Knowledge management in multinational companies: the repatriates’ role in the competitive advantage in subsidiaries

This paper addresses the topic of knowledge management in multinational companies (MNCs). Its purpose is to examine the role of expatriates in knowledge acquisition and transfer within MNCs. Specifically it focuses on knowledge acquisition and transfer from one MNC head office located in Germany to two Portuguese subsidiaries as a basis for competitive advantage in their Portuguese subsidiaries. A qualitative research methodology is used, specifically through an exploratory case study approach, which examines how international assignments are important for the role of expatriates In knowledge acquisition and transfer between foreign head offices and their Portuguese subsidiaries. The data were collected through semi structured interviews to 10 Portuguese repatriates from two Portuguese subsidiaries of one foreign MNC. The findings suggest that the reasons that lead to expatriating employees from Portuguese subsidiaries to foreign head offices are connected to (1) knowledge management strategies to development the subsidiary’s performance; (2) new skills and knowledge acquisition by future team leaders and business/product managers in Portuguese subsidiaries; (3) procuring knowledge, from agents in head office, to be disseminated amongst co-workers in Portuguese subsidiaries; (4) acquiring global management skills, impossible to acquire locally and; (5) developing global projects within MNC. Also our results show that knowledge acquisition and transfer from foreign head office, through subsidiaries’ expatriates, contributes directly to the Portuguese subsidiaries’ innovation, improved performance, competitive advantage and growth in the economic sectors in which they operate. Moreover, evidence reveals that expatriation is seen as a strategy to fulfil some of the main organisational objectives through their expatriates (e.g., create new products and business markets, develop and incorporate new organisational techniques and processes, integrate global teams within multinational corporation with a responsibility on the definition of global objectives). The results obtained suggest that expatriates have a central role in acquiring and transferring strategic knowledge from MNC head office to their subsidiaries located in Portugal. Based on the findings, the paper discusses in detail the main theoretical and managerial implications. Suggestions for further research are also presented. The study’s main limitation is the small size of the sample, but its findings and methodology are quite original and significant.

Reflections on the legal framework for relations between cooperatives and subsidiaries.

In the light of Portuguese legal system, cooperative enterprises may include an enterprise carried out by a subsidiary, provided they conform to certain requirements. The aim of this paper is to reflect on the issue of the legal framework of the relationship between the cooperative and the subsidiary. There are several problems to be addressed in this paper: (i) How to qualify such a relationship since corresponding to mere investments made by the cooperative? Should it be classified as non-member cooperative transactions or as extraordinary activities? (ii) How to qualify such a relationship when related to the development of preparatory or complementary activities for the economic activity developed between the cooperative and its members? May we speak, in this situation, of a concept of “indirect mutuality”, as provided in other legal systems? (iii) How should we classify and what is the regime of the economic results from the activity developed by the subsidiary? We will conclude, advocating: (i) That the cooperative enterprise may include an enterprise carried out by a subsidiary if this is deemed necessary to satisfy the interests of the members; (ii) The inadmissibility of the concept of “indirect mutuality”; (iii) The inadequacy of qualifying the legal relationship between the cooperative partner (iv) The application, to the economic results coming from the activity developed by the subsidiary, of the regime provided for in the Portuguese Cooperative Code to the results from non-member cooperative transactions; (v) The economic results coming from the activity developed by the subsidiary cannot be appropriated by individual co-operators members, and so should be allocated to indivisible reserves.

Determinants of host country for the financial subsidiaries of Portuguese companies

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics

Drivers of human resource management competences development in Brazilian multinational subsidiaries: a multilevel research

This article aims to verify the factors associated with the development of human resource management (HRM) competences in foreign subsidiaries of Brazilian multinationals. These competences are essential in that they allow foreign units to adopt HRM practices that are consistent with the countries or markets in which they operate. A multilevel research was conducted, involving headquarters and subsidiaries of major Brazilian companies; the empirical analysis employed hierarchical linear modelling. Despite the recurrent debate on global standardisation versus local adaptation, it was identified that the integration of international HRM policies (addressing simultaneously global guidelines and local response) may stimulate competences development. In addition, interaction in external networks in the host country may enhance the development of HRM competences in the subsidiaries. However, specific cultural factors of the company may inhibit development activity in units abroad.

