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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…

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

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Article
Publication date: 6 July 2021

Fabienne Chedid, Canan Kocabasoglu-Hillmer and Jörg M. Ries

The importance of the supply network to firm performance is well documented. Until now, the firm and its suppliers have been conceptualized as single entities. Yet…

Abstract

Purpose

The importance of the supply network to firm performance is well documented. Until now, the firm and its suppliers have been conceptualized as single entities. Yet, multinational corporations (MNCs) are composed of a complex, geographically dispersed internal network of subsidiaries. The supply and internal networks are inherently linked. The purpose of this study is to investigate the impact of the interaction of these networks on firm-level financial performance.

Design/methodology/approach

Building on supply network, internal network and dual embeddedness research, the authors investigate the interaction of these networks using supply network data from FactSet and internal network data from Orbis. We assess the impact at the MNC level, using measures of firm-level financial performance, physical proximity between the two networks and geographic dispersion of the internal network.

Findings

The results show that the performance effect of physical proximity of the firm with its supply network is negatively moderated by the geographic dispersion of the firm's internal network. This effect can be traced back to the diminishing marginal profitability of a firm's assets. Moreover, the benefits of dual embeddedness to the individual subsidiary come at a cost at the firm-level due to the operational challenges of managing a complex subsidiary network.

Research limitations/implications

This study is the first to investigate the supply and internal networks of MNCs simultaneously.

Originality/value

The paper extends supply network literature by considering the internal network of the focal firm and its suppliers. This paper is one of the first studies that offer an understanding of the interaction between supply and internal networks of a focal firm and the effect on financial performance.

Details

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

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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…

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

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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…

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

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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.

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

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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…

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

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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

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

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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

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

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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

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Article
Publication date: 30 March 2012

Marty Reilly, Pamela Scott and Vincent Mangematin

Subsidiary units must respond to emerging threats including disaggregation of value chains and increased headquarters monitoring and control which have led to a cycle of

Abstract

Purpose

Subsidiary units must respond to emerging threats including disaggregation of value chains and increased headquarters monitoring and control which have led to a cycle of subsidiary decline. The authors recognize the value of subsidiary initiatives as a short‐term response but argue that subsidiary long‐term survival and growth will depend on the unit's ability to align with its parent strategic activities and knowledge base through developing vertical embeddedness.

Design/methodology/approach

This research is part of an ongoing quantitative and qualitative study programme of Irish subsidiary operations of foreign MNCs. This paper integrates the authors' broader research to date including both in‐depth interviews within a focal case combined with a comprehensive review of the literature relating to MNC and subsidiary management in identifying how subsidiaries can respond to current challenges.

Findings

In contrast to the dominant view in the literature, this research found that subsidiaries can respond to emerging threats by integrating their activities and deepening their alignment with their parent operation. The authors identify three pillars in developing a strategy of alignment – strategic embeddedness or ensuring development of subsidiary strategy in line with headquarters stated objectives, relational embeddedness determined by trust relationships and a history of consistent subsidiary delivery and finally knowledge embeddedness facilitated through coalescent knowledge creation and collaborative effort in line with headquarters strategy and direction.

Research limitations/implications

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

Practical implications

Subsidiary managers need to be aware of how closer integration of unit activities with headquarters and the management of knowledge outflows can reduce the risk of relocation and better position subsidiaries for survival and growth. To date the emphasis on subsidiary initiative has overshadowed the benefits of aligning with headquarters strategy, a more feasible alternative for many subsidiaries which do not enjoy strategic independence.

Originality/value

By demonstrating the benefits of alignment with headquarters, this paper identifies a valuable alternative perspective to the predominant view in the literature that subsidiary survival is dependent on subsidiary initiative. Interesting insights into how alignment can be achieved are also provided. Capturing both the subsidiary and parent perspectives provides valuable insights.

Details

Journal of Business Strategy, vol. 33 no. 2
Type: Research Article
ISSN: 0275-6668

Keywords

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