Characteristics of Foreign Subsidiaries in Industry Clusters

Abstract

This paper examines the characteristics of foreign-owned subsidiaries in export-intensive "leading-edge industry clusters" as defined by Porter [1990]. Using a sample of 229 subsidiaries from three countries, we show that subsidiaries in such clusters are more embedded, more autonomous, and more internationally-oriented than subsidiaries in other industry sectors. We also show that there are significant differences in the roles of J t is well established that the roles of foreign-owned subsidiary companies (i.e. the activities that they have responsibility for in the multinational corporation) vary according to such contingencies as the local environment [Ghoshal and Nohria, 1989], the structural context imposed by the parent [Gupta and Govforeign-owned subsidiaries from one leading-edge cluster to the next, that are associated with the dynamism of the cluster and the overall level of foreign ownership. The results indicate (1) that typologies of subsidiary roles should give increased consideration to environmental factors, and (2) that thinking on industry clusters, instead of treating them identically, should recognize that they have heterogeneous characteristics. indarajan, 1991], and the entrepreneurial capacity of subsidiary management [Birkinshaw, 1997], to name some of the most well-known factors. In this paper we examine another potentially important predictor of varying subsidiary roles -the membership (or not) of a leadingedge industry cluster. An industry clus-*Julian Birkinshaw is an Assistant Professor of Strategy and International Management at the London Business School. His research is concerned with the strategy and organization of large multinational corporations.

Edith Penrose's contribution to the resource‐based view of strategic management

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