizes and clarifies the determinants of subsidiary performance, offers deeper insights from both theoretical, methodological and empirical aspects and proposes some promising avenues for future research directions.

The purpose of the study is to determine the local antecedents of subsidiary participation in global services and, subsequently, the impact on local performance.

The study is based on a survey with the local subsidiaries of 14 manufacturers engaged in global services as part of their servitisation strategy.

Findings show support for considering the local ability for global services as an antecedent for local subsidiary participation in global services and the local service performance as an outcome. In addition, the results reject our hypotheses related to the specific roles of local opportunity and motivation for global services.

This study provides novel insights on the global service operations of manufacturers by highlighting the perspective of subsidiaries engaged in the local service delivery and development of global services. This perspective sets the conditions of the global-local collaboration in the context of global service strategy with local service delivery.

Parent companies usually control a subsidiary’s operations and decision-making processes and policies. This study highlights how subsidiary research and development (R&D) contributes to a parent company’s global strategy formulation in the context of changes in the integrated responsiveness framework and transnational models.

We conducted an interview survey with 149 companies in Japan, of which 92 engaged in R&D activities. Ten companies, 9 R&D managers, and one managing director of different industrial companies were selected.

We identified four cases of how R&D subsidiaries incorporate their requirements into global strategies in the context of changes. Four methods of integrating R&D subsidiaries’ strategies with the parent company are explained. Further, we show that global strategy formulation should not be restricted to headquarters, as dilemmas occur within competing departments in the subsidiaries, which negatively impact innovation and performance. Digital transformation suggests the potential of a new subsidiary management model—the “silent headquarters”.

We failed to discuss how headquarters’ R&D is implemented in strategy formulation. This is because the interview survey was conducted from the perspective of how subsidiary R&D is involved in integrated strategy formulation. Additionally, we did not investigate the actual performance achieved by integrated and non-integrated R&D organisations. Problems faced by subsidiaries in other locations, other departments within the subsidiary country, and the solutions to these problems, should be addressed in future research.

The practical implications of our findings relate to subsidiary-country relationships, inter-facility competition, and global strategy formulation. Active involvement of subsidiary R&D in strategy formulation, considering local requirements, can enhance subsidiary location advantages. Integrated strategies focused on global customers may overlook subsidiary R&D strengths and hinder innovation due to internal dilemmas and competition. Strengthening subsidiary R&D involvement and considering local context can promote innovation and flexibility beyond meta-national management. The concept of Silent HQ is suggested, reducing duplication and coordination issues through delegation and digital transformation.

The implication was from the findings pertain to global strategy formulation after organisational integration, which was not previously elucidated by the transnational management and meta-national management models. It was clarified the existence of four cases for subsidiary R&D involvement in strategy formulation from the perspective of subsidiary R&D activities, addressing the difficulty of explaining the penetration of single strategy management to subsidiaries through integration alone. We revealed that there are the entire, apparent, moderate, and quiescent integration cases of R&D strategies from the perspectives of global integration strategy and the subsidiary country’s adaptation and that considering subsidiary R&D involvement models in global strategy formulation is important for maximising the performance of R&D subsidiaries in MNCs.

This study provides useful insight into the importance of centralisation to enhance performance. It addresses the research gap in the global strategy formulation process by R&D subsidiaries. R&D leaders at subsidiary levels strike a balance between global considerations and the host country. This concerns the need for initiative and value proposition to their local customers, combined with the operation of a transnational model. The findings clarify how high-performing subsidiary R&D leaders can engage in parent company strategy formulation.

This study examines the effects of formal institutional distance (ID) on the foreign subsidiary global mandates (i.e. the subsidiary value-added role in terms of research and development (R&D), product management and supplying of inputs to the multinational enterprise (MNE) globally). Furthermore, it examines the mediating role of subsidiary autonomy for innovation in the relationship between formal ID and subsidiary global mandates.

Survey evidence from foreign subsidiaries in a remote developed economy, i.e. New Zealand, is obtained. Formal distance is measured based on the worldwide governance indicators (WGI), and the hypotheses are tested using structural equation modeling.

Results show that the direct link between formal ID and subsidiary global mandates is negative. However, autonomy for innovation as a mediator offsets this negative relationship, showing a positive mediating effect between formal ID and subsidiary global mandates.

This study extends research on foreign subsidiaries and their value-added roles in the MNE. We show the differentiated role of formal ID and indicate a contingency showing how the negative influence of formal ID on subsidiary global mandates can be offset. The inconsistent mediation of autonomy for innovation suggests that the concept of ID is multifaceted and complex, in contrast to the popular view that ID has only negative implications. Drawing upon evidence from a remote, developed economy and secondary data sources, we suggest how MNEs may positively use their formal ID with their subsidiaries.

