Multinational Subsidiaries Research Articles

Estratégias de Transferência de Conhecimento em Multinacionais Brasileiras: Estudo Comparativo Entre as Subsidiárias Adquiridas e as Greenfield

Este estudo teve como objetivo principal explorar o processo de transferência de conhecimento entre a subsidiária e a matriz, no âmbito das multinacionais brasileiras, identificando os mecanismos de transferência de conhecimento mais utilizados, bem como as barreiras existentes neste processo, comparando-se as subsidiárias adquiridas com as greenfield. Salienta-se que estudos apontam que existem diferenças no processo de transferência de conhecimento devido a forma de origem das unidades estrangeiras. Para isto, realizou-se uma survey entre 2006 e 2007, cuja amostra foi de 66 subsidiárias de multinacionais brasileiras com atividades no exterior. Sobre os resultados, em relação à transferência de conhecimento da matriz para a subsidiária, observa-se que as reuniões com os principais executivos da matriz e a recepção de brasileiros executivos são as duas práticas mais utilizadas em ambos os tipos de unidades. As barreiras à transferência de conhecimento existem de forma branda, sendo mais evidentes no caso das subsidiárias adquiridas. A resistência cultural é a mais eminente. No caso das unidades adquiridas, a estrutura hierárquica é vista como uma barreira, provavelmente refletindo uma postura centralizadora da matriz; enquanto nas unidades greenfield, a falta de incentivos para o compartilhamento de conhecimento é evidenciado. Também, a síndrome do “não inventado” aqui é uma barreira percebida pelas unidades adquiridas.

Change agent sensemaking for sustainability in a multinational subsidiary

Purpose – This paper seeks to improve the understanding of implementation processes that achieve corporate sustainability by providing explanatory knowledge about the role of change agents from a sensemaking perspective. The paper also aims to focus on the sustainability efforts of change agents in a multinational carpet tile manufacturer.

Competitive forces and the levers of control framework in a manufacturing setting

PurposeThe purpose of this article is to explore how the strategic change following a corporate takeover impacted the nature and extent of use of the firm's management control systems (MCS), in particular its performance measurement system (PMS).Design/methodology/approachThis paper uses Michael Porter's theory of competitive advantage and Robert Simons' levers of control framework to illustrate and interpret changes in the PMS within an Australian multinational subsidiary following its takeover by an overseas corporation. To provide empirical evidence on this issue, face‐to‐face interviews and archival data are used.FindingsThe findings reveal that the takeover resulted in changes in the firm's competitive forces (threat of potential entrants, bargaining power of buyers, threat of substitute products or services, bargaining power of suppliers, and rivalry among existing firms), and therefore the firm altered its strategy to change the rules of competition in its favor. Corresponding to the strategic change, the PMS was affected, with specific implications on Simons' four levers of control: interactive, diagnostic, beliefs, and boundary systems.Practical implicationsThe findings suggest that a corporate takeover is an important phase for any organization, as it involves a change in the competitive environment and strategy, and needs to be facilitated by a change in the MCS to create and sustain superior performance.Originality/valueThis case study demonstrates how interactive and beliefs systems work together with diagnostic and boundary systems in the context of change in an organization. Past research devoted to strategic change and MCS has not documented this phenomenon.

Societal institutions and HRM practices: an analysis of four European multinational subsidiaries in Bangladesh

Using the ‘societal-effect’ approach, a variant of the institutional theory developed and tested in Europe, this study investigates the impact of societal institutions on human resource management (HRM) practices of European multinational subsidiaries in Bangladesh, which is now on the list of the Next-11 economies of the world. In-depth case studies of four European multinational subsidiaries revealed the presence of different degrees of influence – partly attributable to societal effect – on the human resource practices of these subsidiaries. Our study added a new dimension to the interface between the strong and weak institutions and how such interfacing accords both legitimacy and reverse legitimacy to MNC subsidiaries and their societal institutions respectively. Another interesting finding of the study is the emergence of political system as a societal institution and, hence, a determinant of HRM practices in these subsidiaries. The study's implications are given.

