Managing the transfer of capabilities within multinational corporations:: the dual role of the subsidiary

In this article, the relation is explored between the external technical embeddedness of the subsidiary, its assigned role, and capability development in the MNC. It is argued that assigning roles of responsibility or mandates to certain subsidiaries can effect integration of subsidiary-developed knowledge in the MNC. Departing from literature on the market-as-networks perspective and writings from recent years on subsidiary roles, hypotheses are developed and a model outlined. The model describes a significant link between the external technical embeddedness of the subsidiary and its assigned role within the MNC, and a significant relation between the subsidiary's assigned role and its importance for other units’ capability development. The model is tested on a sample of 97 subsidiaries using the LISREL 8.3 statistical method. The final model implies that by assigning specific roles to different subsidiaries, headquarters can exploit the knowledge developed in the external environments of these subsidiaries.     

Standardize or Customize: The Interactive Effects of HRM and Environment Uncertainty on MNC Subsidiary Performance

This study examines the impact of customizing (as opposed to standardizing) human resource management (HRM) practices on subsidiary performance in multinational corporations (MNCs). We examine how this relationship is influenced by environmental uncertainty. Hypotheses were tested using data from 92 subsidiaries of a large MNC operating in 27 countries. The results showed an interactive relationship between the customization of HRM practices and subsidiary environmental uncertainty on both financial (net profit) and nonfinancial (customer satisfaction) objective measures of subsidiary performance. The results of this study provide important empirical insights for researchers and practitioners into how HRM can be best configured to drive multiple performance outcomes for MNC subsidiaries. © 2014 Wiley Periodicals, Inc.     

跨国公司子公司治理研究

在经济全球化的今天,跨国公司在境外设立子公司已成为世界各国关注的中心,但同时由于跨国公司自身的特点及子公司的性质使得母子公司间存在着一系列的问题,而这些问题又都主要是源于对跨国公司子公司治理的忽视。对此,从跨国公司子公司的角度出发,探析子公司治理及其治理机制的建构。     

Impact of nationality composition in foreign subsidiary on its performance: a case of Korean companies

This study explores how the nationality compositions of management teams and employee groups in foreign subsidiaries can affect subsidiary performance. By analyzing firm-level data on 401 South Korean subsidiaries across 35 countries in the period between 2005 and 2007, we found that balanced compositions in both subsidiary management teams (SMTs) and subsidiary employee groups (SEGs) were positively associated with subsidiary performance. The results suggest that the benefits of balanced composition are higher for both innovative and coordinative tasks conducted by management teams and for simple computational tasks conducted by employee groups. The effect of the SMT and SEG compositions on subsidiary performance, however, may depend on the host country's institutional conditions. These findings have practical implications for multinational staffing strategies in order to ensure high performance in subsidiaries and for host country policies used to attract high quality foreign direct investments.     

Organizational commitment in MNC subsidiary top managers: antecedents and consequences

This article studies, first, how affective and continuance commitments affect MNC subsidiary top managers' intent to leave either their current post or the firm itself, and second, which variables influence these managers' affective and continuance commitments. The analysis uses a sample of MNC subsidiary top managers in Spain, and the results confirm that these managers' intent to leave the subsidiary and the multinational is determined by affective and continuance commitments in its two dimensions (high-sacrifice and low-alternatives), and that these commitments, in turn, are determined by the managers' personal cultural values and company bonding variables.     

Institutions and Foreign Subsidiary Growth in Transition Economies: The Role of Intangible Assets and Capabilities

Although transition economies experience significant institutional transformations that vary in their degree and pace, scholarly knowledge of what distinguishes more successful foreign subsidiaries from less successful ones in such environments is limited and inconsistent. We enhance the understanding of this subject by examining how variations in the institutional development of transition economies influence the usefulness of a subsidiary's intangible assets and capabilities and, in turn, their effectiveness in enhancing its growth. Prior research assumes that foreign subsidiaries that operate in any given environment are always better off when they possess strong intangible assets and capabilities. Our analysis of more than 33,000 observations in 14 transition economies challenges this view and enables us to explain why some subsidiaries grow more quickly in less‐developed institutional environments, whereas others more quickly in countries with institutions that are more developed. More specifically, we show that although a subsidiary's intangible assets enhance its growth in transition economies with stronger institutions, these effects are particularly weak or insignificant in transition countries with less developed institutional environments. Conversely, a completely different pattern emerges for subsidiary capabilities, with their marginal effects on subsidiary growth being significantly higher in countries that are institutionally less developed than in transition countries with more developed institutions.     

