Multinational subsidiary sales and performance in South East Asia

We extend the theory of the multinational enterprise (MNE) by exploring the concept of subsidiary-specific advantages (SSAs) as a driver for subsidiary performance. We investigate the relationship of host country-specific advantages (host CSAs) in the form of market attractiveness, SSAs and subsidiary sales as they affect subsidiary performance. From an original primary dataset of 101 British multinational (MNE) subsidiaries in six South East Asian countries, our analysis reveals three significant findings. First, host market attractiveness has a statistically positive impact on the performance of subsidiaries. Second, the three traditional SSAs of general management, marketing capabilities and invested capital enhance subsidiary performance. Third, we examine geographic direction and types of customers for subsidiary sales by following international accounting standards. We find that these subsidiaries generate on average 95 percent of total sales from the Asia Pacific region and 91 percent of total sales from external customers. Our findings have important research and managerial implications.

Horizontal and Vertical Interdependence in the Multinational Subsidiary Networks. ACES Working Paper No. 7, July 2008

Existing theoretical studies have predicted that a multinational firm's location choices are interdependent across countries. Little has, however, been done to test the hypothesis at individual subsidiary level. This paper uses a detailed French multinational subsidiary dataset and estimates how a firm's decision to invest in a foreign country is not only conditional on the characteristics of that country but also the firm's existing subsidiary network Using a structural spatial econometric model, the paper finds evidence of both horizontal and vertical interdependence in multinationals' location decisions. The results indicate that while multinational firms have little incentive to duplicate their production in countries with low bilateral trade costs, they are motivated to build a vertical subsidiary network in these countries ~ especially when the countries have complementary comparative advantages.

The rise and fall of stand-alone social reporting in a multinational subsidiary in Bangladesh:a case study

Purpose -The main aim of this paper is to examine the underlying drivers for the development and subsequent discontinuation of stand-alone corporate social responsibility (CSR) reporting in a multinational subsidiary in Bangladesh. Design/Methodology/Approach - The research approach employed for this purpose is a case study using evidence from a series of in depth interviews conducted during the period 2002-2010. Interview data is supplemented by examining other sources of information including annual reports, stand-alone social reports and relevant newspaper articles during the study period. Findings - It appears that the stand-alone CSR reporting process was initiated to give the subsidiary a formal space in which to legitimise its activities in Bangladesh where both tobacco control regulation and a strong anti-tobacco movement were gaining momentum. At the start of the process in 2002 corporate interviewees were very receptive of this initiative and strongly believed that it would not be a one off exercise. However, in the face of subsequent significant national policy shifts concerning tobacco control, irreconcilable stakeholder demands and increasing criticism of the CSR activities of the organisation at home and abroad the process was brought to an abrupt end in 2009. Research Limitations/Implications - The paper has a number of implications for policy makers concerning the future prospects for stand-alone social/sustainability reporting as a means of enhancing organisational transparency and accountability. In addition the paper discusses a number of theoretical implications for the development of legitimacy theory. Originality/value - Using the lens of legitimacy the paper theorises the circumstances leading to the initiation and subsequent cessation of CSR reporting in the organisation concerned. As far as we know this is the first study which theorises and provides significant fieldwork based empirical evidence regarding the discontinuation of stand-alone social reporting by a multinational company operating in a developing country. Thus, it extends previous desk-based attempts at using legitimacy theory to explain a decrease (or discontinuity) in CSR disclosures by de Villiers and van Staden (2006) and Tilling and Tilt (2010).

