Manufacturing Subsidiaries Research Articles

Divesting or keeping overseas subsidiary production under rising production costs and uncertain market demands in host countries

This study examines whether overseas manufacturing subsidiaries are divested or kept under rising production costs and uncertain market demands in their host countries. We predict that even under increasing production costs, a subsidiary will not be divested but kept under high market demand uncertainty. A multinomial logit analysis of Korean overseas manufacturing subsidiaries finds that an overseas manufacturing subsidiary exposed to high labor cost growth in its host country is not divested but kept alive under high market demand uncertainty via cross-border production volume adjustments with other in-network subsidiaries in different countries. It also shows that the moderating impact of demand uncertainty on production shifts over divestment is pronounced more for the subsidiaries with low cross-country labor cost correlation, high product compatibility, and high ownership share. These findings imply that the longevity of subsidiary operations is shaped by geographic and organizational characteristics determining production shift conditions.

Analysis implementation of Behavior Based Safety (BBS) with the DO IT method in PT X, Mojokerto 2023

Occupational Safety and Health (OHS) is imperative across various industries for preventing accidents and Occupational Diseases (PAK) that may lead to disability or death. This study focuses on PT X Mojokerto, a manufacturing subsidiary in the concrete industry and examines the implementation of Behavior Based Safety (BBS). This research is a descriptive qualitative-research with an observational approach using the DO IT (Define, Observe, Intervence and Test). Data collection was carried out by observation, document review and in-depth interviews with several informants. Determination of target behaviors in the implementation of Behavior Based Safety (BBS) at PT X Mojokerto Factory was carried out through discussions with the HSE officer. After determining the focal behavior in the BBS program, observations were made of workers in the designated area. Interventions are conducted to correct risky behaviors identified through observation. The impact of the intervention on the implementation of BBS at PT X Mojokerto can be seen in several aspects. Based on the research, implemention of Behaviour Based Safety (BBS) at PT X Mojokerto has positive contributions towards establishing a secure and healthy workplace. While acknowledging areas that may need refinement.

A proprietary component manufacturer’s global supply chain design: The impacts of tax and organizational structure

This paper studies the supply chain structure design for a proprietary component manufacturer (PCM) in a global environment. The PCM, producing component with patent protection and/or superior quality, chooses to enter into an overseas market to enhance revenue. There are three supply chain structures available to the PCM: (1) monopoly where the PCM establishes a downstream manufacturing subsidiary to produce and sell the end product, (2) component supplier where the PCM supplies component to a local original equipment manufacturer (OEM), and (3) dual distributor where the PCM supplies component to the OEM but also produces a competing end product. Our analysis suggests that two important features in a global environment, i.e., the global tax disparity and the organizational structure, have significant impacts on the PCM’s supply chain structure design and profits. If the downstream has a tax advantage, it is optimal for the PCM to directly enter into the downstream market with the structure of monopoly. As the downstream tax rate increases, the other two structures, i.e., component supplier and dual distributor, become more attractive. We show that centralization makes the dual distributor and monopoly structures more desirable. However, the OEM may be driven out of the market and the dual distributor structure is infeasible when the downstream tax rate is high enough. Contrary to our traditional wisdom, decentralization may benefit the PCM under certain circumstances.

Multinational operational flexibility, within-network redundancy, and downside risks and divestment rates of international investments

This study takes the multinational operational flexibility perspective anchored in real options theory to examine how intra-firm connectedness and switchability affect the performance and longevity of international investments. We postulate that more extensive intra-firm trade connectedness, along with multinationality, reduces downside risks and divestment rates. Through an empirical examination of a large sample of Korean multinational corporations, we find that more extensive trade ties within the same MNC network are negatively associated with downside risks. We also find that decreased downside risks decrease divestment rates. Furthermore, we observe that these impacts of intra-firm trade ties are more salient when more in-network manufacturing subsidiaries produce the same product type and operate in negatively correlated countries in terms of labor costs. These findings indicate how the flexible configurations of international investments influence their performance and longevity.

