Strategic development of the multinational subsidiary through subsidiary initiative-taking

Abstract

The view that subsidiary managers should be active in taking strategic initiatives beyond their mandate is challenging the traditional hierarchical view that MNC subsidiaries' roles should be tightly controlled. MNC subsidiaries operate in three markets—local, global and internal—and take initiatives in these markets which may develop, consolidate or defend their existing position. Their development initiatives need to add value to the parent organization and can lead over time to a strengthening of the subsidiary's contribution to and strategic significance within the corporation, although any such gains can also be lost. This article presents an eight-stage development model for MNC subsidiaries. Corporations will gain from encouraging initiative-taking in subsidiaries as this will allow full exploitation of the company's capabilities in increasingly decentralized multinationals. Subsidiary managers need to change their mindset from one of compliance to head office to proactive initiative-taking if they are to maximize their subsidiary's value to the parent corporation.