Multinational Subsidiaries Research Articles

Impact of dimensions of absorptive capacity on multinationals' reverse knowledge transfer: from an Indian context

Purpose The purpose of this study is to provide a holistic view of how the different dimensions of absorptive capacity (AC) impact reverse knowledge transfer (RKT). Although the importance of AC has been realized in knowledge and RKT literature, scholars have hardly explored the differentiated importance of each component of AC. When knowledge leads to competitive advantage, understanding the differentiated contribution will help enhance the impact of AC on RKT. This becomes even more important for emerging economy multinationals (EMNCs), which struggle in the global market and suffer from various liabilities. Therefore, this study focuses on the multidimensional impact of AC on RKT from Indian multinational subsidiaries based in developed nations to their parent firm. Design/methodology/approach This study is a quantitative study. The authors tested the research model using a structural equation modeling design based on survey data collected from subsidiaries (in developed economies) of Indian multinationals. Findings The results show that acquisition, assimilation and transformation components of AC have positive impact on RKT. However, the authors found that the exploitation dimension has no impact on RKT. Originality/value To the best of the authors’ knowledge, the research design is original and this is the first study on the impact of all components of AC on RKT. AC is one of the most widely researched variables in knowledge literature, including different versions of Zahra and George’s concept of AC. However, its impact has not been explored much in RKT literature. This study addresses this gap and extends the literature on AC and RKT. The advantages of this study can be seen at the team and organization level.

Enhancing knowledge sharing of host-country nationals in foreign subsidiaries: Does cultural intelligence matter?

The knowledge of host-country nationals who work in the foreign subsidiaries of multinationals is a crucial strategic resource for their employers. This study explored the role that cultural intelligence plays in employees' knowledge sharing within a cross-cultural workplace context. Building on social identity theory, this study developed a theoretical framework to explore how hostcountry nationals' cultural intelligence could enhance their knowledge sharing via increasing their social identity, and further investigated the mediating role of host-country nationals' relationships with expatriates and identification with their organization. Using survey data from 412 host-country nationals working for 16 foreign subsidiaries in South Korea, I found that cultural intelligence directly predicted knowledge sharing. The results support and extend the extant literature and provide practical implications for multinationals regarding the management of host-country nationals.

Multinational subsidiary's search for legitimacy: the isomorphism dilemma

The development of companies is limited by institutions that create common paths for all companies, such as the need for mimetic isomorphism. However, when it comes to multinational companies (MNCs), this reality is more complex. These companies face pressure at the global level (from the headquarters and other subsidiaries). Our proposal aims to elucidate how MNCs use the principles of organizational fields in their strategy for entering new markets. We investigate Amazon's entry strategy into the Brazilian market, assessing its level of isomorphism, decoupling, and legitimation. A single case study was conducted on Amazon's entry into Brazil to analyze the consistency of Kostova, Roth & Dacin's (2008) propositions concerning the neoinstitutional theory of organizational fields. Our analysis identified five types of strategies for legitimation in the organizational field: legitimation, synergy, endorsement, innovation, and adaptation, all observed in practice in the case.

Unlocking subsidiary performance: exploring the impact of subsidiary TMT composition, PCN tenure and subsidiary age

PurposeThe purpose of this paper is to study the relationship between subsidiary manager’s demographic characteristics and performance, while incorporating the subsidiary context. We draw upon upper echelon theories and International Business theories to understand this relationship.Design/methodology/approachUsing a dataset based on listed Multinational subsidiaries in India we use linear regression to establish the relationship between subsidiary external performance (host market performance), subsidiary internal performance and subsidiary manager’s demographic characteristics.FindingsWith our data set we find a positive relationship between percentage of host country nationals (HCN) in the Top Management Team (TMT) and subsidiary host market performance and that subsidiary age moderates this relationship. We also find an inverted U-shaped relationship between parent country nationals (PCN) tenure and subsidiary performance.Research limitations/implicationsOne of the limitations is that our study views the strategy process through the Upper Echelons (UE) theory lens, as a clearly specified planning process that associates strategy with intentionality. The opportunity that emanates at lower levels can turn an intended strategy into something different than what was started.Practical implicationsThe findings in this paper can be the basis for decision making on the constitution of leadership teams.Originality/valueThere is a dearth of empirical evidence and studies on TMTs in the subsidiary, particularly from the non-North American context. Using a unique data set of listed multinational subsidiaries in India, the paper explores the impact of TMT demographics such as tenure of the TMT and age of the subsidiary operations on the performance of the subsidiary.

