Subsidiaries Of Multinational Corporations Research Articles

Adapting innovation capabilities in emerging economies: the role of learning and cultural and institutional distance in MNC subsidiaries in Korea

Purpose The rise of emerging economies in the innovation landscape has often been attributed to the positive spillovers of innovation capabilities from multinational corporations (MNCs). However, it is less certain that their innovative capabilities imported from the home country function effectively in the host country from the outset. This study examines the performance of the innovation capabilities of MNC subsidiaries in emerging economies over time by considering the gradual process of their learning about host countries.Design/methodology/approach We employed stochastic frontier analysis to measure innovation capabilities, our focal construct. For regression analysis, we applied the Mundlak estimator, a variant of the fixed-effects panel estimator, to a sample comprising subsidiaries of MNCs from technologically advanced nations operating in Korea between 2006 and 2016.Findings Our results indicate that the innovation capabilities of MNC subsidiaries initially underperform those of local firms but improve over time, eventually surpassing the capabilities of their local counterparts. Furthermore, our findings reveal that institutional distance amplifies the underperformance of the innovation capabilities of MNC subsidiaries.Originality/value This study contributes to the literature by extending both theoretical development and empirical measurement of innovation capabilities in cross-national settings. Additionally, it deepens our understanding of whether and how MNC subsidiaries adapt their innovation capabilities to the local market environment.

Evolution of Organizational Structure: A Case Study of a Multinational Corporation (MNC) Subsidiary in Poland

Evolution of Organizational Structure: A Case Study of a Multinational Corporation (MNC) Subsidiary in Poland

Assessing the risk of profit shifting among the suppliers to Danish municipalities

PurposeAn increasing number of Danish municipalities wish to minimize tax avoidance due to profit shifting in their public procurement. To facilitate this effort, this study aims to develop a firm-level indicator to assess the potential risk of profit shifting (PS-risk) from Danish subsidiaries of multinational corporations to subsidiaries in low-tax jurisdictions.Design/methodology/approachDrawing from previous research, PS-risk is assumed to depend on the maximum difference in the effective corporate tax rate between the Danish subsidiary and other subsidiaries under the global ultimate owner, in conjunction with the tax regulations relevant to profit shifting. The top 400 contractors in Danish municipalities from 2017 to 2019 are identified and their relative PS-risk is estimated by combining information about corporate ownership structure with country-specific information on corporate tax rates, tax regulations and profit shifting from three independent data sets.FindingsThe PS-risk estimates are highly significantly positively correlated across the data sets and show that 17%–23% of the total procurement sum of the Danish municipalities has been spent on contracts with corporations having a medium to high PS-risk. On average, PS-risk is highest for large non-Scandinavian multinational contractors in sectors such as construction, health and information processing.Social implicationsDanish public procurers may use the indicator to screen potential suppliers and, if procurement regulations permit, to ensure high-PS-risk bidders document their tax practices.Originality/valueThe PS-risk indicator is novel, and to the best of the authors’ knowledge, the analysis provides the first estimate of PS-risk in Danish public procurement.

Differences in corporate social responsibility implementation between Slovak and Czech companies

In recent years, corporate social responsibility has emerged as a pivotal factor for corporations in cultivating a favorable public perception. Despite this, many companies remain uncertain about the integration and rationale behind incorporating it into their core business strategies. This study aims to discern dissimilarities in implementing corporate social responsibility initiatives between Slovak and Czech companies, addressing the triple bottom line framework. This approach is a metric for evaluating a company’s achievement across three dimensions: social, environmental, and economic. The study is predicated on a questionnaire survey conducted among a sample of 180 Slovak and 180 Czech companies operating as subsidiaries of multinational corporations as typical implementers of corporate social responsibility activities in emerging economies. Following the triple bottom line framework, three distinct sets of variables were formulated to account for social, environmental, and economic activities using the Mann-Whitney U Test to ascertain statistically significant disparities between Slovak and Czech companies. The findings indicate that the surveyed companies from monitored countries exhibited no notable distinctions in environmental endeavors. However, discrepancies were discerned in economic activities, specifically relating to post-sales or post-warranty customer services, which was significant with a small effect size (0.19). In social activities, significant differences were observed concerning adherence to the principle of equal opportunities in the workplace. Based on these outcomes, it is recommended that future investigations delve more extensively into the monitored parameters within the Visegrad countries. AcknowledgmentThe paper was prepared within the project “Etika v podnikaní na Slovensku” no. 01/2022/GA FEM SPU supported by Grant Agency – Faculty of Economics and Management – Slovak University of Agriculture in Nitra and internal grand of AMBIS college.

