Towards a Framework of Reverse Knowledge Transfer by Emerging Economy Multinationals: Evidence from Chinese MNE Subsidiaries in the United States

This article extends the research on knowledge transfer by emerging‐economy multinationals (EEMs) by exploring the determinants of successful reverse knowledge transfer (RKT) in Chinese enterprises operating in the United States. Building upon organizational evolution and learning literature, we propose a model linking strategic asset‐seeking motivations, headquarters (HQ) control, and subsidiary age to RKT. The model is empirically tested in the context of Chinese enterprises in the United States and further justified by four cases of Chinese multinationals. Our exploratory study provides initial evidence that strategic asset‐seeking motivations and HQ control are significantly and positively related to RKT. Furthermore, our empirical evidence indicates a negative relationship between subsidiary age and RKT. We discuss the implications for theory development and practice for managing and organizing EEMs and their subsidiaries and suggest avenues for future research on this emerging phenomenon. © 2016 Wiley Periodicals, Inc.     

The Impact of Origins of Reverse Technology Transfer on MNC Home‐Country Product Development

Reverse technology transfer (the transferring of multinational corporation [MNC] subsidiaries’ technological knowledge to their home country) deserves more executive attention since the source of competitive advantage of MNCs resides in their capabilities to leverage knowledge from different units across borders. This article examines three salient “origins” of reverse technology transfer—headquarters, local constituents, and subsidiary research and development (R&D) activity—and their impact on MNCs’ home‐country product development. We argue that reverse technology transfer from subsidiary R&D activity is more likely to have a positive impact on MNC home‐country product development than the other two origins because reverse transfer from local constituents requires high integration cost, and transfer from headquarters adds little technological novelty. We also develop two contingency hypotheses for the latter two origins to increase their likelihood of positive impacts on home‐country product development. Using a data set of 1,331 Taiwanese MNCs, our empirical evidence provides two important messages to managers: (1) a subsidiary whose technology mainly relies on its R&D would be an ideal target for reverse transfer; and (2) reverse transfer from local constituents and headquarters can be effective when they fit with an appropriate organizational mechanism, such as governance mode and absorptive capacity. © 2016 Wiley Periodicals, Inc.     

Headquarters parenting advantage in Chinese MNEs: The moderating role of top managers’ political and International experience

This study explores the relevance of top management teams’ experience to support the headquarters parenting advantage in the context of Chinese multinationals. Specifically, it studies how the political and international experience of headquarters’ top management teams moderates the relationship between headquarters involvement in knowledge transfer processes – a key aspect of value creation in the parenting advantage logic – and the extent of reverse knowledge transfer from subsidiaries. Based on the data from two complementary surveys of senior managers in 99 Chinese multinationals and managers in their 177 subsidiaries, our analysis indicates a contrasting effect of top managers’ experience as their political experience weakens, but their international experience strengthens the positive effect of headquarters involvement in reverse knowledge transfer. This study contributes to the parenting advantage logic, by introducing the relevance of different top managers’ experiences, and to our understanding of top management teams in the context of both reverse knowledge transfer and Chinese multinationals, particularly by showing the important implications of top management teams’ experience for Chinese enterprises’ international strategies.     

Learning from foreign subsidiaries: An empirical investigation of headquarters' benefits from reverse knowledge transfers

Within MNCs, the traditional role of headquarters as prime source of knowledge and competencies is changing. Increasingly, headquarters act as a receiver of knowledge from their internationally dispersed subsidiaries. But what drives the benefits headquarters can gain from such reverse knowledge transfers? Drawing on an empirical sample of 294 intra-MNC knowledge transfers, we identify the key variables impacting on headquarters' ability to benefit from reverse knowledge transfer. Taken collectively, our findings indicate that the efficiency of the MNC as a knowledge integrating institution is being driven by changes in both, the subsidiary's context and its capabilities to process knowledge. We discuss the implications of our analysis on the emerging knowledge based theory of the firm, draw out inferences for the strategic agenda of MNCs and suggest avenues for future research.     