Internal Versus External Corporate Social Responsibility Effects on Employees of a Multinational Subsidiary in Russia: The Roles of Morality and Attributions

Internal Versus External Corporate Social Responsibility Effects on Employees of a Multinational Subsidiary in Russia: The Roles of Morality and Attributions

How institutional disruptions impact the choice of MNC subsidiary control systems

PurposeThis study seeks to explicate how institutional disruptions impact multinational corporation (MNC) subsidiary control choices. It uses institutional theory to understand the influence of formal and informal institutions across countries on the type of control system employed in an MNC manufacturing subsidiary.Design/methodology/approachThis study’s sample is based on a unique dataset from five trustworthy sources. We use multi-level models to account for the hierarchical nature of the sample of 1,630 multinational subsidiaries spread across 26 host countries by firms from 21 home countries.FindingsThe institutional distance between the host and the home country has a negative relationship with strategic control. In contrast, the home country’s power distance has a positive relationship with strategic control.Originality/valueStudy findings indicate the need to incorporate formal and informal institutional elements in the control system’s conceptual framing and design. This notion complements existing visualizations of optimizing MNC controls through extant articulations of minimizing governance costs through organizational design choices or strategic needs.

Home country uncertainty and cash holdings: Evidence from multinational subsidiaries in South Korea

Using data on South Korean subsidiaries with 18 different countries of origin and a newspaper-based economic policy uncertainty (EPU) index, we investigate the effect of uncertainty transmission on multinationals’ key decisions. Subsidiaries of multinational corporations face host and home country uncertainty. We document that Korean subsidiaries significantly increase their cash holdings when EPU increases in their home countries, indicating that national uncertainty shocks are transmitted to other countries through multinational networks. We further show a more pronounced home EPU effect when parent companies hold a greater share of subsidiary equity. The home EPU effect is robust to the inclusion of additional home country factors and alternative definitions of home EPU and cash holdings. Additionally, we find that subsidiaries reduce their capital expenditures when their home EPU increases.

Actions to promote circular economy: case study of multinational manufacturers in the automotive and fast-moving consumer goods in Mexico

The overuse of natural resources as manufacturing inputs demands enterprises to support sustainable development through a transition from a linear model of production to a circular and resource-efficient model. This work applies a multiple-case research design based on secondary information to explore the advancement of circular economy (CE) among six subsidiaries of multinationals that operate in Mexico. The qualitative analysis shows that reduction of natural resources and closing the loop of water, followed by closing the package cycle and using renewables, are the main approaches applied by companies in the automotive and fast-moving consumer goods sectors. Slowing the product life cycle and closing the supply chain are the least used approaches. Results show a limited advancement in the implementation of circular economy models and provide guidelines to other companies as well as recommendations for the establishment of a legal framework that complements the bottom-up efforts of enterprises located in a developing country.

Determinants of the Related Party Disclosure Practice by Non-Financial Sectors in Bangladesh

This study attempts to find out the determinants that have significant impact on the extent of related party disclosure. Albeit, related party is one of the most important reasons for corporate scandals, very few researches have been conducted to find the determinants of related party disclosures particularly in developing countries’ perspectives. This motivated the authors to find the determinants of related party disclosures. For conducting this study, a disclosure index of 28 disclosure items has been prepared and the annual reports of 102 listed non-financial firms for the year 2019-2020 of Dhaka Stock Exchange (DSE) were scrutinized against this disclosure index. The findings show that the related party disclosure by the sample companies is on an average 37.36%, which indicates that the current scenario of related party disclosure is not satisfactory. The regression analysis was done to find the determinants of related party disclosures. The results show that the association between the extent of related party disclosure and Multinational Subsidiary is statistically significant. The Security Category has negative but significant impact on the extent of disclosure. The result of this study will add value to the existing literature by providing the empirical evidence of the determinants of related party disclosures from a developing country’s perspective. From practical point of view, the outcome of this paper will help the regulators like Securities & Exchange Commission (SEC) to form a frame of reference for the related party disclosures requirement. The results of this study will also help future accounting researchers to work on this area and the investors to make investment decision on the non-financial companies.