Internal equity financing and the performance of multinational subsidiaries in emerging economies

We examine the internal equity financing of the multinational subsidiary which retains and reinvests its own earnings. Internal equity financing is a type of firm-specific advantage (FSA) along with other traditional FSAs in innovation, research and development, brands and management skills. It also reflects subsidiary-level financial management decision-making. Here we test the contributions of internal equity financing and subsidiary-level financial management decision-making to subsidiary performance, using original survey data from British multinational subsidiaries in six emerging countries in the South East Asia region. Our first finding is that internal equity financing acts as an FSA to improve subsidiary performance. Our second finding is that over 90% of financing sources (including capital investment by the parent firms) in the British subsidiaries come from internal funding. Our third finding is that subsidiary-level financial management decision-making has a statistically significant positive impact on subsidiary performance. Our findings advance the theoretical, empirical and managerial analysis of subsidiary performance in emerging economies.

The subsidiaries of multinational enterprises operate regionally, not globally

Purpose – The purpose of this paper is to examine the determinants of home-region strategy of the multinational subsidiary and the impact of such a strategy on its performance. The author draws upon new internalization theory to develop a theory-driven model and empirically tests the simultaneous relationships between home-region strategy and performance of the subsidiary. Design/methodology/approach – The author tests the model using a simultaneous equation statistical technique on an original, new data set of publicly listed multinational subsidiaries operating in the ASEAN region, with parent firms’ headquarters across the broad triad. Findings – There are three significant findings. The first finding is that subsidiary-level downstream knowledge (marketing advantages), and the geographic location of the subsidiary in the same home region as of the parent firm are key antecedents of a subsidiary’s home-region strategy. The second finding is that a subsidiary’s profitability reduces home-region orientation; however, home-region strategy has an insignificant effect on performance. The third finding is that these subsidiaries generate on average 92 per cent of their total sales in the home region (the Asia Pacific). Originality/value – The author advances the existing literature on the regional nature of parent-level multinational enterprises by demonstrating that their quasi-autonomous subsidiaries also operate mainly on a home-region basis.

Dual paths to performance: the impact of global pressures on MNC subsidiary conduct and performance

Over the last decade, the international business literature has placed ever-greater emphasis on the role that learning and innovation play in determining multinational and multinational subsidiary performance. The present research seeks to understand the organizational paths leading to such desirable outcomes as greater learning, increased innovation and improved performance. Using a model tested with data collected through a survey of managers in subsidiaries of multinational firms, we find dual, independent paths to improved performance - one through networking and inter-unit learning and the other through subsidiary autonomy and innovation. A particular feature of these findings is that they can be shown to be robust after controlling for a wide range of environmental pressures and firm and industry factors. However, in the absence of environmental controls the dual path finding is rejected. These conflicting findings support the imperative to test models that include a diverse range of environmental pressures so that the true effects of organizational factors on learning, innovation and performance can be identified.

Les logiques de localisation des entreprises multinationales au Québec : une analyse des systèmes d'affaires et des relations industrielles en région

L’objet de ce mémoire est de comprendre les logiques de localisation des entreprises multinationales au Québec. À l’aide de deux études de cas, basées sur cinq investissements, nous avons examiné les facteurs qui ont permis à deux filiales d’entreprises multinationales étrangères d’obtenir un investissement ou un réinvestissement. La littérature sur la localisation des entreprises multinationales à l’étranger nous a aidé à identifier trois types d’attributs qui sont susceptibles d’influencer l‘obtention d’un investissement par la filiale locale : les attributs internes à la filiale, les attributs liés à la relation qu’entretient la filiale avec son siège social et les attributs liés aux contextes d’affaires dans lesquels la filiale exerce son activité. Nos résultats permettent d’établir plusieurs constats. Premièrement, les facteurs pris en compte dans les décisions d’investissement varient selon les échelles internationales, nationales, provinciales et locales. Les sièges sociaux des entreprises multinationales procèdent à une sélection successive de facteurs dans la perspective d’arriver à un meilleur compromis. Par conséquent, un facteur ne peut à lui seul expliquer un investissement. Le poids et la diversité des facteurs peuvent varier en fonction des situations. Deuxièmement, la complémentarité des attributs internes de la filiale avec son contexte d’affaires local a fortement contribué à l’obtention d’investissements. La technologie de production, les compétences des employés ainsi que la capacité de la direction locale à promouvoir les atouts de la filiale auprès des comités d’investissement représentent des éléments clés. La présence d’institutions locales fortes et coordonnées est également à prendre en compte dans le soutien apporté au développement de la filiale.

