Initiatives by Subsidiaries of Multinational Corporations

Transcription

1 Lars R. Dzedek Initiatives by Subsidiaries of Multinational Corporations An Empirical Study on the Influence of Subsidiary Role Context

2 Initiatives by Subsidiaries of Multinational Corporations

3 Lars R. Dzedek Initiatives by Subsidiaries of Multinational Corporations An Empirical Study on the Influence of Subsidiary Role Context With a foreword by Prof. Dr. Stefan Schmid

4 Lars R. Dzedek Fort Lauderdale, USA Dissertation ESCP Europe Wirtschaftshochschule Berlin, 2017 Original Title: Role-Specific Subsidiary Initiative-Taking in Multinational Corporations A Contingent and Dynamic Resource-Based Perspective ISBN ISBN (ebook) Library of Congress Control Number: Springer Gabler Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Printed on acid-free paper This Springer Gabler imprint is published by the registered company Springer Fachmedien Wiesbaden GmbH part of Springer Nature The registered company address is: Abraham-Lincoln-Str. 46, Wiesbaden, Germany

5 Foreword For 20 years, the phenomenon of subsidiary initatives has received considerable attention in International Business (IB) and International Management (IM) literature. While Julian Birkinshaw s 1997 article in Strategic Management Journal was certainly breaking the ground, many other authors have provided us with valuable and insightful research on subsidiaries being proactive, risk-taking and autonomous or semi-autonomous. The present thesis has several merits: First of all, the thesis contains an excellent literature review on subsidiary initiatives in Multinational Corporations (MNCs). The literature review fosters our understanding of subsidiariy initiatives, various types of subsidiary initiatives, their antecedents and consequences. The literature review provides us with the state-of-the art of the literature, identifies gaps to be closed, and comes up with avenues for research to be continued. Second, the thesis links the subsidiary initative field to the role typology field in IB and IM literature. It is in the empirical part of this thesis that Lars Dzedek investigates the influence of subsidiary roles on subsidiary initiatives. Based on two case study companies, one from the automotive industry, the other from the telecommunications industry, Lars Dzedek is able to shed light on the subsidiary initiative phenomenon, in particular on the link between the subsidiary role in question and initative processes and initiative outcomes. Third, the thesis implicitly calls for future research that is even more processual and longitudinal in nature as well as moving from the functionalist towards the interpretative paradigm so as to better understand the variety of factors shaping subsidiary initiatives (and their manifold consequences) over time. The thesis in hand is logically structured, very well-written and easy to read despite its length. It shifts the view from the typical headquarters-centred MNC towards an MNC in which subsidiaries can have not only a voice, but can trigger important new developments. If you are convinced that in MNCs it is not only headquarters, but also subsidiaries abroad that matter, you will benefit from the present thesis. You will learn under which conditions subsidiaries have a greater likelihood to become influential in their parent companies and their sister subsidiaries as well as in the environment in which they are embedded. I wish you new and useful insights! Berlin, November 2017 Stefan Schmid

6 Preface This doctoral thesis was initiated during my time at ESCP Europe Wirtschaftshochschule Berlin where I was working as a research assistant at the Chair of International Management and Strategic Management. Completing this academic endeavor has only been made possible through the support of many people who I owe much appreciation. First, I would like to express my deep gratitude to my advisor Prof. Dr. Stefan Schmid who encouraged and continuously supported this dissertation over the past years. He gave me the opportunity to choose this highly interesting research topic and promoted many fruitful discussions, for example, at various research colloquia and international conferences. His academic rigor, critical guidance and valuable advice have helped to successfully complete this dissertation. Second, much appreciation also goes to my second supervisor Prof. Dr. Mark Lehrer who not only acted as a second reviewer but who also helped to critically shape this dissertation from its beginning. Thank you so much for many great discussions and valuable feedback at research meetings, over lunches or even during long walks together. An essential part of this dissertation is the empirical study. I am very grateful for the trust and support from the two multinational firms and the participating managers both at headquarters and in the many subsidiaries abroad. This research would not have been possible without their important input on how subsidiary initiatives develop and unfold in various settings. I would also like to thank my colleagues from ESCP Europe who supported me in many ways and of which many have become close friends over the years. They were always open for discussions, shared ideas and provided moral support when needed. Many thanks go to Dr. Joern Basel, Prof. Dr. Tobias Dauth, Dr. Ruben Dost, Dr. Holger Endrös, Dr. Swantje Hartmann, Prof. Dr. Lena Knappert, Dr. Thomas Kotulla, Dr. Max Kury, Dr. Martina Maletzky, Renate Ramlau, Esther Rödel, Dr. Timo Runge, Carsten Schiefelbein, Jens Sievert, Dr. Sven Seehausen and Dr. Dennis Wurster. Most of all I am deeply indebted to my wife Anna-Kathrin for her continuous support, endless encouragement and great patience. I also sincerely thank my parents, my family and close friends for all their help and trust throughout this challenging journey. Thank you all for helping to make this possible. Fort Lauderdale, November 2017 Lars R. Dzedek