Organizational communication strategies in response to major disruptions: the case of the worsening situation in the Russia-Ukraine conflict

PurposeThe purpose of this paper is to understand communication strategies formed by multinational subsidiaries in a transition economy during disruptive events. The authors develop and test a framework based on political realism and situational crisis communication theory (SCCT).Design/methodology/approachThe authors collect and analyze communication statements from multinational subsidiaries located in Russia and made in the first two months (March–April, 2022) of the Russia–Ukraine conflict.FindingsThis study’s main findings are twofold. First, this study extends SCCT by showing that multinational subsidiaries use communication strategies that go beyond the traditional categories of diminish, rebuild and bolster. In particular, this study identifies so-called “shut the door” and “burning bridges” methods as possible industrial and home country contingent communication strategies. Second, this study shows that possession of a political realism lens provides us with powerful communication strategies made requisite during disruptive events.Practical implicationsThe results provide practical hands-on advice for subsidiary managers on how to communicate effectively and efficiently during disruptive events such as the one described. This study offers novel communication strategies that help to understand the wider implications for managers in both home and host countries.Originality/valueTo the best of the authors’ knowledge, this is one of the first papers to apply SCCT and political realism to a current disruptive event for multinational enterprises, i.e. the ongoing Russia–Ukraine conflict. In that context, this study expands both perspectives by highlighting their complementarities and their conceptual boundaries. The authors can base those insights on two unique and purpose-built databases of multinational subsidiary characteristics in Russia-proper.

CORPORATE SOCIAL RESPONSIBILITY IN BUSINESS PRACTICES OF MULTINATIONAL COMPANIES: STUDY OF DIFFERENCES BETWEEN CZECH AND SLOVAK

Purpose – find differences in the core principles of implementation of CSR (Corporate Social Responsibility) practices in subsidiaries of foreign multinationals in Slovak and Czech Republic, two similar yet different countries. Research methodology – the questionnaire was distributed to local daughter companies of foreign multinational enterprises selected on the basis of stratified randomization. The sample: 360 enterprises (180 from each country). Mann‐Whitney U Test was used for the analysis (non-normally distributed data) of the differences between Slovak and Czech companies in their CSR implementation. Findings – differences among the two countries in the implementation of CSR exist in few factors due to their joint history. Research limitations – the representativeness of companies connected with foreign mother companies in the two countries cannot be computed: no data are available. To overcome this issue, the same number of monitored entities was analysed to so as to make further statistical analysis possible. Practical implications – the results can be used by business entities, which may benefit from comparing themselves against other players on the market or against the average situation on the monitored markets. Moreover, teaching future managers and promoters CSR is of significant importance. Originality/Value – the work sheds lights on CSR practices in Czechia and Slovakia, two countries in which there is a lack of studies on the topic of CSR.

The journey of Spanish subsidiaries as international springboards in Latin America

This study examines the transformation of ordinary foreign multinational subsidiaries into springboard subsidiaries. Using a case study approach, the research examines three Spanish subsidiaries of European multinationals that, targeting the Latin American market, have transitioned into springboard subsidiaries. The findings reveal that this evolution is driven by several factors: favourable economic conditions in the target region; location-specific advantages such as the ability to reduce the psychic distance and effectively transfer knowledge; and micro-political negotiations processes as a result of the subsidiary’s strong initiative, peculiarities of the multinational structure and subsidiary’s unique capabilities.