Integration practices for the technological innovation of products: Case studies at two large technological companies

Studies on innovation and technology management have emphasized the importance of integration between the research and development (R&D) department and others involved with the product development process (PDP) as a relevant practice for the good performance of technological innovation of product activities. This study addresses the topic of transfers of technologies to new product projects and also integration practices between the R&D department and others involved with the PDP. A qualitative study was conducted that was operationalized through two case studies at large high-tech companies: One is Brazilian and the other is a multinational subsidiary in Brazil. Among its main result, this paper represents and analyzes management practices that are favorable to integration in product development projects that demand development and transfer of technologies, such as: participation of R&D personnel in market activities, the adoption of virtual interaction mechanisms, and the application of methods such as technology roadmaps. © Universidad Alberto Hurtado, Facultad de Economía y Negocios.

Congruências entre posicionamentos estratégicos e redes de negócios: estudo de caso de uma subsidiária brasileira

Na pesquisa exploratória aqui relatada, realizada em 2009 e guiada por uma extensa revisão bibliográfica e pelo emprego do método de estudo de caso, busca-se identificar congruências entre o posicionamento estratégico adotado pela subsidiária brasileira de uma corporação multinacional e o tipo de rede de negócios por ela integrada. Apoiando-se em dois modelos específicos da literatura acadêmica sobre os temas mencionados (posicionamento estratégico e redes), as conclusões dessa investigação sugerem que as Redes Verticais de Demanda e Fornecimento (MOLLER e RAJALA, 2007) são adequadas para operacionalizar o posicionamento definido como Melhor Produto no Modelo Delta (HAX e WILDE II, 1999; 2001).

The evolution of innovation capability in multinational enterprise subsidiaries: dual network embeddedness and the divergence of subsidiary specialisation in Taiwan

This paper examines how innovation-related capabilities for production, design and marketing develop at the subsidiary level within multinational enterprises (MNEs). We focus on how subsidiary autonomy and changing opportunities to access internal (MNE) and external (host country) sources of capability contribute in a combined way to the accumulation of specialist capabilities in five Taiwan-based MNE subsidiaries in the semiconductor industry. Longitudinal analysis shows how the accumulation process is subject to discontinuities, as functional divisions are (re)opened and closed during the lifetime of the subsidiary. A composite set of innovation output measures also shows significant variations in within-function levels of capability across our sample. We conclude that subsidiary specialisation and unique subsidiary-specific advantages have evolved in a way that is strongly influenced by the above factors.

The drivers of multinational enterprise subsidiary entrepreneurship in China: a new resource-based view perspective

This paper extends the resource-based view (RBV) of the firm, as applied to multinational enterprises (MNEs), by distinguishing between two critical resource dimensions, namely relative resource superiority (capabilities) and slack. Both dimensions, in concert with specific environmental conditions, are required to increase entrepreneurial activities. We propose distinct configurations (three-way moderation effects) of capabilities, slack, and environmental factors (i.e. dynamism and hostility) to explain entrepreneurship. Using survey data from 66 Canadian subsidiaries operating in China, we find that higher subsidiary entrepreneurship requires both HR slack and strong downstream capabilities in subsidiaries, subject to the industry environment being dynamic and benign. However, high HR slack alone, in a dynamic and benign environment, but without the presence of strong capabilities, actually triggers the fewest initiatives, with HR slack redirected from entrepreneurial experimentation towards complacency and inefficiency. This paper has major implications for MNEs seeking to increase subsidiary entrepreneurship in fast growing emerging markets.