7 Brief Contents 1 INTRODUCTION Subsidiary Initiative-Taking in Foreign Subsidiaries Research Background and Research Questions Objectives and Structure of the Study REVIEW OF THE LITERATURE ON SUBSIDIARY INITIATIVES Roots of Subsidiary Initiative Research Findings from the Literature Review and Analysis Summary of Findings and Implications for Research Project RESEARCH FRAMEWORK Overview of the Research Framework Elements of the Research Framework Theoretical Perspectives Contingent and Dynamic Resource-Based Framework Predictions for Role-Specific Initiative-Taking EMPIRICAL STUDY Research Philosophy Research Design Operationalization of the Research Framework Collection of Data Data Analysis Scientific Quality Criteria EMPIRICAL FINDINGS Company A: Strategic Business Unit Autocomp Company B: Strategic Business Unit Telecomp Overview of Findings at Autocomp and Telecomp CONTRIBUTIONS, LIMITATIONS AND THE ROAD AHEAD Implications for International Business Research Implications for Management Practice Limitations Avenues for Further Research

8 xi Contents 1 INTRODUCTION Subsidiary Initiative-Taking in Foreign Subsidiaries Research Background and Research Questions Objectives and Structure of the Study REVIEW OF THE LITERATURE ON SUBSIDIARY INITIATIVES Roots of Subsidiary Initiative Research Findings from the Literature Review and Analysis Overview of the Publication Activity in the Field Framework for the Literature Review and Analysis Concept of Subsidiary Initiatives Types of Subsidiary Initiatives Objectives of Subsidiary Initiatives Process of Subsidiary Initiatives Antecedents of Subsidiary Initiatives Environmental Level Context Organizational Level Context Individual Level Context Consequences of Subsidiary Initiatives Environmental Level Consequences Organizational Level Consequences Theoretical Approaches in the Subsidiary Initiative Field Research Methodologies in the Subsidiary Initiative Field Summary of Findings and Implications for Research Project RESEARCH FRAMEWORK Overview of the Research Framework Elements of the Research Framework Subsidiary Role Types Introduction to Subsidiary Role Typologies Subsidiary Role Determination and Development Subsidiary Roles and Entrepreneurial Behavior Selection of Subsidiary Role Typologies for the Research Overview of Selected Role Typologies Subsidiary Initiative-Taking Behavior Initiative-Related Resource Management Headquarters-Subsidiary Alignment Subsidiary Initiative Outcomes... 69

9 xii 3.3 Theoretical Perspectives Selection of Theoretical Perspectives for the Study Excluded Theories Selected Theories Resource-Based View of the Firm Overview of the Resource-Based View Advancements of the Resource-Based View Resource-Based View in International Business Literature Resource-Based View in Entrepreneurship Literature Resource Dependence Theory Overview of Resource Dependence Theory Resource Dependence Theory in International Business Literature Contingency Theory Overview of Contingency Theory Contingency Theory in International Business Literature Linking the Theoretical Perspectives Relationship Between RBV and RDT Relationship Between Contingency Theory and RBV Relationship Between Contingency Theory and RDT Application of Theoretical Lenses Contingent and Dynamic Resource-Based Framework Introduction and Basic Assumptions Entrepreneurial Resource Management Initiative-Related Opportunity Identification Initiative-Related Resource Structuring Initiative-Related Resource Bundling Headquarters-Subsidiary Alignment Headquarters Involvement Corporate Resistance Subsidiary Initiative Selling Summary of Subsidiary Initiative-Taking Behavior Subsidiary Initiative-Taking Outcomes Realized Subsidiary Initiatives Resource-Based Outcomes Subsidiary Evolution Subsidiary Roles as Contingency Factors Conclusion Predictions for Role-Specific Initiative-Taking Role Typology by Bartlett and Ghoshal Strategic Importance of the Subsidiary Environment

10 xiii Subsidiary Resources and Capabilities Role-Specific Predictions Role Typology by Jarillo and Martinez Subsidiary s Localization and Local Responsiveness Subsidiary Integration Role-Specific Predictions EMPIRICAL STUDY Research Philosophy Research Design Rationale for Case Study Design Description of the Multiple Case Study Design Selection of the Case Study Design Determination of Units of Analysis and Units of Observation Case Selection Types of Data Operationalization of the Research Framework Subsidiary Role Dimensions Strategic Importance of the Subsidiary Environment Subsidiary Resources and Capabilities Subsidiary s Localization and Local Responsiveness Subsidiary Integration and Subsidiary Autonomy Subsidiary Initiative-Taking Subsidiary Initiative Opportunity Identification Resource Structuring Resource Bundling Headquarters-Subsidiary Alignment Subsidiary Initiative-Taking Outcome Extent and Types of Subsidiary Initiatives Specialized Subsidiary Resources and Capabilities for MNC Application Additional Measures Subsidiary Role and Position in the MNC Subsidiary Performance Control Measures Collection of Data Questionnaire Objectives Approach Interviews Objectives