Institutional theory and multinational corporation internationalization strategy: a systematic review and future research agenda

PurposeThis study reviews the literature on institutional theory in international business and examines the institutional factors behind the success or failure of multinational corporations (MNCs) in emerging markets.Design/methodology/approachThis systematic literature review analysed 116 peer-reviewed articles published in leading journals between 2005 and 2022. The R package Bibliometrix and VOSviewer visualization software were used for analysis. A hybrid methodology combining bibliometric and content analyses was utilized to obtain a descriptive evaluation of the publication impact along with a keyword co-occurrence map, context-specific institutional effects and subsidiary strategies.FindingsThe Journal of International Business Studies, along with influential authors such as Mike W. Peng, Klaus Meyer, and Mehmet Demirbag, have taken the lead in advancing institutional theories for MNC internationalization in emerging markets. The clusters from the co-word analysis revealed dominant MNC entry modes, institutional distances and MNC localization strategies. The content analysis highlights how the institutional environment is operationalized across the macro-, micro- and meso-institutional contexts and how the MNC subsidiary responds in emerging markets. Meso-level interactions emphasize the relational aspects of business strategies in emerging markets.Practical implicationsContextualizing subsidiary strategies and institutional forms can help managers align their strategic responses to the dynamic relationship between subsidiaries and the institutional environment. The review findings will enable policymakers to simplify regulatory policies and encourage MNC subsidiary networks with local stakeholders in emerging markets.Social implicationsLegitimacy strategies such as corporate community involvement in emerging markets are crucial for enhancing societal support and removing stakeholders' scepticism for MNC business operations in emerging markets. Moral legitimacy should be implemented by managers, such as lending support to disaster management efforts and humanitarian crises, as they expand to new business environments of emerging markets.Originality/valueThis study is the first to explore institutional diversity and subsidiary strategic responses in a three-layered institutional context. The findings highlight the relevance of contextualizing institutional perspectives for international business scholars and practitioners as they help build context-specific theoretical frameworks and business strategies. Future research recommendations are suggested in the macro-, micro- and meso-institutional contexts.

다국적 기업 현지 자회사의 ESG 경영이 경영성과에 미치는 영향

다국적 기업 현지 자회사의 ESG 경영이 경영성과에 미치는 영향

Sustainability performance of multinational companies in Malaysia

This study investigated the influence of market environment, cultural distance, government policy, and absorptive capacity on international intra-firm technology transfer and organizational sustainability performance among subsidiaries of foreign-based multinational corporations (MNCs) in Malaysia. Quantitative data was collected from randomly selected 252 MNC-Subsidiaries in Malaysia. Data analysis revealed that market environment, determined by market dynamism and competitors' intensity; cultural distance determined by national and organizational cultural distance; along with absorptive capacity, captured by the constructs of ability and motivation have a significant positive effect on intra-firm technology transfer. The study also revealed a significant positive influence of intra-firm technology transfer on organizational sustainability performance across the sample. Furthermore, the results showed a significant indirect effect of market environment, cultural distance, and absorptive capacity on sustainability performance through (mediation) intra-firm technology transfer. The results of this study could serve as a specific reference for policymakers of rapidly emerging economies in order to strengthen policies for a more dynamic, competitive, market and support their citizens to acquire relevant education, skills, and cultural awareness that would enhance technological inflows leading towards improved organizational sustainability.

Protectionism and its Impact on MNC Subsidiaries’ Performance

AbstractThis study investigates the relationship between local protectionism and performance of multinational corporation (MNC) subsidiaries in China. We integrate overarching theories (i.e., institutional theory and extended resource-based view) to investigate a model for identifying whether local protectionism at the subnational level is beneficial or detrimental for foreign subsidiary operations or functions as a double-edged sword. We also examine whether or not internal organizational capabilities and relational capital with government moderate the effects. On the basis of regression analyses, our empirical findings reveal that the positive or negative effects of subnational protectionism in China depend on performance types. Moreover, performance contribution is considerably moderated by various internal capabilities of MNC subsidiaries. Findings offer valuable and practical implications for MNCs intending to invest in emerging economies.