How “space” and “place” influence subsidiary host country political embeddedness

As a part of multinational corporations (MNCs), subsidiaries operate in distinct host countries and have to deal with their external context. Host country political embeddedness, in particular, helps subsidiaries to obtain knowledge and understanding of the regulatory and political context, and to get access to local networks. Moreover, they get some guidance and support from their headquarters. Distance between MNC home and host countries, however, alienates subsidiaries from the MNC and influences the extent of subsidiary host country political embeddedness. We suggest that the host country political and regulatory context moderates the effect of distance on subsidiary host country political embeddedness by reducing the need and/or value of headquarters support. Using a sample of 124 European manufacturing subsidiaries, we find that distance (space) and context (place) matter jointly: the impact of distance is stronger for subsidiaries that operate in host countries with low governance quality and low political stability in place.     

Expatriate management: Comparison of MNCs across four parent countries

This article reports the results of a study of expatriate management and headquarters‐subsidiary relations in 29 American, British, German, and Japanese multinationals and a sample of 46 of their foreign subsidiaries based on face‐to‐face and telephone interviews with key international HR, subsidiary HR, and subsidiary managing directors. We found that earlier studies, heavily weighted with U.S. multinationals, cannot necessarily be applied to expatriate management experiences of other national industrial countries. Also, expatriate management is more similar for American and British MNCs, while both German and Japanese multinationals in our sample had fairly distinct systems of using expatriates in their foreign subsidiaries. Thus, we can discuss at least three fairly distinct models of expatriate management and corporate‐foreign‐subsidiary control. © 2000 John Wiley & Sons, Inc.     

Institutional distance and the quality of the headquarters–subsidiary relationship: The moderating role of the institutionalization of headquarters’ practices in subsidiaries

Through the lens of the institutional theory, we developed and empirically tested a contingency theoretical framework that examines the effects of formal and informal institutional distances on the quality of the headquarters–subsidiary relationship, and how such effects are contextualized by internal institutionalization of headquarters’ practices in subsidiaries of Chinese multinational enterprises (MNEs). Data were collected from both the headquarters of 297 Chinese MNEs and their respective subsidiaries. The results show that regulative and cultural distances are positively associated with the quality of the headquarters–subsidiary relationship, and that these positive relationships are stronger when subsidiaries institutionalize headquarters’ practices to a higher degree. Theoretical and practical implications are highlighted in the paper.     

The performance effects of vertical and horizontal subsidiary knowledge outflows in multinational corporations

Horizontal and vertical subsidiary knowledge outflows in multinational corporations (MNCs) are argued to be central to effective MNC performance. Building on the knowledge-based view of the firm, we develop a conceptual model to investigate the performance consequences, determinants and interaction effects due to coordination and control mechanisms, of horizontal and vertical MNC subsidiary knowledge outflows. The hypotheses are empirically tested with a dataset comprised of survey and archival data from over 200 MNC subsidiaries. Results indicate that explicitness and communication positively influence vertical and horizontal subsidiary knowledge outflows and that national cultural distance, centralization, formalization, and specialized resources moderate these influences. We also find that knowledge outflows to headquarters and to peer subsidiaries enhance an MNC's financial performance (i.e., return on assets). The results provide substantive evidence as to how vertical and horizontal knowledge operate within MNCs.     

The interplay of networking activities and internal knowledge actions for subsidiary influence within MNCs

Knowledge-based and network-based activities are known determinants of foreign subsidiary influence. We demonstrate that the interaction between these factors is essential in understanding how subsidiaries gain influence within an MNC. We test this using data on 184 foreign-owned subsidiaries in the UK. The results indicate that the possession of strategic resources (knowledge or embedded relations) increases subsidiary influence only when the knowledge is transferred back to headquarters. Importantly, the impact of subsidiary–headquarters embeddedness, external embeddedness and knowledge development on influence is mediated by the extent of reverse knowledge transfer. This mediating role sheds new light on the antecedents to subsidiary influence.     

Headquarters to subsidiary transfer effects on marketing strategy exploitation

The transfer of locally created marketing strategies worldwide represents a key competitive advantage for multinational corporations (MNCs). Although a research topic of much interest, empirical content of past studies is scarce. Absorptive capacity studies typically test direct effects of either the transfer capacity of the strategy's initiator or the recipient's ability to process and exploit the strategy on related learning outcomes. Mixed findings allow the possibility of more complex relationships. This study examines the relationships between MNC headquarters and marketing units located in subsidiary firms using a sample of 213 marketing managers. The study systematically explores linear, interaction, and quadratic effects within a structural equation modeling paradigm. The findings indicate that the relationship between a MNC headquarters' transfer capacity and a subsidiary marketing unit's processing capacity on the strategy's exploitation is one of mediation and moderation. The subsidiary marketing unit's processing capacity is a key mediating variable and headquarters' transfer capacity moderates the effects of this variable on the exploitation of the marketing strategy by the subsidiary's unit.     