Sailing through the storm – performance of Russian manufacturing subsidiaries of multinational corporations in the first year of the COVID-19 pandemic

ABSTRACT The aim of this study is to depict the performance of Russian manufacturing subsidiaries of multinational corporations during the first year of the COVID-19 pandemic. Using a unique handcrafted database of financial reports from 259 subsidiaries for 2019 and 2020, we retraced three indicators of business robustness: the dynamics of revenues, positive profitability, and the level of financial solvency. Most of the studied subsidiaries (85%) were able to withstand the crisis and maintain satisfactory financial solvency. Revenues decreased in 2020 to 40% of the studied subsidiaries, and the share of loss-making subsidiaries reached 31%. However, more than 40% of the studied subsidiaries achieved both an increase in revenues and positive profitability of sales in 2020. In this respect we may assess the level of ‘ownership advantage’ of multinational corporations regarding assisting their subsidiaries to achieve different elements of business robustness during the pandemic.

Total expenses for managerial remuneration in foreign manufacturing subsidiaries during the COVID-19 pandemic: a pilot exploration of applied policies

PurposeThis study aimed to reveal the policies applied to determine the total expenses for managerial remuneration in manufacturing subsidiaries during the COVID-19 pandemic.Design/methodology/approachThe author analyzed the annual financial reports of Russian manufacturing subsidiaries containing data on managerial remuneration and compared the dynamics of annual revenues and the amount of annual managerial remuneration.FindingsThe author identified four types of policies regarding the total amount of managerial remuneration. In a minority of cases, when revenues decreased, the share of the total amount of managerial remuneration in total revenues also decreased. The author also observed “payment for efforts”; although revenues decreased in 2020, the share of the total amount of managerial remuneration in total revenues increased. In 17% of cases, when revenue increased, the share of the total amount of managerial remuneration in revenue also increased. Finally, in 50% of cases, the COVID-19 pandemic served as a pretext to generate savings from the reduction in the total amount of managerial remuneration despite the increase in revenues.Originality/valueThis is the first study to use real financial reports to evaluate the dynamics of the total amount and share of managerial remuneration in revenue during a crisis.

East – Asian Lead Firms’ Impact on the Electronics Industry of the V4 Countries: Samsung and Its Competitors

The paper investigates the rapid, FDI-driven expansion of the electronics industry in the V4 countries from the second half of the nineties through their inclusion into the global value chains of East-Asian lead firms with their home base in countries, such as in Korea, Taiwan or Singapore and China. The paper analyses opportunities for upgrading of East-Asian manufacturing subsidiaries and their local suppliers in the V4 region towards higher value-added activities, and the level of the subsidiaries’ embeddedness after 30 years of their appearance as well as their impact on trade relations between East – Asia and the V4.

Do in-network ties help in lowering subsidiary divestment rates under environmental challenges?

This study examines the relationship between the in-network ties of a foreign subsidiary and its longevity in the face of environmental challenges in its host country. It specifically examines whether in-network trade and human ties can help reduce divestment rates under unfavorable and uncertain host market conditions. Empirical tests on a large sample of Korean foreign manufacturing subsidiaries reveal that the positive effect of unfavorable market demand on subsidiary divestment is negatively moderated by exchange rate uncertainty in its host market. Further, the effect of uncertainty on divestment is weakened when subsidiaries have stronger in-network trade ties or expatriate board members. This study contributes to the foreign divestment literature by examining how in-network connections and board-level support influence the longevity of foreign subsidiaries in hostile macro-economic contexts.

Digital technologies and the nature and routine intensity of work: Evidence from Hungarian manufacturing subsidiaries

This paper explores the impact of digital technologies on the nature and routine intensity of shopfloor work, the ways in which digital technologies exert their effects and the factors moderating the outcomes of digitalisation in respect of work. The effect of technology cannot be limited to a dichotomy of increasing versus decreasing degrees of routine. Instead, there are basic scenarios as far as the routine content of activities is concerned: a) no change in routine; b) increased routine; c) transformed routine; d) reduced routine. More specifically, drawing on data from Hungarian companies, we discuss the multiple ways that technology affects the nature and routineness of work. These include (i) workload and intensity of work; (ii) the degree to which tasks can be explicitly defined, measured and codified; (iii) task spectrum, i.e. the variability, complexity and diversity of work tasks; (iv) the composition and amount of skills required for task execution; (v) the importance of experience or tacit knowledge for task execution; and (vi) the value added of work tasks. Evidence indicates that the qualitative enrichment of shopfloor work and digital technology-induced reduction in the routine content of job tasks apply only to relatively skilled employees, albeit not exclusively in high-level shopfloor functions. It is argued that the beneficial effects of digital technologies materialise only if employees are skilled enough to be upskilled and become engaged not only in digitally-assisted but also in digitally-augmented, high-value activities.