National context and the transfer of transgender diversity policy: An institutional theory perspective on multinational corporation subsidiaries in Pakistan

AbstractDeploying institutional theory to analyze the transfer of transgender diversity policy in Pakistan, our research highlights the crucial influence of national context with respect to the development and implementation of transgender‐supportive equality measures in multinational corporation subsidiaries. Based on semi‐structured interviews with 4 government officials, and 30 managers, HR leads, and diversity officers working in subsidiary organizations, our thematic analysis highlights how regulatory institutions, normative and cognitive institutions, and institutional distance inform the conditions of possibility for the transfer and execution of diversity policy across national boundaries. Moreover, by highlighting the inadequacy of etic understandings of diversity categories and practices in settings where social structures and ideologies can be different, we argue that utilizing an emic approach is essential in the global diversity field. Our research emphasizes the value of context‐sensitive research instead of generic, and universalistic, applications of ‘Western’ diversity understandings.

Role of Subsidiary Autonomy and Embeddedness in Subsidiary Knowledge Development: Emerging Economy Perspective

ABSTRACT: This study examines the factors contributing to developing subsidiary knowledge in Malaysian foreign subsidiaries. Prior research on subsidiaries in multinational corporations has either concentrated on transferring knowledge from headquarters to subsidiaries or vice versa, ignoring the factors associated with subsidiary knowledge development through embedded relationship factors. Although embedded relations are essential for developing knowledge, the direction is most important for developing subsidiary knowledge. The significance of subsidiary knowledge development, subsidiary autonomy, and external and internal embeddedness has been poorly illuminated by prior research. This is because the perception of knowledge development is emphasized from the headquarters' perspective, while the subsidiary functions as a passive recipient. Using the resource-based and network theories, we argue that subsidiary development depends on the subsidiary's autonomy practice and the level of engagement or network relations between external and internal network partners. Our research shows that subsidiary autonomy and external embeddedness are the most significant predictors of subsidiary knowledge development. Internal embeddedness in subsidiary knowledge development is inconsistent with the theoretical assumptions for subsidiary autonomy and external embeddedness. In regression analysis, the survey results of 170 foreign-owned subsidiaries in Malaysia validate our hypotheses. According to the results of this study, subsidiary autonomy and external and internal embeddedness are the most significant predictors of subsidiary knowledge development. This study's findings have implications for subsidiary administrators in developing nations and multinational corporations. While subsidiaries are developing their knowledge, multinationals need to consider how much autonomy to offer them in this process. When subsidiaries are able to make independent decisions, embedded relationships will increase, and knowledge will be more likely to develop. This specific knowledge eventually contributes to the knowledge base of the MNE.

Improving subsidiary performance via inpatriate assignments: The role of host country national subsidiary CEOs’ social ties and motivational cultural intelligence

Inpatriation experience (i.e., working at headquarters) for host-country national (HCN) subsidiary managers is supposed to be beneficial for foreign subsidiaries’ knowledge transfer and financial performance. Applying upper echelons theory, we investigate whether HCN subsidiary CEOs with inpatriation experience promote knowledge transfer from multinational corporation (MNC) headquarters to their subsidiaries via the formation of social ties at MNC headquarters to drive subsidiary performance. Moreover, we theorize and investigate if HCN subsidiary CEOs’ motivational cultural intelligence can amplify the positive effect of inpatriation experience. Combining survey and archival data from 289 subsidiaries of MNCs in South Korea, our results partially support our theoretical model. Our findings offer important implications for expatriate staffing, inpatriation assignments, and subsidiary management.

