MULTINATIONAL CORPORATE EVOLUTION AND SUBSIDIARY DEVELOPMENT

Transcription

1 MULTINATIONAL CORPORATE EVOLUTION AND SUBSIDIARY DEVELOPMENT

2 Previous books involving Neil Hood Hood, N. and S. Young (eds) (1979) The Economics of Multinational Enterprise Hood, N. and S. Young (eds) (1984) Industry, Policy and the Scottish Economy Young, S., N. Hood and J. Hamill (1988) Foreign Multinationals and the British Economy Hood, N. and J. -E. Vahlne (eds) (I 988) Strategies in Global Competition Hood, N., R. Kilis and J. -E. Vahlne (eds) (1997) Transition in the Baltic States

3 Multinational Corporate Evolution and Subsidiary Development Edited by Julian Birkinshaw and Neil Hood

4 First published in Great Britain 1998 by MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN ISBN (ebook) DOI / First published in the United States of America 1998 by ST. MARTIN'S PRESS, INC., Scholarly and Reference Division, 175 Fifth Avenue, New York, N.Y ISBN Library of Congress Cataloging-in-Publication Data Multinational corporate evolution and subsidiary development I edited by Julian Birkinshaw and Neil Hood. p. em. Includes bibliographical references and index. ISBN I. International business enterprise. 2. Corporations, Foreign. 3. Subsidiary corporations. 4. International trade. 5. Competition, International. I. Birkinshaw, Julian M. II. Hood, Neil. HD M '.049-dc Selection, editorial matter and Chapters I and 14 Julian Birkinshaw and Neil Hood 1998 Individual chapters (in order) James H. Taggart; Marina Papanastassiou and Robert Pearce; Trond Rand0y and Jiatao Li; Hellmut Schutte; Mats Forsgren and Torben Pedersen; Bernard Surlemont; Luciano Fratocchi and Ulf Holm; William G. Egelhoff; Liam Gorman and Stephen McCormick; Ed Delany; Julian Birkinshaw; Sea-Jin Chang and Philip M. Rosenzweig; Schon Beechler, Allan Bird and Sully Taylor 1998 Softcover reprint of the hardcover 1st edition 1998 All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London WI P 9HE. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources s OS I CIP

5 To the memory of Gunnar Hedlund, one of the leading international business scholars of his generation

6 Contents List of Appendices List oftables List of Figures Preface and Acknowledgements List of Contributors xii xiii XV xvii xviii 1 Introduction and Overview julian Birkinshaw and Neil Hood Context MNC Subsidiary Management Research Outline of the Book Concluding Remarks PART I CORPORATE STRATEGY AND SUBSIDIARY DEVELOPMENT 2 Identification and Development of Strategy at Subsidiary Level james H Taggart Introduction Conceptual Background Research Problem Research Method Results Discussion Conclusions vii

7 viii Contents 3 Individualism and Interdependence in the Technological Development ofmnes: The Strategic Positioning of R&D in Overseas Subsidiaries 50 Marina Papanastassiou and Robert Pearce Introduction 50 R&D and Interdependent Individualism 52 R&D in UK Subsidiaries ofmnes 56 Roles ofmne Subsidiaries' R&D Laboratories 65 Conclusions 71 4 Global Resource Flows and MNE Network Integration 76 Trond Randey and]iatao Li Introduction 76 Global Integration and Resource Flows 77 Three Dimensions oflntra-mne Resource Flows 80 Data and Research Methods 86 Results and Discussion 90 Conclusions and Future Research 97 5 Between Headquarters and Subsidiaries: The RHQSolution 102 Hellmut Schutte Conceptual Framework 102 The Study of Regional Headquarters {RHQs) 104 Research Results 115 Data Analysis 125 Conclusions 131 PARTll CENTRES OF EXCEIJ.ENCE IN MULTINATIONAL NETWORKS 6 Centres of Excellence in Multinational Companies: The Case of Denmark 141 Mats Forsgren and Tor ben Pedersen Introduction 141 The Product Mandate Subsidiary 142

8 Contents The Subsidiary in then etwork MNC 144 Some Classifications of Subsidiary Roles 147 Empirical Analysis 150 Concluding Remarks A Typology of Centres Within Multinational Corporations: An Empirical Investigation 162 Bernard Sur lemont Introduction 162 Toward a Typology of Centres within MNCs 162 Empirical Investigation 168 Further Study of Administrative and Excellence Centres 175 Conclusions Centres of Excellence in the International Firm 189 Luciano Fratocchi and UlfHolm Introduction 189 The Centres of Excellence 191 Methods 196 Empirical Findings 200 Discussion and Concluding Remarks 205 ix PARTill CORPORATEPROCESSAND SUBSIDIARY DEVELOPMENT 9 Using Technology as a Path to Subsidiary Development 213 William G. Egelhoff, Liam Gorman and Stephen McCormick Introduction 213 Literature Review and Conceptual Framework 214 Research Design 216 Findings 216 Discussion and Conclusions 235

9 X Contents 10 Strategic Development of Multinational Subsidiaries in Ireland 239 Ed Delany Importance off oreign Direct Investment to the Irish Economy 239 Review of Subsidiary Development Literature 240 Research Project into Development of Subsidiaries in Ireland 242 Classifying Subsidiaries' Strategic Position 243 Strategic Initiatives by Subsidiaries 249 Phases of Subsidiary Mandate Development 255 Scale Increases - a Different Type of Development 263 Conclusions Foreign-owned Subsidiaries and Regional Development: The Case of Sweden 268 julian Birkinshaw Introduction 268 Theoretical Background 271 Research Methodology 275 Findings: Questionnaire Responses 276 Findings: Case-Studies 284 Conclusions and Implications Functional and Line of Business Evolution Processes in MNC Subsidiaries: Sony in the USA, Sea-fin Chang and Philip M Rosenzweig Introduction 299 Antecedent Research on MNC Evolution 301 Method and Data 303 Sony in the United States: A Case Study of Subsidiary Evolution 308 Modelling the Processes of Subsidiary Evolution 316 Discussion 326 Directions for Further Research and Conclusions 328

