Foreign Subsidiary Management in the Contemporary Multinational Enterprise

Abstract

As multinational enterprises (MNEs) expand into foreign markets that are not only heterogeneous but also change in an unsynchronized manner, the locus of strategic decision-making increasingly lies with foreign subsidiaries as a means of coping with complex multinational operations. However, although this shift towards more subsidiary autonomy seemingly represents a key building block of contemporary MNE strategy, existing international business literature offers little theoretical clarity regarding when an MNE’s headquarters will increase levels of autonomy over foreign subsidiary strategic decisions. Moreover, while prior research highlights increased decision-making autonomy as a key driver of subsidiary performance outcomes, several studies point to efficiency- and agency-based problems associated with higher levels of autonomy. Following the predominance of subsidiary-focused research in international business studies over the last two decades, the aforementioned issues have resulted in scholarly calls to better our understanding of foreign subsidiary management by MNE headquarters and more generally revisit the role of MNE headquarters in subsidiary success. Accordingly, this dissertation aims to propel a more coherent and contextualized understanding of these interrelated and pressing issues, thus advancing theory of MNE strategy and structure. I submit three essays towards that end. Specifically, essay one leverages existing empirical evidence to conduct a meta-analysis of foreign subsidiary autonomy determinants, focusing on theoretically relevant conditions shaping the headquarters’ inclination to increase subsidiary autonomy. Essay two offers a more nuanced, contextualized theory of the outcomes of subsidiary autonomy by demonstrating that subsidiaries can innovate without autonomy in specific contextual settings. Finally, essay three assesses the role of the MNE headquarters, relative to other classes of explanatory variables, to explaining foreign subsidiary performance differences. The result of these efforts is a more lucid theory of global MNE strategy and structure.