Subsidiary Types, Activities, and Location: An Empirical Investigation
Subsidiary Types, Activities, and Location: An Empirical Investigation Subsidiary Types, Activities, and Location: An Empirical Investigation
METHODS AND RESULTSThe results reported in this paper were generated in a two-stage process. In the first stage,statistical cluster analysis on the activities performed in the subsidiaries was used to generate a setof clusters representing different types of subsidiaries in the Asia-Pacific. In the second stage,categorical modeling was used to estimate the impact of firm and location-based features on thelikelihood a subsidiary would be of one type versus another.Stage One: Cluster AnalysisThe typology of subsidiaries was generated by cluster analysis of survey responses concerningthe activities performed in different subsidiaries in the Asia-Pacific. A disjoint cluster analysiswas performed to statistically divide the national subsidiaries into non-overlapping groups to helpdetermine the types of subsidiaries present in the Asia-Pacific region. The variables used to createthe clusters were the responses to questions that asked managers if their companies hadsignificant sales, customer service, production, research and development, and/or corporatemanagement activities in Japan, South Korea, the Chinese Mainland, Taiwan, Hong Kong, thePhilippines, Thailand, Malaysia, Singapore, Indonesia, Australia, and New Zealand.Cluster Analysis Results: Cubic clustering criteria and pseudo F-tests indicated that thedata is consistent with a four clusters or subsidiary types solution. The four-cluster solutioncorresponds to the roles of “Management and Development”, “Full Functional Subsidiaries”,“Production Bases”, and “Sales and Service Subsidiaries”.TABLE 2 GOES ABOUT HEREThe number of subsidiaries in each category was as follows: “Management and Development” -388, “Full Functional Subsidiaries” – 1298; “Production Bases” – 1548; and “Sales and Service19
Subsidiaries” - 651. All subsidiaries have sales activities, though the “Sales and Service”subsidiaries are focused on this activity. “Management and Development” subsidiaries have thehighest mean scores on support and R&D activities. Subsidiaries that are classified as“Production Bases” have production activities apart from the sales and service activities. Finally,“Full Functional Subsidiaries” have the entire range of activities.Other cluster solutions were tried. The appropriateness of different cluster solutions, such as fiveclusterand six-cluster solutions was tried. The five-cluster solution had overlaps with the fourclustersolution, while the six-cluster solution faced problems of interpretation in two of the sixclusters. When the four-cluster solution was compared with the alternate five- and six-clustersolutions, we notice a decrease in the overall ‘tightness’ of the alternate cluster solutions. A lossin ‘tightness’ can also be inferred in the loss of F-values for the alternate solutions. Suchapproaches are also seen in Roth and Morrison (1990) and Birkinshaw and Morrison (1995).Stage Two: Categorical ModelingIn the second stage of the analysis, categorical modeling was used to estimate the impact of firmbasedand location-based variables on cluster membership (in this case the type of subsidiary).Categorical modeling is an analytical technique that allows the researcher to assess the influenceof explanatory variables upon membership in a category. In this case, the analysis is used todetermine which firm attributes and location attributes influence the probability a subsidiary willbe of a certain type.Categorical modeling analytical procedures: The categorical modeling procedure used inthe present analysis computes response functions that compare the log of each response levelprobability to the probability of a baseline response level. The baseline response level used here isthe “Sales and Service” Subsidiaries, identified as p4. The model fitted is a generalized logit20
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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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METHODS AND RESULTSThe results reported in this paper were generated in a two-stage process. In the first stage,statistical cluster analysis on the activities performed in the subsidiaries was used to generate a setof clusters representing different types of subsidiaries in the Asia-Pacific. In the second stage,categorical modeling was used to estimate the impact of firm <strong>and</strong> location-based features on thelikelihood a subsidiary would be of one type versus another.Stage One: Cluster <strong>An</strong>alysisThe typology of subsidiaries was generated by cluster analysis of survey responses concerningthe activities performed in different subsidiaries in the Asia-Pacific. A disjoint cluster analysiswas performed to statistically divide the national subsidiaries into non-overlapping groups to helpdetermine the types of subsidiaries present in the Asia-Pacific region. The variables used to createthe clusters were the responses to questions that asked managers if their companies hadsignificant sales, customer service, production, research <strong>and</strong> development, <strong>and</strong>/or corporatemanagement activities in Japan, South Korea, the Chinese Mainl<strong>and</strong>, Taiwan, Hong Kong, thePhilippines, Thail<strong>and</strong>, Malaysia, Singapore, Indonesia, Australia, <strong>and</strong> New Zeal<strong>and</strong>.Cluster <strong>An</strong>alysis Results: Cubic clustering criteria <strong>and</strong> pseudo F-tests indicated that thedata is consistent with a four clusters or subsidiary types solution. The four-cluster solutioncorresponds to the roles of “Management <strong>and</strong> Development”, “Full Functional Subsidiaries”,“Production Bases”, <strong>and</strong> “Sales <strong>and</strong> Service Subsidiaries”.TABLE 2 GOES ABOUT HEREThe number of subsidiaries in each category was as follows: “Management <strong>and</strong> Development” -388, “Full Functional Subsidiaries” – 1298; “Production Bases” – 1548; <strong>and</strong> “Sales <strong>and</strong> Service19
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