Mandate dynamics and the importance of mandate loss for subsidiary evolution

Gillmore, Edward

doi:10.1016/j.ibusrev.2022.101994

Cited by 6 publications

(5 citation statements)

References 43 publications

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“…This can be less surprising; however, this is also a key finding as existing research has mainly looked at the relationship between geographical distance and subsidiary role (from the perspective of knowledge flows) and capability development (Ambos and Håkanson, 2014; Ambos and Ambos, 2009; Harzing and Noorderhaven, 2006; Monteiro et al ., 2008) and not from the perspective of formal ID. Similarly, while there has been some research on subsidiary global mandates emphasizing how mandates can be gained and/or lost (Birkinshaw, 1996; Gillmore, 2022) and how they enhance subsidiary structural position and development in the MNE (Birkinshaw et al ., 1998; Cavanagh and Freeman, 2012), little has been looked at from the perspective of formal ID. Therefore, we contribute by looking at subsidiary global mandates from the perspective of formal ID, and in this regard, we make a key contribution to research.…”

Section: Discussion Implications and Limitationsmentioning

confidence: 99%

“…Generally, subsidiaries are assigned mandates for those value-added functional activities for which they develop specialized resources and competencies, and while there are overlaps across subsidiaries in the MNE with regard to mandates (Kappen, 2011), the important thing is what drives these mandates, and this is usually newer products and newer technologies (Birkinshaw, 1996;Gillmore, 2022) or, in other words, innovation. So, it can be argued that innovation is the key driving force behind subsidiaries gaining global mandates.…”

Section: Cross Cultural and Strategic Managementmentioning

confidence: 99%

“…Subsidiary global mandates refer to a subsidiary’s value-added role in terms of R&D, product management and/or the supply of inputs to the MNE globally. In other words, it is the responsibility the MNE assigns to a subsidiary over a product or market worldwide (Birkinshaw, 1996; Gillmore, 2022; Roth and Morrison, 1992). For example, many manufacturing subsidiaries in China produce for regional or global markets, and such subsidiaries may be deemed to have manufacturing mandates for a particular product or market.…”

Section: Introductionmentioning

confidence: 99%

“…However, such is established mostly in the context of spatial distance and more in the context of how such distance affects MNE subsidiary knowledge flows. Similarly, while there has been some research on subsidiary global mandates emphasizing how mandates can be gained and/or lost (Birkinshaw, 1996; Gillmore, 2022) and how they enhance subsidiary structural position and development in the MNE (Birkinshaw et al ., 1998; Cavanagh and Freeman, 2012), little has been looked at from the perspective of formal ID.…”

Section: Introductionmentioning

confidence: 99%

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Linking formal institutional distance, subsidiary autonomy for innovation and subsidiary global (value-added) mandates

Raziq,

Saleem,

Sumbal

et al. 2024

CCSM

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PurposeThis study examines the effects of formal institutional distance (ID) on the foreign subsidiary global mandates (i.e. the subsidiary value-added role in terms of research and development (R&D), product management and supplying of inputs to the multinational enterprise (MNE) globally). Furthermore, it examines the mediating role of subsidiary autonomy for innovation in the relationship between formal ID and subsidiary global mandates.Design/methodology/approachSurvey evidence from foreign subsidiaries in a remote developed economy, i.e. New Zealand, is obtained. Formal distance is measured based on the worldwide governance indicators (WGI), and the hypotheses are tested using structural equation modeling.FindingsResults show that the direct link between formal ID and subsidiary global mandates is negative. However, autonomy for innovation as a mediator offsets this negative relationship, showing a positive mediating effect between formal ID and subsidiary global mandates.Originality/valueThis study extends research on foreign subsidiaries and their value-added roles in the MNE. We show the differentiated role of formal ID and indicate a contingency showing how the negative influence of formal ID on subsidiary global mandates can be offset. The inconsistent mediation of autonomy for innovation suggests that the concept of ID is multifaceted and complex, in contrast to the popular view that ID has only negative implications. Drawing upon evidence from a remote, developed economy and secondary data sources, we suggest how MNEs may positively use their formal ID with their subsidiaries.