More effective solutions? Senior managers and non‐routine problem solving

AbstractResearch SummarySolving non‐routine problems—problems for which current organizational, recurrent action patterns do not offer a predetermined, effective solution—can be an important source of value creation. When these problems occur in subsidiaries of multinational corporations, senior headquarters managers can potentially help solve them. However, whether their involvement is beneficial rests upon the assumptions that they know which knowledge is appropriate and that their involvement does not negatively influence the problem solving process. We challenge these assumptions and theorize that the involvement of senior headquarters managers is negatively related to solution effectiveness, unless senior subsidiary managers are also involved, and especially if problems have an external locus (i.e., primarily relate to the firm's products and services). Our robust results are consistent with our theory.Managerial SummaryCompanies are often faced with new problems, which represent an opportunity for organizational improvements. But how different types of senior managers influence problem solving effectiveness has remained unclear. Studying problems occurring in foreign subsidiaries of multinational corporations, we find that the involvement of senior headquarters managers is negatively related to problem solving effectiveness. Two reasons explain this result: senior headquarters managers often lack necessary understanding of their subsidiaries' contexts; and their involvement diminishes active participation of subsidiary employees. The negative relationship is especially strong when problems relate to products and services (as opposed to internal processes). Furthermore, we find that senior subsidiary managers can mitigate the negative consequences related to senior headquarters managers' involvement.

Maintaining product quality consistency when offshoring to emerging markets: The role of subsidiary control

Offshoring can increase firms' exposure to product quality risks, such that manufacturing firms need effective tactics to maintain product quality consistency across offshoring subsidiaries. With an agency theory approach, the present study seeks novel insights into three widely used subsidiary control mechanisms for achieving product quality consistency across offshoring subsidiaries in emerging markets and developed home countries. Through surveys of 150 subsidiaries of multinational corporations in heavy industries operating in China, the paper tests a proposed model using hierarchical linear regression, accounting for endogeneity concerns using the Gaussian copula method. The analysis yielded several findings: An inverted U-shaped relationship exists between decision autonomy and product quality consistency; expatriate staffing positively predicts product quality consistency and attenuates the negative effects of excessive autonomy on product quality consistency; and compared with greenfield entry, mergers and acquisitions negatively predict product quality consistency.

Local sourcing embeddedness, manufacturing relocation, and firm attitudes toward the US-China trade war: A survey analysis of China-based MNC subsidiaries

AbstractThis paper examines the attitudes of multinational corporations (MNCs) toward the U.S.-China trade war through an original survey of China-based MNC subsidiaries in the manufacturing industry. Our argument is in two parts. First, firms that have relocated production outside of China or are considering such moves should be less likely to oppose the trade war as they possess outside options that reduce their vulnerability to trade restrictions. Second, firms’ tendency toward production relocation can in turn be explained by their local sourcing dependence, as measured by the level of such dependence and the degree to which their operations require supplier certification. This is because firms more heavily embedded in local supplier networks face stronger resource dependence that increases organizational inertia, reducing their ability to switch to alternative suppliers and therefore relocating production to other destinations. Our findings corroborate our hypotheses, highlighting how the heterogeneity in MNCs’ supply chain relationships may influence both their manufacturing relocation decisions and trade policy preferences.

해외직접투자가 경제성장에 미치는 영향

Purpose – The purpose of this study is to shed new light on the impacts of FDI by multinational corporations on the economic growth of the host country. Design/Methodology/Approach – This study compares and analyzes the different impacts of existing FDI inflows and local added value creation of multinational corporations on the per capita national income of the host country. In addition, this study conducted a fixed-effects panel model analysis on a sample of 42 countries from 2005 to 2016 of the OECD's Analytical AMNE database. Findings – First, as a result of panel analysis of a fixed-effect model that controlled for the effects of individual countries and major macroeconomic and policy variables, the share of local value-added creation of subsidiaries of multinational corporations had a significant positive impact on the growth of per capita income in each country, but the share of FDI inflows did not have a statistically significant impact on the growth of per capita national income. Second, the results of analysis by dividing the sample into developed and developing countries also confirmed that the share of local value-added creation of subsidiaries of multinational corporations has a positive effect on economic growth in both developed and developing countries. In addition, the impact of FDI on economic growth is greater in developing countries than in developed countries. On the other hand, the share of FDI inflows had a positive effect on the economic growth of developing countries, but had no significant effect on the economic growth of developed countries. Research Implications – In identifying the relationship between FDI and national economic growth, it was confirmed that the use of the OECD's Analytical AMNE statistics is more appropriate than traditional FDI data.

