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.     

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.     

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.     

Organizing for knowledge flows within MNCs

This paper conceptualizes the multinational corporation (MNC) as a network of knowledge flows and argues that, within the same MNC, subsidiary strategic roles can be expected to differ in terms of the extent and directionality of knowledge flows between a focal subsidiary and the rest of the corporation. Building on this framework, the paper hypothesizes and empirically tests for systematic associations between a subsidiary's knowledge-flow based strategic role and the systems and processes linking the subsidiary to the rest of the corporation. The empirical data, collected from 359 subsidiaries of major US, Japanese, and European MNCs (i) provide strong support to the notion of differentiated knowledge flow roles as well as differentiated systems and processes within MNCs, and (ii) suggest that innovation by foreign subsidiaries is more typically the result of autonomous initiative by the subsidiaries rather than strategic directives issued from corporate headquarters.     

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.     

The configuration of employee retention practices in multinational corporations’ foreign subsidiaries

This paper contributes to turnover research by deriving a typology of retention practices and investigating their applicability in multinational corporations’ (MNCs) foreign subsidiaries in the light of home- and host-country effects. Linking institutional and strategic HRM perspectives, the paper then proposes a conceptual framework examining how MNCs can maximize their retention capacity. Specifically, MNCs need to align their transferable home-country retention practices with overall strategy and complement them with flexible context-specific practices to allow for adaptability across different subsidiaries. It is further argued that characteristics of the headquarters–subsidiary relationship will influence the relative importance of context-generalizable versus context-specific retention practices and that the relevant set of practices for each subsidiary then needs to be configured individually.     

The MNC as an externally embedded organization: An investigation of embeddedness overlap in local subsidiary networks

MNCs have been conceptualized as differentiated networks that, in turn, are embedded in external networks. Previous research has predominantly focused on the embeddedness of established subsidiaries into their local environment, omitting to shed light on the phenomenon of headquarters linkages to the local context which creates embeddedness overlap. We develop a model of why MNCs develop overlapping linkages to local subsidiary networks even if the subsidiaries have grown out of the initial start-up phase. Using detailed information on 168 European subsidiaries, we find that MNCs build and maintain more overlapping network ties when subsidiaries are high performers, hold important resources, operate in turbulent environments, and are closely connected to multinational actors as opposed to purely domestic firms.     

The legitimacy of subsidiary issue selling: Balancing positive & negative attention from corporate headquarters

We consider how in issue selling, subsidiaries draw on different forms of legitimacy to attract corporate headquarters’ (CHQ) positive attention and minimise negative CHQ attention. Through case study evidence, we find that directing CHQ attention to subsidiary issues needs to be executed as a balancing act through forms of subsidiary legitimacy, namely; the personal legitimacy of key individuals at the subsidiary; consequential legitimacy vis-à-vis peer subsidiaries; and linkage legitimacy in the local environment. We develop a typology of subsidiary issue-selling roles and illustrate how negative CHQ attention results from a failure to legitimise issue selling.     

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.     

Absorptive capacity in foreign subsidiaries: The effects of language-sensitive recruitment,language training,and interunit knowledge transfer

Are multinational corporations able to enhance the development of absorptive capacity in foreign subsidiaries through language-oriented human resource management (HRM) practices? Taking into account that a shared language enhances absorptive capacity and that many multinational corporations are multilingual entities, this question is relevant but given little focused attention in international business research. In this paper, we hypothesize that two language-oriented HRM practices – language-sensitive recruitment and language training – enhance absorptive capacity in foreign subsidiaries. In addition, we hypothesize that interunit knowledge transfer partially mediates the positive relationship between these language-oriented HRM practices and absorptive capacity. Analyses of survey data derived at three points in time from 574 foreign subsidiary units in Japan provide support for these hypotheses.     

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.     

Sourcing or sharing in MNE networks? National headquarters and foreign subsidiaries as knowledge conduits in SMOPECs

Multinational enterprises (MNEs) act as important conduits of knowledge in advanced, small open economies (SMOPECs). This paper constructs a typology of asymmetric knowledge patterns by comparing net knowledge flows – or differences in sourcing and sharing – in the dual networks of headquarters of national MNEs and subsidiaries of foreign MNEs. We find both act as internal contributors to the MNE, but subsidiaries are more likely to act as external contributors to local partners or dual receivers of net knowledge flows from both networks, and headquarters as dual contributors to both networks. R&D intensity of the subsidiary and of the country are associated with different knowledge patterns of subsidiaries. Inclusion of asymmetric knowledge sourcing and sharing in internal corporate and external business networks contributes to our understanding of knowledge flow directionality via the focal unit, and the roles of national and foreign MNEs as knowledge conduits in SMOPECs.     