Adatbányászati alkalmazások lehetőségei egy multinacionális vállalat magyarországi leányvállalatának információs rendszerében (Opportunities of datamining applications in the information system of a multinational company’s Hungarian subsidiary)

A tanulmány Magyarország egyik legnagyobb foglalkoztatójának megrendelésére készült abból a célból, hogy milyen megoldásokkal lehetne a vállalati működést hatékonyabbá tenni. Ennek keretében a szerzők megvizsgálták, hol tart ma a HR adatbányászati kutatás a világban. Milyen eszközök állnak rendelkezésre ahhoz, hogy a munkavállalói elmenetelt előre jelezzék, illetve figyeljék, valamint milyen lehetőség van a hálózati kutatások felhasználására a biztonság területén. Szerencsés, hogy a vállalkozói kérdések és erőforrások találkozhattak a kutatói szféra aktuális kutatási területeivel. A tanulmány szerzői úgy gondolják, hogy a cikkben megfogalmazott állítások, következtetések, eredmények a jövőben hasznosíthatók lesznek a vállalat és más cégek számára is. _____ The authors were pleased to take part in this research project initiated by one of Hungary’s largest employer. The goal of the project was to work out BI solutions to improve upon their business process. In the framework of the project first the authors made a survey on the current trends in the world of HR datamining. They reviewed the available tools for the prediction of employee promotion and investigated the question on how to utilize results achieved in social network analysis in the field of enterprise security. When real business problems and resources meet the mainstream research of the scientific community it is always a fortunate and it is rather fruitful. The authors are certain that the results published in this document will be beneficial for Foxconn in the near future. Of course, they are not done. There are continually new research perspectives opening up and huge amount of information is accumulating in the enterprises just waiting for getting discovered and analysed. Also the environment in which an enterprise operates is dynamically changing and thus the company faces new challenges and new type of business problems arise. The authors are in the hope that their research experience will help decision makers also in the future to solve real world business problems.

Knowledge Transfer within Western Multinationals' Subsidiary Units in China and Finland - The Impact of Headquarter Control Mechanisms, Subsidiary Location and Social Capital (summary section only)

It is suggested that the ability and practices of how the multinational corporation (MNC) manages knowledge transfer among its geographically dispersed subsidiary units are crucial for the building and development of firm competitive advantage. However, cross-border transfer of valuable organizational knowledge is likely to be problematic and laborious, especially within diversified and differentiated MNCs. Using data collected from 164 western multinational companies’ subsidiary units located in China and Finland, this study aims to investigate cross-border knowledge transfer within the MNC. It explores a number of factors that influence the transfer of knowledge among units in the differentiated MNC. The study consists of five individual papers. Paper 1 investigates a range of organizational mechanisms that may positively influence a subsidiary’s propensity to undertake knowledge transfers to other parts of the corporation. Paper 2 explores the impact of subsidiary location on the motivational dispositions of knowledge receiving units to value and accept knowledge from subsidiaries located in economically less advanced countries. Paper 3 examines the influence of social capital variables on knowledge transfer in dyadic relationships between foreign-owned subsidiaries and their sister and patent units. Paper 4 provides some initial insights into potentially different effects of trust and shared vision in intra-organizational vs. inter-organizational relationships. Using a case study setting, Paper 5 explores means and mechanisms used in transferring human resource management practices to Western MNCs’ business units in China from a cultural perspective. The results of the study show that MNC management through choices regarding organizational controls can encourage and enhance corporate-internal knowledge transfer. It also finds evidence that more knowledge is transferred from subsidiaries located in an industrialized country (e.g., Finland) than subsidiaries located in a developing country (e.g., China). While the study has highlighted the importance of social capital in promoting knowledge transfer, it has also uncovered some new findings that the effect of trust and shared vision may be contingent upon different contexts. Finally, in Paper 5, a number of mechanisms used in transferring selected HRM practices and competences to the Chinese business units have been identified. The findings suggest that cultural differences should be taken into consideration in the choice and use of different transfer mechanisms.