10 Contents xi 13 Organisational Learning in japanese MNCs: Four Affiliate Archetypes 333 Schon Beechler, Allan Bird and Sully Taylor Introduction 333 Methodology 335 Theoretical Foundation 336 A Decision Tree and Four Learning Archetypes 342 Implications for Learning 358 Conclusions Conclusions and Policy Implications 367 Neil Hood and]ulian Birkinshaw Introduction 367 Findings and Implications 368 Conclusions 378 Index 381

11 List of Appendices 4.A Definition of resource flows A The studied firms: turnover, number of employees and main activities in ll.a Study questions 296 xii

12 List of Tables 1.1 Three streams of research on subsidiary management Four-cluster solution: cluster analysis Comparison of operation variables means among four-cluster solutions In-house R&D as a source of technology in MNE subsidiaries in the UK Sources of R&D used by MNE subsidiaries in the UK Anticipated changes in size of R&D laboratories ofmne subsidiaries in the UK, by industry and home country Regressions with anticipated changes in size of R&D laboratories as dependent variables Roles of R&D laboratories ofmne subsidiaries in the UK Patterns of resource flows Means, standard deviations and correlation matrix Clustering analysis Clustering analysis: overall resource flows =means MNCs in Sample Interview results Ranking of scores ofmncs Classification of production subsidiaries within an MNC with respect to export and R&D intensity Characteristics of the foreign-owned subsidiaries in Denmark ( 1991) The average values for the three variables in the four clusters The extent of R&D co-ordination among product mandate subsidiaries 155 xiii

13 xiv List of Tables 6.5 The level of corporate and external embeddedness for all product mandate subsidiaries Typology of centres within MNCs Correlation between the various dimensions of the influence of centres Spearman correlation between descriptive variables and SCOPE and DOMAIN Number of CoEs in 22 Swedish international firms Proportion of CoEs and level of internationalisation Proportion of CoEs according to geographic areas with increasing psychic distance Strategic positions of subsidiaries at start-up and current parent nationality Classification of strategic initiatives from research Basic characteristics of the four groups Distinctive characteristics of the four groups Sony Corporation: activities in the USA, Sony Engineering and Manufacturing of America, Interviews conducted at Sony Corporation Impediments and facilitators in functional migration A comparison of four learning cycle models Implications of the four models for parent and affiliate learning 359

14 List of Figures 2.1 Co-ordination-configuration framework Strategy evolution Dynamics of evolution International strategy at the overall firm level Alternative subsidiary roles related to different resource flows Organisational structure matrix Evolutionary paths of centres Basic and development mandates using extended version ofwhite and Poynter (1984) Classifying the 49 domain developing strategic initiatives by value chain moves Stages of development of multinational subsidiary Example of stages in subsidiary development Typology of Swedish subsidiaries Centres of excellence in Swedish subsidiaries at the different stages of the value chain A process model of functional migration A process model ofline of business addition A basic process model of the japanese MNC parent-affiliate management learning cycle Diagram of tactical decisions and influences in the development of subsidiary HRM system A process model of the Japanese MNC parent-affiliate management learning cycle for export firms A process model of the Japanese MNC parent-affiliate management learning cycle for closed hybrid firms A process model of the Japanese MNC parent-affiliate management learning cycle for adaptive firms 351 XV

15 xvi List of Figures 13.6 A process model of the japanese MNC parent-affiliate management learning cycle for open hybrid firms 353

16 Preface and Acknowledgements This book emerged from the well-established interests of the editors in the processes which influence the development of subsidiaries. It was facilitated by the fact that the Annual Conference of the European International Business Academy was held at the Stockholm School of Economics in December 1996, and the editors were asked to help to shape that programme. Several of the sessions were focused on the topic of this volume and a number of the chapters are based on the papers presented on that occasion. In addition, the editors invited a range of other authors in different parts of the world who were known to be active researchers on subsidiary development. The editors would like to acknowledge the superb work of the Institute of International Business staff in Stockholm, who made the ElBA conference so memorable. In addition they would like to record their sincere thanks to Irene Hood in Strathclyde International Business Unit, University of Strathclyde, Glasgow, for her sterling work in assisting in all aspects of the editorial process and her liaison with all the contributors. JUUAN BIRKINSHAW NEIL HOOD xvii

17 List of Contributors Allan Bird, Californian Polytechnic State University, USA Julian Birkinshaw, Stockholm School of Economics, Sweden Schon Beechler, Columbia University, USA Sea:Jin Chang, Korea University, Korea Ed Delany, E. Delany & Associates, Ireland William Egelhoff, Fordham, USA Mats Forsgren, Copenhagen Business School, Denmark Luciano Fratocchi, University of Bologna, Italy Liam Gorman, Irish Management Institute, Ireland UlfHolm, University ofuppsala, Sweden Neil Hood, University ofstrathclyde, UK Jiatao Li, McKinsey, Hong Kong Stephen McCormick, Irish Management Institute, Ireland Marina Papanastassiou, Economic University of Athens, Greece Robert Pearce, University of Reading, UK Torben Pedersen, Copenhagen Business School, Denmark Trond Randey, Agder College, Norway xviii

18 List of Contributors Philip Rosenzweig, IMD, Switzerland xix Hellmut Schutte, Insead, France Bernard Surlemont, University of Liege, Belgium James H. Taggart, University ofstrathclyde, UK Sully Taylor, Portland State University, USA