Is there an advantage of emergingness? A politico-regulatory perspective

The source(s) of competitive advantage of emerging-economy multinational enterprises (MNEs) remains a puzzle in international strategy scholarship, with some arguing that such firms are at a disadvantage compared to developed-economy rivals. Drawing on the concept of institutional advantage and using a sample of 233 foreign subsidiaries operating in 25 emerging economies over the period of 2000–2017, we find that foreign subsidiaries of emerging-economy MNEs are more adept than foreign subsidiaries of developed-economy MNEs at deploying their fixed asset management capabilities in emerging-economy host countries, especially when host-country politico-regulatory institutions are underdeveloped. Likewise, we find that subsidiaries of emerging-economy MNEs are more adept at deploying their tax planning capabilities when host-country politico-regulatory institutions become increasingly volatile. We discuss how these findings contribute to scholarly thought regarding the performance of emerging-economy MNEs.     

Learning from Older Siblings: Impact On Subsidiary Performance

Newer subsidiaries of a multinational enterprise (MNE) in a foreign (host) country will rarely possess the knowledge required for its performance. As such, a newer subsidiary will learn vicariously from the experiences of older subsidiaries of similar industries and the same MNE operating in the same host country. In particular, the newer subsidiary will learn two types of knowledge from older subsidiaries, namely, operational knowledge related to their experiences in the host country and their knowledge about local markets. Furthermore, we theorize that higher parent MNE ownership in newer subsidiaries will facilitate vicarious learning. We add that as newer subsidiaries gain experience, they become less dependent on vicarious learning from older subsidiaries. We find support for our hypotheses using a longitudinal sample of MNE subsidiaries in India. We conclude with implications for future research.     

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.     

Does parenting matter in subsidiary innovation in emerging economies? Exploring the role of parent superior competitiveness in affecting subsidiary contextual ambidexterity

Parenting in the multinational enterprises (MNEs) creates a dilemma when parent company manages the subsidiary contextual ambidexterity, in which parent superior competitiveness may nurture subsidiary exploitation while inhibit exploration. This study addresses this dilemma by developing an integrated framework and investigating how parent superior competitiveness affects the subsidiary contextual ambidexterity (innovation initiative and motivation of learning from the parent), which in turn increases subsidiary innovation performance. Furthermore, it is also examined that what tactics subsidiaries should take to resolve the dilemma. Using 296 survey responses from multiple informants of 111 subsidiaries in China, we find that parent superior competitiveness hinders subsidiary innovation initiative, but enhances subsidiary motivation of learning from the parent company. The negative effect of parent superior competitiveness on subsidiary innovation initiative becomes weaker when the strengths of subsidiary external tie and parent-subsidiary communication are enhanced. The positive effect of parent superior competitiveness on subsidiary motivation of learning is strengthened by subsidiary external tie, whereas no significant effect is found of parent-subsidiary communication. In addition, subsidiary innovation initiative contributes to subsidiary innovation performance through knowledge exploration and subsidiary motivation of learning from the parent positively affects innovation performance.     

Attributes of Foreign Subsidiaries and the Location Strategy of Multinational Firms in Global Cities in Latin America

International business research has recently honed in on the subnational dimension of multinational enterprises (MNEs), particularly the city level. Through a binomial logistic regression of data from 254 foreign subsidiaries of 10 Latin American global cities between 2006 and 2012, we found that specific attributes of the firm related to the industrial sector, subsidiary control, and ownership level have a positive effect on the location choice in cities. In addition, we found that in the previous period and during the international financial crisis, MNEs exploited their internalization advantages more intensely by exerting greater control over their subsidiaries in global cities.     

