- 06 Dec 2018
Strategies of Subsidiaries of the Multinational Enterprise
06 Dec 2018 - 3:00 pm - 4:30 pm
Klaus E. Meyer, Chengguang Li, Andreas Schotter
Some of the most important firm-specific advantages (FSAs) of Multinational Enterprises (MNEs) are
specific to and embedded in their subsidiaries. Yet, the bulk of MNE subsidiary research focuses either
on initial entry or on exit from foreign locations or on headquarters control. Comparatively fewer
studies have developed specific theory related to the management of MNE subsidiaries and the
processes of developing resources and capabilities within subsidiaries. In particular, the question how
subsidiary-specific advantages are developed and exploited at the subsidiary level is under-researched.
This paper aims to build a foundation for future research by systematically reviewing and integrating
research insights on subsidiaries of the multinational enterprise.
We follow Birkinshaw et al. 1998 and define a MNE subsidiary “as any operational unit
controlled by the MNC and situated outside the home country.” MNE subsidiaries have been studied by
scholars from a wide range of disciplines such as strategic management, organizational theory, human
resource management, and corporate social and political activity. However, we note two limitations.
First, research is fragmented in different functional areas, and draws on diverse theories, but with little
integration. The theoretical foundations of the studies covered in our review are very eclectic, with
institutional, resource-based, and network perspectives being most popular. Second, few studies focus
on the foreign subsidiary as unit of analysis. Most studies view subsidiaries from the perspective of
headquarters rather than from the perspective of the subsidiary leadership team. We propose that a
focus on MNE subsidiaries as unit of analysis will not only enhance our understanding of these major
players in most economies around the world, but of complex and multi-embedded. Ultimately, we are
interested in the question, what does the IB literature have to say to leaders of MNE subsidiaries? And,
what future research may provide deeper theoretical insights of value to subsidiary leaders?
We organize our review around two complementary integrative conceptual frameworks for
MNE subsidiary research. First, building on the theory of the MNE, we propose “new” internalization
theory (Narula & Verbeke, 2015; Rugman & Verbeke, 2008) as an overarching framework that can guide
future theory development on why subsidiaries exist and why they change over time. Second, we
develop a process model of subsidiaries evolution that extends the work by Birkinshaw and Hood
(1998), which provides an integrative framework for analyzing change processes in the MNE subsidiary:
How do subsidiaries change, for example, their resource portfolios and the strategic mandates. On the
basis of our critical review of the literature, we develop a research agenda that aims to develop theory
to explain MNE subsidiary related phenomena, and to guide managerial practice.
Technical University of Munich
TUM School of Management