Sunao as Character: Its Implications for Trust and Intercultural Communication Within Subsidiaries of Japanese Multinationals in Australia

Drawing upon the findings of a grounded theory study, this article addresses how sunao-sa influences intercultural communication and the process of building and developing trust between Japanese expatriate managers and Australian supervisors working in subsidiaries of Japanese multinationals in Australia. The authors argue that sunao is related to other concepts in business ethics and virtue literature such as character and its constituents, empathy and concern for others. How sunao as a value, influences the process of interpreting intercultural behaviour in relation to providing accounts, excuses or apologies in situations where a breach of some norm has occurred, is also explained. Although sunao has a particular role in hierarchical relationships between manager and subordinate, the paper concludes that becoming mutually sunao is crucial in learning and understanding the perspectives and expectations of a counterpart so that trust can deepen and flourish. The study makes an original contribution in an area that to date does not appear to have been researched from a management perspective and purports that sunao as character is an important factor in the culture of Japanese multinational organizations and indeed, international management in that context.

The reverse transfer of innovation of foreign subsidiaries of Brazilian multinationals

This study aims to understand what factors allow the subsidiaries of emerging multinationals to develop innovations that are used by the parent company, that is, what factors drive reverse innovation. The respondents of the survey were Brazilian multinationals with manufacturing activities or professional services abroad. The study began with a base of 46 Brazilian multinationals operating until 2006. From this base, 30 multinationals agreed to participate in the survey. Overall, they had 93 subsidiaries. From these 93 subsidiaries, 66 foreign subsidiaries answered the questionnaire. The article uses data from these 66 subsidiaries. The hypotheses were tested through the statistical techniques of correlations and multiple linear regressions. The results confirm our five hypotheses with an explanatory power of approximately 76%. Therefore, the results show that the reverse transfer of innovation depends on the strategic orientation of the foreign subsidiary’s R&D function, strong integration (communication) between the parent and its subsidiaries, the entrepreneurial orientation of the company, the subsidiary’s age, and, marginally, entry via greenfield investments.

Alignment or independence? Multinational subsidiaries and parent relations

PurposeSubsidiary units must respond to emerging threats including disaggregation of value chains and increased headquarters monitoring and control which have led to a cycle of subsidiary decline. The authors recognize the value of subsidiary initiatives as a short‐term response but argue that subsidiary long‐term survival and growth will depend on the unit's ability to align with its parent strategic activities and knowledge base through developing vertical embeddedness.Design/methodology/approachThis research is part of an ongoing quantitative and qualitative study programme of Irish subsidiary operations of foreign MNCs. This paper integrates the authors' broader research to date including both in‐depth interviews within a focal case combined with a comprehensive review of the literature relating to MNC and subsidiary management in identifying how subsidiaries can respond to current challenges.FindingsIn contrast to the dominant view in the literature, this research found that subsidiaries can respond to emerging threats by integrating their activities and deepening their alignment with their parent operation. The authors identify three pillars in developing a strategy of alignment – strategic embeddedness or ensuring development of subsidiary strategy in line with headquarters stated objectives, relational embeddedness determined by trust relationships and a history of consistent subsidiary delivery and finally knowledge embeddedness facilitated through coalescent knowledge creation and collaborative effort in line with headquarters strategy and direction.Research limitations/implicationsResults from the survey are subject to the standard limitations and a larger pool of interviewees may have reinforced the qualitative findings.Practical implicationsSubsidiary managers need to be aware of how closer integration of unit activities with headquarters and the management of knowledge outflows can reduce the risk of relocation and better position subsidiaries for survival and growth. To date the emphasis on subsidiary initiative has overshadowed the benefits of aligning with headquarters strategy, a more feasible alternative for many subsidiaries which do not enjoy strategic independence.Originality/valueBy demonstrating the benefits of alignment with headquarters, this paper identifies a valuable alternative perspective to the predominant view in the literature that subsidiary survival is dependent on subsidiary initiative. Interesting insights into how alignment can be achieved are also provided. Capturing both the subsidiary and parent perspectives provides valuable insights.