The past, the present, and the foreseeable future of Russian manufacturing subsidiaries of Western multinational corporations

This article retraces the development of Russian manufacturing subsidiaries of Western multinational corporations from the late 1980s until 2019. Using secondary sources and a unique handcrafted database on significant extensions of manufacturing facilities of Western multinational corporations in Russia during 2012–2018, we present the position of Russian manufacturing subsidiaries of Western multinational corporations before and after the beginning of sanctions. We also indicate the major strategic challenges that they currently face, including the necessity to maintain dual loyalty (to home country and host country authorities), manage the deteriorating quality of business regulations in Russia, and overcome the increasing shortage of qualified personnel at all levels. The data on the opening of new facilities in 2017–2018 reveal that such issues impede but cannot stop the quantitative development of foreign-owned Russian manufacturing facilities. At the same time, saving on managerial expenses and low “investments in non-current assets” of the established manufacturing subsidiaries may break down “the innovation engine” assembled in many Russian manufacturing subsidiaries of Western multinational corporations and bring them into the periphery of their corporate parents, where the attention and resources from the corporate center are lacking.

Redefining Phenomenon-Based Research in Strategic Management as Discovery-Oriented Multi-Disciplinary Inquiry

Using the experience and results of our eight-year-long study of the strategic actions of Russian manufacturing subsidiaries of multinational enterprises (MNEs), we argue that the existing definitions of phenomenon-based research (PBR), offered by Von Krogh et al. (2012, 278), Doh (2015, 609), and Schwarz and Stensaker (2016, 245), are incomplete as such definitions omit the key aim of ―capturing, documenting, and conceptualizing an observed phenomenon of interest in order to facilitate knowledge creation and advancement‖—the discovery of missing or omitted element(s)/properties in the existing studies of real-word phenomena. These elements or properties may not always be important, however, in some cases, their discovery may lead to theory advancement theory by incorporating the missing elements into existing theories and models.

Russian manufacturing subsidiaries of foreign corporations in 2012–2018

The article presents the results of studying the development of foreign-owned production facilities located in Russia in 2012–2018. Using a multi-disciplinary approach, the authors summarized heterogeneous information about the activities and performance of such enterprises and revealed their high adaptability to constantly changing institutional and business environment.

Optimization of the Technology Transfer Process Using Gantt Charts and Critical Path Analysis Flow Diagrams: Case Study of the Korean Automobile Industry

This research is focused on the technology transfer process in the automobile industry using project management tools. The aim of this research is the development of a technology-transfer model using Gantt charts and Critical Path Analysis flow diagrams to achieve a sustainable planning process in the global environment. To achieve this goal, the authors use Gantt charts and Critical Path Analysis flow diagrams. The hypothesis and three research questions are presented, which suggest a relationship between project management tools and the sustainable planning process of technology transfer. During the research, we use the case study of the Korean automobile industry as an excellent example of the technology-transfer process in global markets. A single project of technology transfer is discussed: the technology knowledge transfer from Korean headquarters to a Russian manufacturing subsidiary (Hyundai Motor Corporation). Quantitative data were collected through the open resources of the corporation; the qualitative data were analyzed through a case study and model parameter evaluation. The significant result that the combination of Gantt Charts and Critical Path Analysis flow diagrams methods improves the planning process for technology-transfer projects was found in this survey. It is noticed that (a) it is useful to apply project-management tools for technology transferring models; (b) Gantt Charts and Critical Path Analysis flow diagrams have a sustainable impact on technology transfer projects; and (c) critical paths and operational reserves in network diagrams help to optimize the planning process for technology transfer.

