Subsidiary Managers Research Articles

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.

Current Status and Issues for Japanese Firms Expanding into Thailand: From the Perspective of Local Core Human Resource Development

Purpose - The purpose of this paper is the debate on human resource development and the investment and expansion of Japanese firms in Thailand, with the aim of providing suggestions on the aspect of human resource development in Japanese firms operating in Thailand. Design/Methodology/Approach - Based on the contents of a field survey in Thailand, the current situation of local human resource development of Japanese firms was ascertained and examined through comparison with Chinese and Korean human resource development in Vietnam, Myanmar, and Mongolia. Findings - The surveys themselves reveal that the timing of the determination of core personnel tends to be later and the positions to which they are promoted tend to be lower in Japanese firms than in Chinese and Korean firms in Asia. Further research and analysis are required on how this affects the corporate management of local subsidiaries. Research Implications - Human resource development and personnel evaluation are clearly defined and systemized, and clear compensation is provided. The motivation of capable personnel can be expected to increase, and they can be expected to demonstrate their abilities.

Driving lateral collaboration effectiveness across multinational enterprises: The antecedents and consequences

AbstractIn the face of increasing global uncertainty, multinational enterprises (MNEs) have turned to downsizing to maintain profitability while emphasizing lateral collaboration to increase productivity. Here, we establish a conceptual framework and examine from a macro‐to‐micro perspective how the growing subjects of subsidiary role change, team alignment and employee engagement impact lateral collaboration. We used structural equation modelling to analyse the results of 252 surveys given to MNE subsidiaries in the Taiwanese banking industry and found that employee engagement was central to driving lateral collaboration effectiveness, indicating that the subsidiary role is critical for boundary‐spanning activities and building bridges between various teams. These activities in turn enhance subsidiary performance and lead to better people development. Our findings demonstrate that bundling employee engagement with human resource practices is a strategic way of positioning for the evolution of subsidiary management.

Developing successful assumed autonomy‐based initiatives: An attention‐based view

AbstractResearch SummaryAdopting the attention‐based view of the firm as our principal theoretical lens, we explore the mechanisms by which subsidiaries attract or avoid headquarters attention in developing successful assumed autonomy‐based initiatives. To this end, our study utilizes qualitative data from subsidiary and headquarters perspectives in a multiple case study design. Our study reveals that subsidiaries first engage in non‐disclosure of assumed autonomy‐based initiatives to avoid negative headquarters attention. We then highlight the way in which subsidiaries undertake initiative selling to attract positive headquarters attention; in particular, we identify the unique selling criteria of demonstrable financial success and corporate alignment. Finally, we reveal the importance of timing in balancing the competing dual requirements of non‐disclosure and initiative selling.Managerial SummaryOur paper aims to explore the mechanisms by which subsidiaries attract or avoid attention from headquarters, to ensure that their proactive, autonomous actions facilitate the attainment of an extended role within the MNE. We highlight three mechanisms as especially important here for subsidiary managers. First, we reveal that subsidiaries initially engage in “non‐disclosure” of these actions to avoid negative headquarters attention. Second, we discover that subsidiaries ultimately look to demonstrate the financial success and corporate alignment of their autonomous actions. Finally, we emphasize the importance of timing in balancing the requirements of non‐disclosure and the “selling” of the subsidiary's actions to headquarters.

The Scope of Involvement in Management as a Prerequisite for Input Vat Deduction Related to Transactions in Shares and Possible Incompatibility With Abuse of Law Principle

This article analyzes the concept of “direct and indirect involvement of holding companies in the management of subsidiaries”, in the light of principle of abuse of the law, practical problems related to the delineation of actual intention of involvement and difficulties arising in determining proportion to what extent a taxable person is entitled to deduct input VAT. Its conclusions are of relevance to EU Member States and countries who have implemented, or are looking to implement, the VAT system established by “Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax” as part of their national tax regime. Because of conceptual and practical difficulties emerging in the process of VAT application to dealings in shares, the role of CJEU is significant, however in some cases, it has arguably contributed to increase in ambiguity. All in all, according to the CJEU the involvement concept and its current practice does not collide with existing abuse of law principle, which puts taxpayers in a far better position to defend their right to deduct. Furthermore, to guarantee the equity of proper function of the system and taxpayers rights, the CJEU ac- knowledges that tax authorities and policy makers are entitled to introduce measures which will comply with fundamental principles of VAT system.

