Subsidiary Types, Activities, and Location: An Empirical Investigation

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theory building, suffer from some well-known problems. Such ‘fine-grained’ methodologies arecharacterized by limited generalization, hypothesis generation and replicability (Hartigan, 1975).Subsidiary typologies that might be important in one setting might not stand up to broaderexamination. Case studies tend to be carried out on only the largest corporations, or onlycorporations in global industries, or only companies with a reputation for distinctive internationalstrategies. The challenge of generalizing beyond such starting points can be substantial,particularly if specific cases color the research frame to the point where assertions and hypothesesbecome self-fulfilling.In addition, a focus on subsidiaries from or in a particular nation or small set of nations may besubject to two additional biases, namely the bias inherent in the fact that subsidiaries placed in aparticular location are placed there for reasons that might be location-specific (thus limiting thesubsidiary types found in the location) and the bias inherent in the fact that firms from one homenation might have needs that differ from those of firms from other home locations (and thusmight favor one type of subsidiary over another). Even subsidiaries placed in large countries likethe United States or Japan may not reflect the totality of subsidiary type alternatives. Suchcountries, for example, are unlikely to become the host for low wage assembly manufacturingsubsidiaries (MNCs from or subsidiaries operating in Canada, the UK, Spain, Sweden, Scotlandhave been the source of many studies).A second feature of past studies is that they have a predominantly a top-down approach withsubsidiary choices driven by the MNC’s overall strategy. While it may be sensible to align theMNC’s overall strategy and subsidiary roles, and can also be empirically validated (which, infact, has formed the main focus of empirical works), it is neither a necessary nor a sufficientcondition in explaining subsidiary types. For instance, Birkinshaw (1997) and Birkinshaw andHood (1998) show that irrespective of MNC strategy, entrepreneurship at the subsidiary level7
may also determine its role. Others have argued for the location-specific factors that mayinfluence subsidiary roles. After all, locations and firms have different attributes and one wouldexpect that MNC subsidiaries with specific roles would operate in particular places to takeadvantage of those location-specific attributes (Dunning, 1998, 2000). Hence, there is a need tounderstand roles from the subsidiary’s point of view rather than solely from the view of thecorporate entity, i.e. from the node rather than the network. The first major research question ofthis paper, then is to identify subsidiary roles independent of strategy typologies, but based onwhat the subsidiary actually does. We employ a multiple host-country and home-country sampleof firms to address some of the obvious biases identified earlier, as well as to test thedeterminants of such roles.Such an approach also allows us to move away from a strategy focus and examine otherdeterminants of subsidiary roles. This is important, because as the literature focused on verifyingstrategy based subsidiary typologies, the implicit assumption was that other determinants werenot the focus. As a consequence, empirical studies seldom go beyond verification and exploreother determinants. The second major research question of this paper, is then to examine thedeterminants of subsidiary roles identified when answering the first question.The international business literature indicates that both firm-specific and location-specific factorsinfluence the location of corporate activities (Enright, 2005a; Porter, 1986; Yip, 1995). Severalgeneral firm-specific factors have been suggested in the literature such as nationality,technological capabilities, experience (Vermeulen and Barkema, 2002; Caves, 1996). While thismay be the case, the effect of location itself has not featured prominently in international businessresearch (Dunning, 1998, 2000). Location has been traditionally kept in the background, whilefirm level factors have formed the focus of research in the past. However, overlooking locationitself as influencing subsidiary roles is a worthwhile line of research. Yip (1995), for example,8
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 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 18 and 19: manufacturing firms, were extracted
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

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