Informal Networks, Informal Institutions, and Social Exclusion in the Workplace: Insights from Subsidiaries of Multinational Corporations in Korea

Drawing on interviews with decision makers in multinational corporations (MNCs) in South Korea, we examine the role of informal networks in the social exclusion of women in the workforce. Although legislation in the country is in favor of gender equality, we found that informal barriers in the workplace remain difficult to overcome. Informal networks in Korea, yongo, present an ethical issue in the workplace, as they tend to socially exclude women, limiting possibilities for their participation and career progression. We found that informal networks are pervasive and strong because of the informal institutions in which they are embedded and that there is a complex interplay between informal networks and informal institutions that socially excludes women. Due to difficulties accessing yongo, women appear to build inmaek, a network type that is more open and accessible. We also found that MNCs in Korea can compensate for the lack of local informal networks for their female employees. However, despite providing a more supportive environment for women at work, gender equality policies in MNCs are not yet as effective as they could be due to the dynamics of the workplace and the fact that the policies are not tailored to the local context. We have seen evidence in recent years that MNCs can serve as role models for implementing gender equality policies by creating a more inclusive work environment and demonstrating leadership commitment and support.

Foreign lobbying through domestic subsidiaries

AbstractHow much of lobbying activities disclosed under the Lobbying Disclosure Act (LDA) actually represent foreign clients? What are their interests? By identifying the global ultimate owners of all corporate clients filing with the LDA, I find that majority‐owned subsidiaries of foreign multinational corporations (MNCs) account for nearly 20% of corporate lobbying spending in 2015–2016. This amount is comparable to the entire foreign lobbying spending reported under the Foreign Agents Registration Act (FARA). Domestic subsidiaries of foreign MNCs are also found to lobby more frequently and spend more lobbying than American multinationals, after controlling for firm size, industry, and PAC contributions. These subsidiaries actively lobby on issue areas that clearly benefit their foreign parents. The findings suggest that foreign MNCs may actively influence U.S. policies through their domestic subsidiaries, and that the FARA captures only part of foreign lobbying in the United States.

How Do MNCs Conduct Local Technological Innovation in a Host Country? An Examination From Subsidiaries' Perspective

The growing tendency of local technological innovation (LTI) of multinational corporations (MNCs), together with the increasing significance of subsidiaries in MNCs' overseas operations, are promoting subsidiaries' engagement in conducting LTI activities in a host country. In this research, a systematic review methodology with the identification of 116 articles is adopted for the purpose of explicating MNCs' holistic and dynamic LTI process from subsidiaries' perspective. Concretely, we propose a thorough framework upon the typical input-process-output model by taking the antecedents, mechanisms, and consequences into consideration about the whole LTI process. It is suggested in this review that the trigger logic of LTI activities can be explained as the interactions between firm-specific advantages and country-specific advantages that took place at subsidiaries. Crucially, the elaborations on LTI mechanisms have been extended by means of evoking a duality lens of the top-down and the bottom-up pattern. Finally, the results show that differential consequences of LTI activities are presented by bringing divergent benefits to different parties. More importantly, the subsidiary takes the unique role in fostering a virtuous loop between dualistic LTI patterns. Overall, these insights reflect what we have obtained from extant literature and the challenges international business landscapes have ahead, which could point to the directions of future research.

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.

Gaining legitimacy or exploiting opportunities? MNCs’ response to the belt and road initiative in China

PurposeThis study aims to investigate whether and why multinational corporations (MNCs) seek to reduce institutional costs of foreign direct investments (FDIs) by aligning with transnational political frameworks.Design/methodology/approachThis study uses the Chinese Belt and Road Initiative (BRI) to test whether MNCs’ subsidiaries in China increase FDI into BRI-affiliated countries after the BRI’s launch. This study compares FDIs by Chinese subsidiaries of foreign MNCs in the year before and two years after the BRI’s announcement. Hypotheses are tested for two explanations of why foreign MNCs seek to exploit the BRI.FindingsInvestments into BRI-affiliated countries increased after the announcement of the BRI, and this increase is positively moderated by institutional distance between the MNC home country and the BRI-affiliated target country. This shows that the greater the institutional costs of investing in a BRI-affiliated country, the more responsive the MNCs’ Chinese subsidiary will be to the BRI.Research limitations/implicationsThis study demonstrates that MNCs respond to transnational political frameworks. This study only studies the immediate response because the BRI is an infrastructure project. Better infrastructure will, over time, lead to more investments; however, the immediate response is due not to infrastructure but political structure.Originality/valueThe results show how MNCs use transnational political frameworks. The idea that MNCs can channel FDI through existing subsidiaries for this purpose has not previously been discussed in the literature.