National Subsidiaries Research Articles

Whither national subsidiaries? The need to refocus international management research on structures and processes that matter

The notion that multinational companies (MNCs) are comprised of multiple subsidiaries in different countries is one that underpins voluminous research in international management. This body of research was recently the subject of an authoritative and comprehensive review in this journal (Meyer et al. in J Int Bus Stud 51(4):538–576, 2020). However, we share the concerns about the prevalence of the term ‘subsidiary’ within academic writing expressed by some others (Mees-Buss et al. in J Int Bus Stud 50(9):1513–1543, 2019) and take this further by questioning the assumptions of authority and control on which it is based. We argue that the role of national subsidiaries in how MNCs are organized has been eroded by developments ‘from above’ and ‘from below’ the national level such that it cannot be assumed that national subsidiaries are important influences on how MNCs govern and coordinate their production and service provision and how work is organized. We set out the implications for theory and methods in international management (IM).

Importance of Adapting HRM Practices to Local Conditions

Human Resource Management (HRM) is important to increase the performance of the organization in terms of financial as well as organizational outcomes. This paper argues that corporations should adapt their global HRM practices according to local culture, national politics, and build a system where local culture is given promises. To understand the importance of local practices, it is also important to understand the dynamic between global and national subsidiaries.

Sequence and Dynamics of Service Capability Configurations in Product Firms

The purpose of this paper is to explore the process of service capability base development in manufacturing firms. While scholars mostly studied capabilities in isolation we argue that it seems to be important to assess how service capabilities are interrelated as well as how a firm orchestrate their development and deployment. Study cross-compare 10 national subsidiaries of one capital equipment manufacturer to explore the effectiveness of their service capability base development processes. Results suggest that successful organizations opt for a sequential development of three service capability clusters, which we subsequently label the ‘presence’ (first), ‘progress’ (second) and ‘process’ cluster (third). Furthermore, our cases suggest that less successful organizations either fail to fully develop one or more of these capability clusters; they develop them simultaneously or in a different sequence. The understanding of the process may assist the decision makers to prioritize activities and gradually i...

IBM's Tiny Peripheral: Finland and the Tensions of Transnationality

IBM Finland, a small national subsidiary, was at once a Finnish business and an interface to much larger networks of technological innovation and knowledge sharing. We contextualize its development within a nested set of institutions and identities: IBM's Nordic operations, its European business, and its World Trade Corporation. Its development was profoundly shaped by Finland's unique geopolitical position during the Cold War. IBM's internal structures anticipated and paralleled those of the European Union, with mechanisms for international cooperation, for the creation of transnational identities, and for the resolution and regulation of disputes between national subsidiaries.

Resolution of international banks: Can smaller countries cope?

AbstractThe stability of a banking system ultimately depends on the strength and credibility of the fiscal backstop. While large countries can still afford to resolve large global banks on their own, small and medium‐sized countries face a policy choice. This paper investigates the impact of resolution on banking structure. The financial trilemma model suggests that smaller countries can either conduct joint supervision and resolution of their global banks (based on single point of entry resolution) or reduce the size of their global banks and move to separate resolution of these banks' national subsidiaries (based on multiple point of entry resolution). Euro‐area countries are heading for joint resolution based on burden sharing, while the United Kingdom and Switzerland have implemented policies to downsize their banks.

The Routinization of Paradox Management: Managing Recurrent Tensions in Dual Business Models

The objective of our study is to uncover the micro-processes of managing repeated episodes of tensions occurrence between product and service business model. By contrasting 10 national subsidiaries, we find that whereas the unsuccessful subsidiaries pursue a bargaining process to tension management that preserves the dualism between the two business models, the successful subsidiaries upgrade from an initial synergistic process to a subsequent routinized process of tension management, which allows them to move towards a duality. Rather than bargaining for compromises between diverging interests, the successful subsidiaries engaged in promoting common overarching goals, resolving the conflict of interest, and promoting the identification of synergies. As trust in the success of the synergistic process grows, organizational members begin to learn how to resolve conflicts without their leader’s active mediation. They jointly generate and implement routines for the proactive identification of latent tensions, which enables them to identify further synergies, reinforce the mutual trust, and increasingly maintain duality between the dual business models. Our main contribution to the business model literature is a process perspective of managing dual business model tensions, which (a) shifts the literature's focus from the prior solution perspective to a process perspective; (b) replaces the one-off solutions by longer-term evolutionary processes including the emergence of routines to address recurrent tensions; and (c) shifts the focus from formal structural (and reactive) solutions to managerial (and proactive) actions required to address business model tensions. This routinization of paradox management can lead to less salient tensions and long periods of duality.

Resolution of International Banks: Can Smaller Countries Cope?

The stability of a banking system ultimately depends on the strength and credibility of the fiscal backstop. While large countries can still afford to resolve large global banks on their own, small and medium-sized countries face a policy choice. This paper investigates the impact of resolution on banking structure. The financial trilemma model indicates that smaller countries can either conduct joint supervision and resolution of their global banks (based on single point of entry resolution) or reduce the size of their global banks and move to separate resolution of these banks' national subsidiaries (based on multiple point of entry resolution). Our empirical results show that the euro-area countries are heading for joint resolution based on burden sharing, while the UK and Switzerland have started a process of downsizing their banks.

