Subsidiary Strategy Research Articles

Subsidiary strategy and importance of standards: An institutional development of the integration-responsiveness framework

According to the integration–responsiveness framework, subsidiaries of multinational enterprises (MNEs) are assigned different strategic roles depending on the business environments they operate in. MNEs are classified as multinational, international, transnational, and global firms. Although standards are crucial for both export performance and Foreign Direct Investment, there is no scientific knowledge on how different types of standards interrelate with MNE strategies. Derived from the review of the limited literature on the role of different types of standards for different MNEs subsidiary strategies, we take an institutional theory perspective and position different types of standards within the integration–responsiveness framework. Based on data collected within the German Standardization Panel, cluster analysis is performed confirming that MNEs’ subsidiary strategies can be grouped according to the importance of formal and company standards. While conformity with national formal standards is necessary to meet pressure for local responsiveness, the application of international standards provides firms with access to global markets. Company standards and management system standards are important to transnational firms to achieve efficiency gains and improve bargaining positions. We compare the export intensity of MNEs with different subsidiary strategies to validate our clustering. In addition, different motives for applying different types of standards confirm our conceptual positioning.

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.

Is the relationship between institutional distance and subsidiary performance moderated by top management team? Evidence from Chinese multinational enterprises

Institutional distance is well-recognised as having a significant influence on MNE subsidiary performance in host countries. However, there is less clarity as to how the institutional distance is managed by top management teams of MNEs. Specifically, it is not known whether the previous work experiences of the top management team (TMT) can moderate how institutional distance impacts subsidiary performance. The purpose of our research is to address the research question, how do different work experiences among the TMT moderate the relationship between institutional distance and subsidiary performance? To empirically answer this question, we use a sample of 6119 Chinese MNE subsidiaries with 34,870 TMT managers. We apply ordinary least square (OLS) regression and bias-corrected and accelerated bootstrap (BCa) to the data. The results indicate that the strength of the negative relationship between institutional distance and MNE subsidiary performance is conditional on the different work experiences of the TMT. We show that the negative relationship between institutional distance and MNE subsidiary performance is strengthened with an increase in expatriates in the TMT who have home country work experience (β = −0.346, p < 0.05) but mitigated with an increase of managers in the TMT who have host country work experience (β = 0.129, p < 0.01). Additionally, the negative relationship between institutional distance and subsidiary performance is weakened by increasing diversity of TMT’s international experience (β = 0.555, p < 0.01). Notably, the TMT’s international experience in weak-institution markets has a more salient mitigating effect on the negative relationship than work experienced gained in strong-institution markets. This study contributes to the integration of TMT perspective into institutional management and has practical implications for the staffing strategy of MNE subsidiaries.

Subsidiary Strategy in Response to Pressures From Headquarters and Local Institutions

Subsidiary Strategy in Response to Pressures From Headquarters and Local Institutions

Concentration Level and Market Power of Islamic Bank Industry: Analysis of Pre and Post Bank Syariah Indonesia Merger

This paper attempted to examine the concentration and the degree of market power in the Indonesian Islamic Bank Industry during the pre and post-Bank Syariah Indonesia mega-merger. However, using the Strategic Tripod concept, this paper explored the response of the competitor pursuant to the merger. This paper used two main secondary data sources, which were 2 quarterly financial reports before the merger and 1 quarterly financial report after the merger of 34 Islamic bank data, and applied the Herfindhal-Hircsmann Index and Concentration Ratio of the top 5 Islamic banks. This paper discovered that the concentration ratio was at a moderate level. Moreover, based on the CR5 calculation result, Islamic banks have an oligopoly market structure. As for the response to the mega-merger, this paper divides 34 islamic banks into 3 clusters which are full-fledged Islamic banks (Bank Umum Syariah), Private Owned Islamic Subsidiary (Unit Usaha Syariah), Province Owned Islamic Subsidiary (Unit Usaha Syariah Bank BPD). Based on the strategic tripod, the strategy of the Islamic full-fledged bank orchestrates resources to win the competition. The privately owned Islamic Subsidiaries are taking advantage of their resource sharing with their parents. Meanwhile, the Province Islamic subsidiary's strategy relies on the regulations determined by the bank shareholders, who, in this case, are the government province.