11 xiv Approach Archival and Secondary data Objectives Approach Data Analysis Questionnaire Interviews and Secondary Data Scientific Quality Criteria EMPIRICAL FINDINGS Company A: Strategic Business Unit Autocomp German Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Mexican Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome South Korean Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Australian Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Chinese Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Romanian Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Indian Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Company B: Strategic Business Unit Telecomp

12 xv Hungarian Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Polish Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Croatian Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Slovakian Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Greek Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Romanian Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Montenegrin Subsidiary Subsidiary Roles Subsidiary Initiative-Taking Subsidiary Initiative-Taking Outcome Overview of Findings at Autocomp and Telecomp Subsidiary Roles Strategic Leader and Active Subsidiary Contributor and Receptive Subsidiary Black Hole and Autonomous Subsidiary Implementer and Quiescent Subsidiary Subsidiary Initiative-Taking Entrepreneurial Resource Management Headquarter-Subsidiary Alignment Subsidiary Initiative Outcome Extent of Subsidiary Initiative-Taking Resource-Related Outcomes

13 xvi Further Outcomes Summary on Role-Specific Initiative-Taking Additional Findings on Subsidiary Initiatives Objectives of Subsidiary Initiatives Antecedents of Subsidiary Initiatives Subsidiary Initiative Process Subsidiary Initiative Outcomes Conclusion CONTRIBUTIONS, LIMITATIONS AND THE ROAD AHEAD Implications for International Business Research Implications for Management Practice Limitations Avenues for Further Research APPENDIX REFERENCES

14 xvii List of Figures Figure 1.1: Structure of the thesis... 6 Figure 2.1: Publication dates of the literature on subsidiary initiatives Figure 2.2: Framework for the literature review and analysis Figure 2.3: Classification of subsidiary initiative types Figure 2.4: Simplified process view on subsidiary initiative development Figure 2.5: Overview of research approaches for the investigation of subsidiary initiatives Figure 2.6: Subsidiary initiatives, their antecedents and consequences research areas and methodologies in previous publications Figure 3.1: Overview of the basic research framework Figure 3.2: Factors influencing subsidiary roles and role development Figure 3.3: Subsidiary role typology by Bartlett and Ghoshal Figure 3.4: Subsidiary role typology by Jarillo and Martinez Figure 3.5: Subsidiary role typology by Taggart Figure 3.6: Overview of the extended research framework Figure 3.7: Theoretical perspectives and their application in the research framework Figure 3.8: Overview of the resource-based framework Figure 3.9: Components and underlying activities of resource management processes from existing literature Figure 3.10: Key contingency factors outlined in resource management literature Figure 3.11: Sample resources and capabilities at different levels of the MNC Figure 3.12: Development of specialized subsidiary resources and capabilities Figure 3.13: FSA- and SSA-based competitive advantage through subsidiary resources Figure 3.14: Simplified resource-based perspective on subsidiary resource and capability development and potential firm-level advantage Figure 3.15: Extended version of the contingency model Figure 3.16: Theoretical perspectives and their application in the research framework Figure 3.17: Mechanisms and sources for subsidiary initiative-related resource Figure 3.18: Key elements of subsidiary initiative-taking behavior Figure 3.19: Subsidiary initiative types and the associated resource and capability characteristics Figure 3.20: Outcomes of subsidiary initiatives Figure 3.21: Overview of final research framework on role-specific subsidiary initiative-taking Figure 4.1: Four paradigms for the analysis of organizations

15 xviii Figure 4.2: Research Methodologies and related philosophical paradigms Figure 4.3: The environment of MNCs Figure 4.4: Overview of applied selection criteria Figure 4.5: Proposed research framework Figure 4.6: Overview of data collection approaches used in this study Figure 4.7: Section of headquarters questionnaire on subsidiary roles Figure 4.8: General structure of the subsidiary interview guide Figure 4.9: Sample graph chart on subsidiary role dimensions Figure 4.10: Initial coding scheme used for the analysis Figure 5.1: Organizational structure of Company A and its Autocomp division Figure 5.2: Survey Results Subsidiary roles at Autocomp Figure 5.3: Figure 5.4: Survey Results Germany Strategic importance and subsidiary resources/ capabilities Survey Results Germany Subsidiary localization/local responsiveness and subsidiary integration Figure 5.5: Survey Results Germany Subsidiary decision-making autonomy Figure 5.6: Survey Results Germany Identification and innovativeness of initiative opportunities Figure 5.7: Survey Results Germany Initiative-related resource structuring activities Figure 5.8: Survey Results Germany Headquarters-subsidiary alignment and interaction Figure 5.9: Survey Results Germany Types and extent of subsidiary initiatives Figure 5.10: Survey Results Germany New subsidiary resources and impact on MNC capabilities Figure 5.11: Survey Results Germany Performance outcomes and subsidiary role and position Figure 5.12: Survey Results Mexico Strategic importance and subsidiary resources/ capabilities Figure 5.13: Survey Results Mexico Subsidiary localization/local responsiveness and subsidiary integration Figure 5.14: Survey Results Mexico Subsidiary decision-making autonomy Figure 5.15: Survey Results Mexico Identification and innovativeness of initiative opportunities Figure 5.16: Survey Results Mexico Initiative-related resource structuring activities Figure 5.17: Survey Results Mexico Headquarters-subsidiary alignment and interaction Figure 5.18: Survey Results Mexico Types and extent of subsidiary initiatives Figure 5.19: Survey Results Mexico New subsidiary resources and impact on MNC capabilities

