Manufacturing Strategies for Southeast Asia after the Crisis: European, US and Japanese Firms

This article describes short-term reactions to the Asian crisis by European, US and Japanese MNCs and examines their long-term regional production strategies for Southeast Asia. In the process, it highlights similarities in the firms' responses but also distinguishes differences in the long-term regional reorganization of production activities of Western and Japanese firms. The article argues that there is currently a window of opportunity for Western MNCs to expand their Southeast Asian operations. Japanese firms face several obstacles to the implementation of a comprehensive regional production strategy as a result of their highly centralized way of managing international operations and their comparatively early production engagement in Southeast Asia whichequips most US and European MNCs with a latecomer advantage.     

The internationalization of Japanese business: Different approaches,similar problems

In staffing their overseas operations, Japanese firms generally maintain a view that prime positions should be held by the home-country personnel. Having thus decided not to follow the European or American pattern of overseas operations, Japanese firms continue to rely very heavily on their own managerial resources to run fast-expanding operations abroad. However, contrary to a general impression that Japanese managers are adept at working in foreign environments, our study of Japanese subsidiaries in Hong Kong points out that the success rate of their expatriate assignments is not necessarily as high as the figures widely reported by studies conducted elsewhere. This article will attempt to determine the causes of problems related to managerial assignments abroad by examining the practices employed by Japanese firms in the selection and training of managers for overseas assignments.     

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 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.     

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.     

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.     

Competing globally: How Japanese MNCs have matched goals and strategies in India and China

Japanese MNCs have established strong investment positions in the US, Europe and Asia. China has been a major recipient of Japanese foreign direct investment (FDI), while investment in India has grown much more slowly. We argue that the differences extend much beyond the levels of investment—Japanese involvement in India and China is qualitatively different. Japanese FDI in China was motivated by access to location-specific productive resources, and it involved a high degree of technology, management skills and organizational knowledge transfer. The Japanese subsidiaries in China were integrated with the network of international subsidiaries as a part of the MNC's global strategy. Japanese FDI in India, however, was motivated by the desire to access local markets. It involved less transfer of technology and management skills, and Japanese subsidiaries in India operated independently as part of a multi-domestic strategy. We conclude that foreign entrants to the region should be aware and able to respond to the unique advantages of each host country and to the different strategies and capabilities of the subsidiaries of Japanese MNCs.     

Japanese multinationals in the post-bubble era: new challenges and evolving capabilities

Since the bursting of Japan's bubble economy, from 1990 onwards, Japanese multinational companies (MNCs) have faced new competitive challenges and questions about the management practices on which they had built their initial success in global markets. Japanese engagement in the international economy has undergone a number of phases. In the period before the Second World War, Japanese companies learnt from foreign MNCs in trading, shipping, and manufacturing, frequently through strategic alliances, and leveraged their capabilities to succeed in overseas and largely Asian markets. In the immediate post-war decades, during the Japanese ‘economic miracle’, there were notable examples of MNC investment in raw materials and labour intensive production, but both inward and outward foreign direct investment were not significant. Japanese companies achieved leadership in management and technology, in order to support a strategy of export-orientated industrialization. Changes in government policies in the developed economies of the US and Western Europe forced leading Japanese manufacturers to convert themselves into MNCs and to transfer their home-grown capabilities to overseas subsidiaries. The period after 1990 marked declining Japanese competitiveness and it asked questions about the ability of Japanese MNCs to be more responsive and global in their strategies, organization and capabilities.     

The Role of Religiosity in Business and Consumer Ethics: A Review of the Literature

This study investigates antecedents of corporate social responsibility (CSR) in multinational corporations’ (MNCs’) subsidiaries. Using stakeholder theory and institutional theory that identify internal and external pressures for legitimacy in MNCs’ subsidiaries, we integrate international business and CSR literatures to create a model depicting CSR practices in MNCs’ subsidiaries. We propose that MNCs’ subsidiaries will be likely to adapt to local practices to legitimize themselves if they operate in host countries with different institutional environments and demanding stakeholders. We also predict that MNCs’ subsidiaries will be likely to adapt to local practices to avoid spillover effects if their parent companies suffer major legitimacy problems at home or abroad. However, we speculate that MNCs’ subsidiaries will be less likely to adapt to local practices if they are strongly annexed to their parent companies and the benefit to gain internal legitimacy outweighs external legitimacy. This article contributes to the discourse on CSR across borders by exploring the antecedents of CSR practices in MNCs’ subsidiaries at social and organizational levels, and integrating institutional and stakeholder views. We provide a number of propositions for future studies and explore implications for practitioners.     

Explaining variation in reverse diffusion of HR practices: Evidence from the German and British subsidiaries of American multinationals

This paper examines the phenomenon of ‘reverse diffusion’ of HR practices in multinational companies, defined as the diffusion of practices from the foreign operations of MNCs to the home country. Drawing on research incorporating fieldwork in the British and German subsidiaries of US-based multinationals, we identify sources of variation in the incidence of reverse diffusion both between firms and between subsidiaries of the same firm.     

