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Article
Publication date: 5 May 2020

Roger Schweizer, Katarina Lagerström and Johan Jakobsson

The article aims to explain how the drivers of subsidiary evolution influence a multinational company's (MNC) research and development (R&D) subsidiary's evolution over time.

Abstract

Purpose

The article aims to explain how the drivers of subsidiary evolution influence a multinational company's (MNC) research and development (R&D) subsidiary's evolution over time.

Design/methodology/approach

The article draws on insights from a longitudinal comparative case study of three Swedish MNCs' Indian R&D units.

Findings

The study shows that the evolution of R&D units is a triangular showdown among headquarter assignments, local market constraints, and opportunities, and that subsidiary choice is an important driver of both mandated extension and stagnation. We summarize our findings in various propositions that emphasize different drivers over time and that highlight the strong impact of a subsidiary's understanding of the corporate immune system on the evolution of that subsidiary's R&D mandate.

Research limitations/implications

Drawing on the common limitations of a case study approach, further research is needed to test the suggested propositions with larger samples, ideally with subsidiaries in other emerging and developed markets.

Practical implications

The study illustrates the risks involved for subsidiary managers when pushing an R&D mandate-related initiative too far and provoking the corporate immune system. For headquarters management, the study highlights the importance of understanding that the development of R&D competence and capability at a subsidiary cannot be guided solely by headquarter assignments and local market characteristics; rather, the subsidiary's initiatives also need to be considered.

Originality/value

The study contributes to the literature on R&D internationalization by showing how the drivers of subsidiary evolution influence a subsidiary's R&D mandates over time and that subsidiary choice is an important driver of both mandated extension and stagnation.

Details

Cross Cultural & Strategic Management, vol. 27 no. 3
Type: Research Article
ISSN: 2059-5794

Keywords

Article
Publication date: 14 January 2014

Sergey Filippov and Geert Duysters

Management of subsidiaries of multinational companies and subsidiary evolution have emerged as important topics in the international business literature. This strand of literature…

Abstract

Purpose

Management of subsidiaries of multinational companies and subsidiary evolution have emerged as important topics in the international business literature. This strand of literature on multinational subsidiaries has provided the necessary analytical models and research tools to study the phenomenon. Nonetheless, while many studies exist on the roles, strategies and evolutions of subsidiaries, and despite its high importance, this area of academic research is still lacking critical mass. Moreover, the extant studies have been conducted in the context of advanced economies, and yet it has been under-researched in the context of emerging economies, and particularly the economies of Eastern Europe, the so-called new EU member states. The study of the phenomenon of subsidiary evolution is the main aim of this paper.

Design/methodology/approach

The paper makes use of a proprietary dataset, collected in a self-administered web-based survey conducted among foreign-owned companies in Czech Republic, Hungary and Poland. To test the interrelations between different variables, the paper uses the structural equitation modelling, an advanced technique that allows to account for multiple interdependencies in a model. This approach enables the authors to escape the rigid division between dependent and independent variables, inherent to most conventional econometric models. In the paper, three analytical structural equation modelling (SEM) models were developed, tested and compared.

Findings

The empirical analyses show a strong positive relation between the main drivers of subsidiary evolution and the key outcomes of this process. It shows that the tenets of the theory originally developed to describe strategic behaviour of subsidiaries in advanced Western countries, broadly holds for emerging economies too. Moreover, the paper shows that subsidiaries operating in dynamic environments and led by pro-active subsidiary management achieve better results.

Research limitations/implications

The study has its limitations. It is of quantitative nature, whereby the most common feature and characteristics of the research object are studied. Despite the convincing results, the phenomenon of subsidiary evolution can be further investigated in a number of case studies in a dynamic perspective, where specific details may come under the spotlight. On the other hand, such results cannot be easily generalised.

