How interdependence affects subsidiary performance

Abstract

Interdependence across international operations may have important implications for the performance of the multinational corporation (MNC). While most theoretical considerations imply that interdependence benefits the corporation as a whole, its influence on subsidiary performance is not well understood. This study empirically examines interdependence at the subsidiary level and reveals new insights on how interdependence influences subsidiary performance. Data for the study are from 115 foreign subsidiaries of U.S.-based MNCs. The conclusions are: (1) interdependence is intrinsically multi-faceted and subsidiaries exhibit four distinct profiles of interdependence — lone stars, passive stars, dominant stars and constellation stars; (2) a mere high–low metric of interdependence, not accounting for the inherent differences across these interdependence profiles, is not associated with subsidiary performance; however, (3) the closer a subsidiary's interdependence “fits” with any one of the four identified profiles of interdependence, the more subsidiary performance is enhanced. This article discusses implications of these results for successfully managing MNCs.