On the Relationship between Japanese Manufacturing Firms and their Domestic Subsidiaries

Much past research on ownership policy has dealt with foreign subsidiaries. In this paper, we study the ownership relationship between Japanese firms and their publicly-traded domestic subsidiaries. Using a transaction cost framework, we find that benefiting from high subsidiary profitability is not the sole motivation behind parent firms' decisions regarding equity control of their subsidiaries. Our results indicate that different policies are adopted by Japanese firms with respect to domestic and foreign subsidiaries.     

What factors determine the subsidiary mode of overseas R&D by developing-country MNEs? Empirical evidence from Chinese subsidiaries abroad

This study examines the determinants of the subsidiary modes of overseas research and development (R&D) by Chinese multinational enterprises (MNEs). Based on resource-based view and absorptive capabilities, we propose that financial resources and technological resources have different effects on the selection of overseas R&D subsidiary modes, which are competence-exploiting mode or competence-creating mode. This is supported by the empirical results in this paper using data from a survey of 40 Chinese overseas R&D subsidiaries. The results demonstrate that the parent firms with richer financial resources and more R&D expenses prefer the competence-exploiting mode, while the parent firms with more R&D personnel favor the competence-creating mode. Additionally, this study finds that firms matching our mode choice model tend to enjoy a higher level of innovative performance.     

Identifying liabilities of foreignness and strategies to minimize their effects: the case of labor lawsuit judgments in the United States

Most foreign direct investment (FDI) theories assume that foreign subsidiaries are at a disadvantage relative to domestic firms; that is, they suffer a liability of foreignness. Following this reasoning, most FDI research has focused on advantages foreign investors must possess to overcome whatever disadvantages they face. Research directly investigating the sources of foreign subsidiary disadvantages has been notably lacking, despite the fact that understanding disadvantages could uncover ways to reduce exposure to these liabilities of foreignness and improve management of FDI. This study focuses on whether labor lawsuit judgments represent a liability for foreign subsidiaries operating in the United States (U.S.). Specifically, I tested whether 486 British, German, and Japanese subsidiaries operating in the U.S. had more labor lawsuits brought to judgment than a matched sample of U.S.‐owned firms. Results indicate that foreign subsidiaries faced significantly more labor lawsuit judgments in both federal and state jurisdictions. I also investigated several variables hypothesized to be associated with a reduction in labor lawsuit judgments facing foreign subsidiaries. Foreign subsidiaries who used American top officers or whose parent firms had more U.S. operations faced fewer lawsuits, while foreign subsidiaries using human resource professionals actually faced more labor lawsuit judgments. Implications of these findings and avenues for future research are discussed. Copyright © 2002 John Wiley & Sons, Ltd.     

Foreign entry and survival: Effects of strategic choices on performance in international markets

This paper investigates effective strategies that can reduce the risk of failure in international expansion by examining the entry and survival of foreign subsidiaries in the U.S. computer and pharmaceutical industries over the 1974-89 period. Using a hazard rate model, we examine the effects of (1) diversification strategies, (2) entry strategies, and (3) organizational learning and experience on the survival probabilities of foreign subsidiaries. The results show a higher exit rate for foreign acquisitions and joint ventures than for subsidiaries established through greenfield investments. The results also indicate a higher exit rate for subsidiaries that diversify than for those that stay in the parent firm's main product areas. Finally, the results show that firms benefit from learning and experience in foreign operations, which improves the chances of success for subsequent foreign investments. These findings shed light on the dynamic process of international expansion and the evolution of the multinational corporation.     

Operational flexibility and market valuation of earnings

This paper examines the association between the stock returns and accounting earnings of firms that have different levels of operational flexibility. Operational flexibility is a firm’s ability to respond profitably to environmental fluctuations by shifting factors of production within a multinational network of subsidiaries. The geographic breadth and depth of a firm’s multinational network are used as indicators of operational flexibility. We find a significantly greater coefficient relating stock returns and accounting earnings for multinational firms that operate in many countries, but limit their concentration in any one foreign country, than for other multinational firms or domestic firms. This coefficient is significantly smaller for multinational firms whose foreign subsidiaries are highly concentrated in a few countries. When all multinational firms are pooled together, we find their earnings‐returns association does not differ from that of domestic firms. Copyright © 1999 John Wiley & Sons, Ltd.     