Subsidiaries as straddling fields and the trade-off between knowledge development and knowledge transfer

Drawing from work emphasising that foreign subsidiaries are exposed to a tension between the pressure to adapt to the local environment and the pressure to remain integrated within the organisation, this paper provides empirical evidence of the existence of a trade-off between the external embeddedness of subsidiary knowledge development and subsidiary knowledge transfer. It also explores the moderating effects of intra-organisational power and intra-organisational relationships on this trade-off. The study is based on data from 973 foreign-owned subsidiaries. The findings show that, when treated as moderating variables, subsidiary autonomy reinforces the tension that exists between knowledge development and transfer activities among multinational (MNC) subsidiaries, whereas subsidiary influence and the subsidiary’s level of embeddedness in corporate relationships reduce this tension. Implications for managers and suggestions regarding future research are included.

Earnings Shocks and Tax-Motivated Income-Shifting: Evidence from European Multinationals

This paper presents a new approach to estimating the existence and magnitude of taxmotivated income shifting within multinational corporations. Existing studies of income shifting use changes in corporate tax rates as a source of identification. In contrast, this paper exploits exogenous earnings shocks at the parent firm and investigates how these shocks propagate across low-tax and high-tax multinational subsidiaries. This approach is implemented using a large panel of European multinational affiliates over the period 1995-2005. The central result is that parents' positive earnings shocks are associated with a significantly positive increase in pretax profits at low-tax affiliates, relative to the effect on the pretax profits of high-tax affiliates. The result is robust to controlling for various other differences between low-tax and high-tax affiliates and for country-pair-year fixed effects. Additional tests suggest that the estimated effect is attributable primarily to the strategic use of debt across affiliates. The magnitude of income shifting estimated using this approach is substantial, but somewhat smaller than that found in the previous literature.

Multinational Banks and the Global Financial Crisis: Weathering the Perfect Storm?

We use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the Great Recession with lending by a benchmark of 202 domestic banks. Contrary to earlier and more contained crises, parent banks were not a significant source of strength to their subsidiaries during 2008–09. When controlling for other bank characteristics,multinational bank subsidiaries had to slowdown credit growth almost three times as fast as domestic banks. This was in particular the case for subsidiaries of banking groups that relied more on wholesale funding.

Wind power industry in Italy: State and competitiveness factors. An adjusted diamond model approach

Wind energy has grown significantly in the recent years worldwide, as an option in achieving sustainability in the energy sector. In Italy the wind capacity installed has boomed as well, in terms of capacity installed and government incentives given to the sector, achieving the record value od 5,797 MW installed in 2010, positioning itself 6th below countries as China, US, Germany, Spain and India. As a new developing sector, the present paper aims to investigate which are the features of the new emerging industry and which factors are affecting its competitiveness. Moreover, some findings have been used to identify and discuss which are the main weakness and strengths, threats and opportunities of the sector. In order to have an integrated picture of the industry competitiveness, they have been used those categories belonging to the theoretical framework of Porter's Diamond Model, namely (1) Factor Conditions, (2) Demand Conditions, and (3) Firm's Strategy, Structure and Rivalry, (4) Related and Support Industry, (5) Government and (6) Chance. The model has been adjusted taking into account some critics and improvements of the original Porter model. Each category has been analysed in details; data that comes from archival documents were reviewed carefully in order to select the more authoritative sources. A crucial part of the study concerns the analysis of technology capability and the firm's strategy and rivalry and the support industry; arguments have been deepen by using a survey that has involved companies operating along the wind supply chain in Italy. The survey offered the opportunity to have a "firm's perspective", concerning the perceptions of competitiveness opportunities and barriers by business executives who are dealing with local and global business situations. Moreover a final discussion of the main findings of the competitiveness analysis have been translated in terms of a SWOT analysis, that has the advantage of being easily readable by the industry itself and by decision makers. The main result of the study is that the growth in wind capacity installed in Italy has led to the development a new industry composed of multinational subsidiaries and local companies, operating in different areas of the supply chain has developed. The sector has been characterised by high dynamism and by increasing competitiveness, along the all supply chain that has promoted the development of new companies and new business that have had positive return on income and jobs. Positive advanced factor conditions, like physical resources, the high level of renewable energy demand due to the high fossil fuel dependance of Italy, government policies supporting the domestic market have positively influenced competitiveness of the industry. The main weakness of the industry is that it has still a marginal role in technology production, and R&D activities, which are commonly carried out abroad. However the learning process that has been created has been a stimulus for new turbine and component R&D activities. Therefore, actors and decision makers could attempt to further strengthen positive factors and overcome the negative ones in order to increase competitiveness of the national wind industry.

Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance

We examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that, first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in noncrisis years. (JEL F23, G01, L22, M16)

Multinational subsidiary evolution: corporate change in new EU member states

The doctoral thesis examines the subject of the evolution of multinational subsidiaries in the context of new EU member states, catching-up economies of Central and Eastern Europe. It adopts the mo...

Multinational Corporations and Knowledge Flows: Evidence from Patent Citations

This study investigates whether foreign direct investment (FDI) by a multinational corporation increases the likelihood that knowledge about new technologies and production processes will be exchanged between foreign and domestic firms. This could be an important channel for knowledge diffusion since such flows have proven to be highly geographically localized. I develop a framework for measuring the degree to which the close proximity of a multinational subsidiary can enhance flows of knowledge between firms of different countries. I use an original data set on the innovative activity of firms of more than 30 countries and find a strong positive effect of both inward and outward FDI on knowledge flows. Interestingly, I find that countries that are technological followers gain three times as much knowledge from inward FDI as leaders.

The role of actors in configuring HR systems within multinational subsidiaries

This paper theorizes the role of actors in configuring human resource management systems within subsidiaries of multinational companies, a process typically involving the management of complexity and contradictory pressures stemming from a variety of sources. Subsidiary HR managers play a key role in this process as they make ongoing adjustments in response to these pressures. Three theoretical stances are drawn upon: rational choice, particularly as represented in the resource based view, institutional and the micropolitics of actors. We argue that a blended perspective best enables a full conceptualization of the dynamic interactions of actors and their context. We suggest the need to recast the definition of institutional field with regard to MNC subsidiaries, particularly in recognizing wider cognitive influences.

An innovation perspective of knowledge management in a multinational subsidiary

PurposeThis paper seeks to explore the implementation of knowledge management in a telecommunication multinational subsidiary and to investigate factors that affect the performance as well as the impacts.Design/methodology/approachInnovation perspective informs the identification of the ways in which KM strategies are devised and put into action. Using in‐depth interviews and direct observation, the paper maps some problems associated with the strategy and implementation of KM.FindingsThe case shows that the lack of organisation‐wide integrated systems, which is typical across different organisations, does contribute to this problem. However, the main predicament lies with the fact that a KM‐enabling scheme is never explicitly prioritised in the organisation's information systems strategy.Practical implicationsKM implementation should take into account both technological innovation and organisational innovation. Neglecting one aspect poses apparent danger that the implementation is unlikely to bring about benefit to the organisation.Originality/valueThis paper presents the case of a multinational company subsidiary in a developing economy, i.e. Indonesia. It is expected that this case will help substantiate an instance of KM implementation in an emerging economy and latecomer development, which might impact the operation and working of a multinational subsidiary.

