Dear Friends and Colleagues,
The latest issue of Global Strategy Journal is out. There you can find a set of articles on the management of subsidiaries in multinationals. We hope that you find them inspiring.
Gabriel Benito, Alvaro Cuervo-Cazurra, Ram Mudambi, and Torben Pedersen
Co-editors of Global Strategy Journal
Global Strategy Journal
Alvaro Cuervo©\Cazurra, Ram Mudambi, Torben Pedersen
We analyze power relationships in subsidiaries of multinational corporations. We explain how despite many advances in the literature, there is still an unresolved debate with respect to the critical question of whether subsidiary power is loaned or owned. We develop an overarching framework that encompasses both agency theory and resource dependence theory as the two pillars to understand decision©\making by managers in subsidiaries. We propose that agency theory applies more when the subsidiary's decision rights are ¡°loaned¡± by headquarters, while resource dependence theory applies more when the subsidiary ¡°owns¡± its decision rights. We also explain how subsidiary evolution integrates the arguments of these two theories. Agency appears to apply earlier while resource dependence is more relevant at later stages.
Kieran M. Conroy, David G. Collings, Johanna Clancy
This paper emphasizes the social and political dimensions of subsidiary influence in strategically repositioning the subsidiary's mandate. The specific skills subsidiary actors deploy in attempting to influence corporate headquarters have largely been neglected in existing literature. Drawing from a micro©\political perspective, we provide a more nuanced, fine©\grained understanding of subsidiary influence by illuminating how influence is augmented and enriched through the concomitant effects of subsidiary actors' social and political skills. Using a multiple case study analysis and drawing on qualitative interviews, we illustrate how subsidiary actors' social skills are used to continuously create, maintain, and develop spaces of social engagement with corporate decision makers, whereas political skill involves the ability to leverage social spaces by developing specific influence tactics such as targeting, showcasing, and framing.
Christian Geisler Asmussen, Nicolai J. Foss, Phillip C. Nell
The global strategy literature highlights the role of headquarters (HQ) in realizing global integration benefits while enabling independent subsidiary strategic initiatives. We construct a game©\theoretic model of the interaction between HQ and subsidiaries, and, building on procedural justice theory, we analyze the motivational costs that can result from the anticipation or realization of HQ intervention in subsidiary initiatives. We also analyze the implications for MNC©\level value creation when HQ managers, fearing subsidiary managers¡¯ emotion©\based reactions, refrain from intervening. We derive a number of counter©\intuitive results, for example, that good HQ behavior may involve forgoing opportunities for value creation, and that procedural justice systems may sometimes be counterproductive.
Giovanni Battista Dagnino, Claudio Giachetti, Maurizio La Rocca, Pasquale Massimo Picone
This article dissects the antecedents of international diversification through the lens of the agency cost of free cash flow arguments. It explores whether the partial convergence of interests among managers, majority shareholders, and minority shareholders affects a firm's choice to diversify internationally. Using a sample panel of 60 Italian firms evaluated longitudinally from 2004 to 2014, the study tests whether a firm's international diversification is affected by its free cash flow (as the ultimate source of managerial discretion) and debt (as the main constraint to managerial discretion), especially in firm contexts that exacerbate agency problems. We find that the effects on international diversification of free cash flow and debt are contingent on ownership concentration, family control, and growth opportunities.
Sarah Castaldi, Sathyajit R. Gubbi, Vincent E. Kunst, Sjoerd Beugelsdijk
Business group (BG) affiliation affects the strategic behavior and performance of firms. Until now it has been theoretically unclear and insufficiently empirically tested whether affiliation advantages extend to the foreign subsidiaries of group members. We attempt to determine if they do, and if so, to identify the boundary conditions that matter. We analyze a large panel of 451 foreign subsidiaries of 136 Indian multinational firms over the 2003¨C2012 period and find that BG affiliation does enhance foreign subsidiary performance when host©\market institutions are weak and when the parent is in manufacturing.
Denice E. Welch, Lawrence S. Welch
In this article, we explore the interaction between internationalization and language strategy. We identify a range of language coping mechanisms that internationalizing firms use in response to the multilingualism they encounter. Learning outcomes and strategy implications of each of these mechanisms are identified. We then build a conceptual model to depict how, over time, interaction and influence between internationalization and language strategy become a two©\way, co©\evolutionary process. A key aspect is the role of management in shifting the firm from a reactive to a more proactive stance on language strategy. A case study is used to contextualize and illustrate the co©\evolutionary process over the long term. Case data demonstrate the constant adoption and adaptation of coping mechanisms that feed into language strategy as internationalization unfolds.