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.     

Firm-Level Determinants of Political CSR in Emerging Economies: Evidence from India

Multinational companies (MNCs) frequently adopt corporate social responsibility (CSR) activities that are aimed at providing ‘public goods’ and influencing the government in policymaking. Such political CSR (PCSR) activities have been determined to increase MNCs’ socio-political legitimacy and to be useful in building relationships with the state and other key external stakeholders. Although research on MNCs’ PCSR within the context of emerging economies is gaining momentum, only a limited number of studies have examined the firm-level variables that affect the extent to which MNCs’ subsidiaries in emerging economies pursue PCSR. Using insights from resource dependence theory, institutional theory, and the social capital literature, we argue that MNCs’ subsidiaries that are critically dependent on local resources, have greater ties to managers of related businesses and to policymakers, and that those that are interdependent on the MNCs’ headquarters and other foreign subsidiaries, are more likely to be involved in PCSR. We obtain support for our hypotheses using a sample of 105 subsidiaries of foreign firms that operate in India. Our findings enhance our understanding of the factors that determine MNCs’ political CSR in emerging economies.     

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.     

Examining the differential use of global integration mechanisms across HRM practices: Evidence from China

This paper examines how multinational corporations use different mechanisms to integrate four HRM practices in their foreign subsidiaries: financial compensation, performance appraisal, training and development, and recruitment and selection. Our analysis of 76 European-owned subsidiaries located in China reveal systematic differences in the use of integration mechanisms across the four HRM practices. The findings suggest that the usage of global integration mechanisms is contingent on the purposes of integration – headquarters control, and inter-unit coordination – as well as on the degree to which the mechanism is capable of responding to needs for local adaptation of the individual HRM practice in question.     

Balancing the trade-off between learning prospects and spillover risks: MNC subsidiaries’ vertical linkage patterns in developed countries

This paper investigates local vertical linkages of foreign subsidiaries and the dual role of such linkages as conduits for learning as well as potential channels for spillovers to competitors. On the basis of data from 97 subsidiaries, we analyze the quality of such linkages under varying levels of competition and subsidiary capabilities. Our theoretical development and the results from the analysis document a far more complex and dynamic relationship between levels of competition and MNCs’ local participation in knowledge intensive activities, i.e. learning and spillovers, than previous studies do. We find a curvilinear relationship between the extent of competitive pressure and the quality of local linkages confirming our argument of a trade-off between learning prospects and spillover risks. Furthermore, the level of subsidiary capabilities moderates this relationship.     

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.     

Knowledge flows in MNCs: An empirical test and extension of Gupta and Govindarajan's typology of subsidiary roles

This study offers an empirical test and extension of Gupta and Govindarajan's typology of subsidiary roles based on knowledge inflows and outflows. A four-fold typology of subsidiary roles—global innovators, integrated players, implementors and local innovators—is tested using a sample of 169 subsidiaries of MNCs headquartered in the US, Japan, UK, Germany, France and the Netherlands. Results confirm the typology and show that different subsidiary roles are associated with different control mechanisms, relative capabilities and product flows. In comparison to earlier studies, our results show an increased differentiation between subsidiaries, as well as an increase in the relative importance of both knowledge and product flows between subsidiaries suggesting that MNCs are getting closer to the ideal-type of the transnational company.     

Language competencies,policies and practices in multinational corporations: A comprehensive review and comparison of Anglophone,Asian, Continental European and Nordic MNCs

The importance of language differences in multinational companies (MNCs) can hardly be overlooked. This paper therefore provides the first large-scale quantitative overview of language competencies, policies and practices in MNCs. It is based on data from more than 800 subsidiaries, located in thirteen different countries with headquarters in more than 25 different countries, which were aggregated into four distinct home country clusters. This comprehensive study allows us to differentiate prior conceptual or case-based findings according to home, host and corporate languages and to develop managerial implications which vary according to the different country clusters.