Originality/value

This study contributes to the extant body of academic literature on subsidiary evolution. The main contribution comes from investigation of this complex phenomenon in the context of emerging economies of new EU member states. Their transitionary dynamics and transformative change have had a profound impact on the functioning of economic agents and foreign subsidiaries in particular. The paper finds important particularities of this context.

Details

International Journal of Emerging Markets, vol. 9 no. 1
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 29 March 2021

Johan Jakobsson, Katarina Lagerström and Roger Schweizer

While the evolution of subsidiaries has received considerable research attention, the framework for understanding it has not evolved much since the late 1990s. The purpose of this…

Abstract

Purpose

While the evolution of subsidiaries has received considerable research attention, the framework for understanding it has not evolved much since the late 1990s. The purpose of this paper is to add both clarity and depth to the work on the foundations for – as well as the processes of – capability creation and development as a subsidiary evolves.

Design/methodology/approach

This conceptual paper takes as its point of departure the micro-foundation literature, with a specific emphasis on the capability development literature. To describe capability creation and development, both the resource-based view and the resource management perspective are used here.

Findings

The paper adds a conceptual layer to the drivers of subsidiary evolution. To add further clarity regarding how capabilities are actually formed, the resources for capability creation and development are specified herein as entities, abilities and capacity. Arguments are also presented for why capabilities ought to be viewed as patterned behavior to decrease the terminological ambiguity surrounding the concept of capabilities. The process of capability creation and development with an emphasis on learning is brought forward. Further, capability typologies, in terms of substantive, managerial and dynamic capabilities, are presented to add specificity to the kinds of capabilities that are created and developed within a subsidiary.

Originality/value

Clarifying the concept of capability and how capabilities are formed by using advancements in the literature is important to add precision to the literature on the evolution of subsidiaries.

Details

Review of International Business and Strategy, vol. 31 no. 2
Type: Research Article
ISSN: 2059-6014

Keywords

Article
Publication date: 11 January 2011

Kyung‐Tae Kim, Seung‐Kyu Rhee and Joongsan Oh

The purpose of this paper is to investigate the strategic role evolution of client‐following local subsidiaries of foreign automotive parts suppliers in China.

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Abstract

Purpose

The purpose of this paper is to investigate the strategic role evolution of client‐following local subsidiaries of foreign automotive parts suppliers in China.

Design/methodology/approach

The units of analysis are five local subsidiaries of foreign automotive parts suppliers dealing with Beijing Hyundai Motor Corporation in China; a case study methodology based on interviews with managers of the subsidiaries was employed.

Findings

First, a modified version of Ferdows's model can be utilized to aptly analyze the strategic role changes of subsidiaries of foreign automotive parts suppliers which have followed their major client into the emerging market. Second, the development of a subsidiary's functional capabilities varies from subsidiary to subsidiary, depending on the headquarters' (HQ) global strategy and the nature of its interactions with external players. Third, the strategic role evolution of a subsidiary is critically influenced by the levels of its functional capabilities. Finally, the mechanism for a subsidiary's strategic role evolution can be explained by the interactions of three critical factors: the task assigned by HQ, the subsidiary's choice, and the local environment.

Research limitations/implications

The external validity of this case study is yet to be verified and the possible gaps in perceptions between the subsidiary and the HQ have not yet been addressed. This is the first case study to address the strategic role evolution of client‐following subsidiaries of automotive parts suppliers.

Practical implications

This study presents the HQ with a framework for role assignments and a checklist for planning the development of a subsidiary's capabilities.

Originality/value

This is the first paper to investigate the strategic role evolution of local subsidiaries of foreign automotive parts suppliers in the emerging market, and it finds critical factors affecting capability development, which in turn shape the subsidiary's process of role evolution.

