The Role of MNE Subsidiaries in the Practice of Global Business Models in Transforming Economies

ABSTRACT This study provides new insights into the role of subsidiary managers in the practice of global business models of multinational enterprises in transforming economies. Drawing on the global business model literature and through semi-structured interviews with a leading Norwegian maritime multinational enterprise in China, we have developed and critically explored a theoretical framework for uncovering how subsidiary managers understand and manage the tensions between the headquarters based in a western country and the subsidiaries based in a transforming economy. More specifically, when implementing the global business model in the transforming economy, subsidiary managers need to undertake effective management of structural, behavioural, and cultural tensions along with the global integration-local responsiveness dilemma. Subsidiary managers can contribute to solving structural tensions between the headquarters and subsidiary by undertaking effective market sensing and knowledge transfer activities to integrate the transforming economies into the MNE's global production networks. Meanwhile, they need to make effective relationship management to solve behavioural and cultural tensions.

Enacting governance at the local level through management control systems: the case of a multinational energy company

Purpose This paper draws on the case of a multinational energy company to explore the role played by management control systems (MCSs) in enacting governance policies at the local (subsidiary) level. Design/methodology/approach This research mobilizes the literature on governmentality to interpret MCSs as technologies of government that can be drawn upon to translate governance policies into practice. In particular, the authors discuss this process by interpreting “governance” as an epistemic object, that is an object that generates knowledge because of its inherent incompleteness and abstract nature. Findings The paper shows how MCSs act as technical objects insofar they attract, bind and engage local subsidiary managers in the generation of knowledge about governance policies (i.e. the epistemic object) set at the global level, thereby enacting these policies locally. Practical implications The findings have practical implications by showing how subsidiary managers engage with MCSs to translate and implement broader governance policies in their daily activities. Originality/value This research contributes to the accounting literature on governmentality by showing the role of MCSs as technologies that enact governance at the local level through the process of knowledge generation that these technologies enable. Such knowledge is triggered by the engagement between different participating subjects, attracted by MCSs in the attempt to define governance in practice.

Interfere! How Chinese subsidiaries manage their global headquarters

Purpose With the increasing dependence on the Chinese market, Chinese subsidiary managers rather than Western managers in the headquarters take responsibility for the overall success of the multinational company (MNC). This paper aims to argue that Chinese managers need to actively interfere to guarantee the survival of the MNC. Transaction analysis is suggested as a tool to rebalance the relationship. Design/methodology/approach Based on illustrative material and experience cases, the authors highlight why and how Chinese subsidiary managers have to engage in interference management. Findings Introducing different strategies within transaction analysis shows how Western managers can deal with Chinese interference management to improve relationships. Practical implications With the use of transaction analysis, Western managers can verify their communication strategies and behavior to better relate to Chinese subsidiaries on an “adult” level. Originality/value Interference management is based on counterintuitive thought that Chinese subsidiary managers rather than headquarters become responsible for the overall success of the MNC. Transaction analysis is used to uncover hidden assumptions, communication strategies and behavior in headquarters–subsidiary relationships.

The evolution of MNCs' R&D foreign units: the case of Swedish MNCs in India

PurposeThe article aims to explain how the drivers of subsidiary evolution influence a multinational company's (MNC) research and development (R&D) subsidiary's evolution over time.Design/methodology/approachThe article draws on insights from a longitudinal comparative case study of three Swedish MNCs' Indian R&D units.FindingsThe study shows that the evolution of R&D units is a triangular showdown among headquarter assignments, local market constraints, and opportunities, and that subsidiary choice is an important driver of both mandated extension and stagnation. We summarize our findings in various propositions that emphasize different drivers over time and that highlight the strong impact of a subsidiary's understanding of the corporate immune system on the evolution of that subsidiary's R&D mandate.Research limitations/implicationsDrawing on the common limitations of a case study approach, further research is needed to test the suggested propositions with larger samples, ideally with subsidiaries in other emerging and developed markets.Practical implicationsThe study illustrates the risks involved for subsidiary managers when pushing an R&D mandate-related initiative too far and provoking the corporate immune system. For headquarters management, the study highlights the importance of understanding that the development of R&D competence and capability at a subsidiary cannot be guided solely by headquarter assignments and local market characteristics; rather, the subsidiary's initiatives also need to be considered.Originality/valueThe study contributes to the literature on R&D internationalization by showing how the drivers of subsidiary evolution influence a subsidiary's R&D mandates over time and that subsidiary choice is an important driver of both mandated extension and stagnation.