16 xix Figure 5.20: Survey Results Mexico Performance outcomes and subsidiary role and position Figure 5.21: Survey Results SK Strategic importance and subsidiary resources/ capabilities Figure 5.22: Survey Results SK Subsidiary localization/local responsiveness and subsidiary integration Figure 5.23: Survey Results SK Subsidiary decision-making autonomy Figure 5.24: Survey Results SK Identification and innovativeness of initiative opportunities Figure 5.25: Survey Results SK Initiative-related resource structuring activities Figure 5.26: Survey Results SK Headquarters-subsidiary alignment and interaction Figure 5.27: Survey Results SK Types and extent of subsidiary initiatives Figure 5.28: Survey Results SK New subsidiary resources and impact on MNC capabilities Figure 5.29: Survey Results SK Performance outcomes and changes to subsidiary role and position Figure 5.30: Survey Results AUS Strategic importance and subsidiary resources/ capabilities Figure 5.31: Survey Results AUS Subsidiary localization/local responsiveness and subsidiary integration Figure 5.32: Survey Results AUS Subsidiary decision-making autonomy Figure 5.33: Survey Results AUS Identification and innovativeness of initiative opportunities Figure 5.34: Survey Results AUS Initiative-related resource structuring activities Figure 5.35: Survey Results AUS Headquarters-subsidiary alignment and interaction Figure 5.36: Survey Results AUS Types and extent of subsidiary initiatives Figure 5.37: Survey Results AUS New subsidiary resources and impact on MNC capabilities Figure 5.38: Survey Results AUS Performance outcomes and changes to subsidiary role and position Figure 5.39: Survey Results China Strategic importance and subsidiary resources/ capabilities Figure 5.40: Survey Results China Subsidiary localization/local responsiveness and subsidiary integration Figure 5.41: Survey Results China Subsidiary decision-making autonomy Figure 5.42: Survey Results China Identification and innovativeness of initiative opportunities Figure 5.43: Survey Results China Initiative-related resource structuring activities Figure 5.44: Survey Results China Headquarters-subsidiary alignment and interaction

17 xx Figure 5.45: Survey Results China Types and extent of subsidiary initiatives Figure 5.46: Survey Results China New subsidiary resources and impact on MNC capabilities Figure 5.47: Survey Results China Performance outcomes and changes to subsidiary role and position Figure 5.48: Survey Results ROM Strategic importance and subsidiary resources/ capabilities Figure 5.49: Survey Results ROM Subsidiary localization/local responsiveness and subsidiary integration Figure 5.50: Survey Results ROM Subsidiary decision-making autonomy Figure 5.51: Survey Results ROM Identification and innovativeness of initiative opportunities Figure 5.52: Survey Results ROM Initiative-related resource structuring activities Figure 5.53: Survey Results ROM Headquarters-subsidiary alignment and interaction Figure 5.54: Survey Results ROM Types and extent of subsidiary initiatives Figure 5.55: Survey Results ROM New subsidiary resources and impact on MNC capabilities Figure 5.56: Survey Results ROM Performance outcomes and changes to subsidiary role and position Figure 5.57: Survey Results India Strategic importance and subsidiary resources/ capabilities Figure 5.58: Survey Results India Subsidiary localization/local responsiveness and subsidiary integration Figure 5.59: Survey Results India Subsidiary decision-making autonomy Figure 5.60: Survey Results India Identification and innovativeness of initiative opportunities Figure 5.61: Survey Results India Initiative-related resource structuring activities Figure 5.62: Survey Results India Headquarters-subsidiary alignment and interaction Figure 5.63: Survey Results India Types and extent of subsidiary initiatives Figure 5.64: Survey Results India New subsidiary resources and impact on MNC capabilities Figure 5.65: Survey Results India Performance outcomes and changes to subsidiary role and position Figure 5.66: Organizational structure of Company B and its Telecomp Division Figure 5.67: Survey Results Subsidiary roles at Telecomp Figure 5.68: Survey Results HUN Strategic importance and subsidiary resources/ capabilities Figure 5.69: Survey Results HUN Subsidiary localization/local responsiveness and subsidiary integration