Does Distance Affect the Role of Nonlocal Subsidiaries on Cluster Firms’ Innovation? An Empirical Investigation on Chinese Biotechnology Cluster Firms

As translocation strategy has been pursued by cluster firms, two types of nonlocal subsidiaries, nonlocal manufacturing subsidiaries (NMS) and nonlocal R&D subsidiaries (NRS) contribute to their holding firms’ innovation in different ways. Prior studies have not paid much attention to the role of NMS and NRS, and how their effects are contingent on distance. To address this gap, this paper assesses the contribution of NMS and NRS on cluster firms’ innovation performance respectively and ascertains the moderating effect of geographical distance and social distance. The empirical investigation is conducted using a sample of 79 Chinese cluster firms. Our results indicate that both NMS and NRS have positively influenced cluster firms’ innovative performance. Moreover, geographical distance negatively moderates both the role of NMS and NRS. On the other hand, social distance only increases the influence of NRS on their holding firms’ innovation. Thus, spatial distance may hamper knowledge acquisition through NMS and NRS while loosely connected NRS would contribute more to their parent companies in local clusters. Our research contributes to the literature on cluster firms’ relocation strategy by clarifying the distinct role of NMS and NRS and recognizing the contingent effect caused by geographical and social distance.

Seeing the tree and the forest: Japanese auto firm multinational dispersion, cultural distance, and foreign manufacturing subsidiary ownership levels

Firms may pursue greater equity ownership in foreign manufacturing subsidiaries to limit internal costs of coordinating and communicating with culturally dissimilar host-country partners. We offer that this relationship is strengthened when a firm’s multinational network is more geographically dispersed, or dispersed in terms of national cultural contexts, because a highly dispersed multinational network may also make coordination difficult. With a panel of 7422 firm-year observations (1993–2016) from 541 foreign manufacturing subsidiaries (32 Japanese parent automotive firms), we find the positive cultural distance and equity ownership relationship is positively moderated by geographic and cultural dispersion within parent firms’ multinational networks.

Understanding the Development of a Global Mindset: Nature vs. Nurture

Based on the upper echelons perspective and the knowledge based view, we investigate the impact of CEOs from home on the performance of the foreign manufacturing subsidiaries in Korea. In addition, we also investigate the moderating roles of subsidiary level factors such as R&D expenditure, firm size, and entry mode (i.e. joint venture or not). Using the samples of 338 manufacturing subsidiaries, we conducted panel data analysis for five years from 2011 to 2015. The statistical results suggest that CEOs from home show the positive relationships with the performance of foreign subsidiaries. In addition, R&D expenditure positively moderated the relationships between CEOs from home and the performance of foreign subsidiaries.

해외자회사 CEO의 본사파견 여부가 해외자회사의 성과에 미치는 영향: 한국진출 외국인투자 제조기업을 중심으로

해외자회사 CEO의 본사파견 여부가 해외자회사의 성과에 미치는 영향: 한국진출 외국인투자 제조기업을 중심으로

INTERNET OF THINGS AND PROCESS PERFORMANCE IMPROVEMENTS IN MANUFACTURING

ABSTRACT This case study deals with a manufacturing subsidiary of a large national chain of home improvement stores. The focus is on tools such as time-driven activity-based costing, break-even analyses, evaluation of budgets, and assessing departmental performance. The case can serve as both a discussion basis in class as well as an exam for students in management, operations, strategy, and accounting. The case illustrates how managers can optimize their manufacturing process using the internet of things for customer orders and product development. The open questions at the end of the case study allow for an adjustment to the level of knowledge of the students. They also serve the purpose of raising students’ awareness of the limits of absorption costing as product variety increases. Students will need to reflect on the short-term trade-offs between increasing digitalization and operating leverage. Keywords Time-driven activity-based costing; absorption costing; cost-volume-profit analysis; break-even; digitalization; internet of things; process performance; performance evaluation; budgeting; variance analysis; department cost allocation; profitability; consultants; case study; teaching notes.

WuXi delists small-molecule subsidiary

The drug services firm WuXi AppTec will delist its small-molecule contract manufacturing subsidiary Shanghai SynTheAll (STA) from a Chinese stock exchange where it has traded since 2015. Delisting will save administrative expenses and allow STA to focus on its long-term development, WuXi says. STA operates process development and commercial production facilities in Shanghai’s Jinshan district and at a newer site in nearby Changzhou. In April, WuXi announced that STA will build a new facility in Jinshan large enough to accommodate 500 scientists.—Jean-François Tremblay, special to C&EN

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.