Subsidiary Types, Activities, and Location: An Empirical Investigation

More documents

Recommendations

Info

manufacturing firms, were extracted for the present analysis. The focus on manufacturing firmswas partly motivated by the longer history of manufacturing investment in the region (Enright,2002, 2005a). Further, the value chain activities of service firms are more difficult to discriminatewhen compared with traditional manufacturing firms (Stabell & Fjeldstad, 1998). 450manufacturing companies times 12 economies meant there were 5,400 potential subsidiaries inthe dataset. Removing firms with missing data, the Japan location for Japanese companies, andfirm-location combinations with no subsidiaries left a total of 3,885 observations for 440 firms tocontribute to the analysis.The firms were surveyed concerning the activities performed in different subsidiaries in the Asia-Pacific. The investment location decisions for five different corporate activities were selected forinvestigation: sales, customer service, production, research and development, and management.Sales, production, and research and development are self-explanatory. Customer serviceactivities can include call-in service, warranty service, and other related services. Managementactivities were defined to include management and support functions for which the subsidiary hasa significant amount of autonomy.The responses to questions that asked managers if their companies had significant sales, customerservice, production, research and development, and/or management activities in Japan, SouthKorea, the Chinese Mainland, Taiwan, Hong Kong, the Philippines, Thailand, Malaysia,Singapore, Indonesia, Australia, and New Zealand. These economies represent the overwhelmingmajority of the output and inward foreign investment in the Asia-Pacific (Enright, 2002). Giventhe difficulty for individual managers to report what percentage each of the economiesrepresented for each activity in the region or worldwide, it was left for the managers to decidewhat constituted “significant”. The activity variables used in the present study are the binaryvariables SALES, SERVICE, PRODUCTION, R&D, and MANAGEMENT. In each case, the17
variable was given a value of 1 if the company had significant operations in that activity in agiven economy and 0 otherwise. We also examined biases due to non-response, by conducting ashorter follow-up from a small random sample of non-respondents, and the responses did notshow any systematic variances that were statistically significant.In the second-stage analysis of subsidiary role determinants, the dependent variable, TYPE, is amultilevel categorical variable that specifies one of the four types of subsidiaries generatedthrough the first-stage cluster analysis. The independent variables were designed to capture theinfluence of the firm-based and location-based effects described earlier. FIRMSIZE is the firm’stotal annual worldwide sales turnover reported in six ascending categories, ranging from “lessthan US$100 million” to “greater than US$10 billion.” INTERNATIONAL represents thenumber of countries in which the firm was active reported in four ascending categories rangingfrom “two to five countries” to “greater than 30 countries.” Nationality was captured by twodummy variables, EUROPE and JAPAN, with North American firms as the baseline.The attractiveness of the market of an economy was captured by MARKET, the natural log of theeconomy’s GDP in US dollars in 2000. The overall state of development of an economy wascaptured by DEVELOPMENT, the natural log of GDP per capita in US dollars in 2000.Economic growth was captured by GROWTH, the average annual GDP growth rate in constantUS dollars for the years 1990-2000. MARKET, DEVELOPMENT, and GROWTH were derivedfrom data in World Bank (2001, 2002). The openness of an economy was captured inOPENNESS, defined as the trade to GDP ratio [(Imports + Exports)/(2 x GDP)]. This variablewas taken from the World Trade Organization (2001). The influence of the tax system oninvestment was captured in TAXRATE, the economy’s tax rate on corporate profits. Thisvariable was taken from World Economic Forum (2001).18
Page 1: Academy of International BusinessBe
Page 4 and 5: that the suggested strategy types w
Page 6 and 7: effect, what this process literatur
Page 8 and 9: theory building, suffer from some w
Page 10 and 11: identifies several factors that mig
Page 12 and 13: Firm size is often used as a proxy
Page 14 and 15: Location-Specific FactorsA number o
Page 16 and 17: • Hypothesis 7: The level of the
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
Page 26 and 27: subsidiaries are “Production Base
Page 28 and 29: levels of openness may be that mult
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.
Page 36 and 37: shops and networks. Strategic Manag
Page 38 and 39: Table 1. Empirical Studies of Subsi
Page 40 and 41: Table 2. Cluster StatisticsVariable

Subsidiary Types, Activities, and Location: An Empirical Investigation

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?