Subsidiaries Of Corporations Research Articles

Local initiatives and global regimes – Multi-scalar transition dynamics in the chemical industry

The breaking with regime logics is one of the key leverage points to enable a socio-technical transition. Understanding how, and under what conditions, this may happen is thus an important task for transition studies. Recent research on socio-technical regimes has shown that they may be less geographically bound than previously assumed. Regimes may instead be replicated and reinforced globally through networks of multi-national companies (MNCs), international interest organizations, and other actor groups. This paper studies the dynamics of such multi-scalar transitions by focusing on the interrelation of local sustainability initiatives and global regimes. Using the case of the chemical industry, we illustrate how sustainability initiatives taken by a few subsidiaries of global corporations in Sweden are closely intertwined with the global regime and vice versa. We show that global regimes are locally embedded as well as globally institutionalized and that sustainability initiatives must therefore challenge both, highly institutionalized local as well as global socio-technical configurations at once. Four main multi-scalar transition dynamics are identified; institutional contradictions, internal competition, inadequate networks, and inconsistent aims and expectations. Each of these dimensions contributes to shaping pathways for local transitions in industries that are dependent on developments outside their immediate boundaries.

Sending expats or hiring locals? The impact of communication barriers on foreign subsidiary CEO staffing

Communication between headquarters (HQs) and foreign subsidiaries of multinational corporations (MNCs) is crucial for coordination, control, and knowledge transfer, but language barriers and geographic distance impede this exchange. Hypothesising that MNCs react to these hurdles by appointing subsidiary top managers with adequate communication skills, we investigate how the native language barrier, foreign language barrier, and geographic distance between HQs and a foreign subsidiary influence the choice between parent and host/third country nationals as subsidiary CEOs. Testing our hypotheses on a sample of 101 staffing decisions made by German firms in 33 countries, we find a negligible effect of the native language barrier, but establish that a foreign language barrier enhances and higher geographic distance lowers firms' propensity to staff subsidiary CEO positions with parent country nationals. An MNC's international experience was found to moderate these relationships.

A Comparison of Contemporary Human Resource Management and Employment Relations Practices of Japanese and US Multinational Corporation Subsidiaries: Evidence from Four Countries

This paper compares Japanese and US multinational corporations (MNCs) on their deployment of human resource management (HRM) and employment relations (ER) practices within four countries. Debate about convergence is used to reconcile findings. The context is the shift from the dominance of the Japanese economy in the 1980s and early 1990s towards the renewed dominance of the US economy in more recent decades. We draw on data from representative, parallel surveys of MNCs operating in Canada, the UK, Spain and Australia to test a set of hypotheses examining similarities and differences between subsidiaries of Japanese and US MNCs in relation to management control across borders, remuneration, representation and worker involvement.The findings demonstrate that, despite the pressures of globalization, and the partial movement away from traditional Japanese management practices in Japan, there are clear country of origin effects for Japanese and American MNCs. Results indicate that Japanese and US MNCs behave differently in terms of the control that they exercise, with Japanese firms exhibiting a greater tendency to use personal forms of control in their foreign subsidiaries and a lower tendency to use procedural forms of control. In terms of HRM practices, Japanese MNCs are distinctive in relation to pay systems. For example, they are less likely than their US counterparts to use performance-related pay and, more likely, to adopt non-union representative structures in subsidiaries.In line with Kaufman (2016), we argue that the study’s findings provide evidence for the ‘converging divergence phenomenon’ in that both Japanese and US MNCs are adopting the most universal aspects of each other’s management practices and integrating them into their own unique systems of management in response to global market forces. We discuss the theoretical implications for the convergence and divergence of HRM and ER systems, and the development of such systems in Japanese and US MNC subsidiaries.

