Autonomy and Performance of Foreign Subsidiaries in Transition Countries

Multinational Business Review, 2008

This paper investigates whether changes in autonomy and embeddedness in host locations by foreign owned subsidiaries are associated with improvements in performance by subsidiaries. The results provide evidence that increasing operational decision-making autonomy is associated with enlianced performance as measured by both subjective and more objective measures of performance. The results on the importance of increasing strategic decision-making autonomy and embeddedness are less clear, with improved performance being detected in some cases, but only for the subjective measure of performance.

Japanese Journal of Comparative Economics, 2015

This paper examines the patterns of subsidiary autonomy at the organizational periphery: at multinational companies’ (MNCs) manufacturing subsidiaries in Hungary. It investigates the impact of upgrading on subsidiary autonomy. Our case study-based investigation (27 in-depth interviews at 14 manufacturing subsidiaries) integrates three previously isolated lines of research: 1) subsidiary upgrading, 2) subsidiary autonomy and 3) headquarters’ role in MNCs. We find no direct relation between upgrading and subsidiary autonomy, since external factors such as changes in the business environment and/or in parent companies’ strategic decisions often counteract upgrading-induced effects. It is shown that the subsidiaries’ moving up the value chain is paralleled by similar upward shifts in parent companies’ activity specialization. The reconfiguration of parent companies’ activities, together with the expansion of the size and scope of the multinational company will necessarily have an impact on the headquarters’ coordination and governance practices: over time they tend to become more formal.

Journal For East European Management Studies, 2013

This paper aims at shedding new light on the variables that indicate the level of autonomy of subsidiaries of internationalizing companies. Specifically, we examine subsidiaries located in the transition economies of Central and Eastern European Countries (CEECs). We identified a sample of 72 subsidiaries of micro, small and medium-sized Italian companies, and we assessed the impact of three variables on the subsidiary's autonomy: the size; the strategic aim in the local market (market seeking or cost reduction); and the degree of economic development of the local country. Our results suggest that subsidiary's autonomy reflects local country characteristics, but not the economic development. Our findings also show that subsidiaries looking for penetrating the local market are generally more autonomous than the ones pursuing costcutting strategies. Dieser Artikel untersucht zentrale Einflussfaktoren der Selbständigkeit von Tochterunternehmen anhand eines Samples von 72 italienischen Tochtergesellschaften (Klein-und Mittelunternehmen) in Mittel-und Osteuropa. Die Ergebnisse zeigen, daß die Größe des Tochterunternehmens, das Gründungsziel (Gewinnung neuer Märkte oder Kostenabbau) und die wirtschaftliche Entwicklung des Auslandsmarktes die Autonomie der Tochtergesellschaft beeinflussen. Wachsende Auslandsmärkte und das Ziel der Absatzmarkterschließung führen generell zu mehr Selbständigkeit des Tochterunternehmens.

Management, 2012

This study investigates the relationship between subsidiary size and subsidiary autonomy in forty-two Tu rkish companies investing directly in Central Asia, Russia and Balkan countries. Literature exists on the size-autonomy relationship among subsidiary co mpanies in developed economies but little focuses on developing economies. The findings of the study indicate that autonomy levels among subsidiaries of Turkish companies involved in outward d irect investment are similar to those of subsidiaries fro m developed countries.Experience in the target market significantly affected the autonomy levels of subsidiary companies. The relationship between autonomy and size is differentiated depending on the decisionlevels involved.

Journal of Management Research, 2011

In recent years, studies of multinational corporations (MNC) have shifted their focus from the perspective of the MNC itself to the perspective of transnational networks, which has resulted in greater recognition of the role and function of MNC subsidiaries. China's membership of World Trade Organization has offered more opportunities for MNC in China with the consequence that many of their subsidiaries have become international players where subsidiary autonomy is considered an essential competency. World famous MNCs set up subsidiaries in succession to occupy a market share in China. Therefore, it is worthy to study MNCs' Chinese subsidiaries' behaviour. This quantitative study therefore examined the role

Journal of World Business

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 decisionmaking 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.

International Business Review, 2015

We studied an underrepresented area in the international business (IB) literature: the effect of country context distance on the distribution of decision-making autonomy across headquarters and foreign affiliates. Foreign affiliates directly contribute to the competitive advantages of multinational enterprises, highlighting the importance of such intra-firm collaboration. The division of decisionmaking autonomy is a core issue in the management of headquarters-subsidiary relationships. The main contribution of our paper is that we confront two valid theoretical frameworks -business network theory and agency theory -that offer contradictory hypotheses with respect to the division of decisionmaking autonomy. Our study is among the first to examine this dilemma with a unique dataset from five Central and Eastern European transition countries. The empirical results provide convincing support for our approach to the study of subsidiary decision-making autonomy.

