Headquarters Subsidiary Relationships Research Articles

Talent management in German multinational firms in China: the role of headquarters-subsidiary relations

Despite the bourgeoning interest in talent management (TM) in the last two decades, limited research has been carried out to understand the diffusion of TM strategies and practices from home-country headquarters to their subsidiaries in host countries. Furthermore, extant firm-level research on TM tends to neglect the role of the macro-level context, particularly in emerging economies where talent shortage is acute and their institutional distance is large, with headquarters in developed countries. This study fills these knowledge gaps by exploring the TM of German multinational corporations (MNCs) and their subsidiaries in China. Drawing on qualitative data collected from 42 semi-structured interviews with senior managers, human resource professionals, and operations managers from six German MNCs and their subsidiaries in China, the study uncovers headquarters-subsidiary relations. We identify a portfolio of what we refer to as ‘institutional shapers’ and develop a model for future research. This study contributes to extant knowledge by contextualizing multi-level TM shapers from an institutional-cultural perspective, supported by cross-country empirical data based on informant triangulation.

Do emerging market multinational corporations headquarter-subsidiary relationships foster subsidiary innovation and performance in developed markets?

This study investigates sources of innovation and performance for emerging market multinational corporations (EMNCs). We develop a contingency framework that examines how internal administrative embeddedness (IAE) and internal knowledge embeddedness (IKE) shape EMNC overseas subsidiary innovation capabilities, and how these relationships are contingent on EMNC headquarter host country experience and subsidiary embeddedness with host-country business partners. Data were collected from a survey of 242 dyads composed of Chinese EMNC headquarters and overseas subsidiaries located in 30 developed countries. Secondary data were also collected for EMNC host country experience and subsidiary performance. The empirical results show that IAE negatively influences EMNC subsidiary innovation capability, and this negative relationship is stronger when subsidiary host-country embeddedness increases. The findings further reveal that IKE positively influences subsidiary innovation capability. This relationship becomes stronger as subsidiary host-country embeddedness and headquarter host country experience increase. We also find that subsidiary innovation capability mediates the relationship between HQ-subsidiary embeddedness and subsidiary performance. Theoretical and managerial implications are discussed.

Mutual Sense-Censoring, Generative Exploration, and Collaborative Change: A Case Study of Headquarters–Subsidiary Relationships in Asia

This study contributes to the literature on power processes within multinational corporations (MNCs) by finding that the headquarters and subsidiaries mutually censor their sensemaking and may opt for strategic inaction, depending on the relational context. It develops systematic explanations of the patterns in the headquarter–subsidiary partnership by proposing a model of evolutionary, co-existent meaning-making transition processes. In a Japanese manufacturing MNC, change practitioners helped balance paradoxical processes to create psychological safety in a dialogic space, leading members to move ahead with a sense of crisis. The study deals with collective reactions to change from a qualitatively grounded approach. It then proposes theoretical and practical implications for building collaboration capability in multistakeholder partnerships by inspiring people's spirit of inquiry.

The determinants of the use of process control mechanisms in FDI decisions in headquarters–subsidiary relationships

This study investigates the impact of foreign direct investment (FDI) motivations and technological resource commitment on headquarters’ employment of process control over subsidiaries, to better understand the process control mechanisms. Drawing on agency theory and the resource dependence perspective, a cross-sectional data model is developed among the 1541 Taiwanese manufacturing firms engaged in foreign investments, 1015 headquarters–subsidiary (HQ–Sub) relationships in China were selected from the database; in each of these relationships, the headquarters is located in Taiwan, while the subsidiary is located in China. Our findings reveal that the headquarters will use process control if the primary motivation for setting up a subsidiary in a host country is resource-seeking, but not use process control with market-seeking motivation. This control process relationship is enhanced/weakened/weakened by the headquarters’/subsidiaries’/partners’ technological resource commitment. Taiwanese multinational corporations (MNCs) from newly industrialized economies (NIEs) seeking to choose control mechanisms that fit their technological resources and FDI motivations in China are given guidelines. It adds to the use of control mechanisms with HQ-Sub literature. Both resource-seeking and market-seeking motivations shed light on technological resource commitment by various units of an MNC, to ward off information asymmetry.