Details

International Journal of Operations & Production Management, vol. 31 no. 1
Type: Research Article
ISSN: 0144-3577

Keywords

Article
Publication date: 1 April 2003

Georgios I. Zekos

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some…

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Abstract

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

Details

Managerial Law, vol. 45 no. 1/2
Type: Research Article
ISSN: 0309-0558

Keywords

Book part
Publication date: 20 October 2011

Filip De Beule

Purpose – The purpose of this chapter is to analyse the evolution in the local, global and multinational network embeddedness of foreign subsidiaries in ChinaMethodology – The…

Abstract

Purpose – The purpose of this chapter is to analyse the evolution in the local, global and multinational network embeddedness of foreign subsidiaries in China

Methodology – The study focuses on Sino-Belgian subsidiaries in China. Factor analysis was used to determine the local responsiveness, global integration and multinational network embeddedness of firms. Next cluster analysis was carried out to classify groups of subsidiaries, while ANOVA analysis assessed their different characteristics.

Findings – Although most firms remain the same type of subsidiary throughout the period of 1995–2005, the most prevalent trajectory of strategic evolution by multinational subsidiaries in China is by increasing the integration in the multinational network before gaining more local embeddedness towards a more active role within the multinational network.

Research implications – Changes in the strategic setting and operations of MNEs occur over time because of the dynamic patterns and changing interactions of firm- and country-related factors and policies, especially when the host economy is involved in a rapid transformation process, such as China. Further research could focus on the determinants of strategic evolution.

Originality – This is one of the first chapters to analyse the changing roles of subsidiaries, in particular in an emerging economy.

Details

Entrepreneurship in the Global Firm
Type: Book
ISBN: 978-1-78052-115-2

Keywords

Article
Publication date: 28 September 2018

Katarina Lagerström, Roger Schweizer and Johan Jakobsson

The purpose of this paper is to contribute to the literature discussing the internationalization of research and development (R&D) among multinational companies by proposing a…

Abstract

Purpose

The purpose of this paper is to contribute to the literature discussing the internationalization of research and development (R&D) among multinational companies by proposing a process description to capture the development of local R&D capabilities in subsidiaries.

Design/methodology/approach

The authors build the conceptualization not only on the prevailing literature on resource management, subsidiary evolution and subsidiary initiatives, but also on empirical observations.

Findings

A process in four phases is distinguished to describe the evolution of R&D capabilities in subsidiaries: the identification of an opportunity in the host country that triggers the establishment of local R&D capabilities; the gathering of support – from the host country and from MNC internally – and resources; the bundling of the resources to build capabilities; and finally the leveraging of the capabilities.

Research limitations/implications

By offering a conceptualization of the process through which subsidiaries build R&D capabilities, the authors contribute to the literature on R&D internationalization that hitherto has neglected the central role played by subsidiaries and the fact that a subsidiary needs to develop and manage resources and capabilities to change its R&D related role and/or mandate within the MNC.

Originality/value

By providing a process perspective on MNCs internationalization of R&D focussing on the development and management of R&D capabilities at subsidiaries, the paper adds a more dynamic dimension to the previously rather static view on R&D internationalization.

Details

Multinational Business Review, vol. 27 no. 1
Type: Research Article
ISSN: 1525-383X

Keywords

Article
Publication date: 31 March 2021

Nina Magomedova, Fariza Achcaoucaou and Paloma Miravitlles

The aim of this study is to explore the drivers of the evolution of a subsidiary’s strategic role from an ordinary subsidiary into a springboard subsidiary in multinational…

Abstract

Purpose

The aim of this study is to explore the drivers of the evolution of a subsidiary’s strategic role from an ordinary subsidiary into a springboard subsidiary in multinational corporations, paying special attention to the role of subsidiary management in this transformation.

Design/methodology/approach

The authors apply a case study methodology to analyse the transformation of three Spanish subsidiaries of European multinational companies into springboard subsidiaries to pursue opportunities in the Latin American region.

