Subsidiary Types, Activities, and Location: An Empirical Investigation
Subsidiary Types, Activities, and Location: An Empirical Investigation 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
subsidiary roles. Specifically, some subsidiaries will be engaged in a narrow set of activitieswhile other subsidiaries would be engaged in a broader range of activities, depending on firmcharacteristics, location characteristics (Porter, 1990), home-country characteristics (Yip,Johansson, & Roos, 1997) and the roles played by the subsidiaries within the multinational(Birkinshaw, 1997). Defining subsidiaries through their activities is the converse of the approachtaken in Birkinshaw and Morrison (1995), which used role in the multinational strategy toseparate out subsidiaries and then showed how different subsidiary types were related to differentactivities.HYPOTHESES DEVELOPMENTOnce we have generated subsidiary roles, we move to our next objective of identifying factorsthat have an effect on the roles. In particular, we investigate the effect of firm and locationspecific factors on the identified subsidiary roles. The impact of a set of generic firm and locationspecific factors, identified in the literature, are examined. We examine the impact of such factorson subsidiary types by generating hypotheses between the firm- and location-specific factors andpossible subsidiary types.Firm-Specific FactorsA number of firm-specific factors have been used in the literature but not linked directly toactivities. Firm-based factors that may influence foreign investment decisions include the firm’sresource base, its knowledge of international markets, its overall regional profile, and itsnationality. The firm-specific factors and associated hypotheses refer to the overall MNC, i.e. thecorporate level where the locus of decision making for overseas investments could reside.10
- Page 1: Academy of International BusinessBe
- Page 4 and 5: that the suggested strategy types w
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- Page 12 and 13: Firm size is often used as a proxy
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- Page 20 and 21: METHODS AND RESULTSThe results repo
- Page 22 and 23: model with multiple response levels
- Page 24 and 25: A restricted maximum likelihood est
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- Page 30 and 31: ReferencesAgarwal, S., & Ramaswami,
- Page 32 and 33: Enright, M. J. 2005a. Regional mana
- Page 34 and 35: Johanson, J., & Vahlne, J-E. 1977.
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subsidiary roles. Specifically, some subsidiaries will be engaged in a narrow set of activitieswhile other subsidiaries would be engaged in a broader range of activities, depending on firmcharacteristics, location characteristics (Porter, 1990), home-country characteristics (Yip,Johansson, & Roos, 1997) <strong>and</strong> the roles played by the subsidiaries within the multinational(Birkinshaw, 1997). Defining subsidiaries through their activities is the converse of the approachtaken in Birkinshaw <strong>and</strong> Morrison (1995), which used role in the multinational strategy toseparate out subsidiaries <strong>and</strong> then showed how different subsidiary types were related to differentactivities.HYPOTHESES DEVELOPMENTOnce we have generated subsidiary roles, we move to our next objective of identifying factorsthat have an effect on the roles. In particular, we investigate the effect of firm <strong>and</strong> locationspecific factors on the identified subsidiary roles. The impact of a set of generic firm <strong>and</strong> locationspecific factors, identified in the literature, are examined. We examine the impact of such factorson subsidiary types by generating hypotheses between the firm- <strong>and</strong> location-specific factors <strong>and</strong>possible subsidiary types.Firm-Specific FactorsA number of firm-specific factors have been used in the literature but not linked directly toactivities. Firm-based factors that may influence foreign investment decisions include the firm’sresource base, its knowledge of international markets, its overall regional profile, <strong>and</strong> itsnationality. The firm-specific factors <strong>and</strong> associated hypotheses refer to the overall MNC, i.e. thecorporate level where the locus of decision making for overseas investments could reside.10
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