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 regional strategies of British multinational subsidiaries in South East Asia

We compare the strategies of manufacturing and service multinational enterprise (MNE) subsidiaries in South East Asia to investigate whether they follow global versus regional strategy. We examine foreign direct investment (FDI) motives, types of FDI, product and service offerings, and sales strategies of these two groups. Using a unique primary data set of 101 British MNE subsidiaries in six South East Asian countries over the five-year period (2003–2007), we find that manufacturing and service subsidiaries pursue regional strategies. Both groups have a strong regional focus in their sales. We explore the possible reasons for the relative lack of global strategy of these subsidiaries.

Exploring the paradox of competence-creating subsidiaries: balancing bandwidth and dispersion in MNEs

This paper seeks to synthesise the various contributions to the special issue of Long Range Planning on competence-creating subsidiaries (CCS), and identifies avenues for future research. Effective competence-creation through a network of subsidiaries requires an appropriate balance between internal and external embeddedness. There are multiple types of firm-specific advantages (FSAs) essential to achieve this. In addition, wide-bandwidth pathways are needed with collaborators, suppliers, customers as well as internally within the MNE. Paradoxically, there is a natural tendency for bandwidth to shrink as dispersion increases. As distances (technological, organisational, and physical) become greater, there may be decreasing returns to R&D spread. Greater resources for knowledge integration and coordination are needed as intra-MNE and inter-firm R&D cooperation becomes more intensive and extensive. MNEs need to invest in mechanisms to promote wide-bandwidth knowledge flows, without which widely dispersed and networked MNEs can suffer from internal market failures.

The empirical literature on multinational enterprises, subsidiaries and performance

Purpose – This paper aims to provide a synthetic review of the empirical literature on the multinational enterprise (MNE), subsidiaries and performance. Design/methodology/approach – The paper examines the following: the theoretical and conceptual foundation of multinationality (M) and performance (P) measures; the impact of MNE strategic investment motives on performance; the influence of contextual external and internal environment factors on performance; the strategy to optimize value chain activities of the MNE by cooperating with external partners in an asymmetric network, the key drivers of enhanced shareholder value and the implications of performance; and the need to access primary data provided by firms and managers themselves when analyzing the internal functioning of the MNE and its subsidiaries. Findings – The overall message from this literature review is that empirical research should be designed on the basis of relevant theoretical and conceptual foundations of the performance construct. Originality/value – The paper provides a systematic and synthetic review of theoretical and empirical literature.

The impact of social and relational contexts on innovation transfer in foreign subsidiaries

It is widely acknowledged that innovation is one of the pillars of multinational enterprises (MNEs) and that technological knowledge from different host locations is a key factor to the MNEs’ competitive advantages development. Concerning these assumptions, in this paper we aim to understand how the social and the relational contexts affect the conventional and reverse transfer of innovation from MNEs’ subsidiaries hosted in emerging markets. We analyzed the social context through the institutional profile (CIP) level and the relational context through trust and integration levels utilizing a survey sent to 172 foreign subsidiaries located in Brazil, as well as secondary data. Through an ordinary least squares regression (OLS) analysis we found that the relational context affects the conventional and reverse innovation transfer in subsidiaries hosted in emerging markets. We however did not find support for the social context effect.

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.

The impact of national context effects on HRM practices in Russian subsidiaries of Western MNCs

This article contributes to the research on comparative human resource management by providing a model of the Russian business system and its effect on human resource management practices at Russian subsidiaries of Western multinational companies. Whitley’s approach was adopted to illustrate the links between institutional arenas, business systems, and human resource management practices. The empirical part is based on interviews with senior human resources managers of Western multinational companies operating in Russia. The findings provide insight into the interaction between the national business system and human resource management practices in Russia.