Resolution of International Banks: Can Smaller Countries Cope?

The stability of a banking system ultimately depends on the strength and credibility of the fiscal backstop. While large countries can still afford to resolve large global banks on their own, small and medium-sized countries face a policy choice. This paper investigates the impact of resolution on banking structure. The financial trilemma model indicates that smaller countries can either conduct joint supervision and resolution of their global banks (based on single point of entry resolution) or reduce the size of their global banks and move to separate resolution of these banks' national subsidiaries (based on multiple point of entry resolution). Our empirical results show that the euro-area countries are heading for joint resolution based on burden sharing, while the UK and Switzerland have started a process of downsizing their banks.

The Ecological Movement and Internationalism

The ecological movement is a very prominent, popular and influential element of the new social movements. Among them, it also has the most global outlook since many of today’s environmental problems have a global dimension and cannot be solved on a national, let alone a regional or even local level. As a consequence, the movement often takes up international, transnational and global issues; it organises its own international conferences and contributes to many others; it tries to coordinate its activities and can draw on its own international / global organisations. At the same time however, most of the activities take part on a local, regional and at the most national level. It is here, where most environmental organisations and especially political parties become well known and where they concentrate their energies. The same is true for environmental debates, which often have global dimensions but more importantly are shaped by national contexts and national or even local issues. At the same time, the best known global organisation, Green Peace, is organised hierarchically and run form a dominant centre leaving almost no autonomy to its national subsidiaries. Apart from this organisation, however, the ecological movement is characterised by its international and global outlook, but derives its strength from and has its base on national and especially local levels.

Systèmes d'Information Internationaux et culture nationale : influence de la dimension culturelle contrôle de l'incertitude sur le processus d'implantation

The research question is to what extent the culture influences the implenmentation process of International Information Systems (IIS) process. A social technological approach gives the theoritical framework. IIS implementation process is defined within an organisational perspective, as well as the cultural dimension of the study, the Uncertainty Avoidance. A research model is then presented. A case study is carried out : four implementation process were studied in four national subsidiaries. The case study analysis provides four cultural traits and notes that an autonomy of local sites during the IIS implementation process is advisable for cultural reasons.

Control over Employment Practice in Multinationals: Subsidiary Functions, Corporate Structures, and National Systems

The authors use comparable data on employment practices in multinationals located in four countries—Canada, Ireland, Spain, and the United Kingdom—to examine the question, How can we explain variation among national subsidiaries of MNCs in the extent and form of control on employment matters? In accounting for variation in both output and social control, the authors explore three potential influences: the functions of the national subsidiaries within the wider companies; the role of host country constraints; and the structures of the multinational, including the HR function. They examine the effect of each set of factors in the presence of the others, something that previous research has been unable to do, and show that each is a significant influence. Their study breaks new ground by investigating the functions of subsidiaries and the link with control.

Servitization: Disentangling the impact of service business model innovation on manufacturing firm performance

As manufacturing businesses operate in an ever more competitive, global economy where products are easily commoditized, innovating by adding services to the core product offering has become a popular strategy. Contrary to the economic benefits expected, recent findings pinpoint implementation hurdles that lead to a potential performance decline, the so-called ‘servitization paradox’. In this paper, we analyze this paradox by disentangling the value creation and value appropriation processes of 44 national subsidiaries of a global manufacturing firm turned product-service provider, in the 2001–2007 period. Our findings show that the firm under study is able to successfully transcend the inherent substitution of products by services and to enact complementary sales dynamics between the two activities. Moreover, labor-intensive services such as maintenance, which imply higher levels of customer proximity, further enhance product sales. Empirical results also reveal a positive yet non-linear relationship between the scale of service activities and profitability: while initial levels of servicing result in a steep increase in profitability, a period of relative decline is observed before the positive relationship between the scale of services and profitability re-emerges. These findings suggest the presence of initial short-term gains but also indicate the existence of a ‘profitability’ hurdle; profitable growth seems feasible only to the extent that investments in service capability are translated into economies of scale. In helping to clarify the performance implications of service innovation, our findings suggest pathways to sustainable growth through servitization for manufacturing firms.

Re‐conceptualizing Bartlett and Ghoshal's Classification of National Subsidiary Roles in the Multinational Enterprise

abstractWe re‐conceptualize the Bartlett and Ghoshal typology of national subsidiary roles in the multinational enterprise (MNE), using a resource bundling perspective. Our view is that national subsidiary roles can vary dramatically across value chain activities. We focus on the distinction among innovation, production, sales, and administrative support activities. For each value chain activity, the subsidiary bundles sets of internal competences with accessible, external location advantages. We also address the effects of regional integration on national subsidiary roles. Such schemes may affect substantially the extent to which location advantages of individual countries can be accessed and bundled with internal competences, thereby typically altering some national subsidiaries' roles in specific value chain activities. However, such substantive changes in specific value chain activities performed by national subsidiaries do not necessarily lead to any move in conventional subsidiary role typologies, such as the Bartlett and Ghoshal one, since these typologies only acknowledge aggregate subsidiary role changes, supposedly valid for the entire value chain.

