MNC Headquarters Research Articles

MNC headquarters’ role in subsidiaries’ value-creating activities: A problem of rationality or radical uncertainty

We examine the role of headquarters (HQ) in the value-creating processes of sub-units in the multinational corporation, and claim that this role is dependent on how the knowledge situation of HQ is conceptualized. Two perspectives on the role of HQ are considered: “rationality” and “radical uncertainty”. We find that there are clear differences between the two perspectives concerning the possibility of HQ to shape future innovation projects, monitor these projects and contribute with own expertise. In general the first perspective is rather optimistic about these possibilities, while the second perspective tells us that HQ involvement in the value-creating processes often becomes dysfunctional. The paper ends by indicating how the theoretical conflict between the two perspectives can be addressed by empirical research.

Thinking locally: exploring the importance of a subsidiary-centred model of FDI-related spillovers in Brazil

This paper investigates FDI-related spillovers in Brazil. Contrasting to previous studies on other emerging economies, it found horizontal spillovers. However, spillovers did not arise simply as consequence of technology transfer from MNC headquarters as the standard approach presumes; nor were associated with differences in technological intensity across industries, in domestic firms' absorptive capability. Instead, spillovers were associated with particular kinds of localised knowledge-creation activities by subsidiaries. Those findings have both significant theory and policy implications. They help to make clear the explanatory limitations of the dominant 'centrally-driven' perspectives, and point to the relevance of focusing on subsidiaries' technological behaviour in order to explain the existence or not of FDI-related spillovers. This implies that government policies aiming at simply attracting FDI do not ensure that FDI-related spillovers will automatically take place. Instead, effective policies on this matter should be concerned with the innovative behaviour of already established subsidiaries.

The influence of internal and external social networks on HRM capabilities in MNC subsidiaries in China

In this study we examine the influence of involvement in internal and external social networks on HRM capabilities. We distinguish between technical and strategic HRM capabilities and focus on the capabilities of the HR department relating to four HRM practices – recruitment and selection, training and development, compensation, and performance appraisal. The study is based on data from dual respondents, general managers and HR managers, in 66 European MNC subsidiaries located in China. The results indicate that contact with other MNCs in China regarding HRM issues is positively associated with both technical and strategic HRM capabilities whereas contact with local Chinese companies does not have any significant influence on either strategic or technical HRM capabilities. Contact with MNC headquarters is positively associated with strategic HRM capabilities.

Knowledge Transfer between Multinational Corporations’ Headquarters and Their Subsidiaries: Influences on and Implications for New Product Outcomes

A multinational corporation's (MNC's) competitive advantage depends increasingly on control over intangible resources, such as knowledge and relational capital. Although prior research has suggested that cross-border knowledge transfer in MNCs is critical to their new product outcomes, the conditions under which such knowledge transfer can serve to induce positive outcomes remain unclear. This study builds on resource-based theory to suggest that knowledge and MNC network strength are the two critical firm resources individually and collectively influencing new product outcomes. Because MNCs are subject to the pressures on various environmental changes, the authors rely on the contingency theory to examine when knowledge transfer works in differential global market and technological turbulence. The results of a survey of MNC headquarters show that the impacts of cross-border knowledge transfer on new product outcomes are not always positive, depending on the levels of network strength and environmental turbulence.

The MNCS Global Ethics And Social Responsibility: A Strategic Diversity Management Imperative

A multinational corporation’s (MNC) ethical and social responsibility issues must be an integral part of its strategic management process. The MNC headquarters (HQ) must decide on its core ethical and social responsibility values and priorities, and, it should empower its foreign units to formulate their specific programs and strategies to respond to changing host countries’ environments.

Managing subsidiary knowledge creation: The effect of control mechanisms on subsidiary local embeddedness

Given the importance of local (external) network embeddedness for an MNC subsidiary's ability to create new knowledge, a crucial question is what factors affect this local embeddedness. Despite its obvious relevance, few efforts have been made in the MNC literature to deal with this issue. In this paper, we hypothesize that a subsidiary's local embeddedness is influenced by headquarters' use of different control mechanisms, and that local embeddedness, in turn, is an important antecedent to a subsidiary's level of knowledge creation. The model is tested on a dataset of MNC subsidiaries in Finland and China. The results indicate that MNC headquarters can indeed influence subsidiary local network embeddedness, which in turn enhances subsidiary knowledge creation.

Similarities of Human Resource Management Systems between Taiwanese MNC Headquarters and Subsidiaries in China

This study explores the factors that influence the design and execution of MNCs' HRM systems in their overseas subsidiaries. Through in-depth interviews with multiple managers from four Taiwanese MNCs, this study compares the HRM similarities between MNC headquarters and their overseas subsidiaries in China. We found MNCs' control systems, degree of internationalization and their strategic international human resource management (SIHRM) orientation significantly affect the design of subsidiary firms' HRM systems. When the MNC has high degree of internationalization, when it utilizes output control system, and when it adopts ”adaptive” SIHRM orientation, HRM systems in subsidiaries adjust to local demands and exhibit large differences compared to that of the HQs'. If the MNC has low degree of internationalization, when it utilizes input, behavior control system, and when it adopts integrative or exportive SIHRM orientation, HRM systems in subsidiary firms exhibit high similarities to that of the HQs'.

Asymmetric information as a key determinant for locational choice of MNC headquarters and the development of financial centers: A case for China

As a socialist market economy, the spatial effect of asymmetric information is much more effective in China where most of the information sources are centralized to a few administrative and governmental bodies. The objective of this paper is thus to testify the impact of asymmetric information on the locational choice of foreign MNCs in China based on our investigation. By doing so, we try to illustrate that asymmetric information is the key determinant of the locational choice of MNC headquarters and the development of financial centers. The findings of the paper argue that contrary to the traditional point of view, Beijing has more advantages than Shanghai in developing into the biggest service and financial center in China since its attractiveness to the MNC headquarters is far pronounced according to the asymmetric information criterion and requirement. (c) 2005 Elsevier Inc. All rights reserved.

The relationships between types of network organization and adoption of management mechanisms: an empirical study of knowledge transactions of MNC’s subsidiaries in Taiwan

This paper examines the relationships of various types of network organizations and the adoption of management mechanisms through the application of network theory. We found that strong relationships exist as described within the four hypotheses by empirically evaluating case studies of MNC subsidiaries in Taiwan. Based on “the knowledge transaction density” observed between an MNC’s enterprise group and local firms, the subsidiaries can be classified into three categories of network organization, namely: (1) Self-sufficient, (2) Production- based, and (3) Operation-centered subsidiaries. The literature review suggests that there are four types of mechanisms that MNC headquarters use to control their foreign subsidiaries. These mechanisms are bureaucratic, personnel, performance and cultural controls. This research reports three major findings. Firstly, for Operation-centered subsidiaries, headquarters prefer to adopt two or more management mechanisms simultaneously. Secondly, for Production-based subsidiaries, headquarters prefer to adopt bureaucratic management mechanisms. Finally, for Self-sufficient subsidiaries, headquarters prefer to adopt performance and cultural management mechanisms.