Research on the political connections of multinational enterprises’ (MNEs’) subsidiaries in emerging host countries has been growing. The purpose of this paper is to integrate institutional and resource dependence theories to argue that MNEs-subsidiaries are likely to develop fewer formal (i.e. board-level) political connections when operating in welfare-state monarchies as compared to in host countries with developmental-state democratic systems. Furthermore, this paper argues that MNE-subsidiaries develop formal political connections to a greater extent in industries where religion influences the development of products and services considerably. Finally, the extent of developing formal political connections varies by the scale of the MNEs’ investment (or subsidiary density) in the host market.

The paper tests its hypotheses on a sample of foreign-owned subsidiaries operating in Saudi Arabia and Egypt. The data was collected by combining information from Bureau Van Dijk’s Orbis database with company websites and other secondary sources. The final sample consisted of 156 observations – 70 MNEs-subsidiaries operating in Saudi Arabia, and 86 in Egypt.

The findings confirm that foreign subsidiaries are likely to develop fewer formal political connections in a welfare-state monarchy as compared to in a developmental-state democratic system. Furthermore, formal political connections are more significant in industries that are impacted by the influence of religion – such as the financial industry in Arab countries. Finally, the extent of using political connections varies by the scale of the MNEs’ investment in the host market – that is, with a greater scale of investment (or higher subsidiary density), formal political connections are greater.

The paper contributes theoretically by explaining that a combination of institutional heterogeneity and its associated resource dependence conditions between MNEs and host governments influence MNE-subsidiaries' political connections. The paper tests its hypotheses in an emerging Arab context, which is characterized by both autocratic and semi-democratic political settings, and which makes the integration of institutional and resource dependence theories useful in explaining how MNE-subsidiaries navigate local complexities in this region.

The purpose of this paper is to study the relationship between subsidiary manager’s demographic characteristics and performance, while incorporating the subsidiary context. We draw upon upper echelon theories and International Business theories to understand this relationship.

Using a dataset based on listed Multinational subsidiaries in India we use linear regression to establish the relationship between subsidiary external performance (host market performance), subsidiary internal performance and subsidiary manager’s demographic characteristics.

With our data set we find a positive relationship between percentage of host country nationals (HCN) in the Top Management Team (TMT) and subsidiary host market performance and that subsidiary age moderates this relationship. We also find an inverted U-shaped relationship between parent country nationals (PCN) tenure and subsidiary performance.

One of the limitations is that our study views the strategy process through the Upper Echelons (UE) theory lens, as a clearly specified planning process that associates strategy with intentionality. The opportunity that emanates at lower levels can turn an intended strategy into something different than what was started.

The findings in this paper can be the basis for decision making on the constitution of leadership teams.

There is a dearth of empirical evidence and studies on TMTs in the subsidiary, particularly from the non-North American context. Using a unique data set of listed multinational subsidiaries in India, the paper explores the impact of TMT demographics such as tenure of the TMT and age of the subsidiary operations on the performance of the subsidiary.

This study examines how the characteristics of innovation knowledge exchanged among affiliate firms affect the ownership strategies adopted for their foreign subsidiaries.

This study employs a cross-classified multilevel model to examine a sample of 185 Korean manufacturing affiliates derived from 49 Chaebols engaged in international diversification, along with their 1,110 foreign manufacturing subsidiaries.

While exploratory innovation knowledge exchange lowers the affiliate's level of ownership in its foreign subsidiary, exploitative innovation knowledge exchange rather increases the affiliate's level of ownership in its foreign subsidiary.

This study advances the literature on intrafirm knowledge exchange by highlighting it as a determinant of ownership strategies. The study further shows that the characteristics of knowledge exchanged at the affiliate level not only determine the ownership structure but also have the potential to shape the direction in which the subsidiary develops its competencies.

This study has practical implications for the managers of business group affiliates. The results suggest that managers should adapt their ownership strategies according to the type of knowledge exchanged at the affiliate level to achieve a balanced and synergistic effect on intraorganizational knowledge exchange.

Previous studies have extensively explored the performance implications related to knowledge exchange. However, there is a notable gap in understanding the mechanisms through which the value of knowledge transferred within an affiliate is realized. To address this gap, this study focuses on ownership strategy as a crucial factor and empirically examines how the characteristics of innovation knowledge exchanged among affiliate firms influence the ownership strategies adopted for their foreign subsidiaries. By investigating this relationship, this study provides valuable insights into the complex dynamics of knowledge exchange and its effect on ownership decisions within business group affiliates.