18 xxi Figure 5.70: Survey Results HUN Subsidiary decision-making autonomy Figure 5.71: Survey Results HUN Identification and innovativeness of initiative opportunities Figure 5.72: Survey Results HUN Initiative-related resource structuring activities Figure 5.73: Survey Results HUN HQ-S alignment and interaction Figure 5.74: Survey Results HUN Types and extent of subsidiary initiatives Figure 5.75: Survey Results HUN New subsidiary resources and impact on MNC capabilities Figure 5.76: Survey Results HUN Performance outcomes and subsidiary role and position Figure 5.77: Survey Results PL Strategic importance and subsidiary resources/ capabilities Figure 5.78: Survey Results PL Subsidiary localization/local responsiveness and subsidiary integration Figure 5.79: Survey Results PL Subsidiary decision-making autonomy Figure 5.80: Survey Results PL Identification and innovativeness of initiative opportunities Figure 5.81: Survey Results PL Initiative-related resource structuring activities Figure 5.82: Survey Results PL HQ-S alignment and interaction Figure 5.83: Survey Results PL Types and extent of subsidiary initiatives Figure 5.84: Survey Results PL New subsidiary resources and impact on MNC capabilities Figure 5.85: Survey Results PL Performance outcomes and subsidiary role and position Figure 5.86: Survey Results CR Strategic importance and subsidiary resources/ capabilities Figure 5.87: Survey Results CR Subsidiary localization/local responsiveness and subsidiary integration Figure 5.88: Survey Results CR Subsidiary decision-making autonomy Figure 5.89: Survey Results CR Identification and innovativeness of initiative opportunities Figure 5.90: Survey Results CR Initiative-related resource structuring activities Figure 5.91: Survey Results CR HQ-S alignment and interaction Figure 5.92: Survey Results CR Types and extent of subsidiary initiatives Figure 5.93: Survey Results CR New subsidiary resources and impact on MNC capabilities Figure 5.94: Survey Results CR Performance outcomes and subsidiary role and position. 431 Figure 5.95: Survey Results SL Strategic importance and subsidiary resources/ capabilities

19 xxii Figure 5.96: Survey Results SL Subsidiary localization/local responsiveness and subsidiary integration Figure 5.97: Survey Results SL Subsidiary decision-making autonomy Figure 5.98: Survey Results SL Identification and innovativeness of initiative opportunities Figure 5.99: Survey Results SL Initiative-related resource structuring activities Figure 5.100: Survey Results SL HQ-S alignment and interaction Figure 5.101: Survey Results SL Types and extent of subsidiary initiatives Figure 5.102: Survey Results SL New subsidiary resources and impact on MNC capabilities Figure 5.103: Survey Results SL Performance outcomes and subsidiary role and position Figure 5.104: Survey Results Greece Strategic importance and subsidiary resources/ capabilities Figure 5.105: Survey Results Greece Subsidiary localization/local responsiveness and subsidiary integration Figure 5.106: Survey Results Greece Subsidiary decision-making autonomy Figure 5.107: Survey Results Greece Identification and innovativeness of initiative opportunities Figure 5.108: Survey Results Greece Initiative-related resource structuring activities Figure 5.109: Survey Results Greece HQ-S alignment and interaction Figure 5.110: Survey Results Greece Types and extent of subsidiary initiatives Figure 5.111: Survey Results Greece New subsidiary resources and impact on MNC capabilities Figure 5.112: Survey Results Greece Performance outcomes and subsidiary role and position Figure 5.113: Survey Results ROM Strategic importance and subsidiary resources/ capabilities Figure 5.114: Survey Results ROM Subsidiary localization/local responsiveness and subsidiary integration Figure 5.115: Survey Results ROM Subsidiary decision-making autonomy Figure 5.116: Survey Results ROM Identification and innovativeness of initiative opportunities Figure 5.117: Survey Results ROM Initiative-related resource structuring activities Figure 5.118: Survey Results ROM HQ-S alignment and interaction Figure 5.119: Survey Results ROM Types and extent of subsidiary initiatives Figure 5.120: Survey Results ROM New subsidiary resources and impact on MNC capabilities

20 xxiii Figure 5.121: Survey Results ROM Performance outcomes and subsidiary role and position Figure 5.122: Survey Results MON Strategic importance and subsidiary resources/ capabilities Figure 5.123: Survey Results MON Subsidiary localization/local responsiveness and subsidiary integration Figure 5.124: Survey Results MON Subsidiary decision-making autonomy Figure 5.125: Survey Results MON Identification and innovativeness of initiative opportunities Figure 5.126: Survey Results ROM Initiative-related resource structuring activities Figure 5.127: Survey Results MON Headquarters-subsidiary alignment and interaction Figure 5.128: Survey Results MON Types and extent of subsidiary initiatives Figure 5.129: Survey Results MON New subsidiary resources and impact on MNC capabilities Figure 5.130: Survey Results MON Performance outcomes and changes to subsidiary role and position Figure 5.131: Main antecedents of subsidiary initiatives by role types Figure 5.132: Additional findings on subsidiary initiative sub-processes Figure 5.133: Key antecedents of entrepreneurial subsidiary initiatives

