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Resource dependency and parent–subsidiary capability transfers

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  • Chen, Tain-Jy
  • Chen, Homin
  • Ku, Ying-Hua
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    Abstract

    In this paper, we treat the multinational firm as an internal market in which various business units compete for scarce resources. By using the resource dependence theory to examine the parent–subsidiary relationship, we view this relationship as more of a political coalition than a hierarchy. We studied the pattern of capability transfers from the headquarters to the subsidiary to highlight this relationship. Using Taiwan-based multinational firms as the sample, our results show that the pattern is more reminiscent of a power game than an effort to maximize global efficiency. In essence, a triangular power play between the headquarters, subsidiary, and local networks determines the extent to which firm-specific capabilities are to be transferred abroad. It is almost certain that capabilities will never be completely transferred. A subsidiary can leverage local market potential to prompt more capability transfers from the headquarters, but any inclinations for the subsidiary to differentiate itself from the parent will discourage such transfers.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of World Business.

    Volume (Year): 47 (2012)
    Issue (Month): 2 ()
    Pages: 259-266

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    Handle: RePEc:eee:worbus:v:47:y:2012:i:2:p:259-266

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    Related research

    Keywords: Resource dependency; Firm-specific capabilities; Capability transfers;

    References

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    1. Dörrenbächer, Christoph & Gammelgaard, Jens, 2010. "Multinational corporations, inter-organizational networks and subsidiary charter removals," Journal of World Business, Elsevier, vol. 45(3), pages 206-216, July.
    2. Tan, Danchi & Meyer, Klaus E., 2010. "Business groups' outward FDI: A managerial resources perspective," Journal of International Management, Elsevier, vol. 16(2), pages 154-164, June.
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    9. Ingmar Bj�rkman & Wilhelm Barner-Rasmussen & Li Li, 2004. "Managing knowledge transfer in MNCs: the impact of headquarters control mechanisms," Journal of International Business Studies, Palgrave Macmillan, vol. 35(5), pages 443-455, September.
    10. Julian Birkinshaw, 1996. "How Multinational Subsidiary Mandates are Gained and Lost," Journal of International Business Studies, Palgrave Macmillan, vol. 27(3), pages 467-495, September.
    11. Cerrato, Daniele, 2006. "The multinational enterprise as an internal market system," International Business Review, Elsevier, vol. 15(3), pages 253-277, June.
    12. Ulf Andersson & Mats Forsgren & Ulf Holm, 2007. "Balancing subsidiary influence in the federative MNC: a business network view," Journal of International Business Studies, Palgrave Macmillan, vol. 38(5), pages 802-818, September.
    13. Caves, Richard E, 1971. "International Corporations: The Industrial Economics of Foreign Investment," Economica, London School of Economics and Political Science, vol. 38(149), pages 1-27, February.
    14. Klaus E. Meyer & Saul Estrin & Sumon Kumar Bhaumik & Mike W. Peng, 2009. "Institutions, resources and entry strategies in emerging economies," LSE Research Online Documents on Economics 4217, London School of Economics and Political Science, LSE Library.
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