The advantage of foreignness in innovation

I argue that subsidiaries of foreign multinational enterprises (MNEs) enjoy an advantage of foreignness in innovation, that is, they are more innovative than domestic firms. To explain this, I present the subsidy and the incentive arguments. The subsidy argument proposes that subsidiaries are subsidized in their innovation effort by the MNE, which results in subsidiaries having more innovations than domestic firms, because they belong to a foreign MNE. The incentive argument posits that subsidiaries are subject to two sets of unique and converging pressures, one at the MNE level in the corporate factor market and another at the host country level in the consumer market. These pressures drive subsidiaries to become more successful at transforming their research and development investments into innovations. Copyright © 2011 John Wiley & Sons, Ltd.     

Management practices of Taiwanese firms: As compared to those of American and Japanese subsidiaries in Taiwan

The management practices of local Taiwanese firms were evaluated by Negandhi in 1973 as the least developed as compared to those of the American and Japanese subsidiaries. Since then, the local Taiwanese firms have undergone a phenomenal change. In comparison to the American and Japanese subsidiaries, the current management practices — organisational structure, decision making and human resource management of the local Taiwanese firms are a mixture of those of the American and Japanese subsidiaries. The local Taiwanese firms have adapted very well to the impact of the West (the United States) and the East (Japan) and contributed greatly to the economic prosperity of Taiwan.The author wishes to thank the Council for Economic Planning and Development, Republic of China (Taiwan) for financial support.     

Pace,rhythm, and scope: process dependence in building a profitable multinational corporation

Many potential benefits of foreign expansion have been identified in the literature, yet empirical support that multinational firms perform better than domestic firms is mixed. This paper takes a longitudinal perspective and argues that how much a firm benefits from having foreign subsidiaries depends on its process of internationalization. We argue that a firm's capacity to absorb expansion is subject to constraints: some expansion patterns increase profitability less than others, owing to diseconomies of time compression. We hypothesize that the speed of internationalization, the spread of the geographical and product markets entered, and the irregularity of the expansion pattern negatively moderate a firm's increase in profitability resulting from international expansion. Model estimations based on panel data raised strong support for these predictions. Copyright © 2002 John Wiley & Sons, Ltd.     

构建金融控股集团子公司财务绩效评价系统研究

金融控股集团子公司的财务绩效评价与其它行业母子公司绩效评价问题相比,既有共性,也有特殊性。结合金融行业特点,探讨金融控股集团子公司财务绩效评价指标,构建财务绩效评价系统,对金融控股集团科学合理地评价子公司的经营绩效,具有重要意义。     

Vertical Disintegration and the Disorganization of German Industrial Relations1

Drawing on case studies from the telecommunications and auto industries, the authors argue that the vertical disintegration of major German employers is contributing to the disorganization of Germany’s dual system of in‐plant and sectoral negotiations. Subcontractors, subsidiaries and temporary agencies often have no collective bargaining institutions or are covered by different firm‐level and sectoral agreements. As core employers move jobs to these firms, they introduce new organizational boundaries across the production chain and disrupt traditional bargaining structures. Worker representatives are developing new campaign approaches and using residual power at large firms to establish representation in new firms and sectors, but these have not been successful at rebuilding co‐ordinated bargaining.     

MNC foreign investment and industrial disasters: The moderating role of technological,safety management,and philanthropic capabilities

Research Summary: We investigate how industrial disasters can discourage FDI and how MNCs' technological, safety management, and philanthropic capabilities can moderate these effects. Using two unique panel data sets of entry and expansion of U.S. wholly‐owned manufacturing subsidiaries overseas, we found that industrial disasters are associated with reduced foreign entry of wholly‐owned subsidiaries in the disaster industry, but not for all firms in the host country experiencing the disaster. We also found that MNCs' technological, safety management, and philanthropic capabilities can, in some cases, positively moderate the negative relationships between industrial disasters and the foreign entry and expansion of wholly‐owned subsidiaries. Additionally, three‐way interactions with government stability suggest that technological and safety management capabilities substitute government stability in managing industrial disasters, while philanthropic capability complements government stability. Managerial Summary: How can MNCs' technological, safety management, and philanthropic capabilities overcome the effects of industrial disasters such as chemical spills and explosions in host countries? Our results show that industrial disasters are associated with reduced foreign entry of wholly‐owned subsidiaries in the industry in which the industrial disaster occurs, but not for other firms operating in the country experiencing the disaster. However, an MNC's technological capability can, in general, lower the negative consequences of industrial disasters in both the entry and expansion of its wholly‐owned subsidiaries. Regarding the institutional quality of a host country, the results imply that MNCs should develop philanthropic capability when the government stability of the host country is strong, and develop technological and safety management capabilities when the government stability is weak.     

