Marketing strategy antecedents of value adding by foreign subsidiaries

Abstract

PurposeThe purpose of this paper is to extend the knowledge of marketing strategy antecedents of industrial value adding in foreign markets. It attempts to answer the following two questions: how is the marketing strategy of a foreign subsidiary associated with the extent of its value‐adding activity? Is there an association between the extent of value‐adding activity and financial performance of the subsidiary?Design/methodology/approachA model is developed and hypotheses are tested. Data are collected from 191 subsidiaries of Swedish manufacturing firms in Germany, the UK, and the USA.FindingsProduct‐market breadth and market experience positively affect the extent of foreign value adding. Also, market experience has a moderating effect and strengthens the positive association between product‐market breadth and the extent of value adding. A foreign subsidiary's financial performance is positively associated with the number of value‐adding activities of the subsidiary.Research limitations/implicationsThe study shows that the marketing strategy of a foreign subsidiary needs to be acknowledged to understand the antecedents of foreign value‐adding activity. In addition, the extent of value‐adding activity contributes to the implementation of an effective international strategy.Practical implicationsAn industrial firm wanting to implement an effective international marketing strategy needs to pay attention to the links between the marketing strategy of a foreign subsidiary and the extent of the subsidiary's value‐adding activity.Originality/valueThe study is unique in that it applies a subsidiary perspective and focuses on foreign subsidiary strategy associations. The study both extends the common approach, which argues that the value adding of a foreign subsidiary is determined only by the corporate marketing strategy, and explores associations with foreign subsidiary performance.