Global,national and local practices in multinational corporations: towards a sociopolitical framework

This paper intends to shed some light on strategies and power resources of subsidiary managers and employee representatives involved in ‘charter changes’ and the implementation of ‘best practices’ developed elsewhere. Research shows that local managers face a dilemma in that they need both internal legitimacy (within the MNC itself) and external legitimacy (within the local context). It is argued that the power resources key actors draw on in the (internal) decision-making processes of ‘charter changes’ are intertwined with certain (external) national business system (NBS) characteristics, an aspect often neglected in North American research about MNCs. The authors identify three key influences, which restrain or empower local management and employees in their ability to make strategic choices and gain power within the MNC. They are (1) the overall strategic approach of the multinational group, (2) the strategic position and the economic performance of the subsidiary itself and (3) the degree of institutional embeddedness of the subsidiary in the host country. Comparative mini-case studies are used to illustrate the effect of local management and employee representatives' empowerment on their ability to retain skills and work practices supportive of a diversified quality production process in the face of MNC pressure to adopt global ‘best practices’ based on more standardized production processes.     

Human resource control in MNCs: a study of the factors influencing the use of formal and informal control mechanisms

This study tests the effects of different internal and external factors on Multinational Corporations' (MNCs) use of formal versus informal mechanisms to control their human resources. Responses to a survey of 74 General Managers (GMs) of US subsidiaries in Mexico were used to test the hypotheses. The use of formal and informal mechanisms of control was associated with the extent to which the MNC had a global strategy as well as with the strength of localization forces such as local dependence and local regulations. Level of employee education, a subsidiary characteristic, also predicted the extent to which MNCs used informal control mechanisms. Most importantly, the results suggest that, even though they share some antecedents, each type of control mechanism, namely formal and informal, has a different set of internal and external antecedents. Indeed, our data hint that informal and formal control mechanisms are not mutually exclusive and that, on the contrary, they can fruitfully co-exist because they satisfy different internal and external demands.     

The influence of internal and external social networks on HRM capabilities in MNC subsidiaries in China

In this study we examine the influence of involvement in internal and external social networks on HRM capabilities. We distinguish between technical and strategic HRM capabilities and focus on the capabilities of the HR department relating to four HRM practices – recruitment and selection, training and development, compensation, and performance appraisal. The study is based on data from dual respondents, general managers and HR managers, in 66 European MNC subsidiaries located in China. The results indicate that contact with other MNCs in China regarding HRM issues is positively associated with both technical and strategic HRM capabilities whereas contact with local Chinese companies does not have any significant influence on either strategic or technical HRM capabilities. Contact with MNC headquarters is positively associated with strategic HRM capabilities.     

Determinants of central control and subsidiary autonomy in HRM: the case of foreign‐owned multinational companies in Spain

This article examines the factors affecting HRM subsidiary autonomy within multinational companies (MNCs). Drawing on institutional theory arguments, along with an analysis of the impact of international HRM structures, it attempts to identify the multiplicity of factors influencing subsidiary autonomy with regard to HRM. Using data gathered from a highly representative survey of foreign MNC subsidiaries located in Spain, the results identify a number of factors that hold explanatory power. First, the distance between the home and the host country in terms of variety of capitalism is crucial in explaining variations in subsidiary autonomy. In addition, international HR structures, such as the existence of an international policy‐making body and the use of HR shared service centres or HR data reporting mechanisms, are also important in accounting for the degree of autonomy over HR issues experienced by the MNC subsidiaries in our study.     

