Subsidiary embeddedness and control in the multinational corporation
A subsidiary of a multinational corporation (MNC) is embedded in a network of specific business relationships. It is argued that the degree of subsidiary embeddedness is a function of the adaptation between the subsidiary and direct and indirect counterparts of these relationships. The paper hypothesizes that the higher the degree of embeddedness, the greater the likelihood of counterparts influencing the subsidiary's behaviour. This influence competes with headquarter's desire to exercise control to integrate the subsidiary into the overall corporate strategy. The empirical data presented, collected from 78 subsidiaries of major Swedish MNCs, indicate that embeddedness has an impact on how headquarter's control is perceived by the subsidiary, if embeddedness is separated into external and corporate embeddedness. The test provides support for the opinion that the higher the degree of embeddedness vis-à-vis external customers, suppliers and other counterparts, the lower the degree of headquarters' control, as perceived by the subsidiary. But it also lends support for the view that embeddedness vis-à-vis corporate counterparts works in the opposite direction; it rather tends to increase the control perceived at the subsidiary level. These results indicate that competition for influence over the subsidiaries' behaviour, as seen from the headquarter's point of view, arises primarily from external actors who have business specific relationships with the subsidiary.
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Volume (Year): 5 (1996)
Issue (Month): 5 (October)
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References listed on IDEAS
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- David Cray, 1984. "Control and Coordination in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 15(2), pages 85-98, June.
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- Jon I Martinez & J Carlos Jarillo, 1989. "The Evolution of Research on Coordination Mechanisms in Multinational Corporations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 20(3), pages 489-514, September.
- Gupta, Anil K. & Govindarajan, V., 1994. "Organizing for knowledge flows within MNCs," International Business Review, Elsevier, vol. 3(4), pages 443-457, December.
- Merchant, Kenneth A., 1985. "Organizational controls and discretionary program decision making: A field study," Accounting, Organizations and Society, Elsevier, vol. 10(1), pages 67-85, January.
- Andersson, Ulf & Forsgren, Mats, 1994. "Degree of integration in some Swedish MNCs," Working Papers 1994:4, Uppsala University, Department of Business Studies.
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