The mediating performance role of staffing options in MNE subsidiary strategies within rapidly deteriorating environments

PurposeIn an environment of intensive global mobility, this study aims to investigate the performance role of staffing choices within diverse MNE subsidiary strategies. Incorporating the integration-responsiveness (IR) framework with a contingency perspective, this study proposes that the performance success of distinct MNE subsidiary strategies depends on staffing choices. This study argues that performance differences of staffing choices such as assigned expatriates, self-initiated expatriates, former inpatriates and host-country nationals derive from their different knowledge/experience advantages regarding the intra-firm environment and local market conditions.Design/methodology/approachThe study utilizes a unique sample of 169 foreign subsidiaries located in Greece that faced the outbreak of the COVID-19 pandemic (in 2020). For robustness reasons, this study also captures the imposition of capital controls (in June 2015).FindingsThis study finds important mediating performance effects of a diversified human resource portfolio across distinct subsidiary strategies in difficult times. Integration strategy tends to use more assigned expatriates, locally responsive strategy tends to utilize more host-country nationals, whereas multi-focal strategy favors self-initiated expatriates and former inpatriates, with positive subsidiary performance effects accordingly. So, staffing policies that are suitable to balance the needs of Human Resource Management (HRM) portfolio differ from strategy to strategy. Moreover, this study finds that managing HRM diversity is crucial in turbulent times.Originality/valueWhile the empirical evidence has been predominantly accumulated from large economies, largely neglecting performance effects of MNE subsidiary staffing in crisis contexts, the analysis sheds light on a small open economy (i.e. the Greek context) emphasizing rapidly environmental deterioration. The findings extend existing theorizing on international performance and HRM management by providing an integrative conceptual framework linking integration-responsiveness motivated strategies with distinct groups of high-quality human resources under contingency considerations, so creatively synthesizing largely fragmented IB and HRM research streams. The study provides valuable insights into the performance role of non-conventional staffing choices such as self-initiated expatriates and former inpatriates, given that relevant studies examine either exclusively expatriates or compare expatriates with host country nationals, reaching inconclusive results.

The subsidiary strategising process for a competence-creating role

PurposeThe authors’ contention in this paper is that the expression of subsidiary strategy in IB literature has become fragmented and incomplete. Therefore, this study aims to propose a rethink on how IB scholarship approaches the important issue of subsidiary strategy by holistically examining the discrete and integrated set of activities, choices and decisions that constitute the subsidiary strategy process for, in this context, assuming a competence-creating role within the multinational enterprise (MNE).Design/methodology/approachA conceptual model is designed to illustrate the holistic process of subsidiary strategy from assigned to assumed role and how a subsidiary can navigate a pathway to elevated performance and survival.FindingsThe paper identifies the key integrated elements that constitute a holistic strategic process that can enhance a subsidiary’s standing within the MNE and maximise its survival prospects.Research limitations/implicationsParticular focus is placed on subsidiaries that strategise to advance their internal corporate role to competence creator via upgraded knowledge capabilities.Originality/valueThis paper offers a roadmap for IB scholars to contribute to a future discourse around the subsidiary strategy process for assuming a competence-creating role.

Gaussian distribution-based facial expression feature extraction network

In this paper, we proposed a plug-and-play Gaussian-based Facial Expression Feature Extraction Network (GFE2N) for effective Facial Expression Recognition (FER). We considered facial expression image as a combination of the common information (facial attribute features) across different images and the unique information (facial movement features) that described expression movements. More specifically, GFE2N consisted of two crucial sub-networks: a Gaussian Sampling Network (GSN) and a Movement Feature Generation Network (MFGN). In particular, GSN first simulated latent facial attributes by a Gaussian distribution with neutral images. Then, MFGN captured the relationship between latent attributes and overall representations of expression images to generate the sample-specific variations of facial movement features. The wide ranges of experiments (including on in-the-wild datasets RAF-DB, AffectNet, FERPLUS and in-the-lab dataset CK+) illustrated that the proposed GFE2N can consistently achieve competitive results. GFE2N can also be fused as a subsidiary strategy module to assist improve the existing FER performance.