What changes the rules of the game in wholly owned subsidiaries? Determinants of knowledge acquisition from parent firms

We examine key factors affecting the extent of knowledge acquisition from multinational enterprises (MNEs) in their wholly owned subsidiaries (WOSs). As the volume of foreign direct investment (FDI) by MNEs is rapidly growing, empirical studies dealing with knowledge acquisition from parent firms in subsidiaries are in the limelight. However, as far as we know, none has attempted to identify primary mechanisms influencing subsidiary learning by dividing WOSs based on ‘investment mode’ and ‘investment direction’. We believe WOSs are characterized by these two issues and thus this research contributes to current literature by providing a detailed picture of learning mechanisms in subsidiaries. We advance a series of propositions to achieve the research objective by using a sample of WOSs established by MNEs in Korea. By doing this, we reveal that subsidiary learning depends significantly on absorptive capacity in learning organizations, relational capital and parent firms’ behavior. Also, we confirm that factors facilitating knowledge acquisition are influenced by investment mode and investment direction. Based on the results, this study provides some useful implications for MNEs and policy makers in local markets.     

MNE subsidiary evolution from sales to innovation: Looking inside the black box

Whereas the innovation-related evolution of multinational enterprise (MNE) subsidiaries has been extensively studied, the numerous sales subsidiaries in MNE networks have received little attention in this context. This study examines the evolution process of a sales subsidiary towards acquiring innovation-related capabilities and actively supporting innovation activities of a MNE. The evolution is explained in terms of technical information flow in an in-depth case study of a semiconductor MNEs’ sales subsidiary in South Korea. We find that the evolution of the sales subsidiary to innovation support has been enabled by a combination of subsidiary-related, lead market-related and event-related factors. We contribute to the literature on MNE subsidiary evolution by studying the unexplored evolution of a sales subsidiary. We combine the general framework of subsidiary evolution with the lead user perspective and suggest directions for potential theory extensions on MNE subsidiary evolution.     

Shared Vision in MNE Subsidiaries: The Role of Formal,Personal, and Social Control in Its Development and Its Impact on Subsidiary Learning

Given the strategic importance of achieving global integration and worldwide learning for most multinational enterprises (MNEs), this article focuses on “shared vision” as a critical mechanism for realizing both goals. Specifically, this paper investigates the impact of three types of control mechanisms—formal (headquarters imposed rules and decisions), personal (the presence of expatriates), and social (social interaction among subunits) control—on building shared vision in subsidiaries and examines the subsequent impact of having shared vision on subsidiary learning. Overall, data from 99 subsidiaries located in the United States and headquartered either in Europe or Japan show that personal and social mechanisms of control are effective in building shared vision whereas formal control mechanisms have no impact. Results also support a significant relationship between shared vision and subsidiary learning. © 2012 Wiley Periodicals, Inc.     

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.     

The intersubsidiary competition in an MNE: evidence from the Greater China region

We examine subsidiary survival from an intersubsidiary competition perspective. Drawing from 87 Taiwanese subsidiaries of MNEs we examine the influences of strategic importance of a subsidiary, resource asymmetry, and characteristics of value activities on the survival rate of a subsidiary. Results show that these factors have differential effects on the survival rates of a firm's foreign subsidiaries. Specifically, strategic importance and gains in intangible resources enhance a subsidiary's survival rate, whereas local responsiveness, gains in physical resources, and similarity and mobility of value‐added activities decrease its survival rate. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

Foreign direct investment motivations and knowledge acquisition from MNEs in overseas subsidiaries

Despite studies exploring factors affecting knowledge acquisition from multinational enterprises in subsidiaries, what accounts for a successful acquisition is unresolved. We argue that such disparity may stem from inattention to investment motivations of multinational enterprises (MNEs) in foreign markets and to the fact that learning patterns of subsidiaries can be influenced by foreign firms' market‐seeking or efficiency‐seeking behaviors. We find that absorptive capacity in learning organizations and daily interactions with knowledge possessors are essential to learning from parent firms. In addition, active support from parent firms is particularly crucial for subsidiaries seeking to improve operational efficiency of MNEs. We also suggest that potential absorptive capacity plays a catalyst role in initiating knowledge acquisition, particularly in cases where MNEs have market‐seeking motivations. Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd.     

