Subsidiary coopetition competence: Navigating subsidiary evolution in the multinational corporation

This paper examines the engagement of subsidiaries in coopetition, the simultaneous pursuit of competitive and cooperative behavior, in subsidiary role development. Drawing on twelve detailed case studies, we uncover how framing of the mandate situation shapes subsidiary actions to influence role development, thereby leading to competitive and cooperative subsidiary behavior. This paper advances our understanding of coopetition in MNCs by developing the concept of subsidiary coopetition competence and extends theory on subsidiary evolution.     

Entrepreneurial leadership and MNE subsidiary performance: The moderating role of subsidiary context

Managers of international subsidiaries, especially subsidiary CEOs, operate at critical interfaces within multinational enterprises (MNEs) and hold strategic responsibility for the operations in their country. Yet, their impact on subsidiary performance has received scant research attention. Building on the subsidiary entrepreneurship and strategic leadership literatures, we develop a model of how subsidiary CEOs’ entrepreneurial leadership affects subsidiary performance, and how this relationship is moderated by the subsidiary context that determines managerial discretion. We combine survey data of 291 international subsidiaries in South Korea with archival data to test our hypotheses. Our results show that subsidiary CEOs’ entrepreneurial leadership enhances subsidiary performance and that this relationship is strengthened by managerial discretion. Our study highlights the pivotal role of subsidiary CEOs within MNEs and contributes to a microfoundational understanding of international subsidiary management.     

Mandate dynamics and the importance of mandate loss for subsidiary evolution

This paper provides insights into the dynamics of mandate loss and subsidiary charter development through exploring two research questions on what the characteristics of subsidiary mandate loss are and what roles do intra-MNE actors have in subsidiary mandate loss? The paper is based on a qualitative study of 17 cases of subsidiary mandate losses. The data revealed four distinct patterns of mandate loss depending upon what phase of mandate development the subsidiary found itself: (1) mandate loss due to a combination of failure in the new mandate or a change in the external environment. (2) mandate loss due to competition with sister subsidiaries (3) Subsidiaries shed peripheral mandates to create space and focus on the core activities (4) mature mandate loss due to misfit between subsidiary skills and that of competition in the local market. This paper contributes to the subsidiary evolution literature by elucidating the multiplicity of subsidiary mandate loss and the “prime mover” involvement in mandate loss.     

Firm-specific intangible assets and subsidiary profitability: The moderating role of distance,ownership strategy and subsidiary experience

How does distance attenuate the value of MNC parent intangible assets on affiliate profitability? Beyond the basic assumption of internalization theory about the positive relationship between parent intangibles and foreign affiliate performance, we test how this relationship, is contingent on ownership strategy, subsidiary experience, and is moderated by the distance between home and host economies, in terms of differences in technological capacity, intellectual property regimes, economic development, language and geography. Based on newly-available accounting data on intangible assets, we test hypotheses on a sample of over 2000 multinationals and 5000 of their overseas affiliates in 45 home and host economies.     

The role of subsidiary learning behavior and absorptive capacity in foreign subsidiary expansion

We examine how subsidiaries can implement business expansion successfully to capitalize on growth potentials. Building on our baseline hypothesis, which examines the effect of the extent of business expansion on subsidiary divestment, we identify the boundary condition of the tendency of subsidiary’s learning behavior in foreign expansion. Specifically, we argue that subsidiaries that expand multiple businesses through competence-creating learning behaviors are more likely to be divested due to increasing complexity. We further suggest a remedial condition to offer a viable approach to implement business expansion through competence-creating learning successfully. Based on a sample of 6040 foreign subsidiaries operating over 14 years, we show that affiliates are more likely to expand into unfamiliar business domains successfully if they have a higher level of absorptive capacity.     

Product innovation and decision-making autonomy in subsidiaries of multinational companies

This paper investigates the relationship between subsidiary decision-making autonomy and their development of product innovations. Using survey data from 563 subsidiaries located in six European countries, we show how the degree of decision-making autonomy, as well as the functional area in which the subsidiary has decision-making autonomy, affect the probability of a subsidiary developing product innovations. We find that higher decision-making autonomy increases the probability of a subsidiary developing a product innovation. This effect is particularly pronounced, but not restricted to, decision-making in the area of R&D or the adoption of technologies. The positive effect extends also to functional areas such as investment, finance, supplier selection as well as marketing and sales. In addition, our study suggests that higher degrees of novelty of product innovation still benefit from subsidiaries’ autonomy, but may require higher degrees of managerial involvement by headquarters.     

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.     