Export intensity of foreign subsidiaries of multinational enterprises

PurposeThe author contributes to the theory of the multinational enterprise by examining subsidiary-specific capability in financial management, defined as the stock of knowledge and capability to plan, manage, control and direct financial resources effectively and efficiently, and the perceptions of subsidiary managers of host country financial development as drivers of export intensity (the share of sales that are exported) of foreign subsidiaries of multinational enterprises (MNEs). The author theorizes that subsidiary-specific capability in financial management is conceptually a valuable subsidiary-specific advantage and it is as important as other traditional competitive advantages, such as research and development and marketing intensity. Perceptions of subsidiary managers of host country financial development are argued to be largely related to the characteristics of the host country-specific advantages.Design/methodology/approachThe author uses a survey dataset of the foreign subsidiaries of Western multinational enterprises (MNEs) together with other public data sources.FindingsThe author provides empirical evidence to support for these arguments that export intensity of MNE foreign subsidiaries depends on subsidiary-specific advantages and host country specific advantages.Originality/valueThe study broadens the understanding of the relationships between subsidiary-specific advantage in financial management, host country specific advantage, and export intensity of MNE foreign subsidiaries. In this way, the author makes an original contribution to new internalization theory by emphasizing the internal capability building of subsidiaries. The author discusses the implications of the findings for MNE foreign subsidiary managers, and policy makers because exporting is critical to the overall strategy of foreign subsidiaries, and it also contributes to the balance of trade and economic development of host countries where foreign subsidiaries operate.

Aligning PTCI Strategies to Global Corporate Strategies Using Scenario Planning

Profitability and growth are two important and essential measures to a firm existence and survivability. Profitability is critical to a company’s short-term existence, and growth is crucial to long term survivability. Every business wants to maintain its existence and bring value to its stakeholders. Divestment and merger acquisition are part of the company strategy to achieve business growth that fulfil the company objectives, purpose, vision, and mission. In the case of a multinational company, it normally would have a global corporate strategy. Subsidiary companies will follow the strategic guidelines from its parent company. Thus, subsidiary company needs to align its strategy to the parent global corporate strategy. Scenario planning used to answer the key focal issue about how to align subsidiary company strategy to its parent company global corporate strategy. One option for a firm to cope with uncertainty is scenario planning. Scenario planning is a unique tool compared to other decision analysis methodology. Scenario planning uses information on key uncertainties and certainties concerning the future to assemble an information rich illustration that provides eloquent descriptions of future worlds. The data collected in this study comes from literature studies, interviews, questionnaires with internal and external stakeholders. External analysis is using the PESTEL framework and Porter Five Forces model. While internal analysis is using Growth-Share matrix, VRIO framework, and Strategic Diamond model. Information is consolidated to give driving forces that would shape up the future. Two driving forces that give the highest impact and uncertainty, Indonesia economic growth and company Product Innovation, are defined as critical uncertainty and used to construct a 2×2 scenario matrix. The scenario matrix, implication, options, and early warning systems are explored for each scenario to align subsidiary company strategy to its parent global company strategies.

Nonmarket Strategy of Subsidiaries of Foreign MNEs in the Wake of Worsened Interstate Relations

Nonmarket Strategy of Subsidiaries of Foreign MNEs in the Wake of Worsened Interstate Relations

한국 진출 미국 다국적기업 자회사의 역량이 현지화와 그 성과에 미치는 영향에 관한 실증연구: 본사 국제화 역량과 자회사 업종의 조절효과를 중심으로

