Multinationals, host countries and subsidiary development: Falconbridge Nikkelverk in Norway, 1929–39

Abstract

Multinational companies and their subsidiaries have been important actors in the world economy. However, we know relatively little about the evolution of subsidiaries and their adaption to host country conditions. This article is a case study of a Norwegian subsidiary of the Canadian mining multinational Falconbridge Nickel Mines Ltd. It examines what autonomy the subsidiary had, how the autonomy was used, its development of knowledge and how it adapted to Norwegian ways of doing business. The article shows that subsidiaries may contribute significantly to the development of their mother companies. It highlights four factors that influenced the degree of autonomy and the evolution of subsidiaries in the inter-war era; namely host country politics, the line of business, the configuration of knowledge within the given multinational company and in case of acquisitions; the prehistory of the subsidiary.subsidiaries, subsidiary autonomy, multinational companies, host countries, nickel industry, Falconbridge,

How do subsidiaries assume autonomy? A refined application of agency theory within the subsidiary‐headquarters context

“…In summary, these findings make two important contributions. First, by identifying three overall reasons as to why subsidiaries assume autonomy, we extend the current knowledge on subsidiary autonomy (Birkinshaw and Fry, ; Delany, ; Dorrenbacher and Geppert, ; Miozzo and Yamin, ; Sandvik, ; Sargent and Matthews, ; Young and Tavares, ). While the existing research has documented the occurrence of the subsidiary possessing autonomy beyond its formally assigned levels, it has not directly explored the issue of why this is so.…”

“…Accordingly, we aim to explore not only autonomy that is assumed by the subsidiary and the circumstances under which it is acquired, but also how this type of autonomy is viewed and dealt with by both parties. This research problem is noted by Young and Tavares (: 231), who claim that ‘information is lacking on the nature and extent of autonomy.’ Tong et al (: 22) reinforce this argument, noting that more research is still needed to ‘investigate the scope of subsidiary autonomy.’ More recently, Hoenen and Kostova (: 106) note that ‘the mismatch between headquarters’ expectations and subsidiary behavior continues to be an issue that needs further understanding, particularly with regard to the causes.’ Specifically, even those studies that acknowledge the ability of subsidiaries to assume autonomy beyond their authority (Birkinshaw and Fry, ; Delany, ; Dorrenbacher and Geppert, ; Miozzo and Yamin, ; Sandvik, ; Sargent and Matthews, ; Young and Tavares, ) neither distinguish between the different types of autonomy nor directly explore subsidiary‐developed autonomy.…”

“…More recently, Hoenen and Kostova (2015: 106) note that 'the mismatch between headquarters' expectations and subsidiary behavior continues to be an issue that needs further understanding, particularly with regard to the causes.' Specifically, even those studies that acknowledge the ability of subsidiaries to assume autonomy beyond their authority (Birkinshaw and Fry, 1998;Delany, 2000;Dorrenbacher and Geppert, 2010;Miozzo and Yamin, 2012;Sandvik, 2010;Sargent and Matthews, 2006;Young and Tavares, 2004) neither distinguish between the different types of autonomy nor directly explore subsidiary-developed autonomy.…”

“…Some studies (e.g., Delany, 2000;Schotter and Beamish, 2011) have found that a subsidiary assuming its own autonomy will face negative consequences from the head office as a result of these apparent 'agency problems,' including headquarters' opposition toward any attempts at subsidiary development, dismissal of subsidiary managers, or even divesture. Yet other studies (Balogun et al, 2011;Birkinshaw and Fry, 1998;Sandvik, 2010;Sargent and Matthews, 2006) identify subsidiaries being rewarded (typically in the form of a greater contributory roles and continued subsidiary development) for engaging in the same form of activities. With this in mind, we investigate the following research question:…”

“…However, research exists that indicates key tenets of agency theory (such as the causes of goal conflict, agent‐principal risk preferences, and ‘agency problems’) may not hold within the context of subsidiary‐claimed autonomy. For example, agency theory cannot explain why some studies have identified subsidiaries facing negative consequences (in line with the notion of agency problems) for developing their own autonomy (Delany, ) while others have found subsidiaries being rewarded for the same form of behavior (Balogun, Jarzabkowski, and Vaara, ; Birkinshaw and Fry, ; Sandvik, ; Sargent and Matthews, ). This suggests that it may be necessary to apply the theory in a subtly different, more nuanced way within the subsidiary‐headquarters context than that of traditional agent‐principal relationships.…”