Adaptations of multinational subsidiaries for surviving host country crises: A case study of Venezuela

Adaptations of multinational subsidiaries for surviving host country crises: A case study of Venezuela

Home or away? Profit shifting with territorial taxation

In 2009, the United Kingdom abolished the taxation of profits earned abroad and introduced a territorial tax system. Under the territorial system, firms have strong incentives to shift profits abroad. Using a difference-in-differences research design, we show that the profitability of UK subsidiaries in low-tax countries increased after the reform compared to subsidiaries of non-UK multinationals in the same countries by an average of 2 percentage points. The shifted profits originate largely in the UK headquarters and its domestic affiliates, not in other high-tax affiliates.

Organization culture types and the replication of transferred human resource management practices in multinational subsidiaries in Nigeria

PurposeGiven that institutional and cultural factors affect the transfer of HRM practices between multinational companies (MNCs) and their subsidiaries, the paper set out to investigate the explanatory mechanism for the replication of transferred HRM practices and the factors likely to influence the choice of transfer mechanisms.Design/methodology/approachUsing an exploratory qualitative approach, 40 interviews were conducted with senior managers and employees in two MNC subsidiaries located in the alcoholic beverage and oil industries in Nigeria.FindingsThe findings suggest that organizational culture (OC) was the mechanism for MNC HRM replication and inhibition. In addition to explaining the mechanisms for HRM practice replication, the authors developed a conceptual framework to explain how clan and hierarchical OC influence the extent to which human resource (HR) practices are replicated or inhibited and how institutional and cultural factors influence the choice of OC.Originality/valueThe study uncovered that MNCs deploy hierarchical OC to oversee the replication of transferred practices. Interestingly, the authors found that institutional and cultural environments were key factors that influenced the choice of mechanism for overseeing the replication of HR practices. The conceptual framework can help managers of MNCs to understand how to replicate transferred HRM practices in developing countries.

Tax provision by international subsidiaries of Indian extractive industry multinationals: Do environmental pollution and corruption matter?

Outward foreign direct investment in the extractive industry increases the availability of metals and minerals that run the economic engine in the home country. It is unclear, however, whether tax provision by subsidiaries of emerging multinationals in extractive sectors respond to environmental pollution and corruption in the host country. In this paper we examine the tax provision in the host countries by subsidiaries of private sector based emerging multinationals in the extractive resources (metals and mining) sector. The analysis is carried out through a two-step system dynamic panel data GMM estimation, using data from 86 international subsidiaries of 15 Indian multinationals in 31 host countries for the period 2010 to 2019. Tax provisioning is found to be lesser in countries with higher environmental pollution. Tax provision is higher in countries with greater prevalence of corruption. However, the interactive effect suggests that in the presence of environmental pollution the subsidiary tax provisioning is higher in host countries if there is better control of corruption. This indicates that low corruption will offset a decline in tax provision from higher pollution. Furthermore, subsidiaries are found to have lesser tax provisioning when the parent firm has a tax dispute in the home country, implying the role of firm behaviour in shaping tax contribution by subsidiaries. The results are robust to the organization of subsidiaries through offshore financial centres.

해외직접투자 또는 해외기업 활동이 글로벌가치사슬 참여에 미치는 영향

Global value chain (GVC) driven by multinational enterprises (MNEs)’ FDI plays a significant role in national economic development. Accordingly, many previous studies have focused on FDI as one of the major factors that determine GVC participation and made various attempts to understand the relationship between FDI and GVC participation, but have not yet yielded consistent results. Therefore, this study compared and analyzed the effect of existing FDI inflows with the OECD's Analytical AMNE database developed based on the local value-added activities of subsidiaries of multinationals on the production-based GVC participation rate and the trade-based GVC participation rate, respectively. As a result of the fixed-effects model panel analysis conducted for 43 countries from 2005 to 2016, it was found that Analytical AMNE statistics was appropriate for explaining the influence of FDI on GVC participation with the that production-based approach is more likely to explain the influence of major determinants shown in previous research on GVC participation.