The competition-cooperation interplay for knowledge development: a headquarters-subsidiary perspective

PurposeIn this paper, the authors contribute with insights on competition and cooperation in multinational enterprises with a focus on challenges related to these governance mechanisms in a knowledge development context. The mechanisms have been widely recognized as important for developing knowledge, but their contradicting nature implies considerable complexity when it comes to governance. The complexity is further increased as a result of the headquarters-subsidiary relationships. The aim of this paper is to contribute with theoretical and empirical insights on these aspects by focusing on the research question: How and why does competition and cooperation in an MNE emerge over time?Design/methodology/approachA manufacturing MNE with headquarters (HQ) in Sweden is analyzed on both HQ and subsidiary levels. Interviews with 24 managers in Sweden and India have been performed.FindingsThe study illustrates that competition and cooperation are integral aspects in HQ-subsidiary relationships. The results show that both competition and cooperation depend on environmental, organizational and object-related conditions and that these conditions influence the dynamics of the interplay. The importance of including a subsidiary perspective and the interdependencies in an MNE setting are emphasized.Originality/valueThe authors add to the discussion on the interplay between competition and cooperation as they play an important role for knowledge development in MNEs. The results indicate that they do not take place simultaneously, and therefore, the authors suggest that the dynamic can be better understood by focusing on the interplay and analyze the concepts separately.

Cooperative or Competitive Relationship Within the MNE: A Parent Subsidiary Study

This study investigates how competition or cooperation are implemented strategically by the headquarters (HQ) to influence its subsidiaries’ behavior. In specific, we center our attention on the strategies MNEs consider for different internal configurations of competition or cooperation. Our main argument is that competitive or cooperative relationships are socially constructed and to discuss this we combine literature-based conceptual arguments with empirical observations on headquarters-subsidiary relationships. Our study demonstrates that cooperation or competition (whether headquarter-led or subsidiary-led) are manifestations of reward systems, mandates, and position systems. These important strategic and structural influencing factors explain how technologies are developed and how responsibilities are distributed across the organization. Hence, organizing sometimes for competition or sometimes for cooperation is challenging, yet very helpful, to headquarters addressing innovation capability development, to facilitate knowledge transfer and learning as well as to advance technological innovation.

How Subsidiary Internal and External Embeddedness Affects an MNE’s Attention Allocation?

Existing literature has suggested that MNEs direct attention and resources based on subsidiaries’ actions and attributes. Yet whether or not subsidiaries’ internal and external embeddedness affects MNE attention allocation remains underexplored. We postulate that the more embedded a subsidiary is internally within an MNE and/or externally within its host country, the more likely it is that the subsidiary will receive positive notice from the MNE. Subsidiaries’ internal and external linkages matter for subsidiary operations, meriting the MNE’s regard. We furthermore suggest that these proposed effects of internal and external embeddedness would change depending on certain boundary conditions. Results based on a sample of Japanese MNEs and their subsidiaries operating within Asia support our arguments. Our findings advance the literatures on both the attention-based view and headquarters-subsidiary relationships.

Host country corruption and headquarters-subsidiary relationships in emerging economies

PurposeThe primary objective of this study is to investigate the impact of a host country's corruption on the autonomy of a foreign subsidiary from a country with lower tolerance for corruption. In doing so, the study examines the moderating role of subsidiary-headquarters communication and multinational corporation's (MNC's) prior international experience in countries with a higher tolerance for corruption.Design/methodology/approachThe data were collected from 182 foreign subsidiaries of 57 Malaysian MNCs operating in 16 host countries. The study employed ordinary least square (OLS) using Stata16.1 to analyze the modeled relationships.FindingsThe findings of this study reveal a significant positive association between the extent of corruption in the host country and the subsidiary's autonomy. The findings illustrate that an MNC's prior experience in the country with an increased tolerance for corruption does not moderate the association between corruption and subsidiary autonomy. However, the findings also confirm that the extent of headquarters-subsidiary communication negatively moderates the association between corruption and subsidiary autonomy.Originality/valueThe study uses unique data collected from Malaysian MNCs. Furthermore, the study contributes to the literature by bringing forth subsidiary autonomy as a counter strategy to potential risks that can arise due to weak institutions and widespread corruption in a host country.