21 xxv List of Tables Table 3.1: Comparison of subsidiary role typologies Table 3.2: Subsidiary role types with entrepreneurial potential Table 3.3: Selection of suitable subsidiary role typologies for study Table 3.4: Contingency factors impacting organizational structure and behavior Table 3.5: Summary of predictions for the subsidiary role typology by Bartlett/ Ghoshal Table 3.6: Summary of predictions for the subsidiary role typology by Jarillo/Martinez Table 4.1: Comparison of different research philosophies Table 4.2: Comparison of objectivist and subjectivist approach Table 4.3: Overview of Autocomp and Telecomp cases Table 4.4: Sample of subsidiaries included in research Table 4.5: Measurement of the strategic importance of the subsidiary s market environment Table 4.6: Measurement of subsidiary resources and capabilities Table 4.7: Measurement of the subsidiary s localization and local responsiveness Table 4.8: Measurement of subsidiary integration Table 4.9: Measurement of subsidiary decision-making autonomy Table 4.10: Measurement of subsidiary initiative opportunity identification Table 4.11: Measurement of the innovativeness of subsidiary initiative opportunities Table 4.12: Measurement of initiative-related resource structuring Table 4.13: Measurement of initiative-related resource bundling Table 4.14: Measurement of headquarters-subsidiary alignment Table 4.15: Measurement of subsidiary initiative-taking per initiative type Table 4.16: Measurement of the enhancement of distinctive subsidiary resources and capabilities through subsidiary initiatives Table 4.17: Measurement of the subsidiary initiative impact on MNC capability development 309 Table 4.18: Measurement of changes in subsidiary role, influence and credibility Table 4.19: Measurement of change in subsidiary performance Table 4.20: Elements of subsidiary-level questionnaire Table 5.1: Strategic Leader and Active Subsidiary: Subsidiary role dimensions and other information Table 5.2: Contributor and Receptive Subsidiary: Subsidiary role dimensions and other information Table 5.3: Black Hole and Autonomous Subsidiary: Subsidiary role dimensions and other information

22 xxvi Table 5.4: Implementer and Quiescent Subsidiary: Subsidiary role dimensions and other information Table 5.5: Case Comparison: Identification and innovativeness of initiative opportunities Table 5.6: Case Comparison: Initiative-related resource structuring activities Table 5.7: Case Comparison: Initiative-related resource bundling activities Table 5.8: Case Comparison: Headquarters-subsidiary alignment and interaction Table 5.9: Case Comparison: Types and extent of subsidiary initiatives Table 5.10: Case Comparison: New subsidiary resources and impact on MNC capabilities Table 5.11: Case Comparison: Further outcomes of subsidiary initiatives Table 5.12: Summary of findings on role-specific subsidiary initiative-taking Table 5.13: Identified objectives of subsidiary initiatives Table 5.14: Perceived risks and benefits of subsidiary initiatives

23 1 Introduction 1 1 Introduction Subsidiary Initiative-Taking in Foreign Subsidiaries Traditional concepts in International Business (IB) literature have generally taken a hierarchical and center-dominated perspective of the Multinational Corporation (MNC) in which competitive advantage is generated at the corporate center for subsequent implementation by foreign subsidiaries located at the MNC periphery (Hymer 1976, pp , Kutschker/Schmid 2011, p. 340). In contrast, more advanced concepts such as the geocentric company, the transnational organization or the heterarchy acknowledge the growing relevance of subsidiaries for the competitiveness of the entire corporation (Schmid et al. 2002, Kutschker/Schmid 2011, pp ). More specifically, it has been shown that subsidiary units can contribute to the development of the MNC by, for instance, obtaining locally acquired knowledge (Almeida/Phene 2004, Mu et al. 2007) or more generally by developing unique resources and capabilities (Birkinshaw et al. 1998, Schmid/Schurig 2003, Cantwell/Mudambi 2005) which are then transferred to other units of the MNC, such as headquarters or sister subsidiaries (Ambos et al. 2006, Schotter/Bontis 2009, Schmid/Hartmann 2011).There is also a growing body of IB literature demonstrating that subsidiaries pursue innovative and entrepreneurial opportunities for local and global application often even independently of the parent organization (e.g. Ghoshal/Bartlett 1988, Birkinshaw 1997, Scott/Gibbons 2009). Examples presented in scholarly literature of such dispersed innovative and entrepreneurial endeavors undertaken by foreign subsidiaries in MNCs include, for example, the introduction of the teletext technology by the UK subsidiary of Philips (Bartlett/Ghoshal 1986, p. 90, Birkinshaw 1997, p. 212), the development of an advanced automatic teller machine by the Scottish subsidiary of NCR (Ambos et al. 2010, p. 1099), or innovation activities in the area of wireless technologies by the US subsidiary of T-Mobile (Ambos/Schlegelmilch 2005, pp ). Evidently, the identification and development of new business opportunities and the creation of new resources and capabilities do not necessarily have to take place at corporate headquarters. Instead, subsidiaries, as geographically dispersed entities within the MNC network (Bartlett/Ghoshal 1989), may benefit from their exposure to the various stimuli and resources immanent in their heterogeneous host environments (Frost 2001), thereby enhancing the MNC s accessibility to valuable knowledge and locally dispersed entrepreneurial opportunities (Mahnke et al. 2007). The identification, evaluation and exploitation of such entrepreneurial opportunities in the MNC host countries can either be coordinated by corporate headquarters or driven through subsidiaries own initiative (Burgelman 1983, Birkinshaw 1997, Birkinshaw et al. 1998, Birkinshaw/ 1 Certain elements of this text have been previously published as parts of a working paper (Schmid/Dzedek 2011) and a journal article (Schmid et al. 2014). Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2018 L. R. Dzedek, Initiatives by Subsidiaries of Multinational Corporations,