Agency controls and subsidiary strategic initiatives: The mediating role of subsidiary autonomy

Prior studies examining the impact of organizational controls on subsidiaries’ strategic initiatives have to a large extent failed to find a significant direct association between the two. We argue that this lack of direct association may be due to the fact that the control mechanisms used exert their influence on subsidiaries’ strategic initiatives indirectly by suppressing subsidiaries’ decision-making autonomy. Drawing upon agency theory we consider the effects of two types of controls, monitoring and incentive alignment, as mediated by subsidiaries’ decision-making autonomy. We test this effect on data from 115 subsidiaries of foreign multinationals operating in Greece. The results of our analyses empirically validate this assertion for both mechanisms. Our findings further show that, when both mechanisms are present, one may accentuate the effect of the other, highlighting the value of employing a contingency approach to fully capture the effects of organizational controls on the pursuit of subsidiaries’ strategic initiatives.     

Characteristics and influences of multinational subsidiary entrepreneurial culture: The case of the advertising sector

This paper undertakes an exploratory study into the characteristics of entrepreneurial culture of the multinational subsidiary; and, into the associated influences and manifestations linked to multinational corporation (MNC) and environmental contexts. The theme of multinational subsidiary entrepreneurial culture is an unexplored theme in the literature, and has considerable research and managerial significance. This qualitative research is based on eight multinational subsidiaries in the advertising sector in the UK. The evidence suggests that the constituents of multinational subsidiary entrepreneurial culture include global vision, entrepreneurial orientation and entrepreneurial MNC network management. The related influences and manifestations refer to subsidiary autonomy, target market servicing and responsiveness to local environmental conditions. In addition, the findings show that while entrepreneurial behaviour was evident in all investigated subsidiaries, its locus varied significantly. Specifically, entrepreneurship in multinational subsidiaries can be subsidiary-, headquarters-, or jointly-driven.     

The accelerating effect of institutional environment unfamiliarity on subsidiary portfolio expansion in a new host country

In forming external networks in a host country, a foreign subsidiary acquires knowledge which contributes to the parent’s stock of country-specific knowledge and capabilities. Building on this notion, we argue that an MNE unfamiliar with the institutional environment of a newly entered foreign country has an incentive to expand its subsidiary portfolio in that country at a higher rate. We test this using a longitudinal dataset of German public firms which made investments into 2220 new host countries between 1985 and 2015. We find that unfamiliarity accelerates subsidiary portfolio expansion most when the initial investment is a wholly-owned subsidiary, and that the effect becomes weaker over time. Our study contributes to the internationalization process literature by showing that being unfamiliar with a host country is not necessarily an obstacle to subsidiary portfolio expansion – indeed it can accelerate it.     

Knowledge sharing and subsidiary R&D mandate development: A matter of dual embeddedness

Sharing knowledge across borders has proven to be especially relevant to multinational corporations (MNCs). Foreign subsidiaries have become active players in these knowledge flows. However, the network effects of interacting with multiple agents on the evolution of the R&D role played by subsidiaries are still undeveloped. The present study focuses on changes in subsidiary capabilities and on the dynamic mechanisms by which their R&D role might evolve, especially, as a consequence of their interaction with a variety of knowledge networks. We examine this issue by conducting four longitudinal case studies of subsidiaries operating in Spain. Using an inductive approach to theory building, we develop a general theoretical framework considering the subsidiary's embeddedness in the knowledge networks within the MNC (internal) and within the host country (external). We find that evolving towards a competence-creating mandate is characterised by the simultaneous growth of embeddedness in both internal and external networks; otherwise, a subsidiary may gravitate away from upgrading its R&D role. Thus, the contribution of this paper is to present a dynamic model that sheds light on how internal and external knowledge embeddedness interact in generating outcomes for subsidiary R&D roles.     

The integration-responsiveness framework and subsidiary management: A response

The discussion that follows responds to Haugland's (forthcoming) questions regarding the justification for using the I-R framework, the appropriateness of using the framework's implied taxonomy as the basis for formulating hypotheses and conducting empirical tests of differentiated fit, and the usefulness of the implications thereby derived. This response also discusses the applicability of the alternative structural model proposed by Haugland from a theoretical and empirical point of view. The discussion shows that the fit approach by Lin and Hsieh (forthcoming) may better explain subsidiary strategies and management than Haugland's model does. This response demonstrates the appropriateness and extends the applicability of the I-R framework.     

Integrating organizational learning with high-performance work system and entrepreneurial orientation: a moderated mediation framework

This study proposes a moderated mediation model to investigate the relationship between organizational learning and firm performance. We argue that entrepreneurial orientation mediates the positive effect of organizational learning on firm performance. Furthermore, the relationship between organizational learning and entrepreneurial orientation is strengthened when firms employ a higher level of high-performance work system. Hypotheses are supported by data from 181 firms operating in the manufacturing and service industries in China. Statistical results further reveal that a high-performance work system has different moderating effects on exploitative learning and exploratory learning. This research extends our understanding of organizational learning theory, entrepreneurship and human resource management literature by cross-fertilizing constructs in these fields with empirical evidence.     