When does the global mindset affect headquarters–subsidiary relationships?

Drawing on the dynamic managerial capabilities perspective, we examine the effects of the global mindset of subsidiary managers on headquarters–subsidiary relationships and the moderating effects of their cognitive flexibility, overseas study experience, and exchanges with headquarters managers on the relationship. The analysis of dyadic survey data collected from managers at the headquarters and subsidiaries of 312 Chinese multinational enterprises reveals that the subsidiary managers’ global mindset is positively associated with the quality of headquarters–subsidiary relationships. This association is stronger when the subsidiary managers exhibit higher cognitive personality flexibility and more overseas study experience but weaker when exchanges with the headquarters managers become more frequent.

Subsidiary contribution to the MNC – impact of strategic initiatives

The purpose of this paper is to investigate subsidiary strategic initiatives in the light of dynamic headquarters-subsidiary relations. The study is based on cross-sectional questionnaire survey data from 105 subsidiary top managers in subsidiaries located in Europe, Asia, and the USA within the ICT industry. The assumption of similar behavior by subsidiaries in the same industry is a sufficient motive for concentration on single industry. Theoretical contribution is reflected in the testing of models in subsidiaries within single rapidly growing turbulent industry that is abundant with hyper-competition and competitive dynamics, and where strategic initiatives are fundamental for survival, and by modeling variables in a different way than previously explored. Furthermore, the additional contribution is reflected in the conceptual model of the interdependence of subsidiaries and MNC in the process of subsidiary strategic initiatives, and besides providing a new perspective in this area, provides a framework for future research. The obtained results show that subsidiary networking and autonomy have a significant impact on subsidiary strategic initiatives whereas top management support and subsidiary innovativeness have no impact on the same variable. The results show that subsidiary strategic initiatives have a significant impact on its contribution to the multinational corporation (MNC).

Strategic Issue Selling by International Subsidiaries: The moderating role of the cultural distance

This study was to examine the moderation effect of cultural distance in the packaging and process of a strategic issue selling by a subsidiary of multinational company affects the attention dedicated by the headquarters. Data was collected via an online survey sent to the country managers of subsidiaries of multinational companies and responded by managers from 29 different countries and 46 different headquarter location, with that was possible to assess the cultural distance. The method used was structural equation modeling using Smart PLS 3.0. The results of this research show that as the effect of the issue selling strategy changes due to the cultural distance in the headquarter-subsidiary relationship, the greater the cultural distance, the less the effect of presenting organizational benefits on headquarter attention and, contrary to priori theory, the greater the cultural distance the lesser the effect of the consistency of values on the attention of the multinational company's headquarters. This research brings two contributions to the strategic issue analysis and the headquarters-subsidiaries relationship literatures. First, to provide additional empirical evidence regarding impact of issue framing on headquarters’ attention in MNC around the world; second, to expand the unresearched impact of the cultural distance like a moderation effect in headquarter-subsidiary relationship.

Organization of Hybrid Governance

A key theme for multi-business firms and multinational firms is managing heterogeneous business units or international subsidiaries. Where does the heterogeneity come from? How do firms redeploy resources across differing units to maximize value? In this paper, we identify a particular source of subsidiary variation—entry mode into foreign markets. Firms choose either greenfield investment or M&A when entering a new market. We propose that different entry modes lead to different governance mechanisms by the headquarters towards the subsidiaries, resulting in variation in structure and work contexts of the subsidiaries. This variation then leads to differences in headquarters-subsidiary relationship, and knowledge creation and transfer at the subsidiary level. We test our hypothesis with a field study at a multinational company and find that the firm exerts more dynamic control towards M&A subsidiaries by redeploying more headquarters employees to these subsidiaries than to greenfield subsidiaries, and knowledge created at M&A subsidiaries are less location specific as employees from these subsidiaries tend to be redeployed to more unrelated locations.