24 2 1 Introduction Ridderstråle 1999). However, following the conceptualization of the MNC as a differentiated network of semi-autonomous entities and given the considerable size and complexity of many MNCs, it cannot be assumed that headquarters managers in all cases are able to foresee potential sources of opportunity and initiative across the wider MNC network (Birkinshaw 1998). These bounded rationality constraints therefore may force headquarters to grant the independent development of autonomous subsidiaries entrepreneurial undertakings, hoping that profitable opportunities will be captured well beyond the headquarters own ex ante capabilities to understand or even to identify such opportunities themselves (Rugman/Verbeke 2003, p. 134). Within the wider IB literature, these entrepreneurial subsidiary activities have been researched and brought together under the larger umbrella termed subsidiary initiatives. This phenomenon is commonly understood as proactive, risk-taking and innovative behavior that takes place outside the home country in a foreign subsidiary of an MNC and which is typically started by actors in the unit abroad. The underlying initiative process commonly unfolds over several stages, beginning with the identification of an opportunity and finishing with the commitment of resources for the specific opportunity in the end. Subsidiary initiatives may take various forms, ranging from e.g. smaller internal business improvement efforts to extensive new product development activities for the external market. They do not only provide an important means by which foreign units can grow their own resource base but in the longer term they also allow the subsidiary to maintain or improve its standing within the corporate network (see e.g. Birkinshaw 1997, p. 207, 1999, p. 9, Birkinshaw/Ridderstråle 1999, Ambos et al. 2010, p. 1099, Ambos/ Birkinshaw 2010, p. 456). Although the potential benefits of subsidiaries engaging in entrepreneurial initiatives for subsequent exploitation across the MNC are increasingly acknowledged, not all subsidiaries exhibit such autonomous behavior (Birkinshaw et al. 1998, p. 235). Apparently, the phenomenon of subsidiary initiatives only materializes in a subset of MNC subsidiaries and empirical evidence at least at first sight seems to remain rare (Birkinshaw et al. 1998, p. 224, Birkinshaw/Ridderstråle 1999, p. 149, Birkinshaw 2000, p. 16, Borini et al. 2009, p. 260, Keupp/Gassmann 2009a, p. 194). 1.2 Research Background and Research Questions A growing body of research has been dealing with entrepreneurial subsidiary initiatives over the past two decades. Despite the increasing interest from IB scholars, however, this subject still appears to have only received limited attention and remains an underexplored topic (Birkinshaw 1997, Birkinshaw et al. 2005). Accordingly, the concept of subsidiary initiatives is still labeled a troublesome and little-understood concept (Ambos et al. 2010, p. 1100). In line with these statements, the systematic literature re-

25 1 Introduction 3 view and critical analysis that was conducted as part of this research, revealed a number of different research gaps which inspired and guided the present study. 2 Three of the identified research gaps were particularly relevant when determining the focus of and the guiding questions for this research. (1) First, it was derived that the effect of subsidiary context in the form of subsidiary roles on entrepreneurial initiatives remains underexplored. (2) Second, it was noted that the initiative process has not yet been systematically and purposefully investigated yet. (3) Third, it was identified that in future research more attention needs to be paid to outcomes of subsidiary initiatives at subsidiary and corporate level. (1) Concerning the firm as a whole it has already been stated earlier that it is the principal challenge to management researchers to identify the entrepreneurial processes that lead to various forms of corporate entrepreneurship, and then to theoretically predict and empirically verify the forms of this phenomenon that produce the best results for firms in various business and industry contexts (Covin/Miles 1999, p. 60). The same seems to hold true for subsidiary initiative-taking as a specific form of corporate entrepreneurship. Here, it has been requested that future research needs to strive towards developing a better understanding of subsidiary entrepreneurial initiatives in different contextual settings, as a single structural context is unlikely to facilitate all different forms of initiatives. Although it has been, rather generally, articulated earlier that the role a foreign subsidiary holds should potentially impact its innovative and entrepreneurial behavior, comprehensive and systematic research appears lacking (e.g. Birkinshaw 1997, p. 227, Young et al. 2003, p. 39, Mahnke et al. 2007, p. 1294). (2) Various scholars have acknowledged that in general more process related research is needed in the subsidiary entrepreneurship arena. More specifically, research is warranted in relation to initiative opportunity identification, the physical realization of initiatives as well as headquarters-subsidiary interaction and alignment. Here, it is believed that further investigation of these particular process facets should generate valuable new insights (e.g. Boojihawon et al. 2007, p. 568, Mahnke et al. 2007, p. 1293, De Clercq et al. 2011, p. 1271, Hoskisson et al. 2011, p. 1149). (3) Previous research has largely focused on antecedents of subsidiary initiatives. However, outcomes of entrepreneurial subsidiary activities have been analyzed less frequently and in less depth. Accordingly it has been recommended that more attentions is to be paid on the potential link between initiatives and resulting outcome at both subsidiary and corporate level (e.g. Rugman/Verbeke 2001, p. 239, Boojihawon et al. 2007, p. 569, Liouka 2007, p. 7, Verbeke et al. 2007, p. 596, Williams/Lee 2009, p. 297). 2 See also Sections 2.3 and 3.1 of this publication for further details on research gaps in the field of subsidiary initiatives.

