Roles of foreign owned subsidiaries in a small economy

Abstract

This study explores the roles and characteristics of foreign owned subsidiaries in a small economy within a trading block. Four role types of foreign owned subsidiaries are identified: local satellite, truncated miniature replica, export platform, and the regional or world mandated hub. Evidence is provided on the sales focus of foreign owned subsidiaries in the Dutch electronics and electrical applications industry. We find that almost half of the foreign owned subsidiaries focus their sales on more markets than just the Netherlands. These subsidiaries use the Netherlands as an export base. They supply the European market with products that are produced in one location, instead of using multiple production plants. The results show that these subsidiaries with a non-European parent are relatively young and focus also on manufacturing activities.