ORGANIZATIONAL STRUCTURE AND THE DIVERSIFICATION DISCOUNT: EVIDENCE FROM COMMERCIAL BANKING*

We provide evidence on organizational structure and performance at bank holding companies (BHC's). First, we show that a BHC's member banks benefit from access to internal capital markets. Second, we ask if these benefits are best realized within loosely structured, decentralized organizations or more consolidated, centralized firms. We find that BHC's with many subsidiaries are less profitable and have lower q ratios than similar BHC's with fewer subsidiaries. However, because we study multi‐unit firms in a single industry, our results suggest that the diversification discount reported in the corporate finance literature reflects not only industry diversification, but also organizational structure.     

Localisation of Japanese subsidiaries in Southeast Asia

The success story of Japanese firms, both in their home country and their overseas subsidiaries, has been the focus of comparative management research in the 1970s and early 1980s. Several scholars attributed the impressive productivity gains in Japanese industries to the basic principles of Japanese management. Further, they advocated the adoption of these principles by American and European businesses to solve employee morale and productivity problems. However, in recent years, the validity of the “happy worker” hypothesis in explaining the effectiveness of Japanese management has been seriously questioned. In fact, the results of several empirical studies indicate that Japanese firms are facing manpower management problems both at home and in their overseas subsidiaries. The main purpose of this article is to identify and discuss the Japanese management problems of overseas subsidiaries, based on several empirical studies of Japanese overseas subsidiaries undertaken by the authors of this article and other scholars during the last 17 years (1968 to 1985). These studies are:

Localisation Problems of Japanese Subsidiaries Overseas: A Comparative Study in Southeast-Asian Countries.

A comparative study of American, Japanese and local firms in Taiwan.

A comparative study of American, European and Japanese multinationals' subsidiaries in Brazil, Peru, India, Malaysia, Singapore, and Thailand.

A comparative study of American, German, and Japanese multinations in the United States, Western European countries, Australia, and Japan.

A comparative study of upper-level Japanese and American managers of subsidiaries of Japanese firms in the United States.

A comparative study of subsidiaries of American and Japanese multinationals in Singapore.

An intensive case study of a Japanese subsidiary in Australia.

     

Alliance Concentration in Multinational Companies: Examining Alliance Portfolios,Firm Structure,and Firm Performance

Research summary: This article explores the distribution of alliances across firms' internal structure. Focusing on multinational companies, we examine the impact of alliance portfolio concentration—i.e., the extent to which alliances are concentrated within a limited number of geographic units—on focal firms' performance. Relying on Knowledge‐Based View (KBV) insights, we hypothesize that an increase in alliance portfolio concentration positively influences firm performance and that alliance portfolio size negatively moderates this relationship. Our empirical results enrich the emerging capability perspective on alliance portfolios, point to the relevance of conceptualizing focal firms in alliance portfolio research as polylithic entities instead of monolithic ones, and provide new insights into how firms create value by potentially recombining externally accessed knowledge. Managerial summary: In the setting of multinational companies, we examine whether alliance activities are concentrated in a limited number of subsidiaries or are highly dispersed across multiple subsidiaries. We find that, over time, firms exhibit different patterns in terms of alliance portfolio concentration. In addition, the results show that, for MNCs with a relatively small alliance portfolio, an increase in alliance portfolio concentration is positively related to their financial performance. However, when MNCs' alliance portfolios are relatively large, the relationship between alliance portfolio concentration and firm performance becomes negative. Jointly, these findings suggest that the distribution of alliances across firms' internal structure is an important factor in shaping potential knowledge recombination benefits from alliance portfolios. Copyright © 2017 John Wiley & Sons, Ltd.     

Perceived fairness,decision control,and commitment in international joint venture management teams

Previous research examining the effectiveness of international joint ventures (IJVs) has focused on differences in the backgrounds and bargaining power of IJV parent firms, while little attention has been given to the IJV itself. This study takes a different perspective by examining the relationship between IJV parent firms and the IJV. Specifically, we examine how IJV and parent involvement in strategic decision‐making influences the IJV management team's commitment to the IJV and to the parent firms. We hypothesize that the IJV management team tends to be more committed to the IJV than to the parent firms, and that there is a strong positive relationship between procedural justice, strategic decision control, and organizational commitment. A field study involving 51 IJVs supported our hypotheses. We discuss the implications of organizational commitment and procedural justice for managing IJVs. Copyright © 2002 John Wiley & Sons, Ltd.     

