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What are the consequences of initiative-taking in multinational subsidiaries?

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Abstract

The phenomenon of subsidiary initiative has received increasing attention in recent years, but the consequences of initiatives and the associated dynamics of headquarters–subsidiary relationships have received much less research attention. Building on resource dependence theory and self-determination theory we argue that two basic goals subsidiary managers pursue are to achieve autonomy vis-à-vis corporate headquarters, and influence over other units. We investigate how a subsidiary's past initiatives contribute to its bargaining power, and how headquarters’ response – through granting attention or monitoring – affects the realization of the subsidiary's goals. Using structural equation modeling, our hypotheses are tested by drawing on a sample of 257 subsidiaries located in three different countries (Australia, Canada and the United Kingdom). Our results show that subsidiaries are not able to increase their influence through initiatives unless they get headquarters’ attention. We also find that subsidiary initiatives have a direct effect on subsidiary autonomy, but the caveat is that initiatives also evoke headquarters monitoring, which in turn decreases the subsidiary's autonomy. In addition to providing insights into how subsidiaries can achieve their goals, the paper also sheds light on the critical role headquarters plays in leveraging initiatives, and the influence of individual subsidiaries in the multinational enterprise.

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Notes

  1. One reviewer also suggested we test the robustness of the model by running a 3SLS model, where controls can be included, simultaneously compared with the jack-knife tests. All significant paths from the SEM analysis are also significant with the same signs when 3SLS is pursued (see Appendix).

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Acknowledgements

The authors would like to thank Cyril Bouquet, Lisa Gärber, Phillip Nell, Torben Pedersen, James Robins and Ivo Zander for their helpful comments and suggestions. Support from the Advanced Institute of Management Research (AIM), WU Vienna and Handelsbanken's Research Foundation is gratefully acknowledged. An earlier version of this paper has been included in the Best Conference Paper Proceedings at AIB Milan 2008.

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Authors and Affiliations

  1. Department of International Management, Johannes Kepler University, Linz, Austria

    Tina C Ambos

  2. Center for Strategic Management and Globalization, Copenhagen Business School, Frederiksberg, Denmark

    Ulf Andersson

  3. Strategic and International Management, London Business School, London, UK

    Julian Birkinshaw

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  1. Tina C Ambos
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  2. Ulf Andersson
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  3. Julian Birkinshaw
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Correspondence to Tina C Ambos.

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Accepted by Sea-Jin Chang, Area Editor, 6 January 2010. This paper has been with the authors for three revisions.

APPENDIX

APPENDIX

See Table A1.

Table a1 Robustness Test: 3SLS-Equations
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Ambos, T., Andersson, U. & Birkinshaw, J. What are the consequences of initiative-taking in multinational subsidiaries?. J Int Bus Stud 41, 1099–1118 (2010). https://doi.org/10.1057/jibs.2010.19

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