Cooperative or Competitive Relationship Within the MNE: A Parent Subsidiary Study

Abstract

This study investigates how competition or cooperation are implemented strategically by the headquarters (HQ) to influence its subsidiaries’ behavior. In specific, we center our attention on the strategies MNEs consider for different internal configurations of competition or cooperation. Our main argument is that competitive or cooperative relationships are socially constructed and to discuss this we combine literature-based conceptual arguments with empirical observations on headquarters-subsidiary relationships. Our study demonstrates that cooperation or competition (whether headquarter-led or subsidiary-led) are manifestations of reward systems, mandates, and position systems. These important strategic and structural influencing factors explain how technologies are developed and how responsibilities are distributed across the organization. Hence, organizing sometimes for competition or sometimes for cooperation is challenging, yet very helpful, to headquarters addressing innovation capability development, to facilitate knowledge transfer and learning as well as to advance technological innovation.