From foreign investors to strategic insiders: Shifting parameters,prescriptions and paradigms for MNCs in China

Multinational corporations (MNCs) entering and operating in China have been significantly changing their dominant strategies over the past two decades to cope with China's shifting competitive and regulatory environments. The new strategies have resulted in a status shift such that MNCs are no longer merely “foreign investors”; they have become “strategic insiders” who view their large-scale China operations as key to their overall corporate success. To provide an overarching picture of this status shift, this article identifies and discusses shifting competitive parameters facing MNCs (from scant to strong competition, from niche to massive competition, from single- to multi-market competition and from structural similarity to multiplicity), as well as the shifting regulatory parameters they face (from entrance to operational intervention, from separation to convergence with domestic policies and from national control to regional regulation). This article also analyzes the shifting dominant strategies MNCs use to deal with changing environmental landscapes, including shifts from parent to national integration, from production relocation to value chain localization, from competence transfer to competence building, from competition to coopetition, from repetition to adaptive diversification and from alliance building to restructuring. This article concludes by discussing how the above strategic shifts provoke the extension and rethinking of extant MNC theories and what future issues merit particular attention.     

Reshaping Malaysian Subsidiaries in the Wake of China’s Rise as the Preferred Location for Foreign Production

This article examines the locational behavior of multinational enterprises, particularly the role of Malaysian subsidiaries in relation to other subsidiaries in the region. Survey results showed that rising wage costs have led to low cost, labor-intensive, and mature technology production being moved to China. Concurrently, Malaysian subsidiaries, particularly the export oriented, have taken on production of more sophisticated goods. They play regional coordination roles, are sources of ethnic Chinese managerial talent for the region, and they provide “back-up” production for less reliable plants in China. Their strategic role appears to have evolved from being “export platforms” toward “regional mandated hubs.”     

Must the semi-conductor industry be subsidised?

According to the memorandum entitled “Microelectronics 2000”, the Japanese and American lead in semi-conductor technology threatens not only the existence of a number of European firms but the prosperity of all the European economies. It therefore concludes that if Europe is not to be at the mercy of giant Japanese and US concerns the state must ensure the development of these key technologies by paying substantial subsidies. How valid is this argument?     

Lessons from Japan: American and Japanese strategies and goals in the 1990s

This article recounts various Japanese business approaches touted in the 1980s as “Lessons from Japan” for U.S. managers. The logical expectation, given the sheer bulk of the literature, was that U.S. managers would become more “Japanese” in their business strategies and goals while the Japanese would have become more entrenched in their approaches. Questionnaire responses from 95 Japanese and 70 American firms suggest, however, that U.S. managers tend to make few shifts from the strategies and goals they emphasized in the 1980s. Meanwhile Japanese managers report that they expect to move toward more “American” business practices. © 1993 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.     

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.     

Practice creation in multinational corporations: Improvisation and the emergence of lateral knowledge

Lateral collaboration across subsidiaries is beneficial for innovation in multinational corporations (MNCs), such as the creation of new organizational practices, because it helps working towards shared, rather than subsidiary-centric, objectives and creates new knowledge. To instill lateral collaboration, prior research has mainly focused on coordination mechanisms that rely on interpersonal exchanges among dispersed individuals across subsidiaries. However, due to rising concerns over coordination cost and sustainability of international travel, MNCs are increasingly challenged to search for other approaches that require less direct interpersonal interaction across subsidiaries. We, therefore, ask: How can MNCs elicit lateral collaboration during practice creation in a less space-time sensitive way? Drawing on a longitudinal case study, we develop a model of practice creation in MNCs. Our model offers two main insights. First, it details a novel approach for unleashing the benefits of lateral collaboration in globally-linked innovation processes in MNCs. In contrast to emphasizing coordination mechanisms that focus on interpersonal interactions across subsidiaries, our study contributes by detailing the emergence of lateral knowledge through a shared technological artefact as key enabler. Second, our model illuminates how MNCs can innovate new organizational practices that reflect both MNC and local subsidiary needs by adopting an improvisational approach.     

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.     

Innovation Processes in the Russian Manufacturing Subsidiaries of Multinational Corporations: An Integrated View from Case Studies

The extant literature acknowledges the role of overseas subsidiaries in the growth and development of multinational companies (MNCs). Such subsidiaries are viewed as critical players in the innovation process at MNCs. This topic remains largely under-researched in the Russian context. This study aims to fill this gap by examining the dynamics of the innovation process in Russian-based subsidiaries of global MNCs. We present qualitative findings that indicate Russian subsidiaries are not only recipients of knowledge and technology developed elsewhere in the MNCs but are active developers of innovative products and solutions.     

Exchange Controls and Multinational Enterprise: The Sterling–Dollar Oil Controversy in the 1950s

This article describes the impact of exchange control policy on multinational oil companies in the 1950s. The analysis contributes to an understanding of the two-way relationship between MNCs and exchange control policy. While the initial purpose was to curtail the short-term dollar drain, the intention of the policy in the longer term was to overcome the continued payments imbalance between the United States and the United Kingdom by encouraging US firms to establish subsidiaries in the UK. In addition, the balance of payments and British-owned suppliers to the oil industry were helped by the agreements negotiated between the government and American companies which encouraged the latter to source their operations from within the sterling area.