MNC practice transfer: institutional theory,strategic opportunities and subsidiary HR configuration

Human resource (HR) practice transfer is an important topic in the domain of strategic international human resource management (SIHRM). Previous research in practice transfer has emphasized the challenges arising from the institutional distance between the home and host countries. However, potential opportunities due to this distance have been largely overlooked. Shifting the focus away from looking at institutional distance as a constraint, we examine the possibilities of strategic opportunities that exist because of institutional distance. We argue multinational corporation (MNC) subsidiaries can exploit these opportunities to gain competitive advantage. Building upon SIHRM literature, institutional theory and the resource-based views, we propose a conceptual framework explaining how institutional environments present strategic opportunities. We argue that these strategic opportunities are most abundant in the case of moderate institutional distance between the two countries. Building upon the conceptualization of strategic opportunities, we propose a model of subsidiary HR configuration, and then we explain how an HR configuration could be a source of competitive advantage. Further, we examine the role of MNCs' overall SIHRM orientation in relation to the identification and exploitation of strategic opportunities.     

The effect of international staffing practices on subsidiary staff retention in multinational corporations

This paper contributes to the scarce body of research on employee turnover in multinational corporations' foreign subsidiaries and addresses some key issues related to dealing with turnover of local staff. Based on a literature review, I conceptualize locals' perceived career prospects and their organizational identification as key variables mediating the relationship between international staffing practices and local staff turnover. In a second step, the paper develops instruments that help international firms to retain their subsidiary staff. Specifically, I focus on how international staffing practices need to be configured to ensure employee retention and I derive moderating factors. My arguments are integrated into a framework for the effect of international staffing practices on subsidiary staff retention in multinational corporations.     

Transferring HR practices within multinational corporations

There is extensive evidence that planned transfers of management practices by the headquarters of multinational corporations (MNCs) to foreign subsidiaries are not always successful. In this article, we outline a model of factors influencing the transfer of HR practices to MNC units abroad. The article has two main contributions. First, we develop a more holistic understanding of the outcome of HR practice transfer as encompassing three dimensions: implementation, internalisation and integration. Second, we expand current explanations of transfers of practices to foreign units. We argue that transfer of HR practices is a social process where the governance mechanisms used by the MNC, characteristics of the subsidiary HR systems, the social relationship between the subsidiary and MNC headquarters, and the transfer approach taken by headquarters management will influence the outcome of the process.     

Subsidiary Strategy: The Embeddedness Component

This article develops the concept of internal subsidiary embeddedness as the canvas within which subsidiary strategy takes place. Developing an inductive model, we identify three hierarchical levels of embeddedness. The first level is operational embeddedness, which relates to interlocking day-to-day relations. The second level is capability embeddedness, which concerns the development of competitive capabilities for the multinational as a whole. The third level is strategic embeddedness, which concerns a subsidiary's participation in a multinational corporation's strategy setting. We derived our concept of embeddedness from an in-depth case study. Embeddedness is not merely an outcome of the institutional setting in which a subsidiary is situated, but is a resource a subsidiary can manage by means of manipulating dependencies or exerting influence over the allocation of critical resources. A subsidiary can modify its embeddedness to change its strategic restraints. Therefore, the development of subsidiary embeddedness becomes an integral part of subsidiary strategy.     

Hablas vielleicht un peu la mia language? A comprehensive overview of the role of language differences in headquarters–subsidiary communication

The management of human resources in headquarters (HQ)–subsidiary relationships requires intensive communication, but effective communication often depends on having a shared language. Hence, language differences can be a serious threat to the successful management of human resources in multinational corporations. In this large-scale quantitative study, encompassing data from more than 800 subsidiaries in 13 countries, we investigated four related issues. First, in terms of the importance of language differences, we found that HQ–subsidiary relationships are clearly affected by language differences and that the latter form a distance category of their own, which should not be subsumed under the related, but separate concept of cultural differences. Second, regarding the consequences of language differences for communication outcomes, we found that a lack of a shared language is associated with misunderstanding, conflict and parallel information networks, which could harm HQ–subsidiary interactions. Third, with regard to the impact of language differences on communication methods, we found that a lack of a shared language is associated with a significantly lower level of oral (face-to-face and phone) communication, but not written communication. Fourth, and finally, in terms of a potential solution to communication problems caused by language differences, we found that expatriates can facilitate both communication and knowledge transfer between HQ and subsidiaries.     

