Determinants of subsidiary’s technological capability – examining the roles of subsidiary–local supplier linkage

Abstract

Purpose – This study aims to explore the effects of subsidiary–local supplier linkage characteristics in a supply chain and the moderating effects of a multinational corporation’s (MNC’s) international experience (IE) and a subsidiary’s innovation orientation (IO) on the subsidiary’s technological capability. Design/methodology/approach – A new research framework is developed comprising four constructs and six research hypotheses. Applying the regression model, the hypotheses were tested on data from Taiwanese MNC’s subsidiaries of manufacturing industries in Asian developing countries. Findings – The subsidiary–local supplier linkage characteristics, including economic aspect: asset-specific investment (ASI) of local supplier and social aspect: relational capital (RC) of local linkage, are positively associated with subsidiary’s technological capability. Moreover, the MNC’s IE can enhance the positive effect of RC on the subsidiary’s technological capability and the subsidiary’s IO decreases the positive impact of ASI on the subsidiary’s technological capability. Practical implications – This study provides useful insights into how MNCs and subsidiaries should concentrate on the factors that increase the subsidiary’s technological capability. Moreover, MNCs’ and subsidiaries’ managers must endeavor to establish long-term linkages with carefully selected local suppliers, induce these suppliers to provide appropriate ASI, and actively develop RC in the subsidiary–local supplier linkage to enhance the subsidiary’s technological capability. Originality/value – This study demonstrates that subsidiary–local supplier linkage characteristics, MNC’s IE and subsidiary’s IO can be applied to examine the technological capability of subsidiaries operating in less advanced countries.

Social capital in buyer-supplier relationships: A review of antecedents, benefits, risks, and boundary conditions

“…Social capital dimensions have also been found to contribute to BSRs by generating other relationship outcomes including facilitating integration (Horn et al, 2014;Shou et al, 2018;Yim & Leem, 2013;Yu & Huo, 2018), increasing supply chain resilience (Johnson et al, 2013), risk identification (Fan & Stevenson, 2018), responsiveness (Grawe et al, 2012), customer knowledge development (Tsai et al, 2013), commitment to innovation (Tsai et al, 2013), innovation capability (Kulangara et al, 2016), and technological capability (Tseng & Chen, 2014), and by reducing opportunism (Hartmann & Herb, 2014;Lioliou & Zimmermann, 2015;Wang et al, 2013).…”

“…Social capital dimensions have been found to be positively related to a supplier's foreign economic performance (Presutti et al, 2016), however the positive impact of relational and cognitive capital is stronger with low levels of psychic distance, while the positive impact of all three social capital dimensions is evidenced only for high geographical distance between the partners. Tseng and Chen (2014) found that relational capital increases a buyer's technological capability as its international experience increases. A recent interesting insight reported by Villena and Craighead (2017) suggests that relational capital reduces opportunism only when both buyer and supplier share the same levels of relational capital.…”

The process of buyer-supplier collaboration to innovation: a study of Brazil-China electronics industry

“…Due to the increasing trend of business internationalization, a growing number of studies have been investigating the factors affecting a subsidiary's capacity abroad. Tseng and Chen (2014), for example, conclude that head office investments, subsidiary entrepreneurship level, host countries' environments, and links with local suppliers of the supply chains are factors that positively influence the subsidiary's technological capacity. Thus, the specific investments of assets (economic aspect) and relational capital (social attitude) allied with international experience and orientation towards innovation will determine the subsidiary's technological capacity.…”

Towards a framework for innovation orientation within business and management studies

“…Few of these studies then linked these internal capability developments to organisational performance (Caerteling et al, 2011;Chen et al, 2009;Dobni et al, 2015;Teichert and Bouncken, 2011;Theodosiou et al, 2012;Dhewanto and Sohal, 2015;Guo et al, 2015;Lii and Kuo, 2016;Yang et al, 2016). The role of innovation orientation as a moderating factor between concepts and performance measures was also considered in a number of studies (Bhaskaran, 2006;Cheung et al, 2012;Yang et al, 2013;Tseng and Chen, 2014;Roach et al, 2016;Wu, 2016). In the study by Bhaskaran (2006), innovation orientation was empirically found to have a moderating effect on profitability in highly competitive and dynamic markets.…”