Headquarters Subsidiary Research Articles

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.

Knowledge flows, strategic motives and innovation performance: Insights from Australian and New Zealand investment in Europe

AbstractWe study the international innovation strategies of Australian and New Zealand (ANZ) firms in the European context, to explain their investment motives, knowledge flows and innovation performance. Our thematic analysis of seven case studies suggests that ANZ investors' motives for innovation in Europe are often both market- and knowledge-seeking and that some are also motivated by diversification and cooperation. While the strategic intent is often for the knowledge to flow in multiple directions among subsidiaries and headquarters (HQ), distance poses challenges to the efficiency of the process. European subsidiaries are often seen as potentially playing a key role in firms' global innovation systems, particularly with regards to radical innovation. However, because of distance and communication bottlenecks (e.g., time zone differences), HQ does not always recognise this potential. We develop a model proposing that HQ–subsidiary trust and strategic motives are moderators in the process of international knowledge connectivity and knowledge creation.

Regional Headquarters Subsidiary Governance, Int'l Corporate Income Tax Rates, & Subsidiary Survival

Multinational enterprises (MNEs) utilize various ways to govern their foreign subsidiaries. We draw on agency theory, regional strategy and structure, and international corporate income tax literat...

Global energy networks: Insights from headquarter subsidiary data of transnational petroleum corporations

Oil companies are powerful international actors, and have formed complex networks by building relationships from their headquarters (HQs) to subsidiaries. However, we do not know much about these networks as energy trade networks. In this paper, we select HQ subsidiary data of the most powerful oil companies in Fortune Global 500, and employ network analysis, Gini coefficient and Herfindahl index to investigate the network centrality, inequality and regional characteristics. We find that HQs are concentrated in the Unites States, Western Europe and East Asia while subsidiaries are more dispersed in both producing and consuming countries. Compared to the trade networks, HQ subsidiary network is more complex and displays greater inequality, especially in the out-degree network. IOCs (international oil companies) and NOCs (national oil companies) show different preferences for choosing subsidiaries locations and form different networks based on their industry value chains. A more complicated network including IOCs and NOCs will be more flexible in respond to market competition and geopolitical situation. HQ-subsidiary energy networks should be seriously considered along with the international diplomatic relations when making transnational energy policies and trading.

Headquarters–subsidiary relationships in MNCs: Fifty years of evolving research

We review the contributions to research on headquarters–subsidiary (HQS) relationships published in the Journal of World Business (known as the Columbia Journal of World Business until 1997) from the late 1960s to the present day. Based on 81 articles on the topic, we identify trends and dominant approaches in the journal's contributions to this area and link them to trends in the broader field of international management (IM) research and practice. We underline the journal's pioneering role in identifying and bringing to the forefront novel research questions and ideas that would later become central to the IM field. We conclude by assessing the importance and relevance of the journal's contributions to the literature on HQS relationships and by suggesting several directions for future research in this area, which could build on past work and leverage new phenomena.

Utilizing the broader agency perspective for studying headquarters–subsidiary relations in multinational companies

The nature of global business today increases the complexity of multinational companies and highlights the challenges of managing headquarters–subsidiary (HQ–Sub) relationships. We identify key unresolved issues in HQ–Sub relations including closing the gap between headquarters’ expectations and subsidiary performance, managing the nested hierarchical relationships across multiple organizational layers, and aligning these relationships across diverse subunits embedded in different social contexts. We propose that agency theory, particularly its more recent progressions, can advance our understanding of these issues and we offer a perspective to guide such research. We discuss several research implications of the static bilateral, static multilateral, dynamic, and social and contextual streams of agency theory.

"Psychic Distance, Global Mindset, and Headquarters-Subsidiary Relationship Quality"

Through the lenses of social cognitive theory and information processing theory perspectives, this paper investigates how managers’ cognitive personality traits and international learning experience interact with their global mindset development and perceived psychic distance influencing headquarters-subsidiary (HQ-Sub) relationship quality. Data were collected from both the headquarters and the respective subsidiaries of 302 Chinese multinational enterprises (MNEs). Our findings suggest that managers’ psychic distance and global mindset have positive effects on HQ-Sub relationship quality, and that the positive relationship between managers’ global mindset and relationship quality is stronger when the managers have more overseas study experience and weaker when the managers demonstrate a non-flexible personality.

Marketing Channels in Foreign Markets: Control Mechanisms and the Moderating Role of Multinational Corporation Headquarters–Subsidiary Relationship

To manage marketing channels, subsidiaries of multinational corporations (MNCs) must balance mandates from headquarters (HQ) with the local realities of the foreign markets. The performance implications of subsidiary–distributor relationship efforts thus are contingent on the HQ–subsidiary relationship. Drawing on marketing channels, economics, and organization theory literature streams, the authors (1) describe the complex performance properties of output and process control mechanisms that MNC subsidiaries deploy to manage foreign distributors and (2) conceptualize the HQ–subsidiary nexus along three attributes that should moderate the performance effects of control mechanisms: task coordination, or HQ's central coordination of processes across subsidiaries; subsidiary decision involvement, or two-way communications and consensual decision making between HQ and the subsidiary; and relational disharmony, or the extent of the HQ–subsidiary conflict. The authors test the hypotheses using field data from German and Japanese MNCs in the United States and Bayesian models that account for measurement error, endogeneity in the control mechanisms, heterogeneity in country of origin, and nonlinear and interactive terms for the latent constructs. The results demonstrate the importance of the HQ–subsidiary relationship for managing the subsidiary–distributor relationship.

