Subsidiary Types, Activities, and Location: An Empirical Investigation

• Hypothesis 2: Prior experience in internationalization should have a positive influence onthe likelihood that subsidiaries will be differentiated in terms of activities and roleswithin the multinational firm.Past literature has also indicated that the investment behavior of multinationals to vary bynationality of the parent firm. A firm’s ‘administrative heritage’ influences its investment pattern,while nationality itself is a key component of that heritage (Bartlett & Ghoshal, 1989). Severalstudies have found differences in the investment and the management styles among European,North American and Japanese multinationals (Caves, 1999; Egelhoff, 1984; Vernon, 1992; Yip etal., 1997). Thus we would expect firms of different nationalities to exhibit different types ofinvestment behavior. In the present investigation, in which data is drawn from Asia-Pacificsubsidiaries of North American, European, and Japanese firms, we would expect particulardifferences.Japanese firms are distinctive with respect to the Asia-Pacific region is that they have a homebase in the Asia-Pacific region. Given the fact that Japan is geographically and culturally closer toother Asian economies that are firms from Western countries, we would expect that Japanesefirms might find it easier to set up and manage information intensive, knowledge-creatingactivities such as R&D than their foreign counterparts. On the other hand, we would expect thatactivities such as sales and service, which often are less difficult to transfer, would not necessarilydiffer from those of Western firms. We are left with the following hypotheses.• Hypothesis 3a: Firm nationality will have a significant influence on subsidiary types.• Hypothesis 3b: Japanese firms are more likely to have high knowledge creation, lowknowledge utilization subsidiaries than their Western counterparts.12