Human Resource Management, Employee Participation and European Works Councils: The Case of Pharmaceutical Industry in Greece

Employee participation is a broad notion that encompasses sets of practices that enable employees to participate in the decision-making process on issues affecting them leading to a committed workforce. According to the 2009/38/EC Directive, a European Workers’ Council (EWC) is established in all undertakings and all community-scale groups of undertakings for the purpose of informing and consulting employees. This study investigates the impact of employee participation on employees and organizations and more specifically the potential benefits and the added value of participation for employees and organizations, the potential costs and threats of employee participation and the added value of EWCs in multinational subsidiaries in the pharmaceutical industry in Greece. The data gathering was carried out through in-depth semi-structured interviews with management, HR executives, trade union representatives and EWC representatives using a semi-structured questionnaire based on the state-of-the-art literature review. Organizations participating in the study are subsidiaries of multinational companies with an active European Works Council in the pharmaceutical industry in Greece. Findings suggest that there are potential benefits of employee participation practices for the employees and added value for the pharmaceutical companies and provide a useful perspective for managers and researchers in the field of labor relations and human resource management.

Layers and limits of power and resistance in multinational subsidiaries: The interaction of micro-politics and postcolonial power at Reuters India

This study analyses how the mutual imbrication of organizational and postcolonial power along with the micro-embedding of actors’ shape and structure power struggles in multinational corporations. Drawing on the case of news agency Reuters’ internationalization and centralization approach at its Indian subsidiaries in Mumbai and Bangalore, our research explores how subsidiaries mobilize resources to pursue their interests in a landscape shaped by clashing professional institutional logics and organizational control systems reflected in quality control and performance assessment. Our findings shows that the power struggle and (professional) identity position of both subsidiary staff differs as they face different organizational, institutional and (neo)colonial pressures and are othered in different ways. We argue that as a site of “value production,” both subsidiaries are qualified and disadvantaged in distinct ways. Our study emphasizes the importance of understanding diverse colonial experiences and the mainstreaming of postcolonial insights in the analysis of power in MNCs.

Mandatory extraction payment disclosures and tax haven use: Evidence from United Kingdom

Research Question: Does public country by country reporting (CbCr) deter multinationals' tax avoidance practices operating in extractive industries? Motivation: Public CbCr has already been implemented for two specific sectors, namely the financial and extractive sectors. Prior studies have focused on tax avoidance of EU banks around the implementation of public CbCr requirement (Joshi et al., 2020; Eberhartinger et al., 2020; Overesch & Wolff, 2021). However, studies on how resource-extracting multinationals respond to the CbCr regulation are scarce. This study seeks to fill this gap by examining the effect of public CbCr on tax avoidance with a special focus on extractive industries. Idea: To improve fiscal transparency, Canadian and European legislators have adopted regulations requiring multinational corporations (MNCs) to provide, annually, their Extraction Payment Disclosures (EPD) (Public CbCr standard for extractive industries) to governments (EC, 2013; Natural Resource Canada, 2014). This study examines the effect of mandatory EPD adoption on the extent of tax haven use. Data: For a 10-year period surrounding the mandatory EPD adoption (2010-2019), we selected a sample of UK MNCs operating in the oil, gas, and mining sectors and listed on the London Stock Exchange. The analysis is mainly based on firm-level information taken from DATASTREAM database. Based on hand-collected data from annual reports, we measured the extent of tax haven use using the percentage of multinational subsidiaries located in tax haven jurisdictions/countries as listed in Dyreng and Lindsey (2009). An alternative list identified by the Organization for Economic Co-operation and Development (OECD) (2006) was also used in a robustness test. Tools: To examine our research question, we estimated a linear regression model with panel data using STATA software. Findings: The results show that the increased transparency resulting from public EPD does not appear to significantly affect the intensity of tax haven use. Contribution: This study extends and complements prior literature examining the effect of CbCr on tax avoidance and profit shifting by focusing on a specific setting i.e. extractive sector. To the best of our knowledge, apart from Johannesen and Larsen (2016) and Rauter (2020), no studies have provided empirical evidence on how resource-extracting multinationals respond to the EPD regulation.