Performance effects of MNC headquarters–subsidiary conflict and the role of boundary spanners: The case of headquarter initiative rejection

Recent research suggests that both the scholarly and the managerial perspectives on intra-organizational conflict in multinational corporations (MNC) between headquarters (HQ) and their foreign subsidiaries have changed. Today, conflict is not necessarily regarded as dysfunctional or the result of inefficient global integration. Instead, conflict is now considered a normal consequence of organizing and managing across national borders. This research advances the literature on HQ–subsidiary relationships by adding new insights to the Headquarters–subsidiary conflict discussion, especially in the so far under-researched case of headquarter initiative rejection by foreign subsidiaries. We specifically focus on subsidiary conflict negotiation tactics, the effects of organizational and individual managerial power, and the characteristics and roles of MNC managers that act as boundary spanners during intra-organizational conflict processes. A qualitative, iterative, multiphase research approach was used to develop new theory pertaining to the phenomenon. The results show that in the presence of boundary spanners, dysfunctional conflict is less common and better overall organizational performance can be achieved for both the subsidiary and the MNC as a whole. The results also indicate that the boundary spanning ability is only partly formalizable and that some MNCs are able to foster boundary spanners better than others.

Internationalization of Italian Firms in Central and Eastern European Countries: Headquarters–Subsidiary Relationship

This article aims at providing further empirical evidence about the international activity of Italian small and medium enterprises (SMEs). In particular, the present contribution can be ascribable to the stream of research regarding the headquarters–subsidiary relationship. Focusing our attention on the subsidiary of Italian SMEs internationalized in Central and Eastern European countries (CEECs), we provide evidences about the main variables affecting their autonomy. Literature review provides us evidences of the fact that subsidiary autonomy is an extremely heterogeneous topic to investigate. Consequently, we decided to add to the quantitative analysis also a qualitative one. Through personal interviews with the Italian entrepreneurs and the managers of the local subsidiaries, we got a better and deeper insight into the evidences coming from the quantitative data.

Headquarters–Subsidiary Relationships during Dramatic Strategic Changes—The Local Implementation of a Global Merger between MNCs in India

This article, using an in-depth single case study approach, studies the local integration process between two globally merging multinational companies’ (MNCs) subsidiaries in India. The focus is on the interplay between the parent company and the subsidiary level during the local implementation of such a global strategic decision. The article shows that the parent company does not in detail coordinate and control the local implementation due to (a) an in-beforehand strictly defined framework and (b) the existing vacuum in MNC internal values and norms. The article further suggests that the strategic importance of a subsidiary’s market is positively and the degree of perceived resemblance between the parent’s home country and the subsidiary’s local environment is negatively related to the degree of parental involvement. Finally, the article suggests that subsidiaries’ reactions towards parental involvement are influenced by: (a) the type of involvement/coordination mechanisms used, (b) the local institutional environment and (c) the relational context.

Is knowledge power? Knowledge flows, subsidiary power and rent-seeking within MNCs

In recent years, as multinational corporation (MNC) subsidiaries have become more closely linked to international networks, their knowledge intensity has risen, and some of their R&D has gained a more creative role. Simultaneously, and often connectedly, many subsidiaries have acquired considerable strategic independence in all aspects of their operations, and therefore are able to exercise considerable intra-firm bargaining power to influence the distribution of the firm’s resources. In this context, we suggest that intra-MNC knowledge flows are a key determinant of subsidiary bargaining power. We argue that subsidiary managers can exploit such power to pursue their own ends. Such rent-seeking behavior is implicit in much of the literature on managerialism, but our analysis suggests that such behavior can now occur in headquarters–subsidiary and subsidiary–subsidiary relations. Thus subsidiary strategic independence, designed to enhance the competitiveness of outputs (market knowledge) and inputs (asset-seeking and learning), can be corroded when the pursuit of subsidiary objectives encourages rent-seeking. Empirical analysis of a sample of high-technology subsidiaries in the UK provides strong support for the theory. We examine several avenues whereby the incentives of units within the MNC can be aligned.

Centralization in Headquarters–Subsidiary Relationships

Research to date on centralization in MNCs has produced many inconsistent findings. The present study attempts to add clarity to the situation by re-testing many of the existing hypotheses with data from a recent study of centralization in 50 large US, UK and European MNCs. It examines how the degree of centralization inherent in the headquarters-foreign subsidiary relationship varies in response to a variety of company-wide and subsidiary level conditions. The influence of company-wide conditions on centralization appears to be much clearer than the influence of subsidiary-level conditions. The study also identifies several new contingency patterns that appear to be at work in MNCs today.