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Subsidiary impact on host-country economies--the case of foreign-owned subsidiaries attracting investment into sweden

Author

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  • Ulf Holm
  • Anders Malmberg
  • Orjan S–lvell

Abstract

This paper examines the impact of foreign-owned subsidiaries on their surrounding host-country economies, focusing particularly on investment attraction. To explain such subsidiary impact, we develop a LISREL-model including four interlinked constructs: (a) the dynamism of the host-country business environment within which the subsidiary unit is active; (b) the control strategies of corporate headquarters; (c) quality of subsidiary competencies; and (d) the formalized mandate provided by headquarters for certain subsidiaries to become centers. Based on the model, six hypotheses are formulated, and tested in a LISREL-analysis on a set of data containing information on foreign-owned subsidiaries in Sweden. The results show that the dynamics of the host-country business environment positively impact on the foreign-owned subsidiary competence development and play a fundamental role in deciding whether such units will impact on the investment attraction in the host economy. Copyright 2003, Oxford University Press.

Suggested Citation

  • Ulf Holm & Anders Malmberg & Orjan S–lvell, 2003. "Subsidiary impact on host-country economies--the case of foreign-owned subsidiaries attracting investment into sweden," Journal of Economic Geography, Oxford University Press, vol. 3(4), pages 389-408, October.
    • Handle: RePEc:oup:jecgeo:v:3:y:2003:i:4:p:389-408
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    Citations

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    Cited by:

    1. Beugelsdijk, Sjoerd & Smeets, Roger & Zwinkels, Remco, 2008. "The impact of horizontal and vertical FDI on host's country economic growth," International Business Review, Elsevier, vol. 17(4), pages 452-472, August.
    2. Achcaoucaou, Fariza & Miravitlles, Paloma & León-Darder, Fidel, 2017. "Do we really know the predictors of competence-creating R&D subsidiaries? Uncovering the mediation of dual network embeddedness," Technological Forecasting and Social Change, Elsevier, vol. 116(C), pages 181-195.
    3. Helena Lenihan & Kevin Mulligan & Justin Doran & Christian Rammer & Olubunmi Ipinnaiye, 2024. "R&D grants and R&D tax credits to foreign-owned subsidiaries: Does supporting multinational enterprises’ R&D pay off in terms of firm performance improvements for the host economy?," The Journal of Technology Transfer, Springer, vol. 49(2), pages 740-781, April.
    4. Franco, Chiara, 2013. "Exports and FDI motivations: Empirical evidence from U.S. foreign subsidiaries," International Business Review, Elsevier, vol. 22(1), pages 47-62.
    5. Ari Kokko & Victoria Kravtsova, 2008. "Innovative capability in MNC subsidiaries: evidence from four European transition economies," Post-Communist Economies, Taylor & Francis Journals, vol. 20(1), pages 57-75.
    6. Drogendijk, Rian & Holm, Ulf, 2012. "Cultural distance or cultural positions? Analysing the effect of culture on the HQ–subsidiary relationship," International Business Review, Elsevier, vol. 21(3), pages 383-396.
    7. Martin Heidenreich & Jannika Mattes, 2012. "Regional Embeddedness of Multinational Companies and their Limits: A Typology," Chapters, in: Martin Heidenreich (ed.), Innovation and Institutional Embeddedness of Multinational Companies, chapter 2, Edward Elgar Publishing.
    8. Hogenbirk, Annelies & Narula, Rajneesh, 2004. "Location and agglomeration of FDI in The Netherlands: implications for policy," Research Memorandum 006, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    9. 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.
    10. Dellestrand, Henrik & Kappen, Philip, 2011. "Headquarters Allocation of Resources to Innovation Transfer Projects within the Multinational Enterprise," Journal of International Management, Elsevier, vol. 17(4), pages 263-277.
    11. repec:rdg:wpaper:em-dp2004-04 is not listed on IDEAS
    12. Fuchs Martina & Winter Johannes, 2008. "Competencies in subsidiaries of multinational companies: The case of the automotive supply industry in Poland," ZFW – Advances in Economic Geography, De Gruyter, vol. 52(1), pages 209-220, October.
    13. Costa, Ionara & Filippov, Sergey, 2007. "A New Nexus Between Foreign Direct Investment, Industrial and Innovation Policies," MERIT Working Papers 2007-030, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    14. Martin Heidenreich, 2012. "Introduction: The Debate on Corporate Embeddedness," Chapters, in: Martin Heidenreich (ed.), Innovation and Institutional Embeddedness of Multinational Companies, chapter 1, Edward Elgar Publishing.
    15. Andrzej Cieślik & Jan Jakub Michałek & Krzysztof Szczygielski & Jacek Lewkowicz & Jerzy Mycielski, 2021. "Foreign Ownership and Within-MNEs GVC Participation as Determinants of Innovation Activities: A CIS-Based Firm-Level Analysis," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 13(2), pages 189-211, June.
    16. Dörrenbächer, Christoph & Gammelgaard, Jens, 2006. "Subsidiary role development: The effect of micro-political headquarters-subsidiary negotiations on the product, market and value-added scope of foreign-owned subsidiaries," Journal of International Management, Elsevier, vol. 12(3), pages 266-283, September.

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