Multinational Enterprises’ Entry Mode Strategies in Syria and Jordan: The Impact of Ownership Advantages

This study addresses the issue of ownership advantages affecting multinational enterprises’ (MNEs) entry mode strategies in developing countries. Although a few studies have focused on such effects, very little attention has been devoted to the ownership advantages generated from the institutional environment of MNEs’ home countries. To bridge this gap, this study concentrates on three types of ownership advantages: intangible asset advantages (IAA), advantages of common governance (ACG), and home‐country‐specific advantages (HCSA). Using a sample of 303 foreign affiliates, this study empirically examines the choice of MNEs between a wholly owned subsidiary (WOS) and a joint venture (JV). The data were collected from senior executives of MNEs’ subsidiaries operating in Syria and Jordan. The findings of this study reveal that MNEs’ choice of entry mode strategies is significantly influenced by intangible asset advantages, advantages of common governance, and home‐country‐specific advantages. Hence, senior executives perceiving an increased importance of these assets will opt for a WOS rather than a JV when entering a new market in the Middle East. © 2015 Wiley Periodicals, Inc.     

A closer look at the productivity advantage of foreign affiliates

In analyzing firm productivity in Belgium, this article shows empirically that both scale and efficiency contribute positively to the typical productivity advantage of foreign affiliates. Stochastic production frontier estimation using the translog functional form indicates that foreign subsidiaries exploit economies of scale more fully and benefit from better (transferred) technological capabilities than Belgian national firms (i.e., Belgian owned firms without subsidiaries abroad). Belgian multinational enterprises (MNEs), i.e., Belgian owned firms with at least one subsidiary abroad, resemble foreign‐based MNEs in possessing specific technological advantages. While the increasing globalization has facilitated the realization of scale effects across borders, this article shows that the development of technological capabilities/advantages is still a prerequisite for MNEs to compete successfully abroad.     

Analysing corporate political activity in MNC subsidiaries through the integration-responsiveness framework

Our study applies the well-known, market-strategy focussed integration-responsiveness (IR) framework and extends it to incorporate the non-market corporate political strategies of MNC subsidiaries. We find government regulation and the market strategies of integration and innovation have positive relationships with MNC subsidiary political activities. Interestingly, whereas the market strategy of innovation has a positive effect on subsidiary performance (but not on legitimacy), the non-market corporate political activities undertaken by MNC subsidiaries enhance subsidiary legitimacy (but not subsidiary performance). In addition, both market innovation and non-market subsidiary political activities are useful tools to gain favourable government decisions. Overall, our study incorporates both market and non-market strategies within a single overarching IR framework, and highlights their complementary role in achieving the twin goals of performance and legitimacy respectively.     

Environmental risks,localization and the overseas subsidiary performance of MNEs from an emerging economy

Despite the fact that multinational enterprises (MNEs) from emerging economies invest actively in host countries with substantial risks, we have limited understanding of how they manage environmental risks to achieve desirable performance in their overseas subsidiaries. Drawing on resource dependence theory, we argue that different localization strategies serve as a mediating mechanism linking environmental risks and overseas subsidiary performance. Our findings based on a sample of Chinese MNEs show that industry risks significantly reduce the levels of input localization and marketing localization of Chinese MNEs’ subsidiaries, and thus negatively affect subsidiary performance. Political risks have an insignificant impact on input localization and marketing localization, but a positive direct impact on Chinese MNEs’ overseas subsidiary performance. We also find that state-owned MNEs’ localization strategies are more sensitive to industry risks compared with privately owned MNEs.     

From local to global innovation: The role of subsidiaries’ external relational embeddedness in an emerging market

This study examines factors that influence the development and transformation of local innovations into global innovations from an emerging market subsidiary. We argue that subsidiaries’ relational embeddedness with the external local network is essential for the development of local innovations. Turning local innovations into global ones is the result of the level of innovativeness evoked by the subsidiary located in an emerging market. However, the transformation of local into global innovations is more likely to happen in the case of subsidiaries having previous reverse knowledge transfers in functional areas. Reverse knowledge transfers indicate internal embeddedness, which is essential for local innovation to be transformed into global innovation. We draw on survey evidence from 131 foreign subsidiaries operating in Brazil. Using a Structural Equation Modeling technique, our results support our hypotheses and show that subsidiaries’ relational embeddedness with the external local network is positively associated with local innovation, which is transformed into global innovation, especially when innovation is developed in the subsidiary´s functional areas with previous reverse knowledge transfers. We draw implications for the field of subsidiary management research, specifically to understand the role of local innovation from foreign subsidiaries in emerging markets.     

