Subsidiary Experience Research Articles

“Distance” in intellectual property protection and MNEs’ foreign subsidiary innovation performance

AbstractDrawing on the institution‐based view of intellectual property (IP) rights, we argue that “distance” in IP protection strength of MNEs’ home and host countries reduces the ability of MNEs to innovate at foreign subsidiary locations. We contend that this logic applies in both directions—i.e., (1) downward direction, when MNEs originating from stronger IP protection regimes innovate in weaker IP protection regimes, and (2) upward direction, when MNEs originating from weaker IP protection regimes innovate in stronger IP protection regimes. Furthermore, we suggest that the negative effect of IP protection distance on foreign subsidiary innovation performance will be moderated by internal (strategic) and external (institutional) conditions, such as the subsidiary experience, subsidiary ownership type (full vs. partial), cultural distance and the extent of scientific labor in the host country. We test the above relationships using a very large panel data set consisting of MNE subsidiary‐level data in the manufacturing industry for 15,246 subsidiaries of 11,284 parent firms, representing 47 home countries and 31 host countries and covering a total of 91,347 observations for the period 2005–2013. Our findings show that (1) the adverse effect of IP protection distance on subsidiary innovation performance applies in both directions; (2) the effect is more intense in case of the downward direction; and (3) the moderating effects vary depending on the direction of IP protection distance.

The Effect of Subsidiary Experience of Target Firm in Cross-Border M&As

The Effect of Subsidiary Experience of Target Firm in Cross-Border M&As

An institutional response model to economic liberalization: Japanese MNEs’ ownership choices in China

This study investigates how Japanese MNEs are adapting their ownership choices to accommodate China’s economic liberalization. Drawing upon the institution-based view of the firm, we propose an institutional response model that is simultaneously based on the progress of economic liberalization and the accumulation of subsidiary experience. This model suggests that Japanese MNEs increasingly adopt higher ownership levels in their subsidiaries because of the combined effects of deepening deregulation on foreign investments, declining pure uncertainty, and increasing contingent uncertainty during economic liberalization. It also suggests that the progress of economic liberalization continuously changes the combination of the two types of institutional uncertainty (pure and contingent), contextualizing the influence of subsidiary experience on Japanese MNEs’ ownership choices. Using data for Japanese investments in China between 1991 and 2013, we construct a latent growth-curve model to provide empirical evidence for the proposed institutional response model.

Firm-specific intangible assets and subsidiary profitability: The moderating role of distance, ownership strategy and subsidiary experience

How does distance attenuate the value of MNC parent intangible assets on affiliate profitability? Beyond the basic assumption of internalization theory about the positive relationship between parent intangibles and foreign affiliate performance, we test how this relationship, is contingent on ownership strategy, subsidiary experience, and is moderated by the distance between home and host economies, in terms of differences in technological capacity, intellectual property regimes, economic development, language and geography. Based on newly-available accounting data on intangible assets, we test hypotheses on a sample of over 2000 multinationals and 5000 of their overseas affiliates in 45 home and host economies.

Sequential expansion in a foreign market

PurposeA multinational firm’s expansion in a foreign market is a key issue of international business. The purpose of this study is to extend the understanding of essential drivers that will facilitate firm’s assessment of alternative modes of sequential expansion.Design/methodology/approachThe study applies the knowledge-based view and explores a multinational firm’s sequential post-entry expansion in a foreign market. Event histories of Swedish industrial firms’ establishments of wholly owned subsidiaries in Germany, the UK and the USA were explored using Cox regression.FindingsBroad market experiences stemming from corporate strategy and deep experiences from the preceding subsidiary increase the likelihood of a sequential investment. Effects of broad experiences are contingent on the context specified by the geographic scope of the firm and its general subsidiary experience.Research limitations/implicationsThe study contributes to international expansion theory and integrates sources of knowledge originating from strategy theory and internationalization theory. The study shows that the dual approach is needed to understand international expansion.Practical implicationsIn evaluating a further subsidiary investment in a foreign market, the multinational firm is advised to assess whether it possesses enough market experiences to justify the investment. The experiences should be associated with corporate strategy, the previous wholly owned subsidiary and the context specifications identified in the study.Originality/valueThe study is unique, as it addresses the simultaneous impact of broad and deep market experiences. Also, the inclusion of central context specifications makes the study novel.

How Much Does Subsidiary Experience Matter for EMNCs: Evidence From Indian Multinationals

This paper explores how direct experiential learning by foreign subsidiaries aid successful international expansion of emerging multinationals (EMNCs). Pursuing a subsidiary level analysis, this st...