Determinants of increasing R&D complexity in affiliates of manufacturing multinational corporations in the UK

The aim of this paper is to evaluate the technological trajectories of the UK subsidiaries of manufacturing multinational corporations as measured by changes in their R&D complexity over a five year period. The data was gathered from a postal survey of 500 randomly selected subsidiaries in the UK; of the respondents that had been established in Britain for at least five years, 16 were found to demonstrate decreasing and 48 increasing complexity of R&D activities. These 64 firms were compared across a number of strategic variables, and a powerful logistic regression model developed that predicts technological trajectories with great precision.
The key variables in the model were differences (over five years) in sales volume, decision making autonomy about human resource matters in the subsidiary, sensitivity to the needs of sister subsidiaries when developing new products, heterogeneity of the subsidiary's markets, and the degree of localization of certain control functions. The central lesson for the subsidiary R&D manager is that HQ undertakings about R&D strategy as it concerns the subsidiary may be fairly accurately evaluated via the model and its five strategic variables.     

The role of foreign subsidiaries in strategic decision-making in swedish multinational corporations

The paper describes how six large Swedish multinational corporations manage the task of assuring strategic integration between headquarters and foreign subsidiaries. Swedish companies are shown to address the problem in an informal way and by leaving their foreign subsidiaries a great deal of autonomy. However, in many instances the necessary integration is not assured. Cases of strategic conflict between parts of companies are analysed, characteristics of and trends in the environment of multinational corporations are identified, and theoretical considerations are applied. With this discussion as a basis, some suggestions are advanced about how to involve subsidiaries more in strategic decision making.     

Centers of excellence in multinational corporations

This paper seeks to understand the conditions under which ‘centers of excellence’ emerge in foreign subsidiaries of multinational firms. We define a center of excellence as an organizational unit that embodies a set of capabilities that has been explicitly recognized by the firm as an important source of value creation, with the intention that these capabilities be leveraged by and/or disseminated to other parts of the firm. Drawing on overlapping research in international business and strategic management, we argue that the formation of centers of excellence is shaped by conditions in the subsidiary's local environment as well as by various aspects of the subsidiary's relationship with other parts of the multinational firm. Based on a survey of 99 foreign units in Canada, our results highlight the fundamental role played by parent firm investment as well as the role of internal and external organizations in the development of subsidiary capabilities. Performance implications of the center of excellence phenomenon are also explored. Copyright © 2002 John Wiley & Sons, Ltd.     

R&D subsidiary isolation in knowledge-intensive industries: evidence from Austria

We investigate R&D subsidiary isolation within Multinational Corporations (MNCs) competing in knowledge-intensive industries. For such MNCs, accessing knowledge and nurturing the innovative potential of R&D subsidiaries is vital for on-going competitiveness. This, according to conventional thinking, requires integration of the subsidiary within the host country as well as internally within the MNC. Recent studies have shown, however, that overseas subsidiaries can become isolated (i.e., losing requisite integration), even in high-technology sectors. We tackle this issue by focusing on organizational factors at corporate and subsidiary levels that have the potential to explain subsidiary isolation. We analyze a sample of 45 foreign-owned Austrian subsidiaries undertaking R&D in knowledge-intensive industries using a combination of questionnaire and secondary data. The results suggest that parent and subsidiary experience, the degree of early-stage research conducted by the subsidiary and the use of training and rotation practices by the subsidiary, all act to counter isolation. Interestingly, we find that proximity between parent and R&D subsidiary does not play a significant role in predicting isolation. We also show how these factors influence communication frequency between the R&D subsidiary and various actors within the internal and the external networks in different ways.     

What Determined Success During the Asian Economic Crisis?—The Importance of Experiential Knowledge and Group Affiliation

This study investigated the factors that determined the change in firm performance during the Asian economic crisis. Applying a process-oriented resource-based view and MNC network theory, we argued that host country experience, industry experience, subsidiary experience, and group affiliation would influence subsidiary performance during an economic crisis. By testing the hypotheses on a sample of 1128 Japanese subsidiaries in Thailand, Indonesia, Malaysia, and Korea, we found that, among different knowledge resources that the MNC accumulated in its internationalization process, subsidiary experiential knowledge was most significant in picking the winners from the losers during the crisis. Keiretsu affiliation and the parent firms industry experience were also significant, positive factors for firms remaining profitable or even better after the crisis. However, firm size and industry effects were not related to performance.