Subsidiary embeddedness and control in the multinational corporation
ABSTRACT A subsidiary of a multinational corporation (MNC) is embedded in a network of specific business relationships. It is argued that the degree of subsidiary embeddedness is a function of the adaptation between the subsidiary and direct and indirect counterparts of these relationships. The paper hypothesizes that the higher the degree of embeddedness, the greater the likelihood of counterparts influencing the subsidiary's behaviour. This influence competes with headquarter's desire to exercise control to integrate the subsidiary into the overall corporate strategy.The empirical data presented, collected from 78 subsidiaries of major Swedish MNCs, indicate that embeddedness has an impact on how headquarter's control is perceived by the subsidiary, if embeddedness is separated into external and corporate embeddedness. The test provides support for the opinion that the higher the degree of embeddedness vis-à-vis external customers, suppliers and other counterparts, the lower the degree of headquarters' control, as perceived by the subsidiary. But it also lends support for the view that embeddedness vis-à-vis corporate counterparts works in the opposite direction; it rather tends to increase the control perceived at the subsidiary level. These results indicate that competition for influence over the subsidiaries' behaviour, as seen from the headquarter's point of view, arises primarily from external actors who have business specific relationships with the subsidiary.
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ABSTRACT: We develop and test a new perspective on dispersed entrepreneurship within the multinational corporation (MNC). Various literatures suggest that corporate, subsidiary, and individual level factors can lead to entrepreneurial initiatives diffusing outward from a subsidiary to other MNC units. We extend this to include political heterarchy (mechanisms by which subsidiary managers enhance their power base through heterarchy) as both direct and moderating factor. Using a survey of 135 managers in a wide range of MNC subsidiaries, we find that a tolerance for local initiative (subsidiary level), subsidiary manager proactivity (individual level), and political heterarchy directly influence initiative diffusion. In terms of moderating effects, political heterarchy is seen to activate corporate level entrepreneurial strategy. We show how political heterarchy is central to dispersed entrepreneurship within the MNC and highlight the positive function of networked organizational politics in rejuvenating the international firm.Journal of Management Studies 09/2011; 48(09):1243-1268. · 4.26 Impact Factor
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ABSTRACT: This paper presents the evolution of a multinational’s subsidiary, which is located in an emerging country, and aims to uncover barriers encountered during the evolution of the accomplishment of its intended strategic role. Throughout a historical study that goes back 40 years, the paper depicts milestones in the subsidiary’s evolution and highlights barriers encountered to developing and deploying capabilities, whether they are transferred from HQ’s or emerge from the subsidiary’s embedding process. The results of this research point out the barriers a subsidiary faces while accomplishing its role and duties towards the ends of internationalization and evolution typologies that emerge from the interaction between local and corporate barriers.Revista de Administração Contemporânea 01/2011;
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ABSTRACT: The article discusses the dynamic relationship between foreign direct investment (FDI) and local conditions in a peripheral area by introducing the Jakobsen model for how outcomes of FDI on local economies differ according to contextual interplays between local conditions and the content of a given FDI. The dynamics are demonstrated in the case of Kuressaare on the island of Saaremaa, Estonia. The authors show how FDI has played a significant role in Estonian economic development since reindependence in 1991 but that the majority of FDIs, with the exception of some resource-motivated FDIs, have either bypassed the peripheries of Estonia or just passed through them. In Kuressaare, however, the community has attracted several foreign investors, resulting in the location of vital manufacturing industry in this remote corner of Estonia. The motives and characteristics of the investments play a significant role in explaining this. In addition, a local entrepreneurial culture seems to be decisive. The Kuressaare manufacturing industry represents a path-dependent but successful FDI case, driven by local capabilities in terms of an entrepreneurial spirit and by knowledge spillovers from the external investors. Returning to the Jakobsen model, the case of Kuressaare demonstrates how a peripheral community can change from an FDI situation marked by dependency to a situation of progress.Norsk Geografisk Tidsskrift 09/2010; 64(3):142-151. · 0.43 Impact Factor