Beyond Credibility of Doing Business in China: Strategies for Improving Corporate Citizenship of Foreign Multinational Enterprises in China

This study examines the perceptions of Chinese executives concerning corporate social responsibilities in their Chinese subsidiaries of foreign multinational corporations in China. These Chinese subsidiaries are found in the elementary stage of corporate citizen development even though their headquarters are in the advanced stage. The key challenges of moving Chinese subsidiaries to be better corporate citizens in China are specific Chinese business culture, intellectual property rights, internal due process, insufficient Chinese government support, and lack of knowledge of Chinese subsidiaries. Through this study, foreign multinational corporations need to invest in social capital that facilitates the transfer of knowledge of comprehensive corporate responsible practices from the headquarters to their Chinese subsidiaries, and to encourage their Chinese subsidiaries to be more actively engaged with external business partners that support corporate social responsibility.     

DHL Bangladesh: Managing headquarters‐subsidiary relations. Comment on DHL Bangladesh: Managing headquarters‐subsidiary relations

This case revolves around Nurul Rahman, a DHL Bangladesh (DHLB) manager who must recommend which of the two human resource information systems (HRISs) DHLB should adopt to alleviate the escalating workload on its human resources (HR) department. The choice between these systems is difficult: the HRIS favored by regional headquarters is significantly more expensive and likely unsuited to DHLB's unique needs, whereas the HRIS favored by DHLB—although likely effective —seems to be incapable of meeting headquarters' strong preference for streamlining human resource systems across disparate Asian subsidiaries. Rahman must carefully balance conflicting stakeholder interests and do so against the backdrop of a politically powerful headquarters that can “make or break” managerial careers. © 2008 Wiley Periodicals, Inc.     

Subsidiary Technology Upgrading and International Technology Transfer,with Reference to China

This paper reviews the research on technology upgrading in the subsidiaries of transnational corporations and the research on the development of Chinese high technology firms. On the basis of this it develops fresh policy options for government intent upon facilitating international technology transfer to their jurisdictions. Technology upgrading is the use of increasingly complex technologies in products and processes, and the development of the managerial and organizational capabilities needed to leverage those technologies effectively. Technology upgrading by the subsidiaries of transnational corporations can contribute to the economic development of the host region and is often driven by the entrepreneurial activities of subsidiary management. The upgrading process involves collaborating/lobbying with suppliers, headquarters and sister subsidiaries. Economic development policy should foster subsidiary technology upgrading as part of initiatives to increase international technology transfer.     

Sequential internationalization,heterogeneous process and subsidiary roles: the case of Hyundai Motor Company*

This paper proposes a new conceptual model to better understand the internationalization process of firms, especially those from rapidly developing East Asian economies. The model is illustrated through a comprehensive analysis of the internationalization process of Hyundai Motor Company (HMC). A comparative case analysis of the development of HMC's five major foreign subsidiaries shows both capability building through sequential investment from the headquarters' perspective and heterogeneous development of operational knowledge at the subsidiary level. The research emphasizes the importance of the post-FDI phase of subsidiary development to the study of firm internationalization, and highlights the process of decision-making and learning as the key to understanding the sequence of investments in subsidiaries.     

French multinational companies' HRM in China: strategic orientation and integration approaches

The purpose of this qualitative study is to identify strategic orientation and integration approaches of French companies in implementing the headquarters-based human resource management (HRM) practices in their Chinese subsidiaries. Through a study of 16 French multinationals’ HRM, our findings reveal that a majority of sample companies tend to standardize the HRM practices in their Chinese subsidiaries to a great extent. This strategic orientation is supported by a combination of specific integration approaches at the subsidiary level. The results add knowledge to international management theory and allow us to develop implications in managing employees in China.     