26 4 1 Introduction In addition, previous research often deals with specific aspects of subsidiary initiatives only. Work integrating the different pieces into a larger picture and taking a more holistic perspective appears to be missing. Thus, scholars have highlighted the need to adopt a more holistic perspective and conceptualization on subsidiary entrepreneurial initiatives (Birkinshaw et al. 2005, p. 246, Scott et al. 2010, p. 336, Strutzenberger/Ambos 2014, p. 315). Based on these research gaps, it is this key objective of this dissertation to more holistically examine the potential relations between (a) the role a foreign subsidiary holds in the MNC, (b) its entrepreneurial initiative-taking behavior and (c) the resulting outcomes. Altogether, this leads to the following overarching research question: (How) do subsidiary initiative-taking behavior and initiative outcomes differ with regard to the specific role a subsidiary holds within the MNC? This research question can be further broken down into three sub-questions as follows: [1] (How) do the amount and types of initiatives of a subsidiary differ with regard to a specific role it holds within the MNC? [2] (How) does the initiative-taking behavior differ with regard to a specific role a subsidiary holds within the MNC? [3] (How) do the subsidiary initiative outcomes differ with regard to a specific role a subsidiary holds within the MNC? 1.3 Objectives and Structure of the Study The present dissertation aims in general at enhancing the understanding of the complex and multilevel phenomenon of subsidiary initiatives for both academia and management practice. More specifically, the present research has three main objectives. First, this work intends to contribute to IB literature and, more precisely, to research streams relating to subsidiary role and subsidiary entrepreneurship. As to subsidiary role research, this dissertation plans to advance knowledge on subsidiary role typologies by empirically investigating how and why different subsidiary roles potentially pursue entrepreneurial initiatives, perhaps even in different ways. Furthermore, it is to enrich our understanding of how and why different role types might contribute in distinct ways to subsidiary or even firm-level advantages in the MNC. Concerning subsidiary entrepreneurship, the present research aims at deriving new insights into the process black box of subsidiary initiatives by empirically investigating different process aspects and linking them to the subsidiary role context. Moreover, by involving both headquarter

27 1 Introduction 5 and subsidiary level in this research, a more holistic and comprehensive approach is to be applied than typically used in the field so far. Second, it is the objective of this dissertation to contribute to theory as well. Currently, a wider range of theoretical perspectives is used in the subsidiary initiative field. Oftentimes, theoretical considerations are not at the center of contributions and discussions do not take place at great depth. Hence, one further goal is to develop and empirically test a holistic research framework on role-specific initiative-taking that is more strongly grounded in theory than commonly done in the field. Among the theories employed, this dissertation will draw from newer strands of the Resource-Based View (RBV) which represent more dynamic and process-oriented approaches as they are deemed particularly fit for this research endeavor. As no other empirical study could be identified that has previously applied and empirically tested this particular theoretical approach in the subsidiary initiative field, it is hoped to contribute to theory-testing and theory-extending of these rather novel RBV strands. Third, it is the goal of this work to provide new knowledge for management practice. The present work aims not only at enhancing awareness and understanding of different role types among managers in multinational firms but also intends to provide guidance as what entrepreneurial activities to potentially expect from different subsidiary roles. Furthermore, it is expected to obtain additional clarity on which particular context factors either support or impede entrepreneurial subsidiary efforts. This should help managers at the corporate or subsidiary level to better understand how they can possibly influence or steer dispersed entrepreneurial efforts in the wider corporation and how the MNC as a whole can benefit from these activities. In order to achieve these objectives, the dissertation involves the execution of a comprehensive literature review and analysis of publications in the subsidiary initiative field (Chapter 2), the development of a theoretically derived research framework (Chapter 3), the design and execution of an empirical study (Chapter 4), the presentation and discussion of empirical findings (Chapter 5), and lastly, the assessment of contributions and limitations of this work (Chapter 6). Accordingly, the document is structured as shown in Figure 1.1 and described in more details as follows. Following the introduction into the topic of subsidiary initiatives in Chapter 1, the results and findings of the systematically derived literature review will be presented in Chapter 2. Following a brief overview of the roots of subsidiary initiative research in Section 2.1, the detailed findings of the critical review are presented including, for example, the concept of subsidiary initiatives, antecedents and consequences, or theoretical approaches applied in the field (2.2). The last section of Chapter 2 then summarizes the findings and