This study aims to explore how subsidiary capabilities collectively configure for performance. Additionally, it seeks to examine whether these configurations of capabilities can provide equifinal solutions through developing a comprehensive research framework that focuses on subsidiaries in China.

With a data set collected through a questionnaire from 172 Korean multinational enterprises (MNEs) in China, this study used a fuzzy-set qualitative comparative analysis to detect the capability conditions and configurations. These configurations represent combinations of various subsidiary capabilities linked to high performance.

This study identified several complex pathways with distinct configurations for high subsidiary performance. The findings demonstrate the importance of configurations over individual conditions. Thus, the results highlight that the effectiveness of diverse capabilities, which are widely believed to singularly contribute to the high performance of MNE subsidiaries, depends on how each combines with other capabilities. Overall, the findings provide a richer and fine-grained understanding of the role and relative importance of various forms of MNE subsidiary capabilities and how the joint effect of these subsidiaries contributes to high performance.

This study suggests that MNE managers should comprehensively understand how subsidiary capabilities are configured to produce subsidiary performance outcomes. This specifically illustrates the importance of understanding the mutually conflicting yet collectively exhaustive results of multi-selective solutions and aims to align with China’s industrial and regional heterogeneity.

By examining the role of MNE subsidiary capability configurations, which may collectively influence the subsidiary’s performance, this study contributes to the literature. It elucidates how MNE subsidiaries may achieve superior performance by developing and possessing various capabilities tailored to the local context.

This research aims to provide a new perspective on the evolving linkages between LAs and FSAs in the context of the technology-based manufacturing industry. Firm-level competitive strengths in an international context build upon the combination of (largely) exogenous location advantages (LAs) and endogenous firm-specific advantages (FSAs). The authors focus especially on the decay of LAs over time, which has been observed in many highly developed countries during the past decades. The authors show how the strengthening of FSAs can substitute for decaying LAs, thereby safeguarding against the demise of entire industrial regions.

The authors examine the technology-based manufacturing industry in Belgium, building upon an analysis of survey responses by 66 firms including a subgroup of 26 multinational enterprise (MNE) subsidiaries. The professional association representing this industry in Belgium (Agoria) viewed the firms included in the survey as representative for Belgian technology-based manufacturing in terms of the LAs they presently build upon (or location disadvantages they face) and the internal strengths they command relative to (foreign) rivals. The investigation uncovered the decay of critical LAs in Belgium and in parallel, the rise of ‘compensating’ FSAs of Belgian operations relative to foreign firms, including, especially, MNE sister subsidiaries in other countries. The authors also conducted 23 in-depth interviews with senior level managers (CEOs and senior vice presidents) of technology-based firms, including 10 subsidiaries of foreign-owned MNEs, which validated our analysis of the interplay between LAs and FSAs.

The findings reveal that since inception, Belgian manufacturing operations experienced an overall decay in their critical LAs by 23% on average. Despite this, several Belgian subsidiaries of foreign MNEs consider themselves as commanding a resource-base superior to that of the next-best-in-class subsidiaries. Furthermore, when assessing the dynamic interplay between LAs and FSAs, there is some evidence that the decay of LAs fueled the quest for – and firm-level journey toward – stronger FSAs.

The originality of this study is the alternative perspective to the conventionally assumed “positive-positive” relationship between LAs and FSAs. Prior management research has not examined the impact of decaying LAs on new FSA-creation in the realm of technology-based manufacturing.

Research examining the joint role of serial acquisitions and subsidiary autonomy in holistic value provision within servitizing industrial firms is scarce. Thus, this paper aims to investigate the role of serial acquisition and subsidiary autonomy in providing value within servitizing industrial networks.

A conceptual framework is developed based on the case study of a large Swedish industrial group specializing in selling industrial products and providing industrial solutions to business customers through its numerous subsidiaries.

The analysis of 14 interviews with the five subsidiaries and seven customer firms and secondary data reveals interesting findings concerning the role of serial niche acquisition strategy and subsidiary autonomy in customer value provision in servitizing organizations. In particular, the authors find that the role of acquisitions in industrial firms extends beyond growth to customer sensing and proximity. Likewise, the authors find that subsidiary autonomy facilitates value provision to customers in industrial networks.

The paper provides a more nuanced understanding of how serial acquisitions and subsidiary autonomy are intertwined and jointly affect industrial firms’ value provision activities amidst the servitization transition in an intraorganizational network.