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Section: Discussion Implications and Limitationsmentioning

confidence: 99%

Section: Cross Cultural and Strategic Managementmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Linking formal institutional distance, subsidiary autonomy for innovation and subsidiary global (value-added) mandates

Raziq,

Saleem,

Sumbal

et al. 2024

CCSM

View full text Add to dashboard Cite

show abstract

“…The main focus of research into subsidiary divestment has been on understanding why subsidiaries are shut down, sold or relocated (e.g., Benito, 2005 ; Berry, 2013 ; Boddewyn, 1979 ; Coudounaris, Orero-Blat, & Rodríguez-García, 2020 ; Ozkan, 2020 ; Schmid & Morschett, 2020 ). While prior studies on subsidiary evolution acknowledge that subsidiary closures are a normal aspect of the subsidiary lifecycle (e.g., Birkinshaw, 1996 ; Birkinshaw & Hood, 1998 ; Gillmore, 2022 ; Gillmore, Anderson, & Ekman, 2021 ; Tippmann et al, 2018 ), the execution of subsidiary relocations “on the ground” has been underexplored. Addressing this shortcoming, our research introduces the literature on organizational death (e.g., Crosina & Pratt, 2019 ; Harris & Sutton, 1986 ; Sutton, 1987 ) into the domain of international business to understand knowledge transfer during subsidiary relocations.…”

Section: Discussionmentioning

confidence: 99%

Subsidiary closures and relocations in the multinational enterprise: Reinstating cooperation in subsidiaries to enable knowledge transfer

2023

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Subsidiary closures and relocations, a process whereby a multinational enterprise (MNE) closes down a subsidiary and relocates its activities, are commonplace and increasing. Yet we lack an understanding of how knowledge in such situations can be successfully transferred to prevent loss and provide for future knowledge recombination in the MNE. Compared to periods of normal operation, knowledge sharing during subsidiary relocations is likely compromised by diminished sender motivation. In a detailed case study of a subsidiary closure and relocation, we find that the announcement of a subsidiary closure can lead to a break in cooperative behavior that inhibits knowledge transfer. It is therefore critical to reinstate cooperative behavior among subsidiary employees. Reinstatement can be achieved through a set of subsidiary leadership practices that affect the emotions of employees and subsidiary identity. This finding contributes to our understanding of knowledge transfer dynamics in MNEs during subsidiary relocations and closures, extends theory on the practices of subsidiary leadership in subsidiary death and adds to our understanding of identity in MNEs.

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Subsidiary Capital Structure in Multinational Enterprises: A New Internalization Theory Perspective

Rygh,

Benito

2023

Manag Int Rev

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We study subsidiary capital structure as a mechanism of intra-MNE (multinational enterprise) governance from the perspective of “new internalization theory”. We build on the argument from transaction cost theory that equity and debt are not just financial instruments but also alternative governance structures, with equity useful for financing specific assets that do not serve well as collateral, especially when external uncertainty is high. Inside an MNE, debt represents a partial reintroduction of market mechanisms that can limit governance costs and strengthen subsidiary manager incentives. However, debt financing may be inappropriate if subsidiaries possess specific assets that are lost if debt contracts are enforced. Using subsidiary-level panel data from Norwegian MNEs, we argue that patents registered in the subsidiary represent MNE-specific non-location bound knowledge assets, while subsidiary R&D income represents location-bound and subsidiary-specific assets. We predict MNE-specific assets to be negatively related to external debt, and subsidiary-specific assets to be negatively related to all debt, under conditions of external uncertainty. We find only partial support for our hypotheses. Patents are negatively related to external debt when external uncertainty in the form of political risk is high. However, we do not find similar significant results for location-bound and subsidiary-specific assets, measured by subsidiary R&D income. For both measures, there is evidence that debt financing is viable in low-risk contexts. Further analysis indicates different effects for joint ventures as compared to wholly owned subsidiaries. We build on the partly unexpected results to propose an expanded internalization perspective on subsidiary capital structure.

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Mandate dynamics and the importance of mandate loss for subsidiary evolution

Cited by 6 publications

References 43 publications

Linking formal institutional distance, subsidiary autonomy for innovation and subsidiary global (value-added) mandates

Linking formal institutional distance, subsidiary autonomy for innovation and subsidiary global (value-added) mandates

Subsidiary closures and relocations in the multinational enterprise: Reinstating cooperation in subsidiaries to enable knowledge transfer

Subsidiary Capital Structure in Multinational Enterprises: A New Internalization Theory Perspective

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