Multinational Firm Knowledge,Use of Expatriates,and Foreign Subsidiary Performance

The impact of knowledge transfer on foreign subsidiary performance has been a major focus of research on knowledge management in multinational enterprises (MNEs). By integrating the knowledge‐based view and the expatriation literature, this study examines the relationship between a multinational firm's knowledge (i.e. marketing and technological knowledge), its use of expatriates, and the performance of its foreign subsidiaries. We conceptualize that expatriates play a contingent role in facilitating the transfer and redeployment of a parent firm's knowledge to its subsidiary, depending on the location specificity of the organizational knowledge being transferred and the time of transfer. Our analysis of 1660 foreign subsidiaries of Japanese firms over a 15‐year period indicates that the number of expatriates relative to the total number of subsidiary employees (1) strengthened the effect of a parent firm's technological knowledge (with low location specificity) on subsidiary performance in the short term, but (2) weakened the impact of the parent firm's marketing knowledge (with high location specificity) on subsidiary performance in the long term. We also found that the expatriates' influence on knowledge transfer eventually disappeared. The implications for knowledge transfer research and the expatriate management literature are discussed.     

The impact of political risk on FDI exit decisions

Do political risks drive exit decisions by multinational companies (MNC)? What mechanisms can protect a multinational subsidiary in a host country that is characterized by weak institutions and high political risks? Using multinational plant-level data for Russia in the period 2000-2016 and applying the Cox proportional hazard model, we find significant effects from elevated host-country political risk when we compare the year of entry to the year of exit. MNCs are particularly sensitive to problems associated with law, order, and social conditions in Russia and the presence of the military in politics in the home country. Institutional similarity does not reduce the hazard of exits, and MNCs from high-risk countries exit less when home-country risk increases. Subsidiaries from countries that have imposed sanctions on Russia are less likely to exit, though sanctions interact with host-country risks, making them more severe. Being large and being part of a greenfield project help subsidiaries to build resistance against host-country political risks. These findings provide empirical evidence that support our conclusions regarding foreign direct investment volatility in countries with high risk.     

Through Thick and Thin? How Self‐determination Drives the Corporate Sustainability Initiatives of Multinational Subsidiaries

Multinational corporation (MNC) subsidiaries implement corporate sustainability initiatives (CSIs) if they are self‐determined to do so (based on intrinsic motivation) or when urged on by circumstances and pressures (based on extrinsic motivation). Such differences in self‐determination are derived from underlying corporate psychological needs for competence, autonomy and relatedness, and are manifested in the governance choices of making, allying or buying CSIs. In this study of oil and gas MNC subsidiaries in the developing country context of Trinidad and Tobago, four distinct types of firm are identified based on their levels of self‐determination and corporate governance tendencies. These groups are identified as trail blazers, marching soldiers, sharp shooters and fire fighters, and their distinctive characteristics are described. These findings are useful to corporate sustainability strategists seeking to select, design and implement CSIs that satisfy MNC headquarter directives but balance subsidiary objectives of maintaining good relations and access to operate in developing countries. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment     

Introduction: service work and its implications for HRM

This article draws on our four case studies to examine the nature of the relationships between ABB and its Canadian subsidiaries. Starting from a critical review of the literature, it develops a framework that is sensitive to three levels of analysis: the factors that shape the parent corporation's strategies, the characteristics of the host countries in which the MNC operates and the characteristics of the local subsidiaries themselves. The empirical material illustrates how innovation is generated by a two-way process, in which the initiative of corporate leaders challenges the ‘interpretation’ of local actors. In doing so, we point to a number of key omissions in the influential attempt by Bartlett and Ghoshal to use ABB to develop a managerial theory of the firm. This research also leads to broader considerations regarding the interface between markets and organizations. As distinct from the orthodox view, a transnational corporation may be conceived as a mediator between the market and a local subsidiary. In many ways, the global corporation channels and mediates the impact of external market forces on internal organizational actors, through a process involving the exercise of politics and power. The article has significant implications for decision making on human resource management. In particular it stresses that local managers, local unions, and employees can think and act strategically only in as far as they properly assess the limits of their respective sphere of organizational autonomy within the corporation.     

企业如何利用社会网络提升吸收能力

在知识经济的背景下,吸收能力被认为是企业提升绩效和增强创新的战略能力.社会网络被认为可以对潜在的吸收能力和实现的吸收能力都产生积极影响.本文从社会网络的关系层面,从外部和内部两个视角,分别阐述了社会网络如何影响吸收能力的两个维度.本文还从提升吸能力的视角,提出了有效构建和维护社会网络的措施.