협력적 노사관계 및 노무관리 현지화가 다국적기업 경영성과에 미치는 영향

The purpose of this study is to comprehensively examine the structural relationship between cooperative labor relations and localization of labor management of Korean subsidiaries entering emerging markets on business performance. Localization of international labor management was defined as cooperative labor-management relations and localization of labor management policies, and the effect on management performance was verified. The subject of this study is a company with a labor union established among Korean companies that have entered China and Vietnam, and data were collected from 82 subsidiaries. The empirical analysis proved the path analysis and mediating effect through the structural equation model. The summary of the analysis results of this study is as follows. First, the cooperative labor-management relations of overseas subsidiaries were found to have a positive effect on the improvement of labor-related performances of overseas subsidiaries, such as reduction of job satisfaction and turnover rate, and improvement of quality. Second, cooperative labor-management relations were found to have a positive effect on the management performance of overseas subsidiaries by mediating labor-related performance. Third, the positive effect of labor-related localization on improving labor-related performance of overseas subsidiaries was partially supported, but the mediating effect on management performance through labor-related performance was not statistically significant. In conclusion, this study is meaningful in that it empirically identified the importance of forming cooperative labor-management relations that have been relatively neglected in the localization of labor management of overseas subsidiaries. Previous studies have focused on finding out the effect of localization of international labor management or personnel management policies on the management performance of overseas subsidiaries. On the other hand, this study presented implications that it is important not only to establish personnel management policies, but also to improve organizational commitment through organic cooperation and communication with local subsidiary labor unions. The results of this empirical analysis are expected to provide a meaningful direction for efficient labor management of Korean subsidiaries in emerging countries such as China and Vietnam.

LPG leakage and explosion accident analysis based on a new SAA method

The petrochemical industry has inherently high safety risks. On 5th June 2017, a liquefied petroleum gas tanker in the storage and transportation department of Linyi Jinyu Petrochemical Co., Ltd. leaked during unloading, causing a major explosion and fire. Ten people were killed and nine were injured. To prevent the recurrence of similar accidents, a retrospective accident analysis was conducted using the system accident analysis method known as ‘24Model’. This analysis proved the coupling relationship between accident causes involving multiple organisations and multiple factors. The analysis results show that the five modules of maintenance and design, that is, loading and unloading valves, emergency training, management of subsidiaries and contractors, multi-level supervision, and task arrangement need to be checked from top to bottom by relevant organisations.In order to verify the reliability of 24Model analysis results, three SAA methods, namely STAMP, FRAM, AcciMap, were used to analyse the accident, and results obtained by the four methods were evaluated qualitatively and quantitatively. The results show that the output of 24Model is reliable and has a more understandable framework, which can be used as reference for the development of other linear accident cause models and application of system accident analysis methods to real applications.

Configuring knowledge connectivity and strategy conditions for foreign subsidiary innovation

We argue that product innovation by foreign subsidiaries of multinational corporations is a complex undertaking requiring a theoretical understanding of how managers combine subsidiary structural arrangements, knowledge connectivity, and contextual conditions into configurations that yield innovative products. Accordingly, we integrate relevant conditions from interrelated literature streams and explore their complementarities and substitutions in relation to subsidiary product innovation. Using a neo-configurational approach and data on 183 foreign subsidiaries operating in Europe, we identify six equifinal configurations associated with subsidiary product innovation. We leverage the configurational patterns to elaborate theory of how subsidiary product innovation is primarily driven by the interrelations among the relevant conditions, thus contributing novel insights to research on subsidiary management and global innovation.

The influence of the external and internal environments of multinational enterprises on the sustainability commitment of their subsidiaries: A cluster analysis

This paper analyses corporate sustainability (CS) in multinational enterprises (MNEs) and, in particular, the way the commitment of subsidiaries depends on different configurations of internal and external influence exerted by stakeholders, institutions and corporate headquarters. The study is based on primary data collected through surveys sent to subsidiary managers in the hotel industry in 19 different countries in the world. The findings of a principal component analysis and a cluster analysis show four different clusters of firm behaviors, depending on the external stimuli and the internal obstacles subsidiaries face when implementing CS. These may actually facilitate or hinder its implementation. Results show that some subsidiaries act proactively towards CS, overcoming objective difficulties, whereas others appear to be sluggish, since they feel no pressure to implement such activities, even though they are increasingly important in the current scenario. This paper contributes to the literature on CS in international business and also provides practical recommendations to help MNEs achieve better CS results through a more effective implementation of sustainability activities by their subsidiaries.

Emerging Market Multinational Family Business Groups and the Use of Family Managers in Foreign Subsidiaries

Little is known about the internationalization behavior of Emerging Market Family Business Groups (EFBGs) and their strategic usage of family managers in foreign subsidiaries facing uncertainty due to institutional differences. Informed by the resource-based view of the firm and by institutional theory, we hypothesize that family managers are an EFBGs-specific resource used to mitigate institutional uncertainty caused by larger institutional distances occurring between home and host countries. Moreover, family managers are used differently depending on the regional focus of the EFBGs, which further strengthens the critical role that family manager’s play in management and control across the business groups. We employ 5-year panel data on Taiwanese EFBGs, and our results indicate that family managers tend to be assigned by EFBGs with stronger operations outside the home region, and in foreign subsidiaries where strong differences in regulative and cognitive institution may exist. We contribute to the continuing understanding of family ownership in the management of EFBGs, and the research of internationalization of firms on managing foreign subsidiaries.