“Wag the Dog” initiatives and the corporate immune system

Purpose This paper aims to contribute to the subsidiary initiative literature by studying the interaction between a headquarters and its subsidiary during an initiative process that has the potential to “wag the corporate dog” that is, for the global corporation’s promising subsidiary initiative in a strategically important emerging market to question the corporation’s prevailing schemata. Design/methodology/approach The longitudinal single case study draws on evidence from the Indian subsidiary of Swedish Volvo Bus and its efforts to introduce a value product in India. Findings The study argues that wag the dog initiatives provoke the corporate immune system independent of the initiative’s potential and the subsidiary’s autonomy and legitimacy. If the idea behind the wag the dog initiative is perceived as strategically important for the multinational corporation, then the corporate immune system tries to engulf – most likely unsuccessfully – the idea within the prevailing schemata. Failed attempts to engulf the initiative weaken the corporate immune system temporarily, thereby opening the organization to revitalization of the original initiative. Resistance, even though weakened, from the corporate immune system continues to exist. Practical implications Subsidiary managers need to avoid having their headquarters perceive an initiative as a wag the dog initiative by balancing their need to sell persistently the initiative with avoiding negative attention. Originality/value This study is a pioneer in explaining how the corporate immune system reacts towards wag the dog initiatives taken from subsidiaries in large emerging markets.

Beyond nationality

Purpose The literature on international staffing in multinational enterprises (MNEs) often focuses on staffing choices based on nationality categories (e.g. parent-country nationals, host-country nationals, third-country nationals) for key positions in subsidiaries when examining their impacts on subsidiary outcomes. Considering both nationality and international experience, the purpose of this paper is to suggest an integrative typology to identify and classify various types of traditional and alternative subsidiary staffing options and evaluate them in relation to social capital and knowledge flows across MNE organizations. Design/methodology/approach Based on a social capital view of MNEs, the authors propose a typology of subsidiary staffing options founded on the dimensions of nationality and the location of prior international experience of incumbents of key positions. Then traditional as well as alternative staffing options from the literature are identified and evaluated corresponding to each type of staffing option in the framework. Findings The typology identifies nine types of subsidiary staffing options. It includes and classifies the traditional and alternative staffing options, while highlighting types which need further research. The study also suggests impacts of the traditional and alternative staffing type on social capital and knowledge flows in MNEs. Originality/value The new typology identifies various types of subsidiary staffing options comprehensively and evaluates them systematically. HRM specialists can classify subsidiary managers based on the typology and examine which staffing option would be desirable given a specific subsidiary context. The research also provides novel insights on what needs to be considered to select and develop subsidiary managers who can build internal and external social capital in MNEs.

Centralization and Effectiveness of Reward Management in Multinational Enterprises

Based on responses from 158 reward managers located at the headquarters or subsidiaries of multinational enterprises, the present study examines the relationship between the centralization of reward management decision making and its perceived effectiveness in multinational enterprises. Our results show that headquarters managers perceive a centralized approach as being more effective, while for subsidiary managers this relationship is moderated by the manager’s role identity. Referring to social identity theory, the present study enriches the standardization versus localization debate through a new perspective focusing on psychological processes, thereby indicating the importance of in-group favoritism in headquarters and the influence of subsidiary managers’ role identities on reward management decision making.