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Network Influence on MNC Subsidiary Initiativ
Mälardalen University, School of Business, Society and Engineering, Industrial Economics and Organisation.ORCID iD: 0000-0003-4425-9367
University of Glasgow, UK.
International University in Geneva, Suisse.
2014 (English)In: The Intersection of International Entrepreneurship Knowledge: Bridging the Gap Between Entrepreneurship and International Business / [ed] Valerie Bell, Yang-Pei Lin, Spiros Batas, Denis Frydrych and Elizabeth Montoya Martinez., 2014Conference paper, Published paper (Refereed)
Abstract [en]

Value-chain networks are of major importance to multinational subsidiaries, yet they have failed to receive significant attention in the literature. We extend the knowledge-based view of the firm by exploring whether three different types of multinational subsidiary networks have dissimilar impact on their initiatives. The level and degree of subsidiary entrepreneurial activities enhances subsidiary performance and generate positive externalities in both the wider multinational corporation (MNC) system and the host country (Birkinshaw, 2000; Dimitratos et al., 2009). Despite the increased interest in the determinants of subsidiary initiative and knowledge integration, the existing literature has primarily focused on the characteristics of the knowledge, e.g. tacitness, stickiness, causal ambiguity, and attributes of the sender and receiver, such as, motivation and absorptive capacity; while the location, or sources, of the knowledge remain largely un-researched with a few exceptions (see e.g. Forsgren, 1999; Foss and Pedersen, 2002). Likewise, network theorists have emphasized different forms of networks as productive for entrepreneurial initiatives (Coleman, 1998; Burt, 2000); and described structural characteristics impeding entrepreneurial activity leading to organizational myopia (Uzzi, 1997; Hansen 1999). Very few, if any, attempts have been pursued to explain how the different types of networks a subsidiary is simultaneously involved affect its entrepreneurial initiatives. We develop four hypotheses based on MNC network and initiative literature streams.

750 UK based subsidiaries originating from the US, EU and Japan were randomly selected, adding up to a total sample of 2,250 subsidiaries. After excluding subsidiaries that were not eligible to participate in the survey, the actual sample of subsidiaries ended up being 1,770 subsidiaries. A structured questionnaire was pretested by academics and subsidiary managers in order to check its comprehensibility and clarity before the launch of the survey. The data collection from the 1,770 subsidiaries included three postal waves and two rounds of follow-up phone calls in between. The total number of usable responses that we employed to test our hypotheses was 268 subsidiaries. A structured questionnaire was posted to each subsidiary’s managing director; while a second top management respondent also participated in the survey

in 10% of the sample to establish inter-rater reliability. The overall response rate across the entire sample of subsidiaries was 16%. The Likert scales draw from previously developed measures. We also took measures to control for common method variance following the suggestions of Podsakoff et al. (2003).

Based on this sample of 268 subsidiaries and a moderated regression analysis, we find that value-chain networks have a higher positive impact than multinational corporation networks and non value-chain networks; because they may provide the subsidiary knowledge with market opportunities that it lacks and that the other types of networks cannot effectively provide. However, value-chain networks have a negative effect on initiative of a subsidiary operating in an environment of high uncertainty; because they can constrain the exploration and creation of new knowledge that cannot be provided by any of the networks. Contrary to our expectations, the combined effect of value-chain and non-value chain networks has a negative influence on enhancing initiatives; and, the combined effect of value-chain and MNC networks does not affect entrepreneurial initiatives.

This paper has considerable research implications. As regards the knowledge based view, the paper argues that not all firm-external knowledge is equally valuable in developing entrepreneurial initiatives. The value of this knowledge may depend on whether the subsidiary needs that knowledge. Since an MNC subsidiary tends to lack knowledge about its local and foreign country market opportunities and such knowledge is difficult for it to acquire because it is tacit, establishing networks with value-chain partners that have this knowledge generates entrepreneurial initiatives. This is especially the case when subsidiaries operate in an environment of high certainty. Furthermore, knowledge accessed through both value-chain and other types of networks may not bring synergistic effects as it is likely to be complex and time consuming to manage.

The paper also contributes to the theme of subsidiary entrepreneurship. This is the first study to more fully examine the role of subsidiary value-chain networks in enhancing entrepreneurial initiatives. Prior studies focus primarily on MNC networks and host-country networks. Additionally, this is seemingly the first study that compared the relative effects of all three types of networks on subsidiary entrepreneurial initiatives. It shows that, after considering the effects of other types of networks, value-chain networks appear to have the largest positive influence, especially when the subsidiaries operate in an environment of high certainty.

The paper also contributes to managerial practice. Subsidiary managers who wish to develop initiatives are advised to establish value-chain networks with customers, suppliers and distributors. This is especially the case for subsidiaries operating in a stable environment. In addition, managers are advised to pursue networking activities with solely value-added partners since the simultaneous implementation of all types of value added activities is seemingly detrimental for entrepreneurial initiatives.

Place, publisher, year, edition, pages
2014.
National Category
Business Administration
Research subject
Industrial Economics and Organisations
Identifiers
URN: urn:nbn:se:mdh:diva-26621OAI: oai:DiVA.org:mdh-26621DiVA: diva2:766168
Conference
International Entrepreneurship Workshop, 7-9 April, 2014, Edinburgh
Available from: 2014-11-26 Created: 2014-11-26 Last updated: 2014-12-30Bibliographically approved

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Citation style
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