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Functional Upgrading and Value Capture of Multinational Subsidiaries

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  • Burger, Anže
  • Jindra, Björn
  • Marek, Philipp
  • Rojec, Matija

Abstract

This paper investigates the relationship between the value capture of multinational subsidiaries and functional upgrading, which is defined as a diversification of employment from primary business functions to higher value adding activities such as ICT, R&D, marketing or logistics. By combining survey-based business function indicators with longitudinal accounting data for a representative sample of multinational subsidiaries located in six Central and Eastern European countries (CEECs), we assess the impact of functional upgrading on foreign subsidiaries' value capture. The results provide robust evidence that the breadth as well as the scope of functional upgrading induces an upward shift of subsidiaries' value added. The effect of functional upgrading is stronger in the earlier phases after entry of the foreign investor, while the long-term growth trend remains unaffected.

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  • Burger, Anže & Jindra, Björn & Marek, Philipp & Rojec, Matija, 2018. "Functional Upgrading and Value Capture of Multinational Subsidiaries," Journal of International Management, Elsevier, vol. 24(2), pages 108-122.
    • Handle: RePEc:eee:intman:v:24:y:2018:i:2:p:108-122
    DOI: 10.1016/j.intman.2017.09.004
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    Cited by:

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    3. Figueiredo, Paulo N. & Larsen, Henrik & Hansen, Ulrich E., 2020. "The role of interactive learning in innovation capability building in multinational subsidiaries: A micro-level study of biotechnology in Brazil," Research Policy, Elsevier, vol. 49(6).
    4. Clark, Kim & Ramachandran, Indu, 2019. "Subsidiary Entrepreneurship and Entrepreneurial Opportunity: An Institutional Perspective," Journal of International Management, Elsevier, vol. 25(1), pages 37-50.
    5. Klaus E. Meyer & Chengguang Li & Andreas P. J. Schotter, 2020. "Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(4), pages 538-576, June.
    6. Klaus E. Meyer & Chengguang Li & Andreas P. J. Schotter, 0. "Managing the MNE subsidiary: Advancing a multi-level and dynamic research agenda," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 0, pages 1-39.
    7. Yang, Xiaoming & Sun, Sunny Li & Jiang, Fuming, 2021. "How Do Emerging Multinational Enterprises Release Subsidiary Initiatives Located in Advanced Economies?," Journal of International Management, Elsevier, vol. 27(1).
    8. Dzikowska Marlena & Gorynia Marian, 2020. "Long-term evolution of the subsidiary’s role: a qualitative perspective on a subsidiary located in Poland," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 56(1), pages 79-95, March.
    9. Metka Stare & Andreja Jaklic, 2020. "Sources of Value Creation in Service Global Value Chains," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 22(55), pages 846-846, August.
    10. Andrea Szalavetz, 2019. "Artificial Intelligence-Based Development Strategy in Dependent Market Economies - Any Room amidst Big Power Rivalry?," Central European Business Review, Prague University of Economics and Business, vol. 2019(4), pages 40-54.
    11. Kang, Yuanfei & Scott-Kennel, Joanna & Battisti, Martina & Deakins, David, 2021. "Linking inward/outward FDI and exploitation/exploration strategies: Development of a framework for SMEs," International Business Review, Elsevier, vol. 30(3).
    12. Gábor Márk Pellényi, 2020. "The Role of Central and Eastern Europe in Global Value Chains: Evidence from Occupation-Level Employment Data," European Economy - Economic Briefs 062, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    13. Jingyun Zhang & Guangping Liu & Xueyuan Li & Han Jiang, 2020. "The transmission mechanism of the housing price fluctuations on the global value chain position of manufacturing-evidence from China," PLOS ONE, Public Library of Science, vol. 15(2), pages 1-14, February.
    14. Liu, Ting & Li, Xizhuo, 2022. "How Do MNCs Conduct Local Technological Innovation in a Host Country? An Examination From Subsidiaries' Perspective," Journal of International Management, Elsevier, vol. 28(3).

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