Social identity in MNCs based on language and nationality

The existence of multiple languages in a multinational corporation (MNC) causes tensions in the firm both by causing problems in communicating and by creating social groups. MNCs that adopt a common corporate language that is not their home language will find a problem of competing languages. Nationality is another cultural feature that leads to perceived biases that favor home‐country nationals. We explore both of these influences using social identity theory. Our research was conducted in a Spanish MNC that has subsidiaries in 42 countries and has adopted English as its corporate language. We used a mixed‐method approach with a mailed survey of 216 managers across 42 subsidiaries in the MNC and personal interviews of headquarters executives. We found that Spanish speakers enjoyed advantages in terms of access to resources for themselves and their subsidiaries, relative to non‐Spanish speakers. This access was greater when the Spanish speakers were Spanish nationals and was moderated by geographic proximity of the subsidiary to the headquarters and age of the subsidiary.     

Cultural distance or cultural positions? Analysing the effect of culture on the HQ–subsidiary relationship

We develop a model of cultural positions in relationships that should be considered in addition to the more conventional cultural distance. We empirically analyse relationships between headquarters and foreign subsidiaries in multinational corporations and how high or low acceptance of power differences at both sides of the relationship is associated with headquarters influence on subsidiary competence development. ANCOVA analyses of 1529 subsidiaries in six European countries, headquartered in 28 countries, provide new insights. We find that relationships with low cultural distance, differ significantly in terms of headquarters influence depending on whether headquarters and subsidiaries agree on accepting or rejecting power differences. Similarly, relationships with high cultural distance differ depending on whether it is headquarters or the subsidiary that is from a high-power-distance culture: we find that headquarters influence is particularly dependent on great acceptance of power differences by the subsidiary.     

Operating Factors That Help to Improve Performance in Subsidiaries with Low Absorptive Capacity

This article aims to investigate the process of knowledge transfer from headquarters to subsidiaries located in developing countries. We studied four cases with activities in the industrial sector. The results obtained reveal that an efficient transfer of knowledge depends on the contribution of headquarters to overcoming cultural differences; evolution of the learning process and the contribution of the recipient; and implementation and consolidation of new knowledge in the subsidiary. The cultural influence is decisive in the evolution of the performance of the subsidiary through the local production and sale of new competitive products. The weak absorption capacity of local individuals means that the business model of the headquarters cannot be replicated in the Mozambican market.     

Proximity at a distance: The relationship between foreign subsidiary co-location and MNC headquarters board interlock formation

Corporations seek various relationships, such as board interlocks, with other firms to reduce resource dependencies. The consistent theoretical expectation and empirical finding that physical proximity is an important driver for board interlock formation is seemingly at odds with the emerging and growing literature on transnational board interlock ties. We argue that the effect of proximity on multinational corporation (MNC) board interlock formation can also be attributed to the firms’ internationalization strategy, namely, when they have co-located subsidiaries in foreign markets. We call this “proximity at a distance”. We test our assumptions on a dataset covering almost 43,000 board interlocks among MNC headquarters and their 12 million subsidiary co-location pairs. We confirm that proximity among headquarters increases the odds of interlocking but also find robust evidence that co-located subsidiaries also increase firms’ propensity to interlock, particularly for transnational board interlocks. Our results help provide an explanation for the “paradox of distance” by showing that the interlock between two distant MNCs may be driven by proximity to their foreign subsidiaries. As such, we illustrate how MNCs’ resource-dependent strategic responses can occur at the headquarters level to address uncertainties experienced at the subsidiary level.     

The effects of subsidiary’s leadership and entrepreneurship on international marketing knowledge transfer and new product development

This study investigates the role of a strong subsidiary leadership and entrepreneurial culture in the promotion of marketing knowledge inflows. We further examine their consequences on the subsidiary’s ability to develop new products when moderated by the tacitness of knowledge. The data were collected from 202 Portuguese subsidiaries of multinational corporations and were analyzed using partial least squares structural equation modelling to test the hypotheses. The results indicate that subsidiaries’ strong leadership support and entrepreneurial culture are fundamental mechanisms that foster marketing knowledge inflows from both the headquarters and peer subsidiaries. Moreover, marketing knowledge inflows enhance the focal subsidiary’s innovation abilities. We also find that tacit knowledge exerts contradictory moderating effects on the transfers of marketing knowledge, carrying distinct implications for a subsidiary’s knowledge management. The results expand our understanding of the effectiveness of transferring marketing knowledge among multinational corporations’ (MNCs) subsidiaries.