Towards Innovation in Multinational Corporation Subsidiaries: Development of an Instrument to Select and Evaluate Value Driven Strategies

This paper examines the complex, interdependent relationship between multinational companies and their subsidiaries. It discusses how subsidiary role development and specific strategic initiatives may add new value to corporations. While previous studies have identified the need for more proactive management practices, there are few practical guides available to managers to help them improve their performance. This paper addresses this deficit and contributes new knowledge on subsidiary role development practices in terms of selection and evaluation. Through an in-depth analysis of extant literature, the research developed and tested an instrument that allows decision makers to assess their company against good practice. This instrument (or audit tool) is an accurate, reliable and valid mechanism to measure a subsidiary’s role development strategies.

Antecedents and Innovation Performance Implications of MNC Political Ties in the Chinese Automotive Supply Chain

The development of political ties represents a non-market strategy, which may substitute for formal contracts in safeguarding against transaction risks of innovation processes in emerging markets with weak institutions, such as China. Previous work has largely ignored the role political ties play in product innovation, and especially with respect to subsidiaries of foreign multinational corporations (MNCs). This study investigates the antecedents and role of political ties in relation to the innovation performance of foreign subsidiaries supplying automotive parts in China. Our analysis is based on survey data from 170 foreign MNC supplier firms in China. A partial least squares structural equation modelling (PLS-SEM) approach is employed to examine relationships through a ‘soft-modelling’ analysis, using SmartPLS 3. The results empirically confirm the positive impact of political ties, in terms of enhancing foreign MNCs’ product innovation performance in China. Furthermore, it is found that the extent to which foreign suppliers invest in and maintain political ties is driven by a mix of organizational and environmental factors, namely protection orientation, relationship-specific investment, technological dynamism and competitor opportunism. The paper contributes to the understanding of the antecedents and the implications of political ties with respect to the innovation performance of foreign MNC subsidiaries in emerging economies.

Performance of Russian manufacturing subsidiaries of foreign multinational corporations opened in 2012-2016

ABSTRACTThis paper reports on the performance dynamics of Russian manufacturing subsidiaries of foreign multinational corporations that were established in 2012–2016. We collected balance sheets, annual income statements and other annual reports of a representative sample of the general population of manufacturing plants opened in Russia by foreign multinational corporations in 2012–2016. We performed an analysis of the major business indicators, such as exit rate, sales dynamics and financial results. We found that showing a positive gross profit was a relatively easy task and the majority of companies achieved this in the year of their official opening or shortly afterward. However, the majority of manufacturing plants opened in 2012–2014 demonstrated negative net profitability until 2016. We explained the massive shift to profitability in 2016 by the improvement in gross margins, measures taken to save “additional costs,” as well as the changes in the legal framework of foreign subsidiaries’ activities in Russia and the subsequent amendment of financial policies applied to Russian subsidiaries by their corporate parents. In general, multinational corporations demonstrated a high ability to operate under conditions of the high market and institutional uncertainty and strategic flexibility in managing their newly established Russian industrial assets.

Multistep Knowledge Transfer in Multinational Corporation Networks: When Do Subsidiaries Benefit From Unconnected Sister Alliances?

In this paper, we explore under which conditions subsidiaries of multinational corporations can benefit from the external networks of sister subsidiaries in terms of new knowledge generation. We focus on the phenomenon of unconnected sister alliances—that is, alliances of sister subsidiaries with whom the focal subsidiary lacks a recent history of internal R&D collaboration. Whereas unconnected sister alliances provide knowledge recombination opportunities for the focal subsidiary, realizing them is challenging because of particular knowledge transfer frictions. In this paper, we theorize on how particular conditions (i.e., headquarters proximity, knowledge overlap, size of focal subsidiary’s own alliance network) influence the strength of these frictions, resulting in hypotheses on how these conditions moderate the relationship between the number of unconnected sister alliances and the generation of new knowledge by focal subsidiaries. We rely on a panel data set of 2,258 R&D subsidiaries belonging to 118 firms in the pharmaceutical industry to empirically test our hypotheses. Jointly, our findings enrich our current theoretical understanding of how different types of external linkages and their interactions shape subsidiaries’ generation of new knowledge. We also illuminate the opportunities and challenges that multistep knowledge transfer processes entail.