Mutual Sense-Censoring, Generative Exploration, and Collaborative Change

Although several extant studies have focused on the discourse-based organizational change, the full potential of the change practices in global meaning-making systems has remained unexplored in the field of organization development and change (ODC) research. Hence, the major objective of this article is to develop systematic explanations on the power mechanisms in multinational corporations (MNCs) by proposing a model that implies the evolutional co-existence of various meaning-making patterns in the headquarter-subsidiary relationship. Furthermore, this paper attempts to explore the implications of some questions, such as what kind of leadership is more conducive for the constructive dialogic setting in the context of the headquarters-subsidiary relationship and how practitioners can facilitate a smooth transition from the mutual sense-censoring phase to the collaborative action phase in multi-cultural settings. The author uses a Japanese manufacturing MNC as a case in point and shows that the change practitioners are in charge of the crucial position to keep a good balance to create psychological safety in a dialogic space and to lead members to move ahead with the sense of crisis. Furthermore, from the viewpoint of leadership, the change leaders’ authentic self-descriptiveness can provoke organizational members to imagine and develop new ways of looking at the complex organizational realities.

City networks binding resource peripheries to economic and political cores: a Northeast Asian perspective

ABSTRACT Under conditions of contemporary globalization and regionalization, economic connectivity is an increasingly important feature of Northeast Asia (NEA). Geographies of these connections and the role of NEA cities in the global and regional economies are increasingly variegated. This paper explores resource industries as landscapes of NEA integration in regional and global economies by focusing on the city networks of energy and mining firms. Using social network analysis (SNA) of the corporate headquarters-subsidiary relations, this paper provides a comparative study of spatialities of the NEA energy and mining city networks at different geographical scales. By distinguishing global, regional, and national scales of urban connectivity, the analysis identifies NEA cities that are strategic in linking resource extraction regions with centers of economic and political power. Based on the multiscale connectivity and SNA metrics, we draw a typology of gateway functions and discuss the positionalities of cities in NEA resources networks. By advancing the empirical understanding of NEA regional and global integration through strategic cities, this study establishes a case for the reframing of NEA as a region that is neither nationally-scaled nor geographically contiguous.

Back to basics: Behavioral theory and internationalization

International business (IB) scholars’ over-reliance on a select few theories leaves our understanding of firm internationalization incomplete. The behavioral theory of the firm (BTF) can offer new insights and can be used to model a broad range of firm actions. We focus on the three basic BTF components: problemistic search, learning by doing, and vicarious learning. These components help us understand why firm behaviors are more dynamic and heterogeneous than other theories allow. BTF, with its emphasis on how firms assess performance according to aspiration levels, selectively learn and update routines, and selectively incorporate the learning of others, is better suited to examine the diversity and change increasingly observed in internationalization decisions. We explain why scholars should move beyond “dynamizing” static theories and show BTF’s applicability to behaviors involving change such as multi-mode market entries and market re-entries. BTF also helps examine the decision to internationalize in the first place, nascent firm internationalization, location choices, international market adaptation, and headquarter–subsidiary relationships. We encourage IB scholars to use theories that can handle the complexity increasingly associated with modern firm growth, and propose BTF as a promising starting point.

Brexit and the discursive construction of the corporation

AbstractThe UK decision to exit the EU in 2016 has led to economic uncertainty. Foreign corporations with UK subsidiaries have sought to mediate these uncertainties while a final agreement is negotiated. Critical to this is the relationship between headquarter-subsidiary relations (HQs) and these subsidiaries. Discourse analysis has increasingly been used to examine corporate relations, with the corporation viewed as socially constructed through discourses and perpetual deliberations. Deploying a discourse approach, and recognising the importance of topological spatial relations, this article examines the relationship between HQs and UK-based subsidiaries during the Brexit negotiation period. In conclusion, HQs have generally devolved responsibility to subsidiaries for responding to Brexit, involving ‘consensual’ relations with subsidiaries and less intrusive ‘stretched’ topological power relations.