International Business Review, 2012

This paper uses network approaches to subsidiary theory to investigate the performance impacts of interactions among the factors of autonomy, intra-organizational network relationships, and inter-organizational network relationships. The paper offers an analysis of both direct and indirect interactions among these factors. This study develops and extends existing research that uses network-based approaches in studies of subsidiary performance by considering the roles of autonomy and network relationships. In addition, the study examines changes in terms of increases in the interactions between the main factors rather than the levels of these factors. The examination of the interactions between increases in autonomy and networks and the subsequent impact of this change on performance contributes to a better understanding of subsidiary evolution. The results, which are based on data gathered from a survey of 350 foreign-owned subsidiaries in the UK, Germany, and Denmark, reveal complex interactions between increases in autonomy and network relationships, and the subsequent impact of these changes on performance. The results also highlight the central role of inter-organizational network relationships in the interaction between the factors, which produce significant and positive effects. ß

2012

Using network approaches to subsidiary theory, this paper investigates the impact on performance of interactions between the factors of autonomy, intra and inter-organizational network relationships. The paper analyzes both direct and indirect interactions between these factors. This study develops and extends existing research that use network based approaches to the study of subsidiary performance by considering the role of autonomy as well as network relationships. In addition the study examines changes in the interactions between the main factors rather than the levels of these factors. Examination of the interactions between changes in autonomy and networks and the subsequent impact on performance provides a framework for obtaining evidence on how these interactions affect changes in performance and thereby contributes towards a better understanding of the evolution of subsidiaries. The results of the data analysis, gathered from a survey of 350 foreign owned subsidiaries in the UK, Germany and Denmark, reveals evidence of the complex interactions between increases in autonomy and in network relationships and the subsequent impact on performance. The results also highlight the central role of interorganizational network relationships in the interaction between the factors that produce significant and positive effects.

2004

The aim of the paper is to analyse the contribution of FDI to knowledge and technology transfer into five CEE economies (Estonia, Hungary, Poland, Slovakia, Slovenia) by examining the influences of country, industry, firm-size and foreign ownership on the choice of the subsidiaries’ strategies. Only the autonomy of subsidiaries across business functions is focused in the current analysis. Proceeding from the results of the analysis one can see many differences in the autonomy of subsidiary. Subsidiaries from the more developed CEE countries Slovenia and Hungary had the highest scores for the autonomy, especially in terms of management and financial autonomy. 1 PhD student, Faculty of Economics and Business Administration, University of Tartu; Science & Technology Policy Research (SPRU), University of Sussex; Mail address: 4-A213 Narva Rd., 51009 Tartu, Estonia; Tel: (+372) 7 37 6361, Fax: (+372 7 37 6312); Email: k.mannik@sussex.ac.uk 2 PhD student, Faculty of Economics and Business...

2006

This paper develops a conceptual framework on the strategic development of subsidiaries and the direct employment of skilled labour. The framework is based on autonomy, and intra and inters organizational relationships. The conceptual model outlines the conditions that are likely to lead to too much, or too little, autonomy and intra and inter organizational relationships. This model is then used to develop propositions on the links between autonomy and intra and inter organizational relationships and direct employment of skilled labour.

International Entrepreneurship and Management Journal, 2012

The paper uses evidence from a developed and a developing economy (New Zealand and Brazil) to study the consequence of multinational subsidiary initiative taking for subsidiary autonomy. Initiative taking and autonomy are known to increase the likelihood of a subsidiary continuing to grow and develop. Uncertainty remains as to whether subsidiaries acquire or lose autonomy as they engage in initiatives partly as the willingness to pursue initiatives can be viewed positively or negatively by the parent company. By using crosscountry data and distinguishing three types of initiative according to the scope of their potential impact (internal, local and global) the study provides a basis for examining this topic that improves on evidence from a single country or single initiative study. Data from 200 multinational subsidiaries in New Zealand and 172 in Brazil are gathered for analysis. As well as examining the overall relationship between initiative taking and autonomy the study presents the first evidence on this topic for subsidiaries in New Zealand and Brazil. The overall conclusion is that subsidiary initiative taking is likely to increase subsidiary autonomy but the affect over autonomy is dependent upon the type of initiative that the subsidiary undertakes: subsidiary autonomy is more likely to increase as a result of a local market initiative than a global or internal market initiative.

2005

 This paper investigates the implications of subsidiary autonomous activities for the governance of the multinational enterprise (MNE).

Journal of East-West Business, 2010

The subsidiary is playing an increasingly important role in generating competitive advantage for MNCs. The key objective of this study is to empirically disentangle the underlying causal structure that determines the autonomy of subsidiaries. We argue that the division of decision-making authority between the headquarter and the operational unit primarily responds to the institutional contexts of both, the parent company and the subsidiary. This is because an MNC is a governance structure that operates affiliates in many and widely different institutional contexts. Our propositions are tested on a database that includes 263 European subsidiaries of 18 MNCs in 25 European countries. The empirical results support our institutional perspective and show that the subsidiary's autonomy is strongly associated with the global strategy of the parent firm and the national business system in which the affiliate is embedded. The results hold while controlling for various key characteristics of the parent firm and for the subsidiary.