Findings

The results present evidence that the development of a springboard subsidiary’s role is influenced by a set of preliminary factors that include: (1) the coincidence of a favourable economic change in the target region of expansion and unfavourable market conditions in the springboard subsidiary’s home market; (2) location-specific advantages of a subsidiary that allow it to develop unique capabilities, such as the ability to reduce the psychic distance between the headquarters and target region, to balance intra-regional conflicts within the target region, and to effectively transfer knowledge from the headquarters to the target region; and (3) micro-political headquarters-subsidiary negotiation processes as a result of the subsidiary’s strong initiative, peculiarities of the structure of a multinational company, and a strong dependency of the headquarters on the subsidiary’s unique capabilities.

Originality/value

The study contributes to the International Business literature by providing an in-depth analysis of the evolution of springboard subsidiaries and explaining how ordinary subsidiaries located in saturated markets can trigger organisational change and achieve the extension of their strategic role.

Details

Management Decision, vol. 60 no. 5
Type: Research Article
ISSN: 0025-1747

Keywords

Open Access
Article
Publication date: 27 September 2023

Niall O'Riordan, Paul Ryan and Ulf Andersson

The authors’ contention in this paper is that the expression of subsidiary strategy in IB literature has become fragmented and incomplete. Therefore, this study aims to propose a…

Abstract

Purpose

The authors’ contention in this paper is that the expression of subsidiary strategy in IB literature has become fragmented and incomplete. Therefore, this study aims to propose a rethink on how IB scholarship approaches the important issue of subsidiary strategy by holistically examining the discrete and integrated set of activities, choices and decisions that constitute the subsidiary strategy process for, in this context, assuming a competence-creating role within the multinational enterprise (MNE).

Design/methodology/approach

A conceptual model is designed to illustrate the holistic process of subsidiary strategy from assigned to assumed role and how a subsidiary can navigate a pathway to elevated performance and survival.

Findings

The paper identifies the key integrated elements that constitute a holistic strategic process that can enhance a subsidiary’s standing within the MNE and maximise its survival prospects.

Research limitations/implications

Particular focus is placed on subsidiaries that strategise to advance their internal corporate role to competence creator via upgraded knowledge capabilities.

Originality/value

This paper offers a roadmap for IB scholars to contribute to a future discourse around the subsidiary strategy process for assuming a competence-creating role.

Details

Multinational Business Review, vol. 31 no. 4
Type: Research Article
ISSN: 1525-383X

Keywords

Article
Publication date: 15 July 2014

Yen-Chen Ho

The purpose of this paper is to argue that multilateral knowledge transfer emerges from two lines of thinking in the international business (IB) literature – the exploitation of…

Abstract

Purpose

The purpose of this paper is to argue that multilateral knowledge transfer emerges from two lines of thinking in the international business (IB) literature – the exploitation of multinationality and the contributory role of subsidiaries – and links three levels of analysis – headquarters, knowledge-creating subsidiaries and host-country environments.

Design/methodology/approach

Multilateral knowledge transfer, both vertical and horizontal, is considered in this paper as a cross-level phenomenon that emerges as a result of beneficial interdependencies between headquarters, knowledge-creating subsidiaries and their host-country environments. The paper also discusses the concept of embeddedness, which both lines of thinking draw upon, and argues that the multinational enterprise (MNE) headquarters can actually moderate both internal and external embeddedness through global strategy and organizational design.

Findings

By putting forward an integrative cross-level interdependency framework that incorporates insights from the R&D internationalization literature and the subsidiary evolution literature, this paper delineates multilateral knowledge transfer as an MNE strategy to systematically transform and integrate knowledge created at the subsidiary-level for the global competitive advantage at the MNE group-level.

Originality/value

Such a perspective reemphasizes the multi-level nature of IB studies and provides new opportunities for theoretical and empirical development as did the internalization theory which has theorized the conventional headquarters-to-subsidiaries knowledge transfer more than 40 years ago.

Details

The Multinational Business Review, vol. 22 no. 2
Type: Research Article
ISSN: 1525-383X

Keywords

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