In the era of globalization today, the localization strategy of subsidiaries has become increasingly essential for multinationals to improve their performance in foreign markets. From the perspective of the resource-based view and capability-based view, this study investigated how the capabilities of multinationals’ foreign subsidiaries affect their localization strategy and how the internationalization capability of the headquarters and the industry type of the subsidiary moderate such relationship, and then examined how the localization strategies of subsidiaries influence their performance. We proposed and empirically tested 14 hypotheses, using panel data of S&P 1000 and Russell 3000 companies of the U.S., operating their subsidiaries in Korea between 2000 and 2018. Our results show that the positive relationships between the technological and marketing capabilities, and the level of localization of subsidiaries in procurement and sales were confirmed, and that the relationship between subsidiaries’ marketing capabilities and their localization level in procurement and sales were weakened by the headquarters’ internationalization capabilities and the industry type of the subsidiary. In terms of performance effect, subsidiaries’ procurement localization turned out to have a positive impact on their performance(ROA) in the manufacturing industry. We hope that this study will contribute to the literature on the relationships among subsidiary capabilities, localization and market performance.

Governing headquarters-subsidiaries relationship: An agency perspective

How multinational enterprises (MNEs) coordinate and control their geographically dispersed subunits is central to international management research (Kostova, Nell, &amp; Hoenen, 2018). Our study adopts agency rationales to evaluate the effects of headquarters (HQs)–subsidiary convergence on the performance levels of the latter. Convergence within organizations relies to a large amount on controls that predicate a specific extent of alignment. In theory, the concept of alignment is seen as a valid proxy of agency intensity (Eisenhardt, 1989). Drawing on the supposition that MNEs are differentiated networks, where some subsidiaries continue to function the traditional competence-exploiting role while others are competence-creating and augment the advantages of their home-base (Björkman, Barner-Rasmussen, &amp; Li, 2004), alignment challenges can be manifested in six dimensions that define their strategic posture, span the organizational context and underly competitive imperatives: 1) subsidiary strategy, 2) culture, 3) governance practices, 4) financial decisions, 5) human resources, and 6) environmental activity. Drawing on a sample of 72 MNE foreign operations and gathering 254 responses from top management team (TMT) members, our results indicate that strategic, cultural, governance, and HR alignment are important determinants of subsidiary performance. However, whereas strategic, cultural, and governance convergence between HQs and subsidiaries are positively related to increased performance levels, an ethnocentric approach towards HR practices seems to trigger welfare losses.

Global and Local CSR Strategies in Foreign-Owned Subsidiaries: The Role of Networks and Competencies

&#x0D; The purpose of this research is to investigate the role of networks and competency dimensions in determining the corporate social responsibility (CSR) strategy of foreign-owned subsidiaries. Survey data has been collected from subsidiary managing directors and analysed using structured equation modelling and fuzzy set qualitative comparative analysis techniques. We show that networks and competencies can have competing as well as complementary effects on the global and local CSR strategies. For instance, inter-organisational network strength and competencies in high primary value chain activities seem to drive global as well as local CSR activities. However, the case is more complex for intra-organisational network relationships and subsidiaries with competencies in supporting value chain activities. The originality of this paper lies in the detailed investigation of how network relationships and competencies affect global and local CSR strategy development. We also provide novelty in applying a combination of symmetric (SEM-PLS) and non-symmetric (fsQCA) analytical techniques.

Deciding where in the world to expand when determining a subsidiary strategy

Purpose This paper aims to review the latest management developments across the globe and pinpoint practical implications from cutting-edge research and case studies. Design/methodology/approach This briefing is prepared by an independent writer who adds their own impartial comments and places the articles in context. Findings This case study paper concentrates on the managerial perceptions that determine where to establish a subsidiary and which strategies to follow in doing so. Cultural and economic distances have the biggest impacts on such strategy formation, followed by secondary administrative and geographic distance factors. Most managers preferred to adapt their marketing approach to the foreign market, to give high autonomy to acquired subsidiaries to manage their market, and to set up a subsidiary in a neighboring country. The interviewed Portuguese companies therefore predominantly opened a foreign subsidiary in Spain. Originality/value The briefing saves busy executives, strategists and researchers hours of reading time by selecting only the very best, most pertinent information and presenting it in a condensed and easy-to-digest format.

