A dynamic perspective on subsidiary autonomy
Global Strategy Journal 11/2011; 1(3‐4):301 - 316. DOI: 10.1002/gsj.25
Prior investigations treated subsidiary autonomy more or less as a static concept, but the headquarters-subsidiary relationship is likely to evolve and result in changing power positions over time. This article examines the static and dynamic impacts of external/internal embeddedness on the autonomy of overseas R&D subsidiaries. Based on data from 73 overseas R&D subsidiaries of German firms, we show that a dynamic perspective indeed produces counterintuitive results, namely that high internal embeddedness in the past may help laboratories gain higher levels of autonomy in the future, whereas high external embeddedness may lead to lower levels of autonomy in the future. Our results indicate that building trust and linking up with headquarters are important strategies for subsidiaries wishing to be granted autonomy in the future.
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- "The purpose of this article is to improve our understanding of this pivotal topic. Building on the evolutionary theory of organizations (Dosi and Marengo 2007; Nelson and Winter 1982), we analyze the effect of the three established coordination mechanisms centralization, formalization, and socialization (Ambos and Schlegelmilch 2007; Manolopoulos et al. 2011; Muethel et al. 2012; Nobel and Birkinshaw 1998; Reger 1999) on an important aspect of SMEs' innovation performance, viz. the time-to-market of their product innovations. Time-related innovation measures are very important as delays in market entry can massively reduce returns from innovations (Vesey 1991). "
ABSTRACT: As SMEs increasingly internationalize their innovation activities, our study strives to improve our understanding of the coordination mechanisms that SMEs can adopt to orchestrate these activities. Building on the evolutionary theory of organizations, we link three established coordination mechanisms (centralization, formalization, and socialization) to the time-to-market of SMEs’ product innovations. We also argue that the complexity of the internationalized R&D tasks moderates the relationship between the three coordination mechanisms and time-to-market. Survey data from 103 SMEs with international innovation activities broadly support our theoretical account. With respect to the main effects, our findings suggest that a high degree of centralization tends to prolong the time-to-market, whereas formalization tends to shorten it. The moderation results further indicate that centralization can become more beneficial when a firm internationalizes highly complex R&D tasks, while formalization tends to become less beneficial with increasing task complexity. Main and moderation effects with respect to socialization are inconclusive. We discuss the implications of these findings for the academic literature and management practice.
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- "The concept emphasizes the extent to which environmental differences between home and host countries present information flows and generate barriers to learning about these markets (Dikova, 2009; O'Grady & Lane, 1996). The greater the psychic distance between home and host countries, the more difficult it is to collect, analyze and correctly interpret information about these differences (Hå kanson & Ambos, 2011). For that reason, firms tend to select overseas markets in accordance with the psychic distance from the home country; a lower psychic distance means that a country is more likely to be selected, and vice versa. "
ABSTRACT: We studied an underrepresented area in the international business (IB) literature: the effect of country context distance on the distribution of decision-making autonomy across headquarters and foreign affiliates. Foreign affiliates directly contribute to the competitive advantages of multinational enterprises, highlighting the importance of such intra-firm collaboration. The division of decision- making autonomy is a core issue in the management of headquarters–subsidiary relationships. The main contribution of our paper is that we confront two valid theoretical frameworks – business network theory and agency theory – that offer contradictory hypotheses with respect to the division of decision- making autonomy. Our study is among the first to examine this dilemma with a unique dataset from five Central and Eastern European transition countries. The empirical results provide convincing support for our approach to the study of subsidiary decision-making autonomy.
- "Conversely, even when an entity has no ownership rights, it may exercise powerful control rights. The case of Philips, the Dutch MNE, may be held up as an example (Ambos et al., 2011; Mudambi and Navarra, 2004). For many years after World War II, the valuable defense contracting business of Philips' North American subsidiary gave it power in resisting headquarters control, since it could use U.S. national security regulations to override European ownership rights. "
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