The determinants of MNC subsidiary initiatives: implications for small business

Abstract

Since the importance of the subsidiary's role continues to increase, a growing number of studies have focused on MNC subsidiary strategies. The aim of this study is to explore the determinants of a subsidiary's initiative. Based on the subsidiary research's classification provided by Birkinshaw and Hood, an integrated framework is developed to examine the influences of three groups of variables on the subsidiary initiative, namely, the headquarters-subsidiary relationship, the subsidiary resources and the network characteristics of the subsidiary. Since previous studies have focused on subsidiary initiatives in developed countries, this study addresses the issue of MNC subsidiaries in developing countries. The present analysis of 67 European, US and Japanese MNC subsidiaries in Taiwan reveals that each of the three groups of variables influences the subsidiary initiative. Furthermore, in terms of individual variables, it is determined that procedural justice, a subsidiary's relative capabilities, and a subsidiary's local responsiveness all have a positive influence on the subsidiary initiative. Finally, because innovation is critical to small business's global strategy, this study discusses the implications of subsidiary initiatives for global strategy of small business and indicates potential directions for future research.