A Dynamic Perspective on Subsidiary Strategy in China

Abstract

This research is about multinational enterprises and their subsidiaries abroad. The specific focus of the research is on the foreign subsidiaries’ local embeddedness, global integration and multinational networks. As these linkages vary among subsidiaries and across time, the focal interest of this study is the processes of subsidiary strategic evolution. On the basis of a longitudinal survey of subsidiaries in China, the results show that most subsidiaries in China start as a quiescent-type of firm, which is clearly a stepping stone towards other more strategic roles as quiescent subsidiaries move out of this category towards autonomous-type or confederate-type firms and eventually active-type subsidiaries. The most prevalent trajectory of strategic evolution by multinational subsidiaries in China is by increasing the liaisons in the multinational network before gaining more local embeddedness towards a more globally active role for the foreign subsidiary. This is in contrast to previous research which found strategic evolution towards the quiescent-type firm in more developed economies. It is suggested that this contradictory result is linked to the emerging economy status of China, which still allows for much strategic progress to be made by foreign affiliates.