MNC subsidiary channel relationships as extended links: Implications of global strategies

Abstract

Foreign subsidiaries of multinational corporations (MNCs) rely on external partners, such as channel partners, to achieve global objectives. We conceptualize the subsidiary's channel partner as an extended link of the MNC's internal network: thus, the subsidiary's adaptation and execution of the MNC's global strategies should influence the subsidiary's channel relationship and performance. Building on the strategy-environment alignment framework, we study the influence of MNC global strategies (global efficiency, multinational flexibility, and worldwide learning) on a subsidiary's channel commitment and the moderating influence of the host-country environment. Survey data from German and Japanese MNCs in the United States indicate the importance of global strategies to a channel relationship. For example, we find that an emphasis on multinational flexibility is detrimental, but worldwide learning benefits the subsidiary's channel commitment. We also find that the host-country environment plays a contingent role: for example, a global efficiency strategy is beneficial for channel commitment in a stable environment, but detrimental in a dynamic environment. Our research offers key implications for MNCs; we suggest that when MNCs decide to lay emphases on global strategies the MNCs should consider not just their internal subsidiary network, but also their extended channel partner links that function in foreign markets.

Betrayal in international buyer-seller relationships: Its drivers and performance implications

“…For example, both environmental uncertainty and market dynamism retard the effective coordination and ruin the relationship among the interacting parties (Hada, Grewal, & Chandrashekaran, 2013). They also undermine the willingness to fulfill agreed-upon obligations, as well as cause difficulties in making adjustments that are critical to preserving the relationship (Griffith & Zhao, 2015;Katsikeas et al, 2009).…”

Investing in Buyer–Seller Relationships in Transitional Markets: A Market–Based Assets Perspective

“…This body of work has investigated the importance of various firm, buyer, and market characteristics for the ability of firms to create or enjoy performance outcomes of strong buyer relationships. For example, studies have demonstrated the importance of national culture and cultural distance (Homburg et al 2009; Leonidou et al 2014; Lund, Scheer, and Kozlenkova 2013; Zhou and Xu 2012), psychic distance (Hada, Grewal, and Chandrashekaran 2013; Johnston et al 2012), high- versus low-context communication culture (Jean, Sinkovics, and Kim 2010), and cross-cultural skills (Sichtmann and von Selasinsky 2010) for firms’ abilities to build and benefit from strong buyer relationships. Research has also demonstrated the role of firm status as foreign versus local (Dong, Li, and Tse 2013), firms’ intercountry coordination (Gao and Shi 2011; Shi et al 2010), and the effects of country (Barnes et al 2014; Dyer and Chu 2000; Steward et al 2010).…”

An Enabling Mechanism for Subsidiary Autonomy

“…Considering the market competition and dynamics, if subsidiaries want to have absorptive capacity, the degree of autonomy should be considered by MNEs, which echoes Glaister et al (2003). Subsidiaries' autonomy often depends on market competition and the extent to which they intend to execute the springboard strategy (Hada et al, 2013;He & Wong, 2004). When autonomy exists, subsidiaries are free to make decisions to determine the extent to which they need to absorb external capabilities.…”

“…If subsidiaries are regarded as the implementers of the global strategy of MNEs, in order to address this, the enterprise needs the subsidiaries to enact an aggressive integration strategy, and so it needs to fully authorize the subsidiaries' autonomy. Hada et al (2013) pointed out that in order to be able to further grow in the host country, subsidiaries need to have committed relationships with local access partners. This committed relationship comes from the enterprise's globalization strategy, and, more importantly, the decision-making autonomy that establishes access relationships can be achieved.…”

“…When Doz and Prahalad (1991) studied the innovation behavior within MNEs, they believed that innovation came from the initiative behavior, which could motivate subsidiaries to engage in innovation behavior if it could be permitted by management. Therefore, for MNEs, not only the headquarters' control should be loose but also the subsidiary's autonomy should be empowered if the subsidiary is expected to grow in the process (Hada et al, 2013;Teece et al, 1997).…”