A micro-level perspective on the implementation of corporate social responsibility practices in multinational corporations

The aim of this paper is to examine the implementation of corporate social responsibility (CSR) practices across subsidiaries within a multinational corporations (MNC). The research relies on an 18-month qualitative case study to establish a novel definition and framework of implementation, which capture two complementary aspects: [1] enactment of commitment into operations and [2] alignment of practices across hierarchical levels, divisions and units. Through this perspective, implementation can be seen as a combination of processes of engagement towards the new practice and measurable outcomes across the firm. This paper provides a micro-level perspective on implementation by offering insight into specific barriers and enablers to implementation. This study also extends current knowledge on headquarter-subsidiary relationships by illustrating divergences between units during the implementation.

Control changes in multinational corporations: Adjusting control approaches in practice

The issue of control in multinational corporations (MNCs) is central to international business scholarship. However, prior literature tends to provide a static perspective offering few theoretical insights on control changes, especially the practices that enable control adjustments. Adopting a practice theory perspective, we consider control as “in the making” whereby adjustments emerge through a social accomplishment, constituted and reconstituted as headquarters and subsidiaries engage in a co-creating process. Using a longitudinal case study approach, we had the rare opportunity to track and compare an unsuccessful and a successful attempt to adjust control in an MNC over time. Our main theoretical contribution is a model of adjusting control in MNCs that details the practices that enable control changes. This model offers theoretical implications for organizational control theory in MNCs, especially in relation to theorizing the subsidiary contribution in the design of control, the reconciliation of raised tensions in headquarters–subsidiary relationships, and the nature of unintended consequences in the adjustment process. Our study also contributes to theories on MNC change, as it details the construction of an ongoing strategy–structure alignment for strategic flexibility.

Headquarters′ monitoring mechanisms, subsidiaries’ financial slack, and the contingent role of subsidiaries′ external embeddedness

Within MNCs’ foreign subsidiaries financial slack, i.e., uncommitted financial resources in excess of those needed for current operations, may incur costs for headquarters. These costs may emanate from subsidiaries' decision to forego investment opportunities and stockpile cash instead, which, in turn, may lead to fewer resources being available for redistribution within the organization. From an agency theory perspective, headquarters can minimize these costs through monitoring mechanisms. While agency theory is considered theoretically appropriate for the study of the headquarters-subsidiary relationship, it reflects a rather undersocialized manifestation of human behaviour, which in turn limits its applicability. In this paper, we attempt to address this limitation by suggesting and empirically exploring that the effect of monitoring mechanisms is dependent (1) on the different types of monitoring used, and (2) on subsidiaries' external embeddedness. Drawing on empirical evidence from 94 subsidiaries of foreign multinationals operating in Greece, we provide some initial evidence on the differential impact of monitoring through expatriates and monitoring through bureaucratic processes. Most importantly, we show that subsidiaries' structural embeddedness moderates both associations. In doing so, we reveal that whether subsidiaries behave opportunistically or as good citizens is partially determined by the social context in which they are embedded. An unexpected finding concerns the positive effect of the origin of the CEO on subsidiaries' financial slack for expatriates compared to local managers. This finding underscores the importance of the CEO identity, and highlights the need for future research exploring its effect on subsidiaries' performance.

Institutionally Derived Strategic Influence of MNE Subsidiaries

What role do host country institutions play for the strategic influence of subsidiaries in multina-tional enterprises (MNEs)? Through an inductive study of ten headquarters-subsidiary dyads across three MNEs, this paper identifies enablers of subsidiary influence in proposed strategies from headquarters, i.e., headquarter strategic initiatives. These enablers reside either in institutions themselves or in interfaces with the MNE. Furthermore, I show how these enablers may be lever-aged by subsidiaries to either avoid or become involved in headquarter strategic initiatives. This is done through distinct tactics that target different organizational rationales related to the complex relationship between MNEs, subsidiaries and local institutions. The study contributes to the litera-ture on global strategy and headquarters-subsidiary relationships by delineating the role of local institutions, as filtered through subsidiaries, in global strategy.