The Role of MNE Subsidiaries in the Practice of Global Business Models in Transforming Economies

ABSTRACTThis study provides new insights into the role of subsidiary managers in the practice of global business models of multinational enterprises in transforming economies. Drawing on the global business model literature and through semi-structured interviews with a leading Norwegian maritime multinational enterprise in China, we have developed and critically explored a theoretical framework for uncovering how subsidiary managers understand and manage the tensions between the headquarters based in a western country and the subsidiaries based in a transforming economy. More specifically, when implementing the global business model in the transforming economy, subsidiary managers need to undertake effective management of structural, behavioural, and cultural tensions along with the global integration-local responsiveness dilemma. Subsidiary managers can contribute to solving structural tensions between the headquarters and subsidiary by undertaking effective market sensing and knowledge transfer activities to integrate the transforming economies into the MNE's global production networks. Meanwhile, they need to make effective relationship management to solve behavioural and cultural tensions.

Breaking the vicious circle of subsidiary isolation: a meta-synthesis of subsidiary initiative-taking

Purpose of the paper: We aim at contributing to the current controversial discussion on the vicious circle of subsidiary isolation. Therefore, we (1) strive for a better understanding of the different stages of initiative undertaking and (2) investigate how subsidiaries can make use of this process to attract HQ attention and break out of isolation. Methodology: Building on Schmid et al.'s (2014) process model of subsidiary initiative development, we adopt a meta-synthesis as our research strategy and combine and interpret the findings from a set of systematically chosen case studies. Results: Our findings suggest that the impact of subsidiary characteristics varies considerably over time during the process. For the case of isolated subsidiaries, we adapt Schmid et al.'s (2014) process model and show how an isolated subsidiary can attract HQ attention due to subsidiary initiative taking at the subsidiary level. Research limitations: The included case studies have not been conducted to answer our research questions and our search strategy may have excluded further relevant studies. Practical implications: While managers of less-embedded subsidiaries should be aware of possible HQ resistance and show persistence over time, HQ managers should use HQ monitoring and reporting to detect silent, but motivated subsidiaries. Further, HQ managers are challenged to balance their (positive) attention towards subsidiaries. Originality of the paper: The paper is original in its use of a meta-synthesis that enables a more holistic and finer-grained understanding of subsidiary initiative processes and draws the attention to aspects that are underrepresented in the current body of subsidiary initiative research.

Multinational enterprises and strategic actions in emerging economy contexts: From conformity to institutional entrepreneurship

AbstractThis research explores the broader set of strategic actions of multinational enterprises (MNEs) in emerging markets in response to institutional forces. We re‐examine the effect of MNEs on changing institutions in host countries and conceptualize a theoretical model of institutionalization and institutional change initiated by MNEs in emerging economy contexts. In our two‐stage approach, we build on an inductive study to explore MNEs' strategic actions and their institutional settings. We then conduct repertory grid analysis to analyze face‐to‐face interviews with mid‐level and senior managers of subsidiaries of eight major MNEs. We identify distinctive categories of strategic action taken by MNEs to respond to facets of their institutional environment, depending on the restrictiveness/openness of their institutional environment, and their self‐perceived organizational strength.

MNC response to superstitious practice in Myanmar IJVs: Understanding contested legitimacy, formal–informal legitimacy thresholds, and institutional disguise

Superstition is a pervasive informal institution affecting the decision-making of organizational actors yet remains under-studied and ill-understood in international business research. We address this lacuna through examining how Western MNCs affect – and are affected by – the use of superstition among local subsidiary managers in an emerging Asian economy. Based on interviews, archival documents, and observation, our inductive investigation reveals a complex, changing, and surreptitious relationship between MNC practice and an informal institution which, while widely practiced, remains forbidden according to its formal institutional counterpart (Buddhism) and illegal according to Myanmar state law. Initial findings showed how MNCs endorsed, acquiesced, or rejected superstitious practice based on a configuration of construed reputational risk, corporate values adherence, degree of formal institution approval, and perceived local performance impact. Subsequent MNC engagement then shifted from accommodation to resistance to manipulation in response to local managers’ disguising their ‘superstitious’ practices as Buddhism, ‘blurring’ the formal–informal institution divide in the process to secure MNC public approval. Together, our findings serve to refine and deepen existing theory into how the MNC subunit can manage its legitimacy through balancing the incompatible demands of formal and informal constituents within a contested institutional dyad.

