Subsidiary Types, Activities, and Location: An Empirical Investigation

identifies several factors that might affect the choice of location: “traditional country factors”such as production costs, tax rates, investment incentives, exchange rates and “strategicadvantages” that depend on the overall configuration of the firm. In essence, the second researchquestion examines the impact of several firm- and location-specific determinants of subsidiaryroles.ACTIVITY-BASED TYPOLOGYTo investigate the determinants of subsidiary roles, we firstly attempt to develop a subsidiarytypology. In this study, we take activities as the unit of analysis when examining a subsidiary.Activities are increasingly considered the unit of analysis when examining firm strategy (Jarillo,2003; Porter, 1985, 1996). An activity-based view of the multinational firm (Porter, 1986; Yip,1995) focuses on the configuration and coordination of firm activities across nations and regions.Some consider activities as one of the three primitives at the firm level, the others being resourcesand knowledge (Ricart et al., 2004). Past empirical research on subsidiary typology has used allthe three primitives as the unit of analysis, with some adopting a resource-based perspective(Birkinshaw, 2001; Birkinshaw & Hood, 1998; Paterson & Brock, 2002; for a review). Aknowledge-based perspective is seen explicitly (Gupta & Govindarajan, 1990) or implicitly(Frost, Birkinshaw & Ensign, 2002; Randoy & Li, 1998). Others such as Birkinshaw andMorrison (1995) where a three-fold typology was induced from literature that was subsequentlyconfirmed, and Jarillo and Martinez (1990), use an activity-based perspective to identifyingsubsidiary roles.An activity view also is conducive to empirical analysis. Resources and knowledge are difficult tomeasure, given the intangible nature of many of the organization’s resources (Grant, 1996). Onthe other hand, the presence or absence of a particular activity is comparatively easier to measure(Ghemawat, 2006). Thus, an activity perspective may provide a more reliable way to study9