Influence of Experiential Learning on Subsidiary Performance of Emerging Multinationals

This paper explores how accumulated international experiences of emerging multinationals (EMNCs) aid successful international expansion. Pursuing a subsidiary level analysis, this study advances and tests the relationship between parent firm’s experiential knowledge (i.e. general international experience and host country specific experience), subsidiaries’ own experience, and the performance of its foreign subsidiaries of EMNCs. By integrating the learning theory, organizational capability and knowledge transfer literature, this study predict: 1). An inverted U-shaped relationship between subsidiary experience and focal subsidiary performance, 2) An overall U- shaped relationship between parent firm’s general international experience and host country experience and focal subsidiary performance. These predictions are tested empirically with proprietary, longitudinal data from 787 foreign subsidiaries within 253 Indian MNCs (those were a part of the BSE 500 index as on November, 2013) for three years, starting from 2010-11 to 2012-13. The results of this study strongly support the hypothesized relationships between different experience profiles and foreign subsidiary performance.

Managing corporate responsibility globally and locally: Lessons from a CR leader

Corporate Responsibility (CR) is today an essential component of corporate global strategy. CR can bolster the institutional context for market expansion fill institutional voids or facilitate market entry as a component of non-market strategy. Yet, in fulfilling these functions, CR may need to be highly sensitive to local contexts. How can transnational firms organize CR so as to maximize efficiencies from globalization and to minimize the fragmentation of corporate organizational cultures? provide a framework for analyzing the way that corporations coordinate global and local functions. We build on this framework in a case study of Novo Nordisk and its approach to determining global and local CR policies and procedures with regard to its China and US subsidiaries. Our findings suggest that it is important for companies to define a common set of organizational norms. In addition, CR need to be sensitive to local institutional contexts, but learning from subsidiary experience is important and lends itself to standardization and replication of initiatives across market contexts.

R&D subsidiary isolation in knowledge‐intensive industries: evidence from Austria

We investigate R&D subsidiary isolation within Multinational Corporations (MNCs) competing in knowledge‐intensive industries. For such MNCs, accessing knowledge and nurturing the innovative potential of R&D subsidiaries is vital for on‐going competitiveness. This, according to conventional thinking, requires integration of the subsidiary within the host country as well as internally within the MNC. Recent studies have shown, however, that overseas subsidiaries can become isolated (i.e., losing requisite integration), even in high‐technology sectors. We tackle this issue by focusing on organizational factors at corporate and subsidiary levels that have the potential to explain subsidiary isolation. We analyze a sample of 45 foreign‐owned Austrian subsidiaries undertaking R&D in knowledge‐intensive industries using a combination of questionnaire and secondary data. The results suggest that parent and subsidiary experience, the degree of early‐stage research conducted by the subsidiary and the use of training and rotation practices by the subsidiary, all act to counter isolation. Interestingly, we find that proximity between parent and R&D subsidiary does not play a significant role in predicting isolation. We also show how these factors influence communication frequency between the R&D subsidiary and various actors within the internal and the external networks in different ways.

Institutional Environments, Staffing Strategies, and Subsidiary Performance

The authors adopt and develop an institutional perspective to advance understanding of how host country environments influence subsidiary staffing strategies. They propose and find that (a) firms rely more on expatriates in institutionally distant environments for reasons related to the efficient transfer of management practices and firm-specific capabilities and (b) the positive influence of expatriate staffing levels on subsidiary performance is dependent on the institutional distance between the host and home country, and subsidiary experience. The authors' findings are based on their analysis of expatriate employment levels and performance in 12,997 foreign subsidiaries of 2,952 Japanese firms in 48 countries.

What Determined Success During the Asian Economic Crisis??The Importance of Experiential Knowledge and Group Affiliation

This study investigated the factors that determined the change in firm performance during the Asian economic crisis. Applying a process-oriented resource-based view and MNC network theory, we argued that host country experience, industry experience, subsidiary experience, and group affiliation would influence subsidiary performance during an economic crisis. By testing the hypotheses on a sample of 1128 Japanese subsidiaries in Thailand, Indonesia, Malaysia, and Korea, we found that, among different knowledge resources that the MNC accumulated in its internationalization process, subsidiary experiential knowledge was most significant in picking the winners from the losers during the crisis. Keiretsu affiliation and the parent firm’s industry experience were also significant, positive factors for firms remaining profitable or even better after the crisis. However, firm size and industry effects were not related to performance.