Subsidiary innovation performance: Balancing external knowledge sources and internal embeddedness

Abstract The open innovation (OI) literature has focused primarily on OI strategies and external sourcing of knowledge at the organizational level and has paid less attention to the role of subsidiaries in the OI activities of multinational corporations (MNCs). In contrast, International Business (IB) scholars have shown that subsidiaries play an emergent role in MNC innovation activities and have highlighted the relevance of subsidiaries' external and internal linkages. In this paper, we bring together these perspectives by examining OI at the subsidiary level within MNCs and test our hypotheses through an empirical analysis using data from 91 MNC subsidiaries. Our findings show an inverted U-shaped relationship between the openness of subsidiaries to external knowledge sources and innovation performance. Moreover, we find that subsidiaries' internal embeddedness positively moderates the above relationship. Practically, our findings suggest the need for MNC and subsidiary managers to develop mechanisms to manage intra-organizational relations in order to achieve improved innovation performance while leveraging of external knowledge sources at the subsidiary level, thus favoring MNCs' knowledge management (KM) approach. We contribute to different interrelated streams of research by providing compelling evidence to support the assertion that subsidiaries need to balance external and internal openness.

Shades of silence: Why subsidiary managers remain silent vis-à-vis their headquarters

Subsidiary managers as communication pins to headquarters are responsible for providing headquarters with relevant information. While research informs us about what subsidiary managers say, we do not know what they remain silent about and why. Given the importance of understanding information flows within MNCs, I explore subsidiary managers’ motivations for silence vis-à-vis headquarters. Drawing on interviews with subsidiary managers of Western-owned MNC subsidiaries in South Korea and adopting a classical and a social view of agency, my findings suggest that subsidiary managers’ silence is contextual and motivated by three dimensions: managing subsidiary image, managing headquarters relations, and managing local context.

The enduring effects of relational attributes on subsidiary evolution after mandate loss

AbstractResearch SummaryWe explore the importance of the relational attributes, trust and commitment, and their association with subsidiary development after mandate loss. We examine how greenfield and acquired subsidiaries, through their interaction with headquarters and sister subsidiaries, develop relational attributes through mutual‐orientated adaption. These relational attributes are subsequently important elements in upholding and developing subsidiary activities despite the loss of a mandate. We trail this process through a longitudinal field study following the evolution of four multinational enterprise (MNE) subsidiaries. We explain how the subsidiaries relational attributes and part of their activities, associated with its mandates, remain even after the loss of a mandate. The study shows how these relational attributes mitigate and compensate for formal mandate loss.Managerial SummarySubsidiaries have been increasingly seen as the locomotive of MNEs value creation. This has coincided with the disaggregation of the MNEs value chain which has had a positive effect on the development of foreign subsidiaries. However, there is now more competition for responsibilities among subsidiaries leading to increased movement of responsibilities and activities between them. We find that the subsidiary managers relationship attributes (trust and commitment) between them, their headquarters and other subsidiaries in the MNE has a mitigating effect on the loss of these responsibilities for the subsidiary. By showing the impact of managerial micro‐activities in the MNE, our study offers insights for subsidiary managers on what they can leverage to pursue subsidiary charter consolidating activities and survival, or charter enhancing activities and growth.

Subsidiary Managers' International Work Experience and Knowledge Transfer: The Differences between PCNs and HCNs

Subsidiary Managers' International Work Experience and Knowledge Transfer: The Differences between PCNs and HCNs

Subsidiary upgrading and global value chain governance in the multinational enterprise

AbstractResearch SummaryUpgrading and governance in global value chains (GVCs) have been understood mainly through studying the buyer–supplier transaction, where the supplier is typically an independent contractor from a developing economy. Little is known about how subsidiaries of multinational enterprises (MNEs) can upgrade in a GVC, whose core activities are coordinated through the “hierarchy” governance model. Using an in‐depth longitudinal single case study in the medical devices industry, we explain how a subsidiary can accomplish upgrading in an intra‐MNE GVC and, over time, increase its control of this GVC reaching a joint coordinator role for its governance. Our findings show that partaking in innovation may not be the final stage of a subsidiary's upgrading but can represent the start of a new phase that culminates with joint coordination of the GVC.Managerial SummaryThe competitiveness of a global subsidiary is determined by its capacity to upgrade in a GVC and engage in higher value‐adding activities. Moving from production to innovation is generally viewed as the pinnacle for subsidiaries in the accomplishment of upgrading within a GVC, thereby ensuring long‐term survival. We show however that specializing in innovation is not the highest peak a subsidiary can reach. Innovation is in fact a necessary condition for a strategic role for the coordination of a GVC. A subsidiary's management team can deliberately strategize to ascend to such a position in the multi‐business MNE as a GVC joint coordinator for a product category. It can achieve this prominent position by leveraging its innovation capabilities to assume a greater proportion of control over the business's GVC governance. This position of greater prominence for the subsidiary within the MNE advances its internal advantage and strengthens its survival prospects.