Local responsiveness strategy of foreign subsidiaries of Chinese multinationals: The impacts of relational-assets, market-seeking FDI, and host country institutional environments

We build upon the theoretical framework of firm-specific advantages (FSAs) and country-specific advantages (CSAs) to examine the determinants of the local responsiveness strategy of foreign subsidiaries of Chinese multinational enterprises (MNEs). Specifically, we focus on relational assets (R-assets is seen as a unique type of Chinese MNEs’ FSA), the market-seeking foreign direct investment (FDI) and host country institutional environments as drivers of the local responsiveness strategy. We empirically test our hypotheses using a survey data of the foreign subsidiaries of Chinese firms together with other secondary data sources. We find that both Chinese MNEs’ R-assets and the market-seeking oriented FDI are positively related to subsidiaries’ local responsiveness strategy in accommodating local customer needs, government policies, market conditions, and competitive intensity. Moreover, the impact of R-assets in motivating the local responsiveness strategy is stronger in a host country with a weak and underdeveloped institutional environment. While the evidence confirms the existence of the R-assets in influencing subsidiary level strategy, it also casts doubt on such relations-based firm resources in advanced host countries with highly developed institutions.

Archetypes of marketing mix standardization-adaptation in MNC subsidiaries

PurposeThis paper aims to identify the archetypes of marketing mix standardization-adaptation in MNC subsidiaries and to examine the relationships between MNC subsidiary strategy, environment and performance through the theoretical lenses of fit and equifinality.Design/methodology/approachThe authors use a mail survey to collect data from MNC subsidiary business units located in multiple countries. They apply a novel archetypal analysis method to identify the diverse archetypes of marketing mix standardization-adaptation in MNC subsidiaries. Finally, through cross-tabulation and regression analysis, they examine the relationships between MNC strategy, environment and performance.FindingsThey identify four archetypes of MNC subsidiary standardization-adaptation including a new archetype that is not recognized in the literature. This analysis finds partial support for both fit and equifinality, suggesting complementarity between the two theories.Research limitations/implicationsThe study could be extended with longitudinal data to examine the dynamics in MNC marketing mix strategy and performance in response to the changing business environment.Practical implicationsThe findings suggest that MNC subsidiary managers could deploy a broader set of international marketing strategy configurations than those currently prescribed to enhance performance.Originality/valueThe authors use a novel configuration-based archetypal analysis method and extend the theoretical typology of international marketing strategies pursued by MNC subsidiaries. The partial support for both fit and equifinality expands the theoretical lens through which we can examine the relationships between MNC marketing strategy, environment and performance.

An empirical study of subsidiary strategies using structure-conduct-outcome framework

One of the most important issues of multinational operations is the decision making of the global marketing strategy. Managers of multinational corporations (MNCs) must coordinate the implementation of their firms' strategies among various subsidiaries in different parts of the world. This study adopted a structure-conduct-outcome (S-C-O) framework to measure the outcome of strategy by structure variables (centralisation, formalisation, and dependencies) and conduct variables (integration and responsiveness) and to identify the interrelationships among network structure, conduct of subsidiary and outcome of subsidiary. The results of this study indicated that the comprehensive model is valuable and presented that high level of centralisation, formalisation and dependencies will result in better integration and responsiveness, which further enhance the performance of the subsidiary.

An empirical study of subsidiary strategies using structure-conduct-outcome framework

An empirical study of subsidiary strategies using structure-conduct-outcome framework

The Impact of Corruption Distance on Ownership Strategies of Spanish and Portuguese MNEs

The ownership strategy of foreign subsidiaries is an important decision for multinational enterprises (MNEs). Previous research has analyzed the effect of country dimensions on this strategy, both from the home and the host country. In this paper we delve into the effect of differences between home and host country on the MNEs’ ownership strategies. Empirically, we analyze the influence of corruption distance on the ownership strategies of Spanish and Portuguese MNEs, using data from 3,941 foreign subsidiaries. We found that the higher the absolute corruption distance between Spain (or Portugal) and the host country, the higher the ownership controlled by MNEs. However, when the host is more corrupt than the home country, MNEs have a lower ownership level in the local subsidiaries.