Subsidiary Strategy and the Role of the Subsidiary Manager : Integrating the Middle Manager Perspective

Abstract

Subsidiary strategy is a concept which has emerged in international business literature but research has so far failed to explain how subsidiary managers develop strategy under the constraints of the paradoxical pressures they face in today’s Multinational Enterprises (MNE). On the one hand current trends suggest that (MNE) are developing into more global business structures which are reducing the power and influence of subsidiary managers (Buckley, 2009, Buckley & Ghauri, 2004, Mudambi, 2008). The result of these trends, are that the market orientated aspects of subsidiary strategy are becoming constrained and to some degree taken out of the hands of the subsidiary managers. This is an important development on its own, but what makes it truly remarkable is that simultaneously there is a broad empowerment trend in management practice, through which subsidiary managers are being encouraged to act more entrepreneurially and to contribute knowledge and innovation to the entire MNE (Birkinshaw & Pedersen, 2009, Ghoshal & Bartlett, 1997, Verbeke, Chrisman, & Yuan, 2007). This creates a tension for subsidiary managers who are finding their choice of customers and markets increasingly constrained by MNE structural developments, while at the same time being pressurised by headquarters to produce initiatives (Birkinshaw, 1997, Williams, 2009) and develop subsidiary specific advantages (Rugman & Verbeke, 2001). Research needs to address how subsidiary management develop strategy while coping with these conflicting demands. The subsidiary is a unique context to study management processes relating to strategy but, so far, there has not been a coherent approach identifiable in the literature. It is recognised that subsidiaries evolve over time and through their own actions and initiatives have the potential to modify the power structures of the MNE and influence strategy from below (Andersson, Forsgren, & Holm, 2007) but little is known about the role of the subsidiary manager in this process. In reviewing the empirical and theoretical research on subsidiary management this article highlights how the tensions between the headquarters perspective and the subsidiary perspective have resulted in inappropriate frameworks being applied to the study of subsidiary managers. It has been recognised that subsidiary management are important drivers of subsidiary development, but their strategic approach to this process has not been studied in any great detail. To find out why this is the case, this article looks at the way in which literature on subsidiary management has evolved. Four over arching streams are discussed which leads into a more detailed analysis of the most recent literature. Special attention is also paid to the theoretical approaches, applied to subsidiary management literature. Finally, the paper highlights the main limitations which have stifled subsidiary management research, and proposes a promising avenue for future research, the middle manager perspective.