Headquarters Parenting Styles as Perceived by Subsidiaries

Receiving positive attention from headquarters is essential to a subsidiary’s ability to receive resources, act on opportunities that arise, and improves the performance of the subsidiary and the firm alike. The impact of receiving both positive and monitoring attention, however, is less understood. Through case studies of five subsidiaries of Swedish multinational corporations in Japan, we uncover the effects of different types and levels of attention from headquarters. We find that the prevalence of subsidiaries receiving mixed attention is more common than previously shown. Building on this insight, we develop an attention-based parenting typology to explain differences between combinations of levels and types of attention. Implications for the attention, MNC, and parenting literatures are discussed.

Corporate Subsidiary Locations, Politics, and Firm Value

Analyzing hand-collected data on the corporate subsidiary locations of all publicly listed firms in China, we find that “hometown firms,” firms headquartered in the hometown of the key political leaders of the province, set up more subsidiaries in their home provinces. This effect is stronger for hometown firms that are non-state owned or without political connections, and more prominent in a political turnover year and the previous year. After a hometown firm sets up more subsidiaries in a key political leader’s home province, the firm will enjoy more preferential government policies such as those related to subsidies and taxes. We find evidence consistent with the positive externalities of these subsidiaries for other firms in the cities where they reside, i.e., local firms. The number of these subsidiaries is also positively associated with the local employment rate. Various causality tests and robustness checks confirm the validity of our results. Our results provide some of the first evidence on the importance of corporate subsidiary locations, showing political geography significantly influences corporate geography.

Organizational cynicism in multinational corporations in China

ABSTRACTOrganizational cynicism is a pejorative attitude toward the employing organization induced by mistrust, disillusion, and various negative experiences. Based on cognitive dissonance theory we develop and test a theoretical model of how perceived cultural differences lead to organizational cynicism which in turn results in greater turnover intentions among host country nationals (HCN) employed in foreign subsidiaries of multinational corporations. Furthermore, we argue that the negative effect of perceived cultural differences can be mitigated by localization, i.e. replacement of expatriates by local staff. Survey results from HCN employees in foreign subsidiaries in China confirm the expected relationships.

Financial constraints on export market exit of domestic firms versus foreign multinational corporation subsidiaries in South Korea

ABSTRACTUsing a Korean manufacturing firm-level data set covering a range of years from 2006 to 2013, this study investigates how the financial condition of firms, such as liquidity, leverage, and cash flow ratio, affects exit from export markets. It also analyses whether the financial status of foreign multinational corporation (MNC) subsidiaries differs from that of domestic firms with respect to the hazard of export market exit, especially during a global financial crisis. The empirical results confirm that, for domestic firms, the hazard of export market exit is affected by the firms’ financial condition only during a financial crisis. In other words, the financial vulnerability of domestic firms increases during the crisis, resulting in the hazard of export market exit. However, financial situations for foreign MNC subsidiaries do not affect exits from export markets, indicating a ‘finance-factor comparative advantage’.

Accessing diverse knowledge for problem solving in the MNC: A network mobilization perspective

Research Summary: The fundamental challenge of problem solving is synthesizing diverse knowledge for solution development. This article addresses the trade‐off betweenknowledge diversity, that is, approaching the most relevant individual to maximize the likelihood that he/she possesses diverse knowledge and theability to access, that is, recognize and assimilate this knowledge. We examine this trade‐off in relation to managers in subsidiaries of multinational corporations (MNCs) and two types of diverse knowledge—novel knowledge and specialist expertise. We use a network mobilization perspective and arguments on network range within and across organizational boundaries, testing our hypotheses on a dataset of 838 ties from 120 managers leading problem‐solving projects. Our study offers implications for the knowledge‐based view of the MNC as well as the problem‐solving perspective in strategy.Managerial Summary: We examine where managers in subsidiaries of multinational corporations (MNCs) access diverse knowledge to solve nonroutine problems. This is underpinned by a trade‐off. To increase chances that the other person holds diverse knowledge, they may reach far in terms of approaching an individual in a different work context; but such far reach diminishes their ability to integrate this knowledge. We resolve this trade‐off. We find that approaching individuals from an MNC unit in another country location but from the same function increases the likelihood of accessing novel knowledge; whereas accessing specialist expertise is more likely achieved by approaching an MNC colleague from another function located in another country and someone working for an external organization. Overall, we provide insights for problem solvers in organizations.