Development of non‐local competences in foreign subsidiaries of Brazilian multinationals

PurposeThe purpose of this paper is to discover whether factors responsible for the existence of non‐local competences in emerging multinationals are different from those of traditional multinationals.Design/methodology/approachSurvey of 66 subsidiaries of Brazilian multinationals (BrMNes). This represents 70 percent of the 93 subsidiaries originally sampled.FindingsThe factors responsible for the development of non‐local competences in BrMNes are: the relationship between subsidiaries and business networks, the initiatives of subsidiaries and the support of the entrepreneurial orientation of subsidiaries by the headquarters.Research limitations/implicationsEven though emerging multinationals require more resources developed abroad and although some studies revealed that different management models had been adopted during the internationalization process, the factors required to develop non‐local competences in BrMNes are very similar to those required by traditional multinationals.Practical implicationsSubsidiary innovation in partnership with the business network in the foreign country is essential to develop non‐local competences.Originality/valueThe paper supports the results of studies of traditional multinationals and demonstrates that despite the differences of Brazilian multinationals the factors required to develop non‐local competences are very similar. This is an interesting result to consolidate knowledge about global competitive advantages in multinationals: the management model to develop non‐local competences seems to be the same, in order of importance, regardless of multinational origin.

Cultural and Institutional Sources of Conflict in Foreign Subsidiaries of Multinational Corporations

This paper investigates the importance of culturally and institutionally induced conflicts between home and host country nationals in foreign subsidiaries of multinational corporations (MNCs). our comprehensive investigation of 617 foreign subsidiaries of US, Japanese and german multinationals firstly demonstrates that subsidiary managers attribute such conflicts to both cultural and institutional sources. We also find that cultural sources have a higher conflict potential compared to institutional sources. Further, we demonstrate that with increasing cultural and institutional distances between home and host countries, culturally induced conflicts become relatively more important than institutionally induced conflicts. these results indicate that although institutional differences matter as sources of conflicts between home and host country nationals in foreign subsidiaries, cultural differences matter somewhat more. nevertheless, the paper stresses that both, cultural and institutional sources of conflicts should be considered in conjunction and in an integrative way.

Does CEO duality is really matter? Evidence from an emerging market

The relationship between board leadership, firm financial performance and agency costs is examined on behalf of a sample of multinational company subsidiaries (MNCs) and local public companies (LPCs) in Sri Lanka. Five years of data for 86 MNC subsidiaries and 113 LPCs, are collected and observations are analysed using a dynamic panel GMM estimation. This study provides empirical support for stewardship theory and contingency theory when firms are multinational subsidiaries. Moreover, findings support agency theory when firms are local public companies. Finally, this study indicates that there is no optimal board leadership structure. Hence, when companies commence their exploration of corporate governance practices, firms need to recognize that firm characteristics and contingency perspective boost the impact of board leadership structure on corporate financial performance.

General Motors India (2009)

Subject area Management control system, corporate performance management, budgeting, planning, multinational organization. Study level/applicability Graduate and executive education level management programs. Case overview General Motors India (GMI) operations established in 1994 and grew steadily, unlike her startling global performance. In 2007, GMI unveiled its new vision and mission for aggressive growth, expansion and establishing presence across all segments. With increased globalization of General Motors Corporation (GMC), the strategic importance of GMI for sourcing was envisaged. The case describes the organization structure and management control systems at GMI and the changes onto new strategy and vision. The case narrates the unique futures of its control systems such as dual reporting and matrix organization, business plan deployment (BPD), budgeting, performance measurement and compensation system. Expected learning outcomes The financial planning and control system in a large decentralized multinational subsidiary. Typical organizational responsibility structure and administrative and functional, dual-control mechanism. Appreciate strategic planning and budgeting process and how the strategy is cascaded through multiple key result areas and the BPD board. The business environment and strategy dynamics and its relationship with the prevalent control system. Opportunity for students to speculate the changes in control system in wake of radical changes in the business and company environment. Opportunity to introduce Simmons (1995) levers of controls and management control system package. Supplementary materials Teaching notes.