OPEC Production Management Practices under WTO Law and the Antitrust Law of Non-OPEC Countries

The petroleum production management practices of OPEC member states have always been controversial particularly among the major petroleum-consuming nations of the developed world. While this controversy has traditionally been kept within the realm of politics, it is increasingly taking a legal form. A number of suits have been brought against OPEC, OPEC member states as well as their national oil companies or subsidiaries, often for alleged breach of national competition regulation. There have also been several attempts to use the WTO dispute settlement system to challenge OPEC member states that are also members of the WTO. This article attempts to answer the question of whether the petroleum production management practices of OPEC member states are subject to any external legal controls in the form of international economic law and the competition or antitrust laws of non-OPEC countries.

Cross-Border Resolution of Failed Banks in the EU: Search for the Second-Best Policies

The response to failures of transnational banks within the European Union (EU) has been distinctly national. The EU institutional framework for cross-border bank resolution proved too weak to sustain coordination and prevent open intergovernmental conflicts. This paper summarizes reasons for this failure and reviews structural, political and legal constraints restraining acceptability of various reform alternatives within the EU. The first-best solution would be either a development of an EU-level bank resolution regime for cross-border banks or turning the transnational banks into a string of independent national subsidiaries backed by national resolution regimes. However, both of these alternatives would require amendments of fundamental EU treaties and they face strong opposition from various stakeholders so they are unlikely to be acceptable in the Council and European Parliament. Ultimately, the introduction of a new governance mechanism is the most likely EU response to the failure of the cross-border resolution regime. The emerging governance arrangements rest on newly created European System of Financial Supervisors and ex ante burden sharing arrangements prepared by the new colleges of supervisors overseeing about 40 of the systemically important financial groups in the EU. The banks are likely to be drawn into the new framework by an obligation to prepare ex ante resolution plans ('living wills'). The new governance arrangements represent a politically feasible second-best solution, as they increase the likelihood that the cooperation will be sustained in crisis, while not impinging on the fiscal sovereignty of member states or restraining the internal market freedoms.

SATISFACTION AND INDIVIDUAL PREFERENCE FOR STRUCTURING: WHAT IS FIT DEPENDS ON WHERE YOU ARE FROM.

The article discusses the role of national culture in regards to person-environment (P-E) fit and the assumption that most individuals are satisfied when they acquire what they want. The article talks about a study conducted with individuals from power-distance cultures to evaluate how cultural boundaries fit into the P-E theory. The theory was tested on national subsidiaries of a Taiwanese manufacturer in France, Germany, and the United Kingdom using an online survey. Responses from Germany and the UK showed that satisfaction was higher with an accordance between preference and supplies. High power-distance groups, including France, showed that individual choices didn't confer with satisfaction levels.

Managing Values and Ethics in an International Bank

Multinational companies face serious problems when personnel in their national subsidiaries are not acting in accordance with basic principles of ‘proper behavior’ and moral standards. In this article a description is given of the way in which an internationally operating bank has formulated four company values, in order to implement basic standards in their organization on a worldwide scale. These values (integrity, respect, teamwork and professionalism) have subsequently been diffused among the bank’s subsidiaries by means of a rollout program. This article focuses on this rollout program and the way it has been received in the national subsidiaries of the bank. Data from a comparative survey in 19 countries help to understand the dynamics of this process of formulating, diffusion and reception. The article closes with some points of discussion.

Business as Usual

Business as Usual

Factors influencing the international advertising practices of multinational companies

Reports on a study which investigated why multinational companies standardize the advertising executions deployed throughout the various national markets in which they operate. Economies of scale and belief in international consumer and market convergence were found to be of less influence than had been indicated in prior studies. Rather the indications were that policy on international advertising is influenced by a broad range of organizational and strategic issues, particularly a perceived need for increased central control over the marketing policies of the national subsidiaries. In some instances it could be argued that standardization is a consequence, or even a means of, increased central control, rather than resulting from detailed analysis of the specific costs and benefits of standardization. Also finds that there are many forms of standardization and the motives of the sampled companies concerned varied to some extent, according to the form and degree of standardization practised.

Interunit Communication in Multinational Corporations

In this paper we investigate some of the organizational factors that influence subsidiary-headquarters and intersubsidiary communication in multinational companies. Our study is based on data collected from 164 senior managers working in 14 different national subsidiaries within the consumer electronics division of Matsushita, a Japanese company, and 84 senior managers working in nine different national subsidiaries within the same business of N.V. Philips, the Holland-based competitor of Matsushita. We show that while subsidiary autonomy has no discernable influence on interunit communication, interpersonal relationships developed through lateral networking mechanisms such as joint work in teams, taskforces, and meetings have significant positive effects on the frequency of both subsidiary-headquarters and intersubsidiary communication. The findings are consistent in the two companies, one Japanese and the other European, and the underlying theoretical propositions appear applicable across borders.