Headquarters involvement, socialization, and entrepreneurial behaviors in MNC subsidiaries

Headquarters of multinational corporations can be involved in their subsidiaries and help with the development and transfer of innovative ideas. However, headquarters involvement might not always be desired or needed, and it can thus be perceived as interference with local activities, potentially reducing local willingness to go the extra mile. We address the lack of knowledge about subsidiary manager behavior by answering the following question: How does headquarters involvement influence the proactive behavior of subsidiary managers to push for new and innovative ideas? Using data from 120 top managers in subsidiaries of multinational corporations, we find that the negative relationship between headquarters involvement and their subsidiary managers' support for initiatives can be reduced when socialization mechanisms such as a common corporate culture or rotation programs are put in place.

Configuraciones de control de las redes de poder empresarial en España

El presente trabajo estudia las estructuras y la distribución del control corporativo en las redes formadas por los accionistas y consejeros de administración (CA) de las 227 mayores empresas españolas en términos de ingresos de explotación (IE) del año 2013. El análisis de los resultados permite identificar tres pautas de control. Primero, una densa red de accionistas y administradores que forman un núcleo centralizado y que ejercen un control directo. Segundo, un conjunto de Instituciones de Inversión Colectiva globales (IIC), mayoritariamente no residentes, que ejercen un estilo de control indirecto mediante la participación en el capital de empresas españolas o a través de filiales de empresas transnacionales, y que intervienen mediante la elaboración y negociación de estrategias desde fuera de los órganos de gestión de las empresas participadas. Tercero, una pauta de control más personal y directo ejercido por blockholders y administradores en empresas aisladas.

The Interplay of Expatriates’ Psychological and Social Capital for Knowledge Transfer

Expatriate managers are recognised as fundamentally important stakeholders in the process of transferring knowledge between headquarters and subsidiaries in multinational corporations (MNCs). This paper’s goal is to determine how expatriates’ personal capital (i.e. positive psychological capital and social capital) facilitates conventional and reverse knowledge transfer where there are language, cultural and geographical differences between headquarters and subsidiaries. A qualitative multiple case study approach was used to analyse the data, obtained by in-depth interviews with expatriates and managers from three MNCs. The findings suggest that psychological capital supports knowledge transfers in MNCs in two ways: first, directly and, second, through the creation of expatriates’ social capital. This study shows that positive psychological capital dimensions of expatriates (efficacy, resilience and optimism) represent individual level antecedents of knowledge transfer between HQ and subsidiaries, thereby contributing to the literature on expatriates’ boundary spanning role in MNCs. The results also indicate that psychological capital dimensions support creation of structural and relational dimensions of social capital, further enhancing knowledge transfer in MNCs, thereby advancing the literature on the role of expatriates’ social capital in knowledge flows. By observing the relationships in different subsidiary types, this study also provides valuable implications for international knowledge management. DOI: 10.15458/85451.65

Exploring the staff localization of Taiwanese MNC subsidiaries in China: Effects of size, operation time, location, and local-market focus

In the literature, several initial endeavors to empirically examine staff-localization models have been described; however, the factors influencing staff localization have focused mostly on human resource management (HRM)-related issues. This study opens a promising new direction for research on localization by contending that the important elements affecting staff localization are not limited to HRM practices only. We analyzed this phenomenon from the perspectives of both organizational factors (firm size and subsidiary operation time) and strategic choice (location and local-market focus). For Taiwanese multinational corporation (MNC) subsidiaries in China, subsidiary size has a positive impact on staff localization. However, subsidiary operation time is not an important factor. The moderating role of subsidiary operation time on the size-staff localization link is not strong. In addition, MNC subsidiaries located in coastal provinces are inclined to hire more local managers. The relationship between local-market focus and staff localization will be U-shaped and curvilinear.

