The impact of increases in subsidiary autonomy and network relationships on performance

Gammelgaard, Jens; McDonald, Frank; Stephan, Andreas; Tüselmann, Heinz; Dörrenbächer, Christoph

doi:10.1016/j.ibusrev.2012.01.001

Cited by 146 publications

(222 citation statements)

References 85 publications

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“…provision of relevant information on local business opportunities). The network relationship provides performance boosting effects linked to improved resource development and enhanced learning and innovation capabilities (Gammelgaard, et al, 2012). This is consistent with the EMF's motives in the internationalization process in which they engage in OFDI in order to acquire strategic assets and capabilities to improve their profitability, and to maximize global synergy (Wei, et al, 2014).…”

Section: Entry Mode and Firm Performancesupporting

confidence: 59%

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What explains the performance of Chinese exporting firms?

Zheng

2015

Journal of Chinese Economic and Business Studies

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Drawing on the entry mode literature and the strategic tripod framework, we examine whether firm performance is influenced by its outward foreign direct investment (OFDI) mode, controlling other firm-, industry-and institution-specific factors. It is found that employing OFDI does not improve an exporting firm's performance. This is not surprising as anecdotal evidence shows that many Chinese firms with OFDI have been making loss in the host country. This may indicate exporting firms employ OFDI to seek complementary and strategic resources/assets, not to improve immediate firm performance. Furthermore, firm performance is influenced by strategic assets, including technology-based capabilities (TBCs) and brands, at the firm level, industry entry barriers at the industry level and the home and host country institutional support at the country level.Keywords: Performance, Exporting Firm, OFDI, Strategic Tripod Framework 2 IntroductionEntry mode is considered as an important determinant of firm performance (Brouthers, 2002; Brouthers, et al., 2003 Brouthers, et al., , 2008Brouthers & Nakos, 2004;Chen & Hu, 2002;Shaver, 1988;Woodcock, et al., 1994). The rationale is that "firms will select the mode that provides the best return on investment" (Brouthers, 2002, p.207). The existing literature has investigated whether some investment modes provide better performance than others (e.g. Brouthers, 2002;Woodcock, et al., 1994). The entry modes under consideration in these studies are often joint ventures (JVs) and wholly-owned subsidiaries (WOSs). Few research considers the performance impact of exporting only versus a hybrid mode of exporting and outward foreign direct investment (OFDI). Given the increasing trend in OFDI, a question arises: Does an entry mode transformation by exporting firms to include OFDI lead to better firm performance? This research aims to fill this research gap. As part of this investigation, other factors influencing firm performance are accounted for by taking an integrative perspective at the firm, industry and country-level.Exporting is often the first stage of internationalization in emerging market firms (EMFs). However, the continuous marketization and liberation in emerging markets motivate firms to undertake OFDI. Exporting helps firms to gain international experiences and to establish linkages in the international market (Mathews, 2006). Yiu et al., (2007) reveal that exporting firms can benefit from learning in foreign markets, 3 accumulating local knowledge, gaining legitimacy and developing local networks.Furthermore, given the home country specific resources (CSRs) such as low labor costs and low production costs, EMFs may benefit from economies of scale by concentrating production at home and then exporting their products to foreign markets.The learning-curve cost advantages suggest that the costs of production fall with the cumulative volume of production, therefore firms moving along the learning-curve can obtain cost advantages over rivals (Wei, et al., 2014). However,...

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Section: Entry Mode and Firm Performancesupporting

confidence: 59%

“…According to network theory, relationships with partners within business networks are critical to the enhancement of capacities and capabilities (e.g. Chen, 2003;Gammelgaard, et al, 2012). OFDI allows EMFs to benefit from the host country partner's network, to access valuable information (e.g.…”

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confidence: 99%

What explains the performance of Chinese exporting firms?

Zheng

2015

Journal of Chinese Economic and Business Studies

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“…Extant research shows that subsidiary autonomy granted by MNE parents has a positive impact on subsidiary performance (Gammelgaard, et al, 2012;Gomez & Werner, 2004;McDonald, Warhurst, & Allen, 2008). Most existing research has argued that less autonomy will discourage the subsidiary from fostering a higher level of organisational learning (Luo, 2003), reduce parent-subsidiary cooperation (Birkinshaw, et al, 2000), block knowledge creation (Young & Tavares, 2004) and hinder strategic leadership initiatives (Birkinshaw, Hood, & Jonsson, 1998).…”

Section: The Mediating Role Of Subsidiary Autonomymentioning

confidence: 99%

“…Thus, expatriates not only affect knowledge transfer between the MNE parent and the subsidiary, but also subsidiary autonomy, which in turn influences subsidiary performance. Although the effect of subsidiary autonomy on subsidiary performance has become an important theme in international HRM research (Gammelgaard, et al, 2012;Gomez & Werner, 2004;Kawai & Strange, 2014;McDonald, Warhurst, & Allen, 2008;Slangen & Hennart, 2008), the mediating role of subsidiary autonomy in the relationship between the level of expatriates and subsidiary performance has been under-explored, especially in the case of EEMNEs. It is important to delineate the path from expatriates to subsidiary performance via subsidiary autonomy in host countries with different institutional environments, given that EEMNEs originated in under-developed institutional environments and they may respond to the institutional environments of host countries through altering internal control systems such as expatriate staffing and subsidiary autonomy.…”

Section: Introductionmentioning

confidence: 99%

Expatriates, subsidiary autonomy and the overseas subsidiary performance of MNEs from an emerging economy

Tong

Liu

Gao

et al. 2017

The International Journal of Human Resource Management

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“…Autonomy allows subsidiaries to develop and contribute to development of their host economies (Edwards, Ahmad and Moss, 2002). Gammelgaard, McDonald, Stephan, Tüselmann, and Dörrenbächer (2012) and Slangen and Hennart (2008) have analyzed subsidiary autonomy and its effect on performance. The findings, both theoretical and empirical, are mixed.…”

Section: Autonomy and Subsidiary Performancementioning

confidence: 99%

A Microeconometric Analysis of the Springboard Subsidiary: The Case of Spanish Firms

et al. 2015

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This paper provides a microeconometric analysis of the distinctive characteristics of springboard subsidiaries that have a positive impact on the subsidiaries' performance. Based on panel data estimations for subsidiaries of European multinational companies with a presence in Spain, the authors found that if the subsidiary is located in the springboard country, then the performance improvement (increase in profit margin) of the subsidiary is about 49 percentage points. When the Spanish subsidiary is considered a springboard subsidiary, its performance is 7.7 percentage points higher than the performance of other subsidiaries that are not springboard subsidiaries. If the subsidiary has a technological relationship with another subsidiary, its performance is 6.7 percentage points higher than the performance of other subsidiaries that do not have a technological relationship. Finally, when the firm has low autonomy, the performance of the subsidiary is 6.2 percentage points lower than that of firms that are independent or have a high level of autonomy.

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The impact of increases in subsidiary autonomy and network relationships on performance

Cited by 146 publications

References 85 publications

What explains the performance of Chinese exporting firms?

What explains the performance of Chinese exporting firms?

Expatriates, subsidiary autonomy and the overseas subsidiary performance of MNEs from an emerging economy

A Microeconometric Analysis of the Springboard Subsidiary: The Case of Spanish Firms

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