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.
- SourceAvailable from: academicjournals.org[Show abstract] [Hide abstract]
ABSTRACT: This study uses the analytical hierarchy process (AHP) to determine the resources needed, from a foreign subsidiary perspective, by small medium-sized multinational firms of financial service and high-technology manufacturing to successfully survive long-term in Taiwan. Results show that factors such as strategic assets, entrepreneurial management system, subsidiary autonomy, and the entrepreneurial orientation of senior managers are important to the survival of small-medium sized multinational firms. This study also finds that an entrepreneurial management system is of greater comparative importance to high-technology manufacturing companies, while autonomy is more important to financial services companies.
- [Show abstract] [Hide abstract]
ABSTRACT: The paper provides a summary of the existing typologies of corporate parenting styles and discovers the missing elements in the theoretical constructs. New theoretical constructs fill the gaps. The paper presents a new typology of corporate parenting style by combining “adding value to subsidiaries by their corporate parent(s)” and “extracting value from subsidiaries by their corporate parent(s).” The four-type typology of corporate styles outlines the different levels of value addition and value extraction and various degree of reciprocity of both processes. This paper determines the most important factors that affect the selection of corporate parenting styles. It postulates that the multinational corporation should simultaneously exhibit different parenting styles towards their subsidiaries and should be ready to swiftly amend their parenting styles to reflect the changes in a subsidiary’s strategy and its motives for corporate ownership.SSRN Electronic Journal 05/2014;
- [Show abstract] [Hide abstract]
ABSTRACT: Purpose ‐ This paper aims to investigate the ability of performance measurement systems (PMS) that were implemented by headquarters at foreign subsidiaries to influence decisions made by the subsidiary. This is important because PMS are important control mechanisms in the relationship between headquarters and subsidiaries within multinational firms. Design/methodology/approach ‐ Acknowledging that controlling foreign subsidiaries is particularly challenging when they are geographically distant to headquarters, the authors collect survey-based data from Chinese subsidiaries of multinational firms. They develop several hypotheses which are tested on a sample of 148 subsidiaries using multiple regression analysis. Findings ‐ The results suggest that the influence of headquarter-designed PMS on subsidiary decisions is higher when the compensation of subsidiary management is linked to PMS, when additional formal control is enforced, when PMS are affected by external events, when PMS are comprehensive, and when subsidiaries are embedded into the local business environment. Also, the authors find a negative interaction effect between comprehensive PMS and the extent to which PMS are affected by external events on the decision-influence of PMS. Research limitations/implications ‐ Limitations arise from the study setting in China. As management accounting research originates from and has mostly focused on Western countries, it remains somewhat unclear whether the constructs and instruments used in this study are fully transferable to China, despite the statistical and conceptual remedies that were applied. Originality/value ‐ The study offers new insights into the role of PMS in multinational companies. It extends earlier research by offering empirical evidence from one of the most important emerging economies. As such, the results are relevant for almost every global firm using PMS to control foreign subsidiaries.Management Decision 04/2012; 50(4). · 1.30 Impact Factor