Stakeholder pressures, EMS implementation, and green innovation in MNC overseas subsidiaries

In this paper, we address the issue of green innovation by the overseas subsidiaries of multinational corporations (MNCs). Drawing upon stakeholder theory and institutional theory, we propose a conceptual model to explain how stakeholder pressures in host countries prompt MNC subsidiaries to undertake green product and process innovations. Our findings indicate that MNC subsidiaries need to meet market stakeholders’ pressures in order to achieve social legitimacy in host countries, and that the implementation of formal environmental management systems (EMS) is an important mechanism translating these pressures into green innovation initiatives. Furthermore, we find that the positive relationship between market stakeholder pressures and EMS implementation is reinforced by global ‘green’ institutional pressures in the different host countries.

Age negotiation at the Asian corporate subsidiary: challenges of managerial ‘youth’ in Thai-based subsidiaries of Western multinationals

This study explores how individuals construed as ‘young’ for their managerial positions seek to mitigate their youth in order to gain and maintain legitimacy in an Asian socio-cultural context which (traditionally) privileges age seniority. Drawing on the narratives of local and expatriate managers at the Thai-based subsidiaries of Western multinational companies, we show how individuals experience ‘youth discrimination’ seeking to negotiate their age using alternative identity attributes with differing stakeholder groups. Findings expand our understanding of how and why attitudes towards managers viewed as ‘young’ affect perceptions of role legitimacy and performance. Implications for corporate HRM – specifically managerial selection – in Asia, as well as notions of discrimination ‘intersectionality’ are then progressed.

Effects of financial constraints on export performance of firms during the global financial crisis: microeconomic evidence from Korea

ABSTRACTThis study uses a manufacturing firm-level panel data set of South Korea for 2006–2013 to investigate the effect of financial constraints on the export performance of firms, with particular emphasis on the corporate ownership structure. The empirical results show that foreign multinational corporation (MNC) subsidiaries are not affected by financial constraint during both crisis and noncrisis periods, implying advantages of foreign ownership. However, domestic firms suffer more from financial constraints on exports during crisis years. In particular, domestic firms without parent firms are financially constrained during both crisis and noncrisis periods. However, those with parent firms do not experience financial constraints during noncrisis periods, although they too suffer from them during crisis periods. Thus, parent–subsidiary linkage among domestic firms plays an important role in alleviating financial constraints on export activity in noncrisis years but not as much during crisis years. Therefore, domestic parent firms exhibit less resilience to the global financial crisis, in comparison to foreign MNC parent firms.

Host-country characteristics, corporate sustainability, and the mediating effect of improved knowledge

Purpose Under the premise of resource-based view (RBV), this study aims to examine the influence of host-country characteristics (i.e. market environment, cultural factors, government policies and absorptive capacity) on improved knowledge acquired by means of intra-firm technology transfer and the latter’s subsequent effect on corporate sustainability among subsidiaries of foreign multinational corporations (MNCs) in Malaysia. Design/methodology/approach The following study adopted a cross-sectional design. Quantitative data were collected through structured interview from the representatives of selected 252 subsidiaries of foreign-based MNCs located in Peninsular Malaysia. Findings The findings of this study revealed that market environment, government policies and absorptive capacity significantly affect the adoption of innovative knowledge, which also has a significant positive effect on corporate sustainability. The findings also revealed a partial mediation of improved knowledge between market environment, government policies and absorptive capacity on corporate sustainability. Research limitations/implications This study recommends that the host country should formulate and adopt trade and FDI friendly policies, as well as stricter intellectual property laws, and, at the same time, provide higher education and training to its citizens to maximize foreign investment and knowledge transfer. Originality/value Apart from highlighting the under-researched issue of organizational sustainability, this study is unique in its approach of connecting the external environment of the host country with the internal knowledge of the firm and corporate sustainability in a single framework. The empirical findings of this study support the hypothesized relationships and thereby extend the scope of the contingency theory and RBV in addition to simultaneously enriching the existing intra-firm knowledge management literature, particularly in the Malaysian context.