‘After-Care’ Service Provision and Repeat Investment

Abstract

Inward investment promotion agencies (IIPAs) need to expend effort and resources in nurturing and ‘looking after’ established multinational enterprise (MNE) operations within their location. Location experience considerations suggest that these are the firms likely to engage in repeat investment. IIPA efforts in winning repeat investment through the provision of ‘after-care’ service has become an integral part of ‘looking after’, embedding and upgrading existing MNE operations in a location. MNE subsidiaries, by signalling to headquarters, play a significant role in initiating investment in the development and expansion of its own resources and capabilities. In taking a subsidiary perspective, this study examines the perceptions of 356 foreign MNE subsidiaries, on the provision of ‘after-care’ service by Australian governments and their IIPAs. Drawing on the resource-based view (RBV) of the firm, the study found discernible differences among the perceptions of foreign subsidiaries operating in Australia depending upon their size and years of operation. The results suggest that if governments and their IIPAs are to embed and potentially upgrade foreign subsidiaries within their domain, they need to consider the different ‘after-care’ needs of foreign subsidiaries, based on size and age. Larger and older subsidiaries were viewed more favourably compared to small- and medium-sized enterprises (SMEs) and more recently established subsidiaries with regard to the provision of ‘after-care’ services. Theoretically, the results confirmed the RBV of the firm that argues that larger firms are able to exploit their size to gain more resources. Thus, a policy of discrimination in the provision of ‘after-care’ service to help support SMEs and recently established ‘younger’ foreign MNEs to engage in future upgrades of subsidiary operations needs to be supported. This will ensure a more sustained competitiveness of locational advantages in Australia across a range of industries.