Foreign subsidiaries as vehicles of industry 4.0: The case of foreign subsidiaries in a post-transition economy

We ask whether foreign subsidiaries may work as entities that neutralize the threat of marginalization of the post-transition economies in terms of Industry 4.0 (I4.0) adoption. Building on a conceptual model of foreign subsidiaries as I4.0 vehicles, we conducted interviews with 440 foreign subsidiaries from the manufacturing sector established in Poland. The originality of the paper concerns three key issues. First, our study shows that the strategy adopted by the headquarters is critical, as it impacts the possibility of foreign subsidiaries to act as vehicles of I4.0 transformation in host economies. Second, embeddedness in local environment guarantees the transition of knowledge, whereas the innovation capacity of a foreign subsidiary does not seem to play any role. Third, we focus on foreign subsidiaries established in a post-transition economy. The results of our research enrich the literature on types of foreign subsidiaries in transmitting and diffusing the knowledge received from headquarters and expose the prominent role of links with host market entities.     

International springboard as an entrepreneurial act

International springboard is an entrepreneurial act that requires international entrepreneurial orientation (IEO). An important aspect of international springboard is the establishment of a deeply localized flagship foreign subsidiary to help pursue diverse international strategic goals. We model parent-level IEO as a mediator in the relationships between diversity of international strategic goals and flagship subsidiary localization strategies (customer responsiveness, market scope, and local cooperativeness). The results from a sample of 208 Chinese MNEs demonstrate that the three dimensions of IEO (innovativeness, proactiveness, and risk taking) play an important but differentiated mediation role. The study illustrates the connection between parent-level entrepreneurial behavior and subsidiary-level strategic actions through which MNEs capture cross-national entrepreneurial opportunities.     

Subsidiary strategy of emerging market multinationals: A home country institutional perspective

We examine the effects of home country institutional factors, namely, home country government support, domestic institutional weaknesses, and state ownership on the subsidiary-level strategy of global integration (I) and local responsiveness (R) of emerging market multinational enterprises (EMNEs). We draw upon the home country institution-based view and the I/R framework to develop our theoretical model. We empirically test our hypotheses using an original new survey data collected from Chinese multinational subsidiary managers supplemented with parent-level and country-level data. We find that home country government support and domestic institutional weaknesses have significant and negative effects on global integration strategy of Chinese multinational subsidiaries. On the other hand, domestic institutional weaknesses push foreign subsidiaries to pursue local responsiveness strategy. Nevertheless, those with greater degree of state ownership in their parent firms are neither willing to disintegrate from their parent firms nor motivated to pursue local responsiveness strategy in order to deal with home country institutional deficiencies and develop new sources of competitiveness in foreign markets. Our findings have advanced the literature on subsidiary strategy in the context of EMNEs, and provide important implications for subsidiary managers and policy makers.     

An exploration of multinational enterprise knowledge resources and foreign subsidiary performance

Successful international expansion requires that parent firms simultaneously transfer multiple MNE knowledge resources and their foreign subsidiaries effectively absorb and utilize the knowledge. In this study, we examine the relationships between multiple knowledge resources (technological and marketing knowledge), the relatedness between parents and foreign subsidiaries, and subsidiary performance. Relatedness is specifically linked to the type of knowledge being transferred from the parent (i.e., technological relatedness versus market relatedness). We hypothesize that subsidiary performance improves with (1) the integration of a parent firm's technological and marketing knowledge resources, (2) high technological (market) relatedness between a parent firm and subsidiaries for transfer of parent technological (market) knowledge and (3) the co-presence of high technological and market relatedness. We find general support in our analysis of pooled cross-sectional data on more than 4000 observations of foreign subsidiaries from 572 Japanese MNEs across 47 countries. Theoretical implications and future research are discussed.