Organizational hybrids as biological hybrids: Insights for research on the relationship between social enterprise and the entrepreneurial ecosystem

Using the study of hybridization in evolutionary biology as metaphorical inspiration, I offer a thought experiment about the emergence and proliferation of social enterprise and the influence of hybrid organizing on the entrepreneurial ecosystem. After establishing a number of analogues between biological and organizational hybrids, I analyze the degree to which social enterprise may be indicative of hybrid speciation – i.e., a new organizational form – versus introgressive hybridization – i.e., a variant of a more traditional organizational form. I then use the metaphor to examine whether social enterprise: (1) possesses distinct rules and features, (2) is shaped by or shaping the entrepreneurial ecosystem, (3) still remains a hybrid organization, and (4) might even be considered an invasive species.     

High performance work systems and corporate performance: the influence of entrepreneurial orientation and organizational learning

This study investigates the functioning mechanisms of how high performance work systems (HPWS) affect organizational performance. We propose that (HPWS) can positively affect organizational performance through the mediating role of entrepreneurial orientation. An organization with high performance work systems can perform better if it enjoys high level of organizational learning. We design and administer a survey questionnaire to high-level executives or founders of companies from manufacturing and service industries and receive 176 valid responses. The results of the empirical data indicate that the relationship between high performance work systems and corporate performance is more positive when organizational learning is stronger. Entrepreneurial orientation partially mediates the relationship between high performance work systems and organizational performance. This study opens new research avenues by extending and incorporating explanations and predictions of HPWS and entrepreneurial orientation, two areas that largely have been considered independently of each other. Implications for practice and directions for future research are provided.     

The integration-responsiveness framework and subsidiary management: A commentary

This commentary article discusses the appropriateness of using the integration-responsiveness framework for studying subsidiary management. The framework is frequently used and highly accepted in the international business literature, but the research contributions of applying the framework can be questioned. This commentary article discusses the applicability of the framework from a theoretical point of view, and furthermore, argues that it is difficult to empirically test subsidiary strategies and management based on hypotheses derived from the framework, and that the implications that can be drawn have limited theoretical content.     

Contextualizing international learning: The moderating effects of mode of entry & subsidiary networks on the relationship between reforms & profitability

This empirical paper studies how MNEs from developing and emerging markets may learn through their choice of entry mode and subsidiary network configuration, and use this knowledge to increase their responsiveness to pro-market reforms in their home market. The paper proposes that entry modes and network configurations that facilitate knowledge acquisition provide firms from developing countries an advantage when responding to such institutional changes. The analyses use data for the largest Latin American companies from 1989 to 2008. The findings provide evidence for a positive moderating effect of equity international joint ventures, international acquisitions, and subsidiary network centrality closeness on the relationship between reforms and profitability.     

Achieving sustained competitive advantage in retail and consumer service firms: The role of entrepreneurial orientation and entrepreneurial bricolage

The vital role of entrepreneurial orientation and entrepreneurial bricolage in creating sustained competitive advantage in retail and consumer service firms is increasingly acknowledged in modern markets. Using data from 246 retail and consumer service firms (hereafter R&CSFs) in Japan, this paper develops and empirically tests a framework delineating how entrepreneurial-oriented R&CSFs strategically combine existing resources while managing risks to differentiate their service portfolios to be competitive. The findings reveal that entrepreneurial orientation and entrepreneurial bricolage influence differentiation advantage and risk management, which, in turn, is associated with creating a sustained competitive advantage (hereafter SCA). This paper adds novel insights to the dynamic capabilities view and retail and service marketing literature by identifying entrepreneurial orientation, entrepreneurial bricolage, and risk management as dynamic capabilities, which allows R&CSFs to create service innovations in resource-constrained environments.     

Strategic ambidexterity and innovation in Chinese multinational vs. indigenous firms: The role of managerial capability

In this study, we challenge the conventional understanding of ambidexterity as an unquestionable contribution to better performance. We combine the concept of ambidexterity and the notion of managerial capability to explore different effects of ambidexterity on innovation performance in the context of emerging markets. We investigate this ambidexterity-innovation effect, and how this effect is moderated by managerial capability, on a sample of 74 Chinese multinational enterprises (MNEs) vs. 60 indigenous firms that are both in high technology industries. We find that, surprisingly, ambidexterity has a negative effect on the innovation performance of indigenous firms, although this effect is less so in the case of Chinese MNEs. More importantly, strong managerial capability increases the positive effect of ambidexterity on the innovation performance of Chinese MNEs, but not so for indigenous firms. We discuss the implications of these findings on research on ambidexterity and product innovation.     

Expatriate utilization,subsidiary knowledge creation and performance: The moderating role of subsidiary strategic context

Little research examines the mechanisms for the relationship between expatriate utilization and subsidiary performance. Building on the knowledge-based view of the firm, we propose a multi-stage mediation model to explain how expatriate staffing promotes subsidiary financial performance. Our results underscore that expatriate utilization has an indirect, mediated effect on subsidiary financial performance through its links with subsidiaries’ knowledge creation and product performance. Adopting a moderated mediation approach, we also find that the indirect relationship between expatriate utilization and subsidiary product